Wauwatosa Holdings, Inc. Announces Results of Operations for the Periods Ended December 31, 2005

WAUWATOSA, Wis., Feb. 23  /PRNewswire-FirstCall/ -- Wauwatosa Holdings, Inc. (NASDAQ:WAUW) reported results of operations for its quarter and six-month transition period ended December 31, 2005.  For the quarter, Wauwatosa Holdings reported a net loss of $709,000 or $0.02 per share.  Net income for the six months ended December 31, 2005 was $2.7 million.  On November 15, 2005, Wauwatosa Holdings announced that it had changed its fiscal year-end from June 30 to December 31 effective December 31, 2005. Consequently, on or before March 31, 2006, Wauwatosa Holdings will file a transition report on Form 10-K for the transition period from July 1, 2005 through December 31, 2005.

Effective October 4, 2005, Wauwatosa Savings Bank completed its reorganization and subsequent initial public offering of common stock of Wauwatosa Holdings, Inc.  Upon completion of the reorganization, Lamplighter Financial, MHC (a Wisconsin chartered mutual holding company) owns a majority of the outstanding shares of common stock of Wauwatosa Holdings, Inc. and Wauwatosa Holdings owns 100% of the common stock of Wauwatosa Savings Bank. The reorganization was the primary contributing factor to the net loss generated during the quarter ended December 31, 2005.

In connection with the reorganization, 556,442 shares of Wauwatosa Holdings, Inc. common stock valued at $5.6 million were contributed to the Waukesha County Community Foundation, Inc.  Charitable contributions totaling $500,000 were accrued in prior periods and $5.1 million in expense was recognized by Wauwatosa Holdings in the quarter ended December 31, 2005.  In addition, an Employee Stock Ownership Plan (ESOP) and related trust were established in connection with the issuance of common stock of Wauwatosa Holdings, Inc.  During the quarter ended December 31, 2005, the ESOP Trust purchased 762,000 shares to be allocated to plan participants ratably over a 10-year period.  As such, 76,200 shares valued at an average market price of $11.22 per share were allocated to plan participants on December 31, 2005, resulting in $854,000 of additional compensation expense in the quarter ended December 31, 2005.  In connection with the establishment of the ESOP, the Board of Directors froze the Wauwatosa Savings Bank Pension Plan.  Pension plan expense totaled $502,000 and $640,000 for the quarter and six months ended December 31, 2005, respectively, including a $370,000 expense in the quarter ended December 31, 2005 related to the planned termination of the plan in 2006.

Net interest income continues to increase on volume even as the interest rate spread continues to decline.  Net interest income was up $871,000 or 8.6% for the three months ended December 31, 2005 as compared to the comparable three months in 2004.  This compares to a 25% increase in average earning assets for the same period.  The interest rate spread, however, continues to decline.  It was 2.34% for the quarter ended December 31, 2005, as compared to 2.94% for the same quarter in 2004.

It is anticipated that the interest rate spread will continue to decline throughout 2006.  As Wauwatosa Holdings is dependent upon net interest income for approximately 90% of its total income, a continued decline in the interest rate spread significantly limits the prospect for increased net income.

During 2006, Wauwatosa Holdings intends to continue executing its plan to expand the product and service lines that it currently offers.  Wauwatosa Savings Bank recently acquired Waterstone Mortgage Corporation, a mortgage broker with offices located in Pewaukee, Madison, Lake Geneva and Sheboygan, Wisconsin, and Livonia, Michigan.  Waterstone Mortgage expects to originate approximately 1,300 loans in 2006 and generate gross revenues of approximately $2.6 million. This acquisition will expand both the types of mortgage loan products offered and the geographical coverage for those products.  All Waterstone Mortgage Corporation revenue is expected to be noninterest income. In addition, Wauwatosa Holdings intends to continue to expand its branch network.  Along with providing a wider delivery channel for a broader array of products and services, the expanded branch network should enable Wauwatosa Holdings to add transaction retail deposit accounts, thus reducing reliance on higher cost certificate of deposit accounts.  Wauwatosa Holdings has plans to open two new retail branch offices in calendar 2006 with the first to be located in the City of Franklin, Wisconsin.

Wauwatosa Holdings had total assets of $1.5 billion at December 31, 2005. Its subsidiary bank, Wauwatosa Savings Bank, is a Wisconsin-chartered savings bank which was originally organized in 1921.  Wauwatosa Savings Bank conducts business from six offices in Wauwatosa, Oak Creek, Oconomowoc, Pewaukee and Waukesha, Wisconsin.

Cautionary Statements

The discussions in this news release which are not historical statements contain forward-looking statements that involve risk and uncertainties. Statements which are not historical statements include those in the future tense or which use terms such as "believe," "expect," and "anticipate." Wauwatosa Holdings, Inc. actual future results could differ in important and material ways from those discussed.  Many factors could cause or contribute to such differences.  These factors include changing interest rates and related yield curves, changes in demand for loans or other services, competition from other institutions, actual verses estimated loan loss experience, other general economic and political developments, plus factors discussed in our filings with the Securities and Exchange Commission.

                         WAUWATOSA HOLDINGS, INC.
                           FINANCIAL HIGHLIGHTS

                        Three months ended  Six months ended   Years ended
                            December 31,     December 31,        June 30,
                           2005     2004    2005     2004      2005    2004
                            (Unaudited)       (Unaudited)
                    (dollars in thousands, except ratios and per share data)
  Operations Data:
    Net interest
     income            $10,959   $10,088 $21,278  $19,290   $38,139 $33,656
    Provision for
     loan losses           826       245   1,035      363     1,238     860
    Noninterest
     income              1,267       729   2,272    1,985     3,311   3,035
    Noninterest
     expense            12,578     7,170  18,331   12,262    23,576  20,384
    Income (loss)
     before income
     taxes              (1,178)    3,402   4,184    8,650    16,635  15,447
    Income tax
     expense
     (benefit)            (469)    1,070   1,471    2,864     7,520   4,863
    Net income (loss)     (709)    2,332   2,713    5,786     9,116  10,584
  Selected Financial
   Ratios:
     Yield on earning
      assets              5.81%     5.99%   5.85%    5.94%     5.91%   5.85%
     Cost of funds        3.47      3.06    3.42     3.05      3.17    3.15
     Interest rate
      spread              2.34      2.94    2.43     2.89      2.74    2.70
     Return on average
      assets              (.18)     0.71    0.36     0.89      0.70    0.90
     Return on average
      equity             (1.39)     7.13    3.22     8.30      7.12    8.88
     Average equity
      to average
      assets             13.27      9.93   11.25    10.66      9.83   10.15
     Non-interest
      expense to
      average assets      3.27      2.18    2.44     1.88      1.81    1.74
     Allowance for
      loan losses
      to total loans
      outstanding         0.40      0.33    0.40     0.33      0.38    0.32
  Per Share:
    Basic earnings
     (loss) per
     share  (1)         $(0.02)
    Diluted earnings
     (loss) per
     share  (1)          (0.02)
    Book value per
     share                7.02
    Weighted average
     shares
     outstanding -
     diluted        33,135,424
    Shares
     outstanding at
     December 31,
     2005           33,038,385


  (1) Loss per share is based on the net loss from the date of the stock
      conversion, October 5, 2005 and the weighted average shares
      outstanding from October 5, 2005 to December 31, 2005.


                                 December 31,        June 30,       Percent
                                      2005             2005          Change
                                 (Unaudited)
                                      (in thousands, except percentages)
  Financial Condition:
    Total assets                  $1,511,209      $1,386,132          9.03 %
    Loans receivable, net          1,300,768       1,213,561          7.19
    Securities available for sale    121,955          83,991         45.20
    Deposits                       1,045,593       1,128,791         (7.37)
    Borrowings                       201,212          93,162        115.98
    Total equity                     231,696         133,416         73.66
    Allowance for loan losses          5,250           4,606         13.98
    Non-performing assets             18,280          13,076         39.80



                         WAUWATOSA HOLDINGS, INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS

                    Three months ended    Six months ended    Years ended
                        December 31,         December 31,       June 30,
                       2005      2004      2005      2004     2005    2004
                        (Unaudited)         (Unaudited)
                          (dollars in thousands, except per share data)
  Interest income:
    Loans           $19,599   $17,770   $38,516   $34,272   $69,775 $61,530
    Mortgage-related
     securities         913       562     1,389     1,206     2,283   3,264
    Debt securities,
     federal funds
     sold and
     short-term
     investments        974       605     2,131     1,102     2,149   1,294
      Total
       interest
       income        21,486    18,937    42,036    36,580    74,207  66,088
  Interest expense:
    Deposits          8,975     8,094    18,296    15,960    33,285  30,324
    Borrowings        1,552       755     2,462     1,330     2,783   2,108
      Total interest
       expense       10,527     8,849    20,758    17,290    36,068  32,432
      Net interest
       income        10,959    10,088    21,278    19,290    38,139  33,656
  Provision for
   loan losses          826       245     1,035       363     1,238     860
      Net interest
       income after
       provision for
       loan losses   10,133     9,843    20,243    18,927    36,901  32,796
  Noninterest income:
    Service charges
     on loans and
     deposits           629       576       940       929     1,217   1,144
    Increase in cash
     surrender value
     of life insurance  151       211       587       424       642   1,007
    Gain on sale of
     securities           -         -         -         -        12      47
    Other               487       (58)      745       632     1,440     837
      Total
       noninterest
       income         1,267       729     2,272     1,985     3,311   3,035
  Noninterest expenses:
    Compensation,
     payroll taxes,
     and other
     employee
     benefits         4,376     3,048     7,404     5,705    11,434  10,763
    Occupancy, office
     furniture, and
     equipment          966       819     1,802     1,714     3,482   3,470
    Advertising         353       233       764       536     1,128   1,024
    Data processing     490       285       840       570     1,142   1,048
    Charitable
     contributions    5,122     1,568     5,310     1,713     2,088     988
    Communications
     expense            142       144       300       272       591     525
    Professional Fees   409       159       529       230       627     386
    Other               720       914     1,382     1,522     3,084   2,180
      Total
       noninterest
       expenses      12,578     7,170    18,331    12,262    23,576  20,384
      Income (loss)
       before income
       taxes         (1,178)    3,402     4,184     8,650    16,636  15,447
  Income tax expense
   (benefit)           (469)    1,070     1,471     2,864     7,520   4,863
      Net income
       (loss)         $(709)   $2,332    $2,713    $5,786    $9,116 $10,584
  Basic earnings
   (loss) per share  $(0.02)      n/a       n/a       n/a       n/a     n/a
  Diluted earnings
   (loss) per share  $(0.02)      n/a       n/a       n/a       n/a     n/a



                         WAUWATOSA HOLDINGS, INC.
              CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


                                  December 31,              June 30,
                                     2005              2005          2004
                               (dollars in thousands, except per share data)
                Assets             (Unaudited)
  Cash                                $8,761         $10,107       $11,116
  Federal funds sold                   5,388           8,779         7,975
  Short term investments               2,349           1,581           301
      Cash and cash equivalents       16,498          20,467        19,392

  Securities available-for-sale
   (at fair value):                  121,955          83,991        99,549

  Loans receivable                 1,306,018       1,218,167     1,066,972
  Allowance for loan losses            5,250           4,606         3,378
      Loans receivable, net        1,300,768       1,213,561     1,063,594
  Office properties and
   equipment, net                     25,022          24,018        15,894
  Federal Home Loan Bank stock,
   at cost                            14,406          14,097        13,322
  Cash surrender value of life
   insurance                          22,792          22,078        20,980
  Prepaid expenses and other
   assets                              9,768           7,920         7,353
      Total assets                $1,511,209     $ 1,386,132    $1,240,084

          Liabilities and
        Shareholders' Equity
  Liabilities:
    Demand deposits                  $82,290        $100,861       $99,182
    Money market and savings
     deposits                         33,565          27,117        28,475
    Time deposits                    929,738       1,000,813       907,931
      Total deposits               1,045,593       1,128,791     1,035,588
    Federal Home Loan Bank
     advances short-term              87,209          35,000        25,000
    Federal Home Loan Bank
     advances long-term              114,003          58,162        35,000
    Advance payments by
     borrowers for taxes                 181          15,821        14,446
    Other liabilities                 32,527          14,942         7,252
      Total liabilities            1,279,513       1,252,716     1,117,286
  Shareholders' equity:
    Common Stock (par value -
     $.01; 200,000,00                    337               -             -
    Shares authorized;
     33,723,750 shares issued;
     33,038,385 shares
     outstanding)
    Additional Paid-In Capital       103,859               -             -
    Net unrealized loss on
     securities available-for-sale
     (net of taxes)                   (1,571)           (627)       (2,129)
    Retained earnings,
     substantially restricted        136,756         134,043       124,927
    Unearned ESOP shares              (7,685)              -             -
      Total shareholders' equity     231,696         133,416       122,798
      Total liabilities and
       shareholders' equity       $1,511,209      $1,386,132    $1,240,084


First Call Analyst: 

FCMN Contact: 

DATASOURCE: Wauwatosa Holdings, Inc.



CONTACT:  John E. Perry, Investor Relations Officer, Wauwatosa Holdings,

Inc., Vice President - Public Relations, Wauwatosa Savings Bank,

[phone],  

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