WAUW Wauwatosa Hldgs (MM)

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., +1-414-918-0656 Web site: http://www.wsbonline.com/

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