WAUW Wauwatosa Hldgs (MM)

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, +1-414-918-0312,

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