Wauwatosa Holdings, Inc. Announces Results of Operations for the Fourth Quarter and Year Ended December 31, 2006

WAUWATOSA, Wis., Feb. 6  /PRNewswire-FirstCall/ -- Wauwatosa Holdings, Inc. (NASDAQ:WAUW) reported 2006 fourth quarter net income of $2.3 million, or $0.07 per share, as compared to a loss of $709,000, or a loss of $0.02 per share in the fourth quarter of 2005.  Net income for the year ended December 31, 2006 was $8.1 million, or $0.24 per share, as compared to $6.0 million for the 12 months ended December 31, 2005.

Effective October 4, 2005, Wauwatosa Savings Bank completed its reorganization into a mutual holding company and concurrently Wauwatosa Holdings, Inc. completed its initial public offering of common stock.  On November 15, 2005, Wauwatosa Holdings announced that it had changed its fiscal year-end from June 30 to December 31.  As a result, operating data for the 12 months ended December 31, 2005 has not been previously reported and per share data for the period is not applicable.

The single most significant difference between fourth quarter 2006 and fourth quarter 2005 operating results is the contribution of 556,442 shares of Wauwatosa Holdings, Inc. common stock to the Waukesha County Community Foundation, Inc. in connection with the October 2005 reorganization.  This charitable contribution totaled $5.6 million and was expensed in the fourth quarter of 2005.  There was no contribution expense in 2006.

Net interest income decreased $1.3 million, or 12.2% for the three months ended December 31, 2006 compared to the same three months in 2005.  This is in spite of a 9.1% increase in average earning assets for the fourth quarter of 2006 versus 2005.  The interest rate spread for the fourth quarter of 2006 was 1.85% compared to 2.34% for the fourth quarter of 2005.  It is anticipated that the interest rate spread will continue to decline during 2007 as our cost of funding continues to increase more rapidly than the yield on our interest- earning assets.  As Wauwatosa Holdings is dependent upon net interest income for approximately 85% of its total revenue, a continued decline in the interest rate spread will significantly impact net income.

Wauwatosa Savings Bank acquired Waterstone Mortgage Corporation, a mortgage broker, in the first quarter of 2006.  As a result, other income for the fourth quarter includes $357,000 in mortgage banking income, while there was no comparable income in 2005.  In addition, the Wauwatosa Holdings, Inc. 2006 fourth quarter loan loss provision was $468,000 less than that of the fourth quarter of 2005, a 56.7% decline.  This is in contrast to an increase in the loan loss provision for the year ended December 31, 2006 to $2.2 million from $1.9 million for the 12 months ended December 31, 2005, a 15.3% increase.  Net charge-offs for the fourth quarter of 2006 were $255,000, or 0.02% of total average loans outstanding during the quarter and $381,000 in 2005, or 0.03% of total average loans in the comparable prior period.  At December 31, 2006, the allowance for loan losses was 0.52% of total loans compared to 0.40% at December 31, 2005.  Nonperforming loans were 2.10% of total loans at December 31, 2006 and 1.39% at December 31, 2005.

Assets at year-end totaled $1.6 billion compared to $1.5 billion at December 31, 2005.  Book value per share was $7.29 on December 31, 2006 compared to $7.01 on the same date in 2005.  Total net loans receivable were $1.4 billion at the end of 2006 and $1.3 billion on December 31, 2005.

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          Years ended
                                December 31,             December 31,
                             2006         2005         2006         2005
                                (Unaudited)              (Unaudited)
                           (In thousands except ratios and per share data)

  Operations Data:
    Net interest income     $9,623      $10,959      $38,449      $40,199
    Provision for loan
     losses                    358          826        2,201        1,909
    Noninterest income       1,289        1,267        5,202        3,526
    Noninterest expense      6,944       12,578       28,698       29,646
    Income (loss) before
     income taxes            3,610       (1,178)      12,752       12,170
    Income tax expense
     (benefit)               1,326         (469)       4,699        6,127
    Net income (loss)        2,284         (709)       8,053        6,043

  Selected Financial Ratios:
    Yield on earning assets   6.12%        5.81%        6.03%        5.84%
    Cost of funds             4.27         3.47         4.03         3.28
    Interest rate spread      1.85         2.34         2.00         2.56
    Return (loss) on average
     assets                   0.54        (0.18)        0.50         0.43
    Return (loss) on average
     equity                   3.77        (1.39)        3.41         4.52
    Average equity to average
     assets                  14.35        13.27        14.79         9.41
    Non-interest expense to
     average assets           1.65         3.27         1.80         2.09
    Allowance for loan losses
     to total loans
     outstanding              0.52         0.40         0.52         0.40

  Per Share:
    Basic earnings (loss)
     per share               $0.07       $(0.02)       $0.24          n/a
    Diluted earnings (loss)
     per share                0.07        (0.02)        0.24          n/a
    Book value per share      7.29         7.01         7.29        $7.01
    Weighted average
     shares
     outstanding        33,105,046   33,135,424   33,076,565          n/a
    Shares outstanding
     at December 31     33,114,539   33,038,385   33,114,539   33,038,385




                                         December 31,              Percent
                                    2006              2005          Change
                                 (Unaudited)
                                            (Dollars in thousands)
  Financial Condition:
    Total assets                 $1,648,470      $1,511,209           9.1 %
    Loans receivable, net         1,365,712       1,300,768           5.0
    Securities available for
     sale                           117,330         121,955          (3.8)
    Deposits                      1,036,218       1,045,593          (0.9)
    Borrowings                      334,003         201,212          66.0
    Total equity                    241,272         231,696           4.1
    Allowance for loan losses         7,195           5,250          37.0
    Non-performing assets            29,408          18,280          60.9


                         WAUWATOSA HOLDINGS, INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS

                           Three months ended           Years ended
                              December 31,              December 31,
                            2006       2005         2006         2005
                       (Unaudited) (Unaudited)  (Unaudited)  (Unaudited)
                             (In thousands except per share data)
  Interest income:
    Loans                $21,509      $19,599      $83,822      $74,020
    Mortgage-related
     securities            1,207          913        4,263        2,466
    Debt securities,
     federal funds sold
     and short-term
     investments           1,971          974        4,143        3,250
      Total interest
       income             24,687       21,486       92,228       79,736
  Interest expense:
    Deposits              11,281        8,975       42,038       35,468
    Borrowings             3,783        1,552       11,741        4,069
      Total interest
       expense            15,064       10,527       53,779       39,537
      Net interest income  9,623       10,959       38,449       40,199
  Provision for loan
   losses                    358          826        2,201        1,909
      Net interest income
       after provision
       for loan losses     9,265       10,133       36,248       38,290
  Noninterest income:
    Service charges on
     loans and deposits      520          629        2,021        1,745
    Increase in cash
     surrender value of
     life insurance          180          151        1,055          805
    Gain (loss) on sale
     of securities           (35)           -         (819)          12
    Mortgage banking income  357            -        2,109            -
    Other                    267          487          836          964
      Total noninterest
       income              1,289        1,267        5,202        3,526
  Noninterest expenses:
    Compensation, payroll
     taxes, and other
     employee benefits     3,715        4,376       16,209       13,133


    Occupancy, office
     furniture, and
     equipment             1,168          966        4,304        3,571
    Advertising              423          353        1,369        1,355
    Data processing          229          490        1,730        1,412
    Charitable
     contributions             -        5,122            -        5,685
    Communications expense   232          142          700          619
    Professional Fees        450          409        1,243          926
    Other                    727          720        3,143        2,945
      Total noninterest
       expenses            6,944       12,578       28,698       29,646
      Income (loss) before
       income taxes        3,610       (1,178)      12,752       12,170
  Income tax expense
   (benefit)               1,326         (469)       4,699        6,127
      Net income (loss)   $2,284        $(709)      $8,053       $6,043
  Basic earnings (loss)
   per share               $0.07       $(0.02)        0.24          n/a
  Diluted earnings (loss)
   per share               $0.07       $(0.02)        0.24          n/a


                         WAUWATOSA HOLDINGS, INC.
              CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                                         December 31,
                                                     2006           2005
                                                    (Dollars in thousands)
                           Assets                (Unaudited)
  Cash                                             $26,745         $8,761
  Federal funds sold                                19,458          5,388
  Short term investments                            27,604          2,349
      Cash and cash equivalents                     73,807         16,498
  Securities available-for-sale (at fair value):   117,330        121,955
  Loans held for sale                                5,387              -
  Loans receivable                               1,372,907      1,306,018
  Allowance for loan losses                         (7,195)        (5,250)
      Loans receivable, net                      1,365,712      1,300,768
  Office properties and equipment, net              32,625         25,022
  Federal Home Loan Bank stock, at cost             17,213         14,406
  Cash surrender value of life insurance            24,152         22,792
  Prepaid expenses and other assets                 12,244          9,768
      Total assets                              $1,648,470      1,511,209
         Liabilities and Shareholders' Equity
  Liabilities:
    Demand deposits                                $58,407        $82,290
    Money market and savings deposits               94,472         33,565
    Time deposits                                  883,339        929,738
      Total deposits                             1,036,218      1,045,593
    Federal Home Loan Bank advances short-term      41,224         87,209
    Federal Home Loan Bank advances long-term      292,779        114,003
    Advance payments by borrowers for taxes            190            181
    Other liabilities                               36,787         32,527
      Total liabilities                          1,407,198      1,279,513
  Shareholders' equity:
    Common Stock (par value - $.01;                    337            337
     200,000,000 shares authorized;
     33,723,750 shares issued; 33,076,565 and
     33,038,385 shares outstanding 2006 and 2005)
     Additional Paid-In Capital                    104,182        103,859
    Accumulated other comprehensive
     loss (net of taxes)                            (1,225)        (1,571)
    Retained earnings, substantially restricted    144,809        136,756
    Unearned ESOP shares                            (6,831)        (7,685)
      Total shareholders' equity                   241,272        231,696
      Total liabilities and shareholders'
       equity                                   $1,648,470      1,511,209


DATASOURCE: Wauwatosa Holdings, Inc.



CONTACT:  Anne Kahl of Wauwatosa Holdings, Inc., [phone]



Web site:  http://www.wsbonline.com/ 

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