10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.20549

Form 10-Q

R	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended June 30, 2012
	OR
*	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 000-51507

WATERSTONE FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Federal	20-3598485
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

11200 W. Plank Ct.

Wauwatosa, WI53226

(414) 761-1000

(Address, including Zip Code, and telephone number,

including area code, of registrant's principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes R No *

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes R No *

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer * Accelerated filer R Non-accelerated filer * Smaller Reporting Company *

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes * No R

The number of shares outstanding of the issuer's common stock, $0.01 par value per share, was 31,350,097 at July 31, 2012.

WATERSTONE FINANCIAL, INC.

10-Q INDEX

	Page No.
PARTI. FINANCIAL INFORMATION
Item l. Financial Statements	3
Consolidated Statements of Financial Condition as of June 30, 2012 (unaudited) and December 31, 2011	3
Consolidated Statements of Operations for the six and three months ended June 30, 2012 and 2011 (unaudited)	4
Consolidated Statements of Comprehensive Income (Loss) for the six and three months ended June 30, 2012 and 2011 (unaudited)	5
Consolidated Statements of Changes in Shareholders' Equity for the six months ended June 30, 2012 and 2011 (unaudited)	6
Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (unaudited)	7
Notes to Consolidated Financial Statements (unaudited)	8 - 42
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	43 - 66
Item 3. Quantitative and Qualitative Disclosures about Market Risk	67
Item 4. Controls and Procedures	68
PART II. OTHER INFORMATION	68
Item 1. Legal Proceedings	68
Item 1A. Risk Factors	68
Item 6. Exhibits	68
Signatures	68
Certification
Certification
Certification
Certification

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

WATERSTONE FINANCIAL, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	(Unaudited)
	June 30,			December 31,
	2012			2011
Assets	(In Thousands, except share data)
Cash	$	50,352			72,336
Federal funds sold and short-term investments		14,523			8,044
Cash and cash equivalents		64,875			80,380
Securities available for sale (at fair value)		213,242			206,519
Securities held to maturity (at amortized cost), fair value of $2,542 at December 31, 2011		-			2,648
Loans held for sale (at fair value)		122,489			88,283
Loans receivable		1,167,181			1,216,664
Less: Allowance for loan losses		(32,658	)		(32,430	)
Loans receivable, net		1,134,523			1,184,234
Office properties and equipment, net		27,115			27,356
Federal Home Loan Bank stock (at cost)		20,507			21,653
Cash surrender value of life insurance		37,339			36,749
Real estate owned		47,815			56,670
Prepaid expenses and other assets		13,276			8,359
Total assets	$	1,681,181			1,712,851
Liabilities and Shareholders' Equity
Liabilities:
Demand deposits	$	76,841			68,457
Money market and savings deposits		114,886			104,102
Time deposits		794,471			878,733
Total deposits		986,198			1,051,292
Short-term borrowings		45,031			27,138
Long-term borrowings		434,000			434,000
Advance payments by borrowers for taxes		14,518			942
Other liabilities		25,650			33,107
Total liabilities		1,505,397			1,546,479
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 2012 and 2011, Issued - 33,974,450 shares in 2012 and in 2011, Outstanding - 31,350,097 shares in 2012 and 31,250,097 in 2011		340			340
Additional paid-in capital		110,652			110,894
Retained earnings		109,959			101,573
Unearned ESOP shares		(2,135	)		(2,562	)
Accumulated other comprehensive income, net of taxes		2,229			1,388
Treasury shares (2,724,353 shares), at cost		(45,261	)		(45,261	)
Total shareholders' equity		175,784			166,372
Total liabilities and shareholders' equity	$	1,681,181			1,712,851

See Accompanying Notes to Unaudited Consolidated Financial Statements.

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WATERSTONE FINANCIAL, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Six months ended June 30,						Three months ended June 30,
	2012			2011			2012			2011
	(In thousands, except per share data)
Interest income:
Loans	$	32,892		$	36,506			16,319			18,040
Mortgage-related securities		1,784			2,048			921			1,012
Debt securities, federal funds sold and short-term investments		1,255			1,664			548			829
Total interest income		35,931			40,218			17,788			19,881
Interest expense:
Deposits		5,866			7,976			2,663			3,877
Borrowings		9,010			8,601			4,497			4,290
Total interest expense		14,876			16,577			7,160			8,167
Net interest income		21,055			23,641			10,628			11,714
Provision for loan losses		5,100			10,156			1,425			5,281
Net interest income after provision for loan losses		15,955			13,485			9,203			6,433
Noninterest income:
Service charges on loans and deposits		631			520			382			271
Increase in cash surrender value of life insurance		409			422			264			270
Total other-than-temporary investment losses		(475	)		(1,093	)		(471	)		(1,093	)
Portion of loss recognized in other comprehensive income (before tax)		371			1,041			371			1,041
Net impairment losses recognized in earnings		(104	)		(52	)		(100	)		(52	)
Mortgage banking income		36,708			15,442			22,507			9,279
Gain on sale of available for sale securities		241			-			-			-
Other noninterest income		368			642			199			409
Total noninterest income		38,253			16,974			23,252			10,177
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		25,602			17,314			14,965			9,397
Occupancy, office furniture and equipment		3,409			3,275			1,688			1,656
Advertising		1,324			651			769			330
Data processing		726			695			334			345
Communications		603			487			306			229
Professional fees		959			797			533			403
Real estate owned		4,273			4,681			2,838			2,886
FDIC insurance premiums		1,814			2,077			873			1,016
Other noninterest expense		7,041			3,346			3,930			1,707
Total noninterest expenses		45,751			33,323			26,236			17,969
Income (loss) before income taxes		8,457			(2,864	)		6,219			(1,359	)
Income tax expense (benefit)		71			(736	)		41			(775	)
Net income (loss)	$	8,386		$	(2,128	)		6,178			(584	)
Income (loss) per share:
Basic	$	0.27		$	(0.07	)		0.20			(0.02	)
Diluted	$	0.27		$	(0.07	)		0.20			(0.02	)
Weighted average shares outstanding:
Basic		31,034,644			30,909,235			31,045,148			30,919,666
Diluted		31,068,812			30,909,235			31,136,121			30,919,666

See Accompanying Notes to Unaudited Consolidated Financial Statements.

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WATERSONE FINANCIAL, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Six months ended June 30,						Three months ended June 30,
	2012			2011			2012		2011
	(In Thousands)
Net income (loss)	$	8,386			(2,128	)		6,178		(584	)
Other comprehensive income (loss), net of tax:
Net unrealized holding gain (loss) on avaliable for sale securities arising during the period, net of tax (expense) benefit of ($420), $1,140, ($320) and $1,089 respectively		922			(201	)		582		123
Reclassification adjustment for net gain (loss) on available for sale securities realized during the period, net of tax expense (benefit) of $55, ($21), ($41) and zero, respectively		(81	)		31			63		31
Total other comprehensive income (loss)		841			(170	)		645		154
Comprehensive income (loss)	$	9,227			(2,298	)		6,823		(430	)

See Accompanying Notes to Unaudited Consolidated Financial Statements.

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WATERSONE FINANCIAL, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

														Accumulated
					Additional						Unearned			Other						Total
	Common Stock				Paid-In			Retained			ESOP			Comprehensive			Treasury			Shareholders'
	Shares		Amount		Capital			Earnings			Shares			Income			Shares			Equity
	(In Thousands Except Shares)
Balances at December 31, 2010		31,250,097	$	340		109,953			109,046			(3,416	)		1,558			(45,261	)		172,220
Comprehensive loss:
Net loss		-		-		-			(2,128	)		-			-			-			(2,128	)
Other comprehensive loss:		-		-		-			-			-			(170	)		-			(170	)
Total comprehensive loss																					(2,298	)
ESOP shares committed to be released to Plan participants		-		-		(320	)		-			427			-			-			107
Stock based compensation		-		-		851			-			-			-			-			851
Balances at June 30, 2011		31,250,097	$	340		110,484			106,918			(2,989	)		1,388			(45,261	)		170,880
Balances at December 31, 2011		31,250,097	$	340		110,894			101,573			(2,562	)		1,388			(45,261	)		166,372
Comprehensive income:
Net income		-		-		-			8,386			-			-			-			8,386
Other comprehensive income:		-		-		-			-			-			841			-			841
Total comprehensive income																					9,227
ESOP shares committed to be released to Plan participants		-		-		(317	)		-			427			-			-			110
Stock based compensation		100,000		-		75			-			-			-			-			75
Balances at June 30, 2012		31,350,097	$	340		110,652			109,959			(2,135	)		2,229			(45,261	)		175,784

See Accompanying Notes to Unaudited Consolidated Financial Statements.

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WATERSTONE FINANCIAL, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended June 30,
	2012			2011
	(In Thousands)
Operating activities:
Net income (loss)	$	8,386			(2,128	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for loan losses		5,100			10,156
Depreciation		985			928
Deferred income taxes		(2,160	)		(795	)
Stock based compensation		75			851
Net amortization of premium on debt and mortgage-related securities		576			299
Amortization of unearned ESOP shares		110			107
Net realized and unrealized loss related to real estate owned		2,670			1,570
Gain on sale of loans held for sale		(37,304	)		(15,442	)
Loans originated for sale		(767,092	)		(403,309	)
Proceeds on sales of loans originated for sale		770,190			462,998
Decrease in accrued interest receivable		508			187
Increase in cash surrender value of bank owned life insurance		(409	)		(422	)
Decrease in accrued interest on deposits and borrowings		(318	)		(305	)
Increase (decrease) in other liabilities		3,862			(8,404	)
Decrease in accrued tax payable		(257	)		(9	)
Gain on sale of available for sale securities		(241	)		-
Net impairment losses recognized in earnings		104			52
Other		(2,887	)		3,224
Net cash (used in) provided by operating activities		(18,102	)		49,558
Investing activities:
Net decrease in loans receivable		33,609			38,939
Purchases of:
Mortgage-related securities		(77,252	)		-
Debt securities		-			(50,115	)
Certificates of deposit		(1,470	)		(4,094	)
Premises and equipment, net		(741	)		(427	)
Bank owned life insurance		(180	)		(180	)
Proceeds from:
Principal repayments on mortgage-related securities		16,182			17,176
Sales of debt securities		11,908			-
Maturities of debt securities		44,868			29,164
Calls of structured notes		2,648			-
Redemption of FHLB stock		1,146			-
Sales of real estate owned		16,247			11,732
Net cash provided by investing activities		46,965			42,195

Financing activities:
Net decrease in deposits		(65,094	)		(63,324	)
Net change in short-term borrowings		17,893			(21,715	)
Net change in advance payments by borrowers for taxes		2,833			13,442
Net cash used in financing activities		(44,368	)		(71,597	)
Increase (decrease)in cash and cash equivalents		(15,505	)		20,156
Cash and cash equivalents at beginning of period		80,380			75,331
Cash and cash equivalents at end of period	$	64,875		$	95,487
Supplemental information:
Cash paid, credited or (received) during the period for:
Income tax payments		2,488			67
Interest payments		15,195			16,882
Noncash investing activities:
Loans receivable transferred to real estate owned		11,002			16,167

See Accompanying Notes to Unaudited Consolidated Financial Statements.

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WATERSTONE FINANCIAL, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Basis of Presentation

The unaudited interim consolidated financial statements include the accounts of Waterstone Financial, Inc. (the "Company") and the Company's subsidiaries.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information, Rule 10-01 of Regulation S-X and the instructions to Form 10-Q. The financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations, changes in shareholders' equity, and cash flows of the Company for the periods presented.

The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the Company's December 31, 2011 Annual Report on Form 10-K. Operating results for the six and three months ended June 30, 2012, are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

The preparation of the unaudited 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, deferred income taxes, certain investment securities and real estate owned.  Actual results could differ from those estimates.

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Note 2- Securities Available for Sale

The amortized cost and fair values of the Company's investment in securities available for sale follow:

	June 30, 2012
			Gross		Gross
	Amortized		unrealized		unrealized
	cost		gains		losses			Fair value
	(In Thousands)
Mortgage-backed securities	$	89,760		2,043		(4	)		91,799
Collateralized mortgage obligations:
Government sponsored enterprise issued		38,163		508		(7	)		38,664
Private-label issued		18,422		-		(371	)		18,051
Mortgage-related securities		146,345		2,551		(382	)		148,514
Government sponsored enterprise bonds		29,006		46		(1	)		29,051
Municipal securities		23,236		1,872		(91	)		25,017
Other debt securities		5,000		240		-			5,240
Debt securities		57,242		2,158		(92	)		59,308
Certificates of Deposit		5,390		32		(2	)		5,420
	$	208,977		4,741		(476	)		213,242

	December 31, 2011
			Gross		Gross
	Amortized		unrealized		unrealized
	cost		gains		losses			Fair value
	(In Thousands)
Mortgage-backed securities	$	33,561		1,857		(1	)		35,417
Collateralized mortgage obligations:
Government sponsored enterprise issued		32,650		559		(13	)		33,196
Private-label issued		19,475		16		(1,040	)		18,451
Mortgage-related securities		85,686		2,432		(1,054	)		87,064
Government sponsored enterprise bonds		71,210		152		(13	)		71,349
Municipal securities		37,644		1,744		(320	)		39,068
Other debt securities		5,000		118		-			5,118
Debt securities		113,854		2,014		(333	)		115,535
Certificates of Deposit		3,920		2		(2	)		3,920
	$	203,460		4,448		(1,389	)		206,519

The majority of the Company's mortgage-backed securities and collateralized mortgage obligations issued by government sponsored enterprises are guaranteed by either Fannie Mae or Freddie Mac.  At June 30, 2012, $24.1 million of the Company's government sponsored enterprise bonds and $77.8 million of mortgage-related securities were pledged as collateral to secure repurchase agreement obligations of the Company.  An additional $1.3 million in municipal securities were pledged as collateral related to mortgage banking activities.

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The amortized cost and fair values of investment securities by contractual maturity at June 30, 2012, are shown below. Actual maturities may differ from contractual maturities because issuers have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
	Cost		Value
	(In Thousands)
Debt and other securities
Due within one year	$	3,812		3,821
Due after one year through five years		41,969		43,102
Due after five years through ten years		1,159		1,257
Due after ten years		15,692		16,548
Mortgage-related securities		146,345		148,514
	$	208,977		213,242

Gross unrealized losses on securities available for sale and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows:

	June 30, 2012
	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	$	8,107		(4	)		-		-			8,107		(4	)
Collateralized mortgage obligations:
Government sponsored enterprise issued		5,497		(7	)		-		-			5,497		(7	)
Private-label issued		2,612		(31	)		15,439		(340	)		18,051		(371	)
Government sponsored enterprise bonds		1,499		(1	)		-		-			1,499		(1	)
Municipal securities		215		-			1,358		(91	)		1,573		(91	)
Certificates of Deposit		978		(2	)		-		-			978		(2	)
	$	18,908		(45	)		16,797		(431	)		35,705		(476	)
	December 31, 2011
	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	$	1,167		(1	)		-		-			1,167		(1	)
Collateralized mortgage obligations:
Government sponsored enterprise issued		5,726		(13	)		-		-			5,726		(13	)
Private-label issued		-		-			15,408		(1,040	)		15,408		(1,040	)
Government sponsored enterprise bonds		12,487		(13	)		-		-			12,487		(13	)
Municipal securities		228		(87	)		1,989		(233	)		2,217		(320	)
Certificates of Deposit		1,958		(2	)		-		-			1,958		(2	)
	$	21,566		(116	)		17,397		(1,273	)		38,963		(1,389	)

The Company reviews the investment securities portfolio on a quarterly basis to monitor its exposure to other-than-temporary impairment.  In evaluating whether a security's decline in market value is other-than-temporary, management considers the length of time and extent to which the fair value has been less than cost, financial condition of the issuer and the underlying obligors, quality of credit enhancements, volatility of the fair value of the security, the expected recovery period of the security and ratings agency evaluations.  In addition the Company may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds and the value of any underlying collateral.  For certain securities in unrealized loss positions, the Company prepares cash flow analyses to compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

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Based upon the aforementioned factors, the Company identified two private-label collateralized mortgage obligation securities at June 30, 2012 with a combined amortized cost of $18.4 million for which a cash flow analysis was performed to determine whether an other-than-temporary impairment was warranted.  This evaluation indicated that the two private-label collateralized mortgage obligations were other-than-temporarily impaired.  Estimates of discounted cash flows based on expected yield at time of original purchase, prepayment assumptions based on actual and anticipated prepayment speed, actual and anticipated default rates and estimated level of severity given the loan to value ratios, credit scores, geographic locations, vintage and levels of subordination related to the security and its underlying collateral resulted in a projected credit loss on the collateralized mortgage obligations.  During the six months ended June 30, 2012, the Company's analysis resulted in $4,000 in credit losses that were charged to earnings with respect to one of these two collateralized mortgage obligations.  This security had an amortized cost of $15.8 million and an estimated fair value of $15.4 million as of June 30, 2012.  The analysis with respect to the second collateralized mortgage obligation indicated no additional estimated credit loss.  This security had an amortized cost of $2.64 million and an estimated fair value of $2.61 million as of June 30, 2012.

In addition to the securities analyzed and discussed above, during the six months ended June 30, 2012, the Company identified two additional municipal securities that were deemed to be other-than-temporarily impaired.  Both securities were issued by a tax incremental district in a municipality located in Wisconsin.  During the quarter ended June 30, 2012, the Company received audited financial statements with respect to the municipal issuer that called into question the ability of the underlying taxing district that issued the securities to operate as a going concern.  During the six months ended June 30, 2012, the Company's analysis of these securities resulted in $100,000 in credit losses that were charged to earnings with respect to these two municipal securities.  As of June 30, 2012, these securities had a combined amortized cost and fair value of $215,000.

The following table presents the change in other-than-temporary credit related impairment charges on securities available for sale for which a portion of the other-than-temporary impairments related to other factors was recognized in other comprehensive loss.

	(In Thousands)
Credit related impairments on securities as of December 31, 2010	$	1,640
Credit related impairments related to securites for which an other-than-temporary impairment was not previously recognized		-
Increase in credit related impairments related to securities for which an other-than-temporary impairment was previously recognized		456
Credit related impairments on securities as of December 31, 2011		2,096
Credit related impairments related to securites for which an other-than-temporary impairment was not previously recognized		100
Increase in credit related impairments related to securities for which an other-than-temporary impairment was previously recognized		4
Credit related impairments on securities as of June 30, 2012	$	2,200

Exclusive of the aforementioned securities, the Company has determined that the decline in fair value of the remaining securities is not attributable to credit deterioration, and based on the foregoing evaluation criteria and as the Company does not intend to sell nor is it more likely than not that it will be required to sell these securities before recovery of the amortized cost basis, these securities are not considered other-than-temporarily impaired.

Continued deterioration of general economic market conditions could result in the recognition of future other-than-temporary impairment losses within the investment portfolio and such amounts could be material to our consolidated financial statements.

Securities Held to Maturity

As of June 30, 2012, the Company does not hold any securities that are designated as held to maturity.  During the six months ended June 30, 2012, the one security held by the Company that had been designated as held to maturity was called by the issuer.  This security had an amortized cost of $2.6 million at the time that it was called.

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Note 3 - Loans Receivable

Loans receivable at June 30, 2012 and December 31, 2011 are summarized as follows:

	June 30,		December 31,
		2012		2011
	(In Thousands)
Mortgage loans:
Residential real estate:
One- to four-family	$	473,730		496,736
Over four-family		530,752		552,240
Home equity		35,881		38,599
Construction and land		38,875		39,528
Commercial real estate		70,046		65,434
Consumer		165		109
Commercial loans		17,732		24,018
		1,167,181		1,216,664

The Company provides several types of loans to its customers, including residential, construction, commercial and consumer loans.  Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to one borrower or to multiple borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions.  While credit risks tend to be geographically concentrated in the Company's Milwaukee metropolitan area and while 89.1% of the Company's loan portfolio involves loans that are secured by residential real estate, there are no concentrations with individual or groups of related borrowers.  While the real estate collateralizing these loans is residential in nature, it ranges from owner-occupied single family homes to large apartment complexes.  In addition, real estate collateralizing $89.8 million or 7.7% of total loans is located outside of the state of Wisconsin.

During the three months ended June 30, 2012, $767.1 million in residential loans were originated for sale.  During the same period, sales of loans held for sale totaled $770.2 million, generating mortgage banking income of $36.7 million.   During the year ended December 31, 2011, the Company began selectively selling loans on a servicing retained basis.  The unpaid principal balance of loans serviced for others was $213.4 million and $29.9 million at June 30, 2012 and December 31, 2011, respectively. These loans are not reflected in the consolidated statements of financial condition.

Qualifying loans receivable totaling $806.1 million and $715.7 million are pledged as collateral against $350.0 million in outstanding Federal Home Loan Bank of Chicago advances under a blanket security agreement at both June 30, 2012 and December 31, 2011.

-- 12 --

An analysis of past due loans receivable as of June 30, 2012 and December 31, 2011 follows:

	As of June 30, 2012
	1-59 Days Past Due (1)		60-89 Days Past Due (2)		Greater Than 90 Days		Total Past Due		Current (3)		Total Loans
	(In Thousands)
Mortgage loans:
Residential real estate:
One- to four-family	$	8,423		5,444		34,391		48,258		425,472		473,730
Over four-family		1,046		5,395		18,837		25,278		505,474		530,752
Home equity		378		130		829		1,337		34,544		35,881
Construction and land		-		-		5,826		5,826		33,049		38,875
Commercial real estate		101		-		3,581		3,682		66,364		70,046
Consumer		-		-		-		-		165		165
Commercial loans		-		-		-		-		17,732		17,732
Total	$	9,948		10,969		63,464		84,381		1,082,800		1,167,181
	As of December 31, 2011
Mortgage loans:
Residential real estate:
One- to four-family	$	12,650		5,536		40,001		58,187		438,549		496,736
Over four-family		13,044		2,630		8,946		24,620		527,620		552,240
Home equity		1,982		131		290		2,403		36,196		38,599
Construction and land		49		155		6,790		6,994		32,534		39,528
Commercial real estate		70		-		515		585		64,849		65,434
Consumer		8		-		-		8		101		109
Commercial loans		543		-		70		613		23,405		24,018
Total	$	28,346		8,452		56,612		93,410		1,123,254		1,216,664

⁽¹⁾ Includes $2.2 million and $4.6 million for June 30, 2012 and December 31, 2011, respectively, which are on non-accrual status.

⁽²⁾ Includes $7.2 million and $1.4 million for June 30, 2012 and December 31, 2011, respectively, which are on non-accrual status.

⁽³⁾ Includes $11.8 million and $15.7 million for June 30, 2012 and December 31, 2011, respectively, which are on non-accrual status.

-- 13 --

As of June 30, 2012 and December 31, 2011, there are no loans that are 90 or more days past due and still accruing interest.

A summary of the activity for the six months ended June 30, 2012 and the years ended December 31, 2011 and 2010 in the allowance for loan losses follows:

	One- to Four- Family			Over Four Family			Home Equity			Construction and Land			Commercial Real Estate			Consumer			Commercial			Total
	(In Thousands)
Six months ended June 30, 2012
Balance at beginning of period	$	17,475			8,252			1,998			2,922			941			28			814			32,430
Provision for loan losses		2,943			1,396			374			(137	)		817			(1	)		(292	)		5,100
Charge-offs		(4,133	)		(612	)		(158	)		(192	)		(43	)		-			(59	)		(5,197	)
Recoveries		252			11			22			15			-			-			25			325
Balance at end of period	$	16,537			9,047			2,236			2,608			1,715			27			488			32,658
Year ended December 31, 2011
Balance at beginning of period	$	16,150			6,877			1,196			3,252			671			28			1,001			29,175
Provision for loan losses		12,567			5,331			1,429			1,346			998			9			397			22,077
Charge-offs		(11,553	)		(3,996	)		(634	)		(1,745	)		(734	)		(10	)		(619	)		(19,291	)
Recoveries		311			40			7			69			6			1			35			469
Balance at end of period	$	17,475			8,252			1,998			2,922			941			28			814			32,430
Year ended December 31, 2010
Balance at beginning of period	$	17,875			5,208			1,642			2,635			720			43			371			28,494
Provision for loan losses		15,054			5,053			170			2,934			525			(3	)		2,099			25,832
Charge-offs		(16,906	)		(3,439	)		(619	)		(2,319	)		(575	)		(13	)		(1,470	)		(25,341	)
Recoveries		127			55			3			2			1			1			1			190
Balance at end of period	$	16,150			6,877			1,196			3,252			671			28			1,001			29,175

-- 14 --

A summary of the allowance for loan loss for loans evaluated individually and collectively for impairment by collateral class as of June 30, 2012 follows:

	One- to Four- Family		Over Four Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total
	(In Thousands)
Allowance related to loans individually evaluated for impairment	$	7,291		5,040		1,135		1,744		795		-		76		16,081
Allowance related to loans collectively evaluated for impairment		9,246		4,007		1,101		864		920		27		412		16,577
Balance at end of period	$	16,537		9,047		2,236		2,608		1,715		27		488		32,658
Loans individually evaluated for impairment	$	62,913		40,070		2,883		7,317		4,175		27		841		118,226
Loans collectively evaluated for impairment		410,817		490,682		32,998		31,558		65,871		138		16,891		1,048,955
Total gross loans	$	473,730		530,752		35,881		38,875		70,046		165		17,732		1,167,181

A summary of the allowance for loan loss for loans evaluated individually and collectively for impairment by collateral class as of the year ended December 31, 2011 follows:

	One- to Four- Family		Over Four Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total
	(In Thousands)
Allowance related to loans individually evaluated for impairment	$	5,707		3,719		803		2,077		-		-		269		12,575
Allowance related to loans collectively evaluated for impairment		11,768		4,533		1,195		845		941		28		545		19,855
Balance at end of period	$	17,475		8,252		1,998		2,922		941		28		814		32,430
Loans individually evaluated for impairment	$	68,321		40,783		2,227		8,436		515		-		1,115		121,397
Loans collectively evaluated for impairment		428,415		511,457		36,372		31,092		64,919		109		22,903		1,095,267
Total gross loans	$	496,736		552,240		38,599		39,528		65,434		109		24,018		1,216,664

-- 15 --

The following table presents information relating to the Company's internal risk ratings of its loans receivable as of June 30, 2012 and December 31, 2011:

	One- to Four- Family		Over Four Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total
	(In Thousands)
At June 30, 2012
Substandard	$	58,026		39,065		3,447		7,316		4,765		27		855		113,501
Watch		26,774		12,311		996		6,089		409		-		1,034		47,613
Pass		388,930		479,376		31,438		25,470		64,872		138		15,843		1,006,067
	$	473,730		530,752		35,881		38,875		70,046		165		17,732		1,167,181
At December 31, 2011
Substandard	$	68,566		37,502		3,188		8,436		1,114		-		1,116		119,922
Watch		14,341		16,993		721		6,199		1,549		-		1,108		40,911
Pass		413,829		497,745		34,690		24,893		62,771		109		21,794		1,055,831
	$	496,736		552,240		38,599		39,528		65,434		109		24,018		1,216,664

Factors that are important to managing overall credit quality include sound loan underwriting and administration, systematic monitoring of existing loans and commitments, effective loan review on an ongoing basis, early identification of potential problems, an allowance for loan losses, and sound non-accrual and charge-off policies.  Our underwriting policies require an officers' loan committee review and approval of all loans in excess of $500,000.  In addition, an independent loan review function exists for all loans.  Our ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans.  To do so, we maintain a loan review system under which our credit management personnel review non-owner occupied one- to four-family, over four-family, construction and land, commercial real estate and commercial loans that individually, or as part of an overall borrower relationship, exceed $1.0 million in potential exposure.  Loans meeting these criteria are reviewed on an annual basis, or more frequently, if the loan renewal is less than one year.  With respect to this review process, management has determined that pass loans include loans that exhibit acceptable financial statements, cash flow and leverage.  Watch loans have potential weaknesses that deserve management's attention, and if left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credit.  Substandard loans are considered inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged.  These loans generally have a well-defined weakness that may jeopardize liquidation of the debt and are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.  Finally, a loan is considered to be impaired when it is probable that the Bank will not be able to collect all amounts due according to the contractual terms of the loan agreement. Management has determined that all non-accrual loans and loans modified under troubled debt restructurings meet the definition of an impaired loan.

The Company's procedures dictate that an updated valuation must be obtained with respect to underlying collateral at the time a loan is deemed impaired.  Updated valuations may also be obtained upon transfer from loans receivable to real estate owned based upon the age of the prior appraisal, changes in market conditions or known changes to the physical condition of the property.

Estimated fair values are reduced to account for sales commissions, broker fees, unpaid property taxes and additional selling expenses to arrive at an estimated net realizable value.  The adjustment factor is based upon the Company's actual experience with respect to sales of real estate owned over the prior two years.  An additional adjustment factor is applied by appraisal vintage to account for downward market pressure since the date of appraisal.  The additional adjustment factor is based upon relevant sales data available for our general operating market as well as company-specific historical net realizable values as compared to the most recent appraisal prior to disposition.

-- 16 --

With respect to over-four family income producing real estate, appraisals are reviewed and estimated collateral values are adjusted by updating significant appraisal assumptions to reflect current real estate market conditions.  Significant assumptions reviewed and updated include the capitalization rate, rental income and operating expenses.  These adjusted assumptions are based upon recent appraisals received on similar properties as well as on actual experience related to real estate owned and currently under Company management.

The following tables present data on impaired loans at June 30, 2012 and December 31, 2011.

	As of or for the Six Months Ended June 30, 2012
	Recorded Investment		Unpaid Principal		Reserve		Cumulative Charge-Offs		Average Recorded Investment		Int Paid YTD
	(In Thousands)
Total Impaired with Reserve
One- to four-family	$	32,641		33,040		7,291		399		31,085		533
Over four-family		24,389		24,634		5,040		245		24,912		559
Home equity		1,811		1,811		1,135		-		1,864		46
Construction and land		6,871		6,871		1,744		-		6,870		26
Commercial real estate		3,730		3,730		795		-		3,742		36
Consumer		-		-		-		-		-		-
Commercial		841		841		76		-		841		19
	$	70,283		70,927		16,081		644		69,314		1,219
Total Impaired with no Reserve
One- to four-family	$	30,272		35,683		-		5,411		35,840		419
Over four-family		15,681		16,901		-		1,220		17,158		206
Home equity		1,072		1,112		-		40		1,115		6
Construction and land		446		503		-		57		503		3
Commercial real estate		445		469		-		24		474		7
Consumer		27		27		-		-		27		1
Commercial		-		-		-		-		-		-
	$	47,943		54,695		-		6,752		55,117		642
Total Impaired
One- to four-family	$	62,913		68,723		7,291		5,810		66,925		952
Over four-family		40,070		41,535		5,040		1,465		42,070		765
Home equity		2,883		2,923		1,135		40		2,979		52
Construction and land		7,317		7,374		1,744		57		7,373		29
Commercial real estate		4,175		4,199		795		24		4,216		43
Consumer		27		27		-		-		27		1
Commercial		841		841		76		-		841		19
	$	118,226		125,622		16,081		7,396		124,431		1,861

-- 17 --

	As of or for the Year Ended December 31, 2011
	Recorded Investment		Unpaid Principal		Reserve		Cumulative Charge-Offs		Average Recorded Investment		Int Paid YTD
	(In Thousands)
Total Impaired with Reserve
One- to four-family	$	25,735		25,913		5,707		178		26,093		579
Over four-family		21,268		21,648		3,719		380		21,846		761
Home equity		1,428		1,428		803		-		1,448		2
Construction and land		6,543		6,543		2,077		-		6,543		113
Commercial real estate		-		-		-		-		-		-
Commercial		1,033		1,033		269		-		1,037		42
	$	56,007		56,565		12,575		558		56,967		1,497
Total Impaired with no Reserve
One- to four-family	$	42,586		48,482		-		5,896		48,552		1,448
Over four-family		19,515		21,264		-		1,749		21,535		780
Home equity		799		799		-		-		833		3
Construction and land		1,893		3,413		-		1,520		3,413		60
Commercial real estate		515		539		-		24		538		17
Commercial		82		100		-		18		90		-
	$	65,390		74,597		-		9,207		74,961		2,308
Total Impaired
One- to four-family	$	68,321		74,395		5,707		6,074		74,645		2,027
Over four-family		40,783		42,912		3,719		2,129		43,381		1,541
Home equity		2,227		2,227		803		-		2,281		5
Construction and land		8,436		9,956		2,077		1,520		9,956		173
Commercial real estate		515		539		-		24		538		17
Commercial		1,115		1,133		269		18		1,127		42
	$	121,397		131,162		12,575		9,765		131,928		3,805

The difference between a loan's recorded investment and the unpaid principal balance represents a partial charge-off resulting from a confirmed loss due to the value of the collateral securing the loan being below the loan balance and management's assessment that the full collection of the loan balance is not likely.

When a loan is considered impaired, interest payments received are treated as interest income on a cash basis as long as the remaining book value of the loan (i.e., after charge-off of all identified losses) is deemed to be fully collectible. If the remaining book value is not deemed to be fully collectible, all payments received are applied to unpaid principal. Determination as to the ultimate collectability of the remaining book value is supported by an updated credit department evaluation of the borrower's financial condition and prospects for repayment, including consideration of the borrower's sustained historical repayment performance and other relevant factors.

-- 18 --

The determination as to whether an allowance is required with respect to impaired loans is based upon an analysis of the value of the underlying collateral and/or the borrower's intent and ability to make all principal and interest payments in accordance with contractual terms.  The evaluation process is subject to the use of significant estimates and actual results could differ from estimates.  This analysis is primarily based upon third party appraisals and/or a discounted cash flow analysis.  In those cases in which no allowance has been provided for an impaired loan, the Company has determined that the estimated value of the underlying collateral exceeds the remaining outstanding balance of the loan.  Of the total $47.9 million of impaired loans as of June 30, 2012 for which no allowance has been provided, $6.8 million in charge-offs have been recorded to reduce the unpaid principal balance to an amount that is commensurate with the loan's net realizable value, using the estimated fair value of the underlying collateral.  To the extent that further deterioration in property values continues, the Company may have to reevaluate the sufficiency of the collateral servicing these impaired loans resulting in additional provisions to the allowance for loans losses or charge-offs.

At June 30, 2012, total impaired loans includes $54.5 million of troubled debt restructurings.  The vast majority of debt restructurings include a modification of terms to allow for an interest only payment and/or reduction in interest rate.  The restructured terms are typically in place for six to twelve months.  At December 31, 2011, total impaired loans included $55.4 million of troubled debt restructurings.

The following presents data on troubled debt restructurings:

	As of June 30, 2012
	Accruing				Non-accruing				Total
	Amount		Number		Amount		Number		Amount		Number
	(dollars in thousands)
One- to four-family	$	16,920		26	$	20,331		90	$	37,251		116
Over four-family		10,765		12		2,022		6		12,787		18
Home equity		148		2		1,047		4		1,195		6
Construction and land		1,408		1		79		1		1,487		2
Commercial real estate		-		-		1,805		2		1,805		2
	$	29,241		41	$	25,284		103	$	54,525		144
	As of December 31, 2011
	Accruing				Non-accruing				Total
	Amount		Number		Amount		Number		Amount		Number
	(dollars in thousands)
One- to four-family	$	8,293		26	$	26,773		93	$	35,066		119
Over four-family		14,845		13		2,453		8		17,298		21
Home equity		43		1		1,024		4		1,067		5
Construction and land		1,408		1		79		1		1,487		2
Commercial real estate		-		-		452		1		452		1
Commercial		-		-		42		2		42		2
	$	24,589		41	$	30,823		109	$	55,412		150

Troubled debt restructurings involve granting concessions to a borrower experiencing financial difficulty by modifying the terms of the loan in an effort to avoid foreclosure.  Typical restructured terms include six to twelve months of principal forbearance, a reduction in interest rate or both.  At June 30, 2012, $54.5 million in loans had been modified in troubled debt restructurings and $25.3 million of these loans were included in the non-accrual loan total.  The remaining $29.2 million, while meeting the internal requirements for modification in a troubled debt restructuring, were current with respect to payments under their original loan terms at the time of the restructuring and thus, continued to be included with accruing loans.  Provided these loans perform in accordance with the modified terms, they will continue to be accounted for on an accrual basis.

-- 19 --

All loans that have been modified in a troubled debt restructuring are considered to be impaired.  As such, an analysis has been performed with respect to all of these loans to determine the need for a valuation reserve.  When a loan is expected to perform in accordance with the restructured terms and ultimately return to and perform under contract terms, a valuation allowance is established for an amount equal to the excess of the present value of the expected future cash flows under the original contract terms as compared with the modified terms, including an estimated default rate.  When there is doubt as to the borrower's ability to perform under the restructured terms or ultimately return to and perform under market terms, a valuation allowance is established equal to the impairment when the carrying amount exceeds fair value of the underlying collateral.  As a result of the impairment analysis, a $6.7 million valuation allowance has been established as of June 30, 2012 with respect to the $54.5 million in troubled debt restructurings.  As of December 31, 2011, $6.2 million in valuation allowance had been established with respect to the $55.4 million in troubled debt restructurings.

After a troubled debt restructuring reverts to market terms, a minimum of six consecutive contractual payments must be received prior to consideration for a return to accrual status.  If an updated credit department review indicates no other evidence of elevated credit risk, the loan is returned to accrual status at that time.

The following presents troubled debt restructurings by concession type as of June 30, 2012 and December 31, 2011:

	As of June 30, 2012
	Performing in accordance with modified terms				In Default				Total
	Amount		Number		Amount		Number		Amount		Number
	(dollars in thousands)
Interest reduction and principal forbearance		26,880		69		2,749		12		29,629		81
Principal forbearance		5,059		33		351		1		5,410		34
Interest reduction		18,710		26		776		3		19,486		29
	$	50,649		128		3,876		16		54,525		144
	As of December 31, 2011
	Performing in accordance with modified terms				In Default				Total
	Amount		Number		Amount		Number		Amount		Number
	(dollars in thousands)
Interest reduction and principal forbearance		22,752		61		6,564		22		29,316		83
Principal forbearance		3,894		29		1,771		9		5,665		38
Interest reduction		20,006		27		425		2		20,431		29
	$	46,652		117		8,760		33		55,412		150

-- 20 --

The following presents data on troubled debt restructurings as of June 30, 2012:

	For the Six Months Ended June 30, 2012				For the Three Months Ended June 30, 2012
	Amount		Number		Amount		Number
	(dollars in thousands)				(dollars in thousands)
Loans modified as a troubled debt restructure
One- to four-family	$	6,500		11	$	3,533		4
Over four-family		1,004		2		1,004		2
Home equity		117		2		105		1
	$	7,621		15	$	4,642		7
Troubled debt restructuring modified within the past twelve months for which there was a default
One- to four-family	$	655		2	$	135		1
	$	655		2	$	135		1

The following table presents data on non-accrual loans as of June 30, 2012 and December 31, 2011:

	June 30,			December 31,
		2012			2011
	(Dollars in Thousands)
Non-accrual loans:
Residential
One- to four-family	$	48,575			55,609
Over four-family		24,739			13,680
Home equity		2,004			1,334
Construction and land		5,826			6,946
Commercial real estate		3,581			514
Commercial		-			135
Consumer		27			-
Total non-accrual loans	$	84,752			78,218
Total non-accrual loans to total loans, net		7.26	%		6.43	%
Total non-accrual loans and performing troubled debt restructurings to total loans receivable		9.77	%		8.45	%
Total non-accrual loans to total assets		5.05	%		4.57	%

-- 21 --

Note 4- Real Estate Owned

Real estate owned is summarized as follows:

	June 30,		December 31,
		2012		2011
	(In Thousands)
One- to four-family	$	21,637		27,449
Over four-family		13,742		16,231
Construction and land		8,793		8,796
Commercial real estate		3,643		4,194
	$	47,815		56,670

The following table presents the activity in the Company's real estate owned:

	Six months ended June 30,
		2012		2011
	(In Thousands)
Real estate owned at beginning of the period	$	56,670		57,752
Transferred from loans receivable		11,002		16,167
Sales		(16,247	)	(11,713	)
Write downs		(3,439	)	(2,154	)
Other		(171	)	68
Real estate owned at the end of the period	$	47,815		60,120

-- 22 --

Note 5- Mortgage Servicing Rights

The following table presents the activity in the Company's mortgage servicing rights:

	Six months ended
	June 30, 2012
	(In Thousands)
Mortgage servicing rights at beginning of the period	$	198
Additions		982
Amortization		(77	)
Mortgage servicing rights at end of the period		1,103
Valuation allowance at end of period		-
Mortgage servicing rights at the end of the period, net	$	1,103

The following table shows the estimated future amortization expense for mortgage servicing rights for the periods indicated:

		(In Thousands)
Estimate for the six months ended December 31:	2012		145
Estimate for the years ended December 31:	2013		263
2014			220
2015			176
2016			133
2017			90
Thereafter			76
Total			1,103

-- 23 --

Note 6- Deposits

A summary of the contractual maturities of time deposits at June 30, 2012 is as follows:

	(In Thousands)
Within one year	$	561,276
More than one to two years		174,557
More than two to three years		35,216
More than three to four years		9,939
More than four through five years		13,483
	$	794,471

-- 24 --

Note 7- Borrowings

Borrowings consist of the following:

		June 30, 2012					December 31, 2011
				Weighted					Weighted
				Average					Average
		Balance		Rate			Balance		Rate
		(Dollars in Thousands)
Short term:
Bank lines of credit		$	45,031		3.18	%		27,138		4.50	%
Long term:
Federal Home Loan Bank, Chicago (FHLBC) advances maturing:
	2016		220,000		4.34	%		220,000		4.34	%
	2017		65,000		3.19	%		65,000		3.19	%
	2018		65,000		2.97	%		65,000		2.97	%
Repurchase agreements maturing	2017		84,000		3.96	%		84,000		3.96	%
		$	479,031		3.83	%		461,138		3.93	%

The bank lines of credit are the outstanding portion of revolving lines with two unrelated banks which represent a $90 million commitment.  The lines of credit are utilized by Waterstone Mortgage Corporation to finance loans originated for sale.  The lines of credit are secured by the underlying loans being financed.  Related interest rates are based upon the note rate associated with the loans being financed.

The $220.0 million in advances due in 2016 consist of eight advances with rates ranging from 4.01% to 4.82% callable quarterly until maturity.

The $65.0 million in advances due in 2017 consist of three advances with rates ranging from 3.09% to 3.46% callable quarterly until maturity.

The $65.0 million in advances due in 2018 consist of three callable advances with rates ranging from 2.73% to 3.11% callable quarterly until maturity.

The $84.0 million in repurchase agreements due in 2017 have rates ranging from 2.89% to 4.31% callable quarterly until maturity.  The repurchase agreements are collateralized by securities available for sale with an estimated fair value of $101.9 million at June 30, 2012.

The Company selects loans that meet underwriting criteria established by the FHLBC as collateral for outstanding advances.  The Company's FHLBC borrowings are limited to 65% of the carrying value of qualifying, unencumbered one- to four-family mortgage loans, 30% of the carrying value of home equity loans and 45% of the carrying value of over four-family loans.  In addition, these advances are collateralized by FHLBC stock totaling $20.5 million at June 30, 2012 and $21.7 million at December 31, 2011.  In the event of prepayment, the Company is obligated to pay all remaining contractual interest on long-term borrowings.

-- 25 --

Note 8 - Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements, or overall financial performance deemed by the regulators to be inadequate, can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). As of June 30, 2012, the Bank meets all capital adequacy requirements to which it is subject.  On December 18, 2009, WaterStone Bank entered into a consent order with its federal and state bank regulators whereby it has agreed to maintain a minimum Tier 1 capital ratio of 8.50% and a minimum total risk based capital ratio of 12.00%.  At June 30, 2012, WaterStone Bank exceeded these capital requirements.  The consent order prohibits the payment of cash dividends or repurchases of common stock, and restricts the ability of the Company to incur debt, in each case without the prior regulatory non-objection.    At June 30, 2012, the Company is in compliance with all requirements of the consent order.

As of June 30, 2012 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as quantitatively "well capitalized" under the regulatory framework for prompt corrective action. To be categorized as "well capitalized," the Bank must maintain minimum total risk-based, Tier I risk‑based and Tier I leverage ratios, as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank's category, however, the outstanding consent order limits transactions otherwise available to "well capitalized" banks, such as acceptance of brokered deposits.

As a state-chartered savings bank, the Bank is required to meet minimum capital levels established by the state of Wisconsin in addition to federal requirements. For the state of Wisconsin, regulatory capital consists of retained income, paid-in-capital, capital stock equity and other forms of capital considered to be qualifying capital by the Federal Deposit Insurance Corporation.

-- 26 --

The actual and required capital amounts and ratios for the Bank as of June 30, 2012 and December 31, 2011 are presented in the table below:

	June 30, 2012
											To Be Well-Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars In Thousands)
Total capital (to risk-weighted assets)	$	182,376		15.11	%		96,550		8.00	%		120,688		10.00	%
Tier I capital (to risk-weighted assets)		167,074		13.84	%		48,275		4.00	%		72,413		6.00	%
Tier I capital (to average assets)		167,074		9.82	%		68,078		4.00	%		85,097		5.00	%
State of Wisconsin (to total assets)		167,074		9.97	%		100,560		6.00	%		N/A		N/A
	December 31, 2011
	(Dollars In Thousands)
Total capital (to risk-weighted assets)	$	174,144		14.58	%		95,579		8.00	%		119,474		10.00	%
Tier I capital (to risk-weighted assets)		158,994		13.31	%		47,790		4.00	%		71,684		6.00	%
Tier I capital (to average assets)		158,994		9.16	%		69,447		4.00	%		86,808		5.00	%
State of Wisconsin (to total assets)		158,994		9.31	%		102,463		6.00	%		N/A		N/A

-- 27 --

Note 9 - Income Taxes

Under generally accepted accounting principles, a deferred tax asset valuation allowance is required to be recognized if it is "more likely than not" that the deferred tax asset will not be realized.  The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management's evaluation of both positive and negative evidence, the forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. We consider both positive and negative evidence regarding the ultimate realizability of our deferred tax assets.  Examples of positive evidence may include the existence, if any, of taxes paid in available carry-back years and the likelihood that taxable income will be generated in future periods.  Examples of negative evidence may include a cumulative loss in the current year and prior two years and negative general business and economic trends.  We currently maintain a valuation allowance against substantially all of our net deferred tax assets because it is "more likely than not" that all of these net deferred tax assets will not be realized.  This determination was based largely on the negative evidence of a cumulative loss in the most recent three-year period caused primarily by the loan loss provisions made during those periods.  In addition, general uncertainty surrounding future economic and business conditions has increased the likelihood of volatility in our future earnings.

The estimated current federal income tax liability for the six months ended June 30, 2012 totals $2.2 million.  This current federal income tax expense is fully offset by deferred federal income tax benefit related to changes in net deferred tax asset valuation allowances as described above resulting in no net federal income tax expense.  A federal income tax benefit of $184,000 was recognized for the three months ended June 30, 2012 as the result of an over estimate of liability related to an IRS audit of the company's federal income tax returns for the years 2005 through 2009.

During the three and six months ended June 30, 2011, the Company recorded a net income tax benefit of $736,000 which relates to the intraperiod tax allocation between other comprehensive income and loss from continuing operations, and represents an out-of-period adjustment for an error that originated beginning in 2008 that was corrected during the three and six months ended June 30, 2011 period.  The correction of the error was not material to the three or six months ended June 30, 2011.  The impact of this error to all prior periods was not deemed to be material. 

During the six months ended June 30, 2012 and 2011, the Company recorded state income tax expense of $255,000 and $59,000, respectively.  The state tax expense relates to various states in which our mortgage banking subsidiary conducts business and to which our state net operating loss carry forwards do not apply.

-- 28 --

Note 10- Financial Instruments with Off-Balance Sheet Risk

Off-balance sheet financial instruments or obligations whose contract amounts represent credit and/or interest rate risk are as follows:

	June 30,		December 31,
		2012		2011
	(In Thousands)
Financial instruments whose contract amounts represent potential credit risk:
Commitments to extend credit under amortizing loans (1)	$	22,713		14,259
Commitments to extend credit under home equity lines of credit		18,582		21,403
Unused portion of construction loans		5,550		5,684
Unused portion of business lines of credit		10,395		10,347
Standby letters of credit		922		970

____________

⁽¹⁾ Excludes commitments to originate loans held for sale addressed in Note 11.

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 June 30, 2012 and December 31, 2011.

Residential mortgage loans sold to others are predominantly conventional residential first lien mortgages that are sold on a servicing released basis.  The Company's agreements to sell residential mortgage loans in the normal course of business usually require certain representations and warranties on the underlying loans sold related to credit information, loan documentation and collateral, which if subsequently are untrue or breached, could require the Company to repurchase certain loans affected.  There have been insignificant instances of repurchase under representations and warranties.  The Company's agreements to sell residential mortgage loans also contain limited recourse provisions.  The recourse provisions are limited in that the recourse provision ends after certain payment criteria have been met.  With respect to these loans, repurchase could be required if defined delinquency issues arose during the limited recourse period.  Given that the underlying loans delivered to buyers are predominantly conventional first lien mortgages and that historical experience shows negligible losses and insignificant repurchase activity, management believes that losses and repurchases under the limited recourse provisions will continue to be insignificant.

-- 29 --

Note 11 - Derivative Financial Instruments

In connection with its mortgage banking activities, the Company enters into derivative financial instruments as part of its strategy to manage its exposure to changes in interest rates.   Mortgage banking derivatives include interest rate lock commitments provided to customers to fund mortgage loans to be sold in the secondary market and forward commitments for the future delivery of such loans to third party investors.  It is the Company's practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on its commitments to fund the loans as well as on its portfolio of mortgage loans held-for-sale. The Company's mortgage banking derivatives have not been designated as being in hedge relationships.  These instruments are used to manage the Company's exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of ASC 815. Changes in the fair value of derivatives not designated in hedging relationships are recorded as a component of mortgage banking income in the Company's consolidated statements of operations. The Company does not use derivatives for speculative purposes.

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 interest rate lock commitments to originate loans and loans held for sale.    At June 30, 2012, the Company had forward commitments to sell mortgage loans with an aggregate notional amount of approximately $163.7 million and interest rate lock commitments with an aggregate notional amount of approximately $179.1 million.  The fair value of the mortgage derivatives at June 30, 2012 included a gain of $2.2 million on mortgage banking derivative assets and an $847,000 net loss on mortgage banking liabilities that are reported as a component of other asset and other liabilities, respectively on the Company's consolidated statements of financial condition.

In determining the fair value of its derivative loan commitments, 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.  The fair value of these commitments is recorded on the consolidated statements of financial condition with the changes in fair value recorded as a component of mortgage banking income.

Note 12 - Earnings (loss) per share

Earnings (loss) per share are computed using the two-class method.  Basic earnings per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the applicable period, excluding outstanding participating securities.  Participating securities include unvested restricted shares.  Unvested restricted shares are considered participating securities because holders of these securities have the right to receive dividends at the same rate as holders of the Company's common stock.  Diluted earnings (loss) per share 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.  Unvested restricted stock and stock options are considered outstanding for diluted earnings (loss) per share only.  Unvested restricted stock totaling 105,000 shares is considered outstanding for dilutive earnings per share only for the six and three months ended June 30, 2012.  Unvested stock options totaled 289,000 shares for the six and three months ended June 30, 2012 and unvested restricted stock and stock options totaling 54,200 and 210,500 shares for the six and three months ended June 30, 2011 are antidilutive and are excluded from the loss per share calculation.

-- 30 --

Presented below are the calculations for basic and diluted earnings (loss) per share:

	Six Months Ended					Three Months Ended
	June 30,					June 30,
		2012		2011			2012		2011
	(In Thousands except per share amounts)
Net income (loss)	$	8,386	$	(2,128	)	$	6,178	$	(584	)
Net income (loss) available to unvested restricted shares		28		-			21		-
Net income (loss) available to common stockholders	$	8,358	$	(2,128	)	$	6,157	$	(584	)
Weighted average shares outstanding		31,035		30,909			31,045		30,920
Effect of dilutive potential common shares		34		-			91		-
Diluted weighted average shares outstanding		31,069		30,909			31,136		30,920
Basic earnings (loss) per share	$	0.27	$	(0.07	)	$	0.20	$	(0.02	)
Diluted earnings (loss) per share	$	0.27	$	(0.07	)	$	0.20	$	(0.02	)

-- 31 --

Note 13 - Fair Value Measurements

The FASB issued an accounting standard (subsequently codified into ASC Topic 820, "Fair Value Measurements and Disclosures") which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This accounting standard applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements. The standard also emphasizes that fair value (i.e., the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date), among other things, is based on exit price versus entry price, should include assumptions about risk such as nonperformance risk in liability fair values, and is a market-based measurement, not an entity-specific measurement. When considering the assumptions that market participants would use in pricing the asset or liability, this accounting standard establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

The fair value hierarchy prioritizes inputs used to measure fair value into three broad levels.

Level 1 inputs - In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that we have the ability to access.

Level 2 inputs - Fair values determined by Level 2 inputs use inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly.  Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets where there are few transactions and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs - Level 3 inputs are unobservable inputs for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.  The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The following table presents information about our assets recorded in our consolidated statement of financial position at their fair value on a recurring basis as of June 30, 2012 and December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

-- 32 --

			Fair Value Measurements Using
	June 30, 2012		Level 1		Level 2		Level 3
	(In Thousands)
Available for sale securities
Mortgage-backed securities	$	91,799		-		91,799		-
Collateralized mortgage obligations
Government sponsored enterprise issued		38,664		-		38,664		-
Private-label issued		18,051		-		-		18,051
Government sponsored enterprise bonds		29,051		-		29,051		-
Municipal securities		25,017		-		25,017		-
Other debt securities		5,240		5,240		-		-
Certificates of Deposit		5,420		-		5,420		-
Loans held for sale		122,489		-		122,489		-
Mortgage banking derivative assets		2,245		-		-		2,245
Mortgage banking derivative liabilities		847		-		-		847
			Fair Value Measurements Using
	December 31, 2011		Level 1		Level 2		Level 3
	(In Thousands)
Available for sale securities
Mortgage-backed securities	$	35,417		-		35,417		-
Collateralized mortgage obligations
Government sponsored enterprise issued		33,196		-		33,196		-
Private-label issued		18,451		-		-		18,451
Government sponsored enterprise bonds		71,349		-		71,349		-
Municipal securities		39,068		-		39,068		-
Other debt securities		5,118		5,118		-		-
Certificates of Deposit		3,920		-		3,920		-
Loans held for sale		88,283		-		88,283		-
Mortgage banking derivative assets		924		-		-		924
Mortgage banking derivative liabilities		397		-		-		397

-- 33 --

The following summarizes the valuation techniques for assets recorded in our consolidated statements of financial condition at their fair value on a recurring basis:

Available for sale securities - The Company's investment securities classified as available for sale include: mortgage-backed securities, collateralized mortgage obligations, government sponsored enterprise bonds, municipal securities and other debt securities. The fair value of mortgage-backed securities, collateralized mortgage obligations and government sponsored enterprise bonds are determined by a third party valuation source using observable market data utilizing a matrix or multi-dimensional relational pricing model.  Standard inputs to these models include observable market data such as benchmark yields, reported trades, broker quotes, issuer spreads, benchmark securities, prepayment models and bid/offer market data.  For securities with an early redemption feature, an option adjusted spread model is utilized to adjust the issuer spread.  These model and matrix measurements are classified as Level 2 and Level 3 in the fair value hierarchy.  The fair value of municipal securities is determined by a third party valuation source using observable market data utilizing a multi-dimensional relational pricing model.  Standard inputs to this model include observable market data such as benchmark yields, reported trades, broker quotes, rating updates and issuer spreads.  These model measurements are classified as Level 2 in the fair value hierarchy.  The fair value of other debt securities, which includes a trust preferred security issued by a financial institution, is determined through quoted prices in active markets and is classified as Level 1 in the fair value hierarchy.

Loans held for sale - The Company carries loans held for sale at fair value under the fair value option model.  Fair value is generally determined by estimating a gross premium or discount, which is derived from pricing currently observable in the secondary market, principally from observable prices for forward sale commitments.  Loans held-for-sale are considered to be Level 2 in the fair value hierarchy of valuation techniques.

Mortgage banking derivatives - Mortgage banking derivatives include interest rate lock commitments to originate residential loans held for sale to individual customers and forward commitments to sell residential mortgage loans to various investors.  The Company relies on a valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale, which includes applying a pull through rate based upon historical experience and the current interest rate environment and then multiplying by quoted investor prices.  The Company also relies on a valuation model to estimate the fair value of its forward commitments to sell residential loans, which includes matching specific terms and maturities of the forward commitments against applicable investor pricing available.  While there are Level 2 and 3 inputs used in the valuation models, the Company has determined that one or more of the inputs significant in the valuation of both of the mortgage banking derivatives fall within Level 3 of the fair value hierarchy.

The table below presents reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2012 and 2011.

	Available for sale securities			Mortgage banking derivatives
	(In Thousands)
Balance at December 31, 2010	$	20,301			407
Transfer into level 3		-			-
Unrealized holding losses arising during the period:
Included in other comprehensive income		(142	)		-
Other than temporary impairment included in net loss		(456	)		-
Principal repayments		(1,252	)		-
Net accretion of discount/amortization of premium		-			-
Mortgage derivative gain, net		-			120
Balance at December 31, 2011		18,451			527
Transfer into level 3		-			-
Unrealized holding losses arising during the period:
Included in other comprehensive income		652			-
Other than temporary impairment included in net loss		(4	)		-
Principal repayments		(1,048	)		-
Net accretion of discount/amortization of premium		-			-
Mortgage derivative gain, net		-			871
Balance at June 30, 2012	$	18,051			1,398

-- 34 --

Level 3 available-for-sale securities include two corporate collateralized mortgage obligations.  The market for these securities was not active as of June 30, 2012.  As such, the Company valued these securities based on the present value of estimated future cash flows   Additional impairment may be incurred in future periods if estimated future cash flows are less than the cost basis of the securities. There were no transfers in or out of Level 1 or Level 2 measurements during the periods.

Assets Recorded at Fair Value on a Non-recurring Basis

The following table presents information about our assets recorded in our consolidated statement of financial position at their fair value on a non-recurring basis as of June 30, 2012 and December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

			Fair Value Measurements Using
	June 30, 2012		Level 1		Level 2		Level 3
	(In Thousands)
Impaired loans, net (1)	$	54,202		-		-		54,202
Real estate owned		47,815		-		-		47,815
			Fair Value Measurements Using
	December 31, 2011		Level 1		Level 2		Level 3
	(In Thousands)
Impaired loans, net (1)	$	43,432		-		-		43,432
Real estate owned		56,670		-		-		56,670

_________

⁽¹⁾  Represents collateral-dependent impaired loans, net, which are included in loans.

Loans - We do not record loans at fair value on a recurring basis.  On a non-recurring basis, loans determined to be impaired are analyzed to determine whether a collateral shortfall exists, and if such a shortfall exists, are recorded on our consolidated statements of financial condition at net realizable value of the underlying collateral.  Fair value is determined based on third party appraisals.  Appraised values are adjusted to consider disposition costs and also to take into consideration the age of the most recent appraisal.  Given the significance of the adjustments made to appraised values necessary to estimate the fair value of impaired loans, loans that have been deemed to be impaired are considered to be Level 3 in the fair value hierarchy of valuation techniques.  At June 30, 2012, loans determined to be impaired with an outstanding balance of $70.3 million were carried net of specific reserves of $16.1 million for a fair value of $54.2 million.  At December 31, 2011, loans determined to be impaired with an outstanding balance of $56.0 million were carried net of specific reserves of $12.6 million for a fair value of $43.4 million.  Impaired loans collateralized by assets which are valued in excess of the net investment in the loan do not require any specific reserves.

-- 35 --

Real estate owned - On a non-recurring basis, real estate owned, is recorded in our consolidated statements of financial condition at the lower of cost or fair value.  Fair value is determined based on third party appraisals and, if less than the carrying value of the loan, the carrying value of the loan is adjusted to the fair value.  Appraised values are adjusted to consider disposition costs and also to take into consideration the age of the most recent appraisal.  Given the significance of the adjustments made to appraised values necessary to estimate the fair value of the properties, real estate owned is considered to be Level 3 in the fair value hierarchy of valuation techniques.  Changes in the value of real estate owned totaled $3.4 million and $2.2 million during the six months ended June 30, 2012 and 2011, respectively and are recorded in real estate owned expense. At June 30, 2012 and December 31, 2011, real estate owned totaled $47.8 million and $56.7 million, respectively.

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of June 30, 2012, the significant unobservable inputs used in the fair value measurements were as follows:

				Significant	Significant Unobservable Input Value
	Fair Value at		Valuation	Unobservable	Minimum Value			Maximum Value
	June 30, 2012		Technique	Inputs
Collateralized Mortgage Obligations
Private-label issued	$	18,051	Discounted cash flow	Prepayment rate		9.6	%		25.7	%
				Default rate		5.6	%		6.0	%
				Discount rate		8.0	%		8.0	%
				Loss severity rate		43.0	%		52.0	%
Mortgage banking derivatives		1,398	Pricing models	Pull through rate		64.4	%		99.0	%
Impaired loans		54,202	Market approach	Disount rates applied to appraisals		15.0	%		30.0	%
Real estate owned		47,815	Market approach	Disount rates applied to appraisals		5.0	%		70.0	%

The fair value of the Company's private label-issued collateralize mortgage obligations was determined using a discounted cash flow analysis.  The significant unobservable inputs included a prepayment rate, default rate, discount rate and a loss severity rate.

The significant unobservable inputs used in the fair value measurement of the Company's mortgage banking derivatives, including interest rate lock commitments is the loan pull through rate.  This represents the percentage of loans currently in a lock position which the Company estimates will ultimately close.  Generally, the fair value of an interest rate lock commitment will be positively (negatively) impacted when the prevailing interest rate is lower (higher) than the interest rate lock commitment.  Generally, an increase in the pull through rate will result in the fair value of the interest rate lock increasing when in a gain position, or decrease when in a loss position.  The pull through rate is largely dependent on the loan processing stage that a loan is currently in and the change in prevailing interest rates from the time of the rate lock.  The pull through rate is computed using historical data and the ratio is periodically reviewed by the Company.

The significant unobservable inputs used in the fair value measurement of collateral for collateral-dependent impaired loans and real estate owned included in the above table primarily relate to discounting criteria applied to independent appraisals received with respect to the collateral.  Discounts applied to the appraisals are dependent on the vintage of the appraisal as well as the marketability of the property.  The discount factor is computed using actual realization rates on properties that have been foreclosed upon and liquidated in the open market.

-- 36 --

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 June 30, 2012 and December 31, 2011:

	June 30, 2012										December 31, 2011
	Carrying										Carrying		Fair
	amount		Fair Value								amount		value
			Total		Level 1		Level 2		Level 3
	(In Thousands)
Financial Assets
Cash and cash equivalents	$	64,875		64,875		64,875		-		-		80,380		80,380
Securities available-for-sale		213,242		213,242		5,240		189,951		18,051		206,519		206,519
Securities held-to-maturity		-		-		-		-		-		2,648		2,542
Loans held for sale		122,489		122,489		-		122,489		-		88,283		88,283
Loans receivable		1,167,181		1,173,381		-		-		1,173,381		1,216,664		1,225,141
FHLB stock		20,507		20,507		-		20,507		-		21,653		21,653
Cash surrender value of life insurance		37,339		37,339		37,339		-		-		36,749		36,749
Real estate owned		47,815		47,815		-		-		47,815		56,670		56,670
Accrued interest receivable		3,556		3,556		3,556		-		-		4,064		4,064
Mortgage banking derivative assets		2,245		2,245		-		-		2,245		924		924
Financial Liabilities
Deposits		986,198		987,830		191,727		796,103		-		1,051,292		1,052,663
Advance payments by borrowers for taxes		14,518		14,518		14,518		-		-		942		942
Borrowings		479,031		537,246		-		537,246		-		461,138		517,624
Accrued interest payable		1,769		1,769		1,769		-		-		2,087		2,087
Mortgage banking derivative liabilities		847		847		-		-		847		397		397
Other Financial Instruments
Stand-by letters of credit		5		5		-		-		5		6		6

-- 37 --

The following methods and assumptions were used by the Company in determining its fair value disclosures for financial instruments.

Cash and Cash Equivalents

The carrying amount reported in the consolidated statements of financial condition for cash and cash equivalents is a reasonable estimate of fair value.

 Securities

The fair value of securities is determined by a third party valuation source using observable market data utilizing a matrix or multi-dimensional relational pricing model.  Standard inputs to these models include observable market data such as benchmark yields, reported trades, broker quotes, issuer spreads, benchmark securities and bid/offer market data.  For securities with an early redemption feature, an option adjusted spread model is utilized to adjust the issuer spread.  Prepayment models are used for mortgage related securities with prepayment features.

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.

Loans Receivable

Loans determined to be impaired are analyzed to determine whether a collateral shortfall exists, and if such a shortfall exists, are recorded on our consolidated statements of financial condition at fair value.  Fair value is determined based on third party appraisals.  Appraised values are adjusted to consider disposition costs and also to take into consideration the age of the most recent appraisal.  With respect to loans that are not considered to be impaired, fair value is estimated by discounting the future contractual cash flows using discount rates that reflect a current rate offered to borrowers of similar credit standing for the remaining term to maturity.  This method of estimating fair value does not incorporate the exit-price concept of fair value prescribed by ASC 820-10 and generally produces a higher fair value.

FHLBC Stock

For FHLBC stock, the carrying amount is the amount at which shares can be redeemed with the FHLBC and is a reasonable estimate of fair value.

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.

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.

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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.

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.

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 June 30, 2012 and December 31, 2011.

Mortgage Banking Derivative Assets and Liabilities

Mortgage banking derivatives include interest rate lock commitments to originate residential loans held for sale to individual customers and forward commitments to sell residential mortgage loans to various investors.  The Company relies on a valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale, which includes applying a pull through rate based upon historical experience and the current interest rate environment, and then multiplying by quoted investor prices.  The Company also relies on a valuation model to estimate the fair value of its forward commitments to sell residential loans, which includes matching specific terms and maturities of the forward commitments against applicable investor pricing available.  On the Company's Consolidated Statements of Condition, instruments that have a positive fair value are included in prepaid expenses and other assets, and those instruments that have a negative fair value are included in other liabilities.

Note 14 - Segment Reporting

Selected financial and descriptive information is required to be provided about reportable operating segments, considering a "management approach" concept as the basis for identifying reportable segments. The management approach is based on the way that management organizes the segments within the enterprise for making operating decisions, allocating resources, and assessing performance. Consequently, the segments are evident from the structure of the enterprise's internal organization, focusing on financial information that an enterprise's chief operating decision-makers use to make decisions about the enterprise's operating matters.  The Company has determined that it has two reportable segments: community banking and mortgage banking.  The Company's operating segments are presented based on its management structure and management accounting practices.  The structure and practices are specific to the Company and therefore, the financial results of the Company's business segments are not necessarily comparable with similar information for other financial institutions.

Community Banking

The Community Banking segment provides consumer and business banking products and services to customers primarily within Southeastern Wisconsin. Consumer products include loan and deposit products:  mortgage, home equity loans and lines, personal term loans, demand deposit accounts, interest bearing transaction accounts and time deposits.  Business banking products include secured and unsecured lines and term loans for working capital, inventory and general corporate use, commercial real estate construction loans, demand deposit accounts, interest bearing transaction accounts and time deposits.

-- 39 --

Mortgage Banking

The Mortgage Banking segment provides residential mortgage loans for the purpose of sale on the secondary market.  Mortgage banking products and services are provided by offices in: Wisconsin, Arizona, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Maryland, Minnesota, Ohio and Pennsylvania.

	Six Months ended June 30, 2012
	Community Banking			Mortgage Banking		Holding Company and Other			Consolidated
	(in thousands)
Net interest income	$	20,582			223		250			21,055
Provision for loan losses		5,100			-		-			5,100
Net interest income after provision for loan losses		15,482			223		250			15,955
Noninterest income:		1,444			36,809		-			38,253
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		6,213			19,779		(390	)		25,602
Occupancy, office furniture and equipment		1,548			1,861		-			3,409
FDIC insurance premiums		1,814			-		-			1,814
Real estate owned		4,273			-		-			4,273
Other		2,540			7,959		154			10,653
Total noninterest expenses		16,388			29,599		(236	)		45,751
Income before income taxes (benefit)		538			7,433		486			8,457
Income taxes (benefit)		(3,107	)		2,983		195			71
Net income	$	3,645			4,450		291			8,386
Total Assets	$	1,611,757			137,374		(67,950	)		1,681,181

	As of or for the Six months ended June 30, 2011
	Community Banking			Mortgage Banking		Holding Company and Other			Consolidated
	(in thousands)
Net interest income	$	23,191			204		246			23,641
Provision for loan losses		10,125			31		-			10,156
Net interest income after provision for loan losses		13,066			173		246			13,485
Noninterest income:		1,237			15,737		-			16,974
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		6,913			10,804		(403	)		17,314
Occupancy, office furniture and equipment		1,720			1,555		-			3,275
FDIC insurance premiums		2,077			-		-			2,077
Real estate owned		4,681			-		-			4,681
Other		2,314			3,357		305			5,976
Total noninterest expenses		17,705			15,716		(98	)		33,323
Income (loss) before income taxes (benefit)		(3,402	)		194		344			(2,864	)
Income taxes (benefit)		(877	)		141		-			(736	)
Net income (loss)	$	(2,525	)		53		344			(2,128	)
Total Assets	$	1,709,955			62,373		(49,008	)		1,723,320

-- 40 --

	Three Months ended June 30, 2012
	Community Banking			Mortgage Banking			Holding Company and Other			Consolidated
	(in thousands)
Net interest income	$	10,335			168			125			10,628
Provision for loan losses		1,500			(75	)		-			1,425
Net interest income after provision for loan losses		8,835			243			125			9,203
Noninterest income:		670			22,582			-			23,252
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		3,086			12,052			(173	)		14,965
Occupancy, office furniture and equipment		758			930			-			1,688
FDIC insurance premiums		873			-			-			873
Real estate owned		2,838			-			-			2,838
Other		1,322			4,462			88			5,872
Total noninterest expenses		8,877			17,444			(85	)		26,236
Income (loss) before income taxes (benefit)		628			5,381			210			6,219
Income taxes (benefit)		(2,313	)		2,159			195			41
Net income	$	2,941			3,222			15			6,178

	Three Months ended June 30, 2011
	Community Banking			Mortgage Banking		Holding Company and Other			Consolidated
	(in thousands)
Net interest income	$	11,452			137		125			11,714
Provision for loan losses		5,265			16		-			5,281
Net interest income after provision for loan losses		6,187			121		125			6,433
Noninterest income:		657			9,520		-			10,177
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		3,168			6,431		(202	)		9,397
Occupancy, office furniture and equipment		822			834		-			1,656
FDIC insurance premiums		1,016			-		-			1,016
Real estate owned		2,886			-		-			2,886
Other		1,170			1,773		71			3,014
Total noninterest expenses		9,062			9,038		(131	)		17,969
Income (loss) before income taxes (benefit)		(2,218	)		603		256			(1,359	)
Income taxes (benefit)		(1,012	)		237		-			(775	)
Net income (loss)	$	(1,206	)		366		256			(584	)

-- 41 --

Note 15 - Recent Accounting Developments

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.  The amendments change the wording used to describe many of the requirements for measuring fair value and for disclosing information about fair value measurements.  The amendments also clarify the Board's intent about the application of existing fair value measurement and disclosure requirements.  The amendments are effective for interim  and annual periods beginning after December 15, 2011.  The adoption of the standard did not have a material impact on our results of operations, financial position or liquidity.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, to increase the prominence of other comprehensive income in financial statements.  Under this ASU, an entity will have the option to present the components of net income and comprehensive income in either one or two consecutive financial statements.  The ASU eliminates the option in U.S. GAAP to present other comprehensive income in the statement of changes in equity.  An entity should apply the ASU retrospectively.  The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The adoption of the standard did not have a material impact on our results of operations, financial position or liquidity.

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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statements Regarding Forward-Looking Information

This report contains or incorporates by reference various forward-looking statements concerning the Company's prospects that are based on the current expectations and beliefs of management.  Forward-looking statements may also be made by the Company from time to time in other reports and documents as well as in oral presentations.  When used in written documents or oral statements, the words "anticipate," "believe," "estimate," "expect," "objective" and similar expressions and verbs in the future tense, are intended to identify forward-looking statements.  The statements contained herein and such future statements involve or may involve certain assumptions, risks and uncertainties, many of which are beyond the Company's control, that could cause the Company's actual results and performance to differ materially from what is expected.  In addition to the assumptions and other factors referenced specifically in connection with such statements, the following factors could impact the business and financial prospects of the Company:

· our ability to maintain higher regulatory capital levels as imposed by federal and state regulators;

· adverse changes in the real estate markets;

· adverse changes in the securities markets;

· general economic conditions, either nationally or in our market areas, that are worse than expected;

· inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;

· changes in interest rates that reduce loan origination volumes and, ultimately, income from our mortgage banking operations;

· our ability to maintain adequate levels of liquidity given regulatory limits on sources of funding and rates that can be paid for funding;

· legislative or regulatory changes that adversely affect our business;

· our ability to enter new markets successfully and take advantage of growth opportunities;

· significantly increased competition among depository and other financial institutions;

· 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.

See also the factors referred to in reports filed by the Company with the Securities and Exchange Commission (particularly those under the caption "Risk Factors" in Item 1A of the Company's 2011 Annual Report on Form 10-K).

Overview

The following discussion and analysis is presented to assist the reader in the understanding and evaluation of the Company's financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements, footnotes, and supplemental financial data appearing elsewhere in this Form 10-Q and should be read in conjunction therewith. The detailed discussion focuses on the results of operations for the six and three months ended June 30, 2012 and 2011 and the financial condition as of June 30, 2012 compared to the financial condition as of December 31, 2011.

Our profitability is highly dependent on our net interest income, mortgage banking income and provision for loan losses.  Net interest income is the difference between the interest income we earn on our interest earning assets which are loans receivable, investment securities and cash and cash equivalents and the interest we pay on deposits and other borrowings.  The Company's banking subsidiary, WaterStone Bank SSB ("WaterStone Bank" or "Bank") is primarily a mortgage lender with loans secured by real estate comprising 98.5% of total loans receivable on June 30, 2012.  Further, 89.1% of loans receivable are residential mortgage loans with over four-family loans comprising 45.5% of all loans on June 30, 2012.  WaterStone Bank funds loan production primarily with retail deposits and Federal Home Loan Bank advances.  The Bank's mortgage banking subsidiary, Waterstone Mortgage Corporation, utilizes a line of credit provided by the Bank as its primary source of funding loans held for sale.  In addition, Waterstone Mortgage Corporation utilizes lines of credit with external banks when needed.  On June 30, 2012, deposits comprised 65.5% of total liabilities.  Time deposits, also known as certificates of deposit, accounted for 80.6% of total deposits at June 30, 2012.  Federal Home Loan Bank advances outstanding on June 30, 2012 totaled $350.0 million, or 23.2% of total liabilities.  During the current prolonged period of low interest rates and economic weakness, we have determined that an investment philosophy emphasizing short-term liquid investments including cash and cash equivalents is prudent and positions the Company to take advantage of the investment, lending and interest rate risk management opportunities that will exist as the local and national economies recover from the recession.  Our high level of time deposits, relative to total deposits, will result in an increase in our cost of funds when market interest rates begin to increase.

-- 43 --

During the six months ended June 30, 2012, our results of operations were positively impacted by a significant increase in income from our mortgage banking segment and from a decrease in our provision for loans losses which resulted from an improvement in our asset quality.  A significant increase in both sales volumes and margins earned on the sale of mortgage loans in the secondary market yielded a $7.2 million increase in pre-tax earnings from our mortgage banking segment during the six months ended June 30, 2012 compared to the six months ended June 30, 2011.

Our provision for loan losses decreased $5.1 million to $5.1 million for the six months ended June 30, 2012 as compared to $10.2 million for the six months ended June 30, 2011.  The decrease in provision for loan losses reflects an improvement in loan portfolio quality and a general stabilization of the local real estate market.  The Company has experienced a stabilization or improvement in a number of key loan-related loan quality metrics compared to June 30, 2011, including impaired loans, loans contractually past due and non-accrual loans.  In addition, the turnover of loans in each of the three aforementioned metrics has slowed during the six months ended June 30, 2012 as compared to the comparable period in the prior year, which has resulted in fewer loans requiring a specific collateral analysis to determine a potential collateral shortfall and subsequent loan loss reserve.  Furthermore, as a result of stabilization in the local real estate market, those loans that have required a specific collateral review to assess the level of impairment have experienced less significant collateral shortfalls when compared to the prior year.  Additional information regarding loan quality and its impact on our financial condition and results of operations can be found in the "Asset Quality" discussion.

Offsetting the positive impact of the increase in income from mortgage banking operations and a reduction of the provision for loan losses, net interest income decreased $2.6 million during the six months ended June 30, 2012 as compared to the six months ended June 30, 2011.  The decrease in net interest income resulted from a 27 basis point drop in net interest margin.  The yield on earning assets declined by three times the decline in the cost of funds for the six months ended June 30, 2012 compared to six months ended June 30, 2011.

Critical Accounting Policies

Critical accounting policies are those that involve significant judgments and assumptions by management and that have, or could have, a material impact on our income or the carrying value of our assets.

Allowance for Loan Losses. WaterStone Bank establishes valuation allowances on loans deemed to be impaired. A loan is considered impaired when, based on current information and events, it is probable that WaterStone 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 estimated net realizable fair value of the underlying collateral (specific component).  The Company recognizes the change in present value of expected future cash flows on impaired loans attributable to the passage of time as provision for loan losses.  On an ongoing basis, at least quarterly for financial reporting purposes, the fair value of collateral dependent impaired loans and real estate owned is determined or reaffirmed by the following procedures:

· Obtaining updated real estate appraisals or performing updated discounted cash flow analysis;

· Confirming that the physical condition of the real estate has not significantly changed since the last valuation date;

· Comparison of the estimated current book value to that of updated sales values experienced on similar real estate owned;

· Comparison of the estimated current book value to that of updated values seen on more current appraisals of similar properties; and

· Comparison of the estimated current book value to that of updated listed sales prices on our real estate owned and that of similar properties (not owned by the Company).

WaterStone Bank also establishes valuation allowances based on an evaluation of the various risk components that are inherent in the credit portfolio (general component). The risk components that are evaluated include past loan loss experience; the level of non-performing 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 recoveries of previously charged-off loans and reduced by charge-offs. Charge-offs approximate the amount by which the outstanding principal balance exceeds the estimated net realizable value of the underlying collateral.  The adequacy of the allowance for loan losses is reviewed and approved quarterly by the WaterStone Bank board of directors. The allowance reflects management's best estimate of the amount needed to provide for the probable loss on impaired loans and other inherent losses in the loan portfolio, and is based on a risk model developed and implemented by management and approved by the WaterStone Bank board of directors.

-- 44 --

Actual results could differ from this estimate, and future additions to the allowance may be necessary based on unforeseen changes in loan quality and economic conditions.  More specifically, if our future charge-off experience increases substantially from our past experience; or if the value of underlying loan collateral, in our case real estate, declines in value by a substantial amount; or if unemployment in our primary market area increases significantly; our allowance for loan losses may be inadequate and we will incur higher provisions for loan losses and lower net income in the future.

 In addition, state and federal regulators periodically review the WaterStone Bank allowance for loan losses. Such regulators have the authority to require WaterStone Bank to recognize additions to the allowance at the time of their examination.

Income Taxes.  The Company and its subsidiaries file consolidated federal and combined and separate entity state income tax returns. 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 as well as for net operating loss carry forwards.  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.  

Under generally accepted accounting principles, a valuation allowance is required to be recognized if it is "more likely than not" that a deferred tax asset will not be realized.  The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management's evaluation of both positive and negative evidence, the forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. Examples of positive evidence may include the existence of taxes paid in available carry-back years as well as the probability that taxable income will be generated in future periods.  Examples of negative evidence may include cumulative losses in a current year and prior two years and general business and economic trends.  At both June 30, 2012 and December 31, 2011, the Company determined a valuation allowance continued to be necessary, largely based on the negative evidence represented by a cumulative loss in the most recent three-year period caused by the significant loan loss provisions recorded during those three years.  In addition, general uncertainty regarding the economy and the housing market has increased the potential volatility and uncertainty of projected earnings.  Management is required to re-evaluate the deferred tax asset and the related valuation allowance quarterly.

Positions taken in the Company's tax returns are subject to challenge by the taxing authorities upon examination.  The benefit of uncertain tax positions are initially recognized in the financial statements only 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 has a greater than 50% likelihood 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.

Management believes the Company's tax policies and practices are critical because the determination of the tax provision and current and deferred tax assets and liabilities have a material impact on our net income and the carrying value of our assets.  We have no plans to change the tax recognition methodology in the future without hard evidence of sustainable earnings trends which are reliant on net interest income, mortgage banking income and significantly reduced credit losses.  If the estimated valuation allowance against our deferred asset is adjusted it will affect our future net income.

Fair Value Measurements.  The Company determines the fair value of its assets and liabilities in accordance with ASC 820. ASC 820 establishes a standard framework for measuring and disclosing fair value under GAAP. A number of valuation techniques are used to determine the fair value of assets and liabilities in the Company's financial statements. The valuation techniques include quoted market prices for investment securities, appraisals of real estate from independent licensed appraisers and other valuation techniques. Fair value measurements for assets and liabilities where limited or no observable market data exists are based primarily upon estimates, and are often calculated based on the economic and competitive environment, the characteristics of the asset or liability and other factors. Therefore, the valuation results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there are inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values. Significant changes in the aggregate fair value of assets and liabilities required to be measured at fair value or for impairment are recognized in the income statement under the framework established by GAAP.

-- 45 --

Comparison of Operating Results for the Six Months Ended June 30, 2012 and 2011

General - Net income for the six months ended June 30, 2012 totaled $8.4 million, or $0.27 for both basic and diluted income per share, compared to a net loss of $2.1 million, or $0.07 for both basic and diluted loss per share, for the six months ended June 30, 2011.  The six months ended June 30, 2012 generated an annualized return on average assets of 0.99% and an annualized return on average equity of 9.59%, compared to an annualized loss on average assets of 0.24% and an annualized loss on average equity of 2.51% for the comparable period in 2011.  The results of operations for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011 reflect a $7.2 million increase in the pre-tax results of operations from our mortgage banking operations, a $5.1 million decrease in the provision for loan losses, a $408,000 decrease in expense related to real estate owned, partially offset by a $2.6 million decrease in net interest income and an $807,000 increase in income taxes.  The provision for loan losses totaled $5.1 million during the six months ended June 30, 2012, compared to $10.2 million for the six months ended June 30, 2011.  Loan charge-off activity and specific loan loss reserves are discussed in additional detail in the Asset Quality section.

Segment Review - As described in Note 14 of the notes to consolidated financial statements, the Company's primary reportable segment is community banking.  Community banking consists of lending and deposit gathering (as well as other banking-related products and services) to consumers and businesses and the support to deliver, fund, and manage such banking services. The Company's mortgage banking segment provides residential mortgage products for the purpose of sale on the secondary market.  As such, it is a transaction based business.  Transaction volume can vary significantly from period to period based upon changes in market interest rates and other economic and political factors.

Mortgage banking segment assets (which consist predominantly of loans held for sale) increased $37.2 million, or 37.1%, to $137.4 million as of June 30, 2012 compared to $100.2 million as of December 31, 2011.  Additional details are provided in the "Loans Held for Sale" section.  Mortgage banking segment revenues increased $21.1 million, or 133.9%, to $36.8 million for the six months ended June 30, 2012 compared to $15.7 million during the six months ended June 30, 2011.   The $21.1 million increase in mortgage banking revenues was attributable to both an increase in loan origination volume, as well as increased margins.  Loans originated for sale on the secondary market totaled $767.1 million during the six months ended June 30, 2012, which represents a $363.8 million, or 90.2%, increase in originations from the six months ended June 30, 2011, which totaled $403.3 million.  In addition to the increase in revenues resulting from the increase in origination volume, mortgage banking revenues increased due to an increase in average sales margin.  The increase in average sales margin was driven by an increase in pricing on all products in all geographic markets.  The major components of mortgage banking revenues include fees and premiums associated with the sale of residential loans held for sale, which are discussed in section "Mortgage Banking Income." The major expenses for the mortgage banking segment are compensation, payroll taxes and other employee benefits, as well as occupancy, office furniture and equipment and other expenses, which are covered generally in the consolidated discussion in section "Noninterest Expense."

-- 46 --

Average Balance Sheets, Interest and Yields/Costs

The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated.  No tax-equivalent yield adjustments were made, as the effect thereof was not material.  Non-accrual loans were included in the computation of average balances.  The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

	Six Months Ended June 30,
	2012							2011
	Average Balance		Interest		Yield/Cost			Average Balance		Interest		Yield/Cost
	(Dollars in Thousands)
Assets
Interest-earning assets:
Loans receivable, net(1)	$	1,284,612		32,892		5.13	%	$	1,319,131		36,506		5.58	%
Mortgage related securities(2)		121,915		1,784		2.93			100,402		2,048		4.11
Debt securities, (2)(6) federal funds sold and short-term investments		196,728		1,255		1.28			239,758		1,664		1.40
Total interest-earning assets		1,603,255		35,931		4.49			1,659,291		40,218		4.89
Noninterest-earning assets		96,856							104,078
Total assets	$	1,700,111						$	1,763,369
Liabilities and equity
Interest-bearing liabilities:
Demand accounts	$	30,445		13		0.09		$	37,416		14		0.08
Money market and savings accounts		117,419		163		0.28			115,374		185		0.32
Time deposits		857,086		5,690		1.33			950,021		7,777		1.65
Total interest-bearing deposits		1,004,950		5,866		1.17			1,102,811		7,976		1.46
Borrowings		464,855		9,010		3.89			442,252		8,601		3.92
Total interest-bearing liabilities		1,469,805		14,876		2.03			1,545,063		16,577		2.16
Noninterest-bearing liabilities
Non interest-bearing deposits		39,411							28,964
Other noninterest-bearing liabilities		15,447							18,622
Total noninterest-bearing liabilities		54,858							47,586
Total liabilities		1,524,663							1,592,649
Equity		175,448							170,720
Total liabilities and equity	$	1,700,111						$	1,763,369
Net interest income			$	21,055						$	23,641
Net interest rate spread (3)						2.46	%						2.73	%
Net interest-earning assets (4)	$	133,450						$	114,228
Net interest margin (5)						2.63	%						2.87	%
Average interest-earning assets to average interest-bearing liabilities						109.08	%						107.39	%

__________

⁽¹⁾  Interest income includes net deferred loan fee amortization income of $296,000 and $337,000 for the six months ended June 30, 2012 and 2011, respectively.

⁽²⁾  Average balance of mortgage related and debt securities are based on amortized historical cost.

⁽³⁾  Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of

average interest-bearing liabilities.

⁽⁴⁾  Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

⁽⁵⁾  Net interest margin represents net interest income divided by average total interest-earning assets.

⁽⁶⁾  Interest income from tax exempt securities is not significant to total interest income, therefore, interest yield on interest earning assets are not stated on a

      tax equivalent basis.  The average balance of tax exempt securities totaled $19.3 million and $27.0 million for the six months ended June 30, 2012 and 2011, respectively.

-- 47 --

Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on our net interest income for the periods indicated.  The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume).  The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate).  The net column represents the sum of the prior columns.  For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionately based on the changes due to rate and the changes due to volume.

	Six Months Ended June 30,
	2012 versus 2011
	Increase (Decrease) due to
	Volume			Rate			Net
	(In Thousands)
Interest income:
Loans receivable(1) (2)	$	(892	)		(2,722	)		(3,614	)
Mortgage related securities(3)		393			(657	)		(264	)
Other earning assets(3)		(277	)		(132	)		(409	)
Total interest-earning assets		(776	)		(3,511	)		(4,287	)
Interest expense:
Demand accounts		(3	)		2			(1	)
Money market and savings accounts		3			(25	)		(22	)
Time deposits		(701	)		(1,386	)		(2,087	)
Total interest-bearing deposits		(701	)		(1,409	)		(2,110	)
Borrowings		480			(71	)		409
Total interest-bearing liabilities		(221	)		(1,480	)		(1,701	)
Net change in net interest income	$	(555	)		(2,031	)		(2,586	)

______________

⁽¹⁾    Interest income includes net deferred loan fee amortization income of $296,000 and $337,000 for the six months ended June 30, 2012 and 2011, respectively.

⁽²⁾    Non-accrual loans have been included in average loans receivable balance.

⁽³⁾    Includes available for sale securities.  Average balance of available for sale securities is based on amortized historical cost.

-- 48 --

Total Interest Income - Total interest income decreased $4.3 million, or 10.7%, to $35.9 million during the six months ended June 30, 2012 from $40.2 million during the six months ended June 30, 2011.

Interest income on loans decreased $3.6 million, or 9.9%, to $32.9 million during the six months ended June 30, 2012 from $36.5 million during the six months ended June 30, 2011.  The decrease in interest income was primarily due to a 45 basis point decrease in the average yield on loans to 5.13% for the six-month period ended June 30, 2012 from 5.58% for the comparable period in 2011.  The decrease in interest income on loans also reflects $34.5 million, or 2.6%, decrease in the average balance of loans outstanding to $1.28 billion during the six months ended June 30, 2012 from $1.32 billion during the comparable period in 2011.

Interest income from mortgage-related securities decreased $264,000, or 12.9%, to $1.8 million during the six months ended June 30, 2012 from $2.0 million during the six months ended June 30, 2011.  The decrease in interest income was due to a 118 basis point decrease in the average yield on mortgage-related securities to 2.93% for the six months ended June 30, 2012 from 4.11% for the comparable period in 2011.  The decrease in average yield resulted from a general turnover of the investment security portfolio.  During the six months ended June 30, 2012, the investment portfolio was decreased by $44.9 million maturities of debt securities, $16.2 million in principal repayments in mortgage related securities and $11.9 million in sales of municipal securities.  The proceeds from maturities, principal repayments and sales were reinvested at a lower average rate which is reflective of the current interest rate environment.  The decrease in interest income from mortgage-related securities due to a decrease in average yield was partially offset by a $21.5 million, or 21.4%, increase in the average balance of mortgage-related securities to $121.9 million for the six months ended June 30, 2012 from $100.4 million during the comparable period in 2011.

Interest income from other interest earning assets (comprised of debt securities, federal funds sold and short-term investments) decreased $409,000, or 24.6%, to $1.3 million for the six months ended June 30, 2012 compared to $1.7 million for the six months ended June 30, 2011.  Interest income decreased due to a decrease of $43.0 million, or 17.9%, in the average balance of other earning assets to $196.7 million during the six months ended June 30, 2012 from $240.0 million during the comparable period in 2011.  The decrease in interest income from other earning assets also reflects a 12 basis point decline in the average yield on other earning assets to 1.28% for the six months ended June 30, 2012 from 1.40% for the comparable period in 2011.

Total Interest Expense - Total interest expense decreased by $1.7 million, or 10.3%, to $14.9 million during the six months ended June 30, 2012 from $16.6 million during the six months ended June 30, 2011.  This decrease was the result of both a decrease in the average cost of funds as well as a decrease in the average balance of interest bearing deposits and borrowings.  The average cost of funds decreased 13 basis points to 2.03% for the six months ended June 30, 2012 from 2.16% for the six months ended June 30, 2011.  Total average interest bearing deposits and borrowings outstanding decreased $75.3 million, or 4.9%, to $1.47 billion for the six months ended June 30, 2012 compared to an average balance of $1.55 billion for the six months ended June 30, 2011.

Interest expense on deposits decreased $2.1 million, or 26.4%, to $5.9 million during the six months ended June 30, 2012 from $8.0 million during the comparable period in 2011.  The decrease in interest expense on deposits was primarily due to a decrease in the cost of average deposits of 29 basis points to 1.17% for the six months ended June 30, 2012 compared to 1.46% for the comparable period during 2011.  The decrease in the cost of deposits reflects the low interest rate environment due to the Federal Reserve's low short term interest rate policy.  These rates are typically used by financial institutions in pricing deposit products.  The decrease in interest expense attributable to the decrease in the cost of deposits was compounded by a decrease of $97.9 million, or 8.9%, in the average balance of interest-bearing deposits to $1.0 billion during the six months ended June 30, 2012 from $1.1 billion during the comparable period in 2011.  The decrease in average interest-bearing deposits was exclusively the result of a decrease in time deposits, which carry a higher cost than demand, money market or savings accounts.  The decrease in time deposits was consistent with the Bank's liquidity needs and funding obligations.

Interest expense on borrowings increased $409,000, or 4.8%, to $9.0 million during the six months ended June 30, 2012 from $8.6 million during the comparable period in 2011.  The increase primarily resulted from a $22.6 million, or 5.1%, increase in average borrowings outstanding to $464.9 million during the six months ended June 30, 2012 from $442.3 million during the comparable period in 2011.  The increased use of borrowings as a funding source during the six months ended June 30, 2012 reflects an increased use of external lines of credit within our mortgage banking segment to fund loan originations to be sold on the secondary market.  The average cost of borrowings decreased 3 basis points to 3.89% during the six months ended June 30, 2012 compared to 3.92% during the six months ended June 30, 2011.

-- 49 --

Net Interest Income - Net interest income decreased by $2.6 million, or 10.9%, to $21.1 million during the six months ended June 30, 2012 as compared to $23.6 million during the comparable period in 2011.  The decrease in net interest income resulted primarily from a 27 basis point decrease in our interest rate spread to 2.46% during the six months ended June 30, 2012 from to 2.73% during the six months ended June 30, 2011.  The 27 basis point decrease in the interest rate spread resulted from a 40 basis point decrease in the average yield on interest earning assets, which was partially offset by a 13 basis point decrease in the average cost of interest bearing liabilities.

Provision for Loan Losses - Our provision for loan losses decreased $5.1 million, or 49.8%, to $5.1 million during the six months ended June 30, 2012, from $10.2 million during the six months ended June 30, 2011.  The decrease in the provision for loan losses resulted from a decrease in loans exhibiting risk characteristics that require estimated loan loss provisions in excess of our historical average experience rates when compared to the same period of the prior year.  While the provision for loan losses has decreased from the prior year, it remains at historical high levels.  These levels remain high due to continued general economic stress resulting in reduced levels of income earned by many of our borrowers combined with loan collateral values, primarily real estate, that remain at levels below those estimated at the time the loans were originally made.  These factors result in higher levels of actual loss experience which when applied to the portfolio in general require higher loan loss provisions.  The provision for the six months ended June 30, 2012 reflected $4.9 million of net loan charge-offs, as well as continued weakness in local real estate markets which required an overall increase to the allowance for loan losses.  See the "Asset Quality" section for an analysis of charge-offs, nonperforming assets, specific reserves and additional provisions.

Noninterest Income - Total noninterest income increased $21.3 million, or 125.4%, to $38.3 million during the six months ended June 30, 2012 from $17.0 million during the comparable period in 2011.  The increase resulted from an increase in mortgage banking income.  Mortgage banking income increased $21.3 million, or 137.7%, to $36.7 million for the six months ended June 30, 2012, compared to $15.4 million during the comparable period in 2011.  The $21.3 million increase in mortgage banking income was the result of an increase in origination and sales volumes as well as an increase in average sales margins.  The increase in average sales margin reflects an increase in pricing and fees on all products in all geographic markets.

Despite the increase in pricing, overall loan origination volumes increased significantly compared to the prior year which reflects the continued strong demand for fixed-rate loans due in large part to historically low interest rates on these products.  Loans originated for sale on the secondary market totaled $767.1 million during the six months ended June 30, 2012, which represents a $363.8 million, or 90.2%, increase in originations from the six months ended June 30, 2011, which totaled $403.3 million.

Our overall margin can be affected by the mix of both loan type (conventional loans versus governmental) and loan purpose (purchase versus refinance).  During the six months ended June 30, 2012, the growth in loan origination volume resulted in a shift towards lower yielding conventional loans and loans made for the purpose of a refinancing, however, margins increased for all loan types and loan purpose, compared to the six months ended June 30, 2011.   Loans originated for the purpose of a residential property purchase, which generally yields a higher margin than loans originated for the purpose of a refinance, comprised 60% of total originations during the six months ended June 30, 2012, compared to 67% during the six months ended June 30, 2011.  The mix of loan type also changed slightly with conventional loans and governmental loans comprising 65% and 35% of all loan originations, respectively during the six months ended June 30, 2012.  During the six months ended June 30, 2011 conventional loans and governmental loans comprised 58% and 42% of all loan originations, respectively.

Noninterest Expense - Total noninterest expense increased $12.4 million, or 37.3%, to $45.8 million during the six months ended June 30, 2012 from $33.3 million during the comparable period in 2011.  The increase was primarily attributable to increased compensation expense and other noninterest expense.

-- 50 --

Compensation, payroll taxes and other employee benefit expense increased $8.3 million, or 47.9%, to $25.6 million during the six months ended June 30, 2012 compared to $17.3 million during the comparable period in 2011.  Due primarily to an increase in loan origination activity, total compensation, payroll taxes and other employee benefits at our mortgage banking subsidiary increased $9.0 million, or 83.1%, to $19.8 million for the six months ended June 30, 2012 compared to $10.8 million during the comparable period in 2010.  The increase in compensation at our mortgage banking subsidiary correlates to the increase in mortgage banking income due to the commission based compensation structure in place for our mortgage banking loan officers.  The increase in total compensation, payroll taxes and other benefits at our mortgage banking subsidiary was partially offset by a decrease in compensation, payroll taxes and other employee benefits at our banking segment.   Due to a decrease in stock based compensation, health care related expense and a reduction in staffing, compensation, payroll taxes and other employee benefits at our banking segment decreased $701,000 to $6.2 million for the six months ended June 30, 2012 compared to $6.9 million during the comparable period in 2011.

Real estate owned expense decreased $408,000, or 8.7%, to $4.3 million during the six months ended June 30, 2012 from $4.7 million during the comparable period in 2011.  Real estate owned expense includes the net operating and carrying costs related to the properties.  In addition, it includes net gain or loss recognized upon the sale of a foreclosed property, as well as write-downs recognized to maintain the properties at the lower of cost or estimated fair value.  The decrease in real estate owned expense results from a decrease in net property management expense and an increase in net gains on the sales of properties, partially offset by an increase in write-downs of asset values.  During the six months ended June 30, 2012, net operating expense, which includes but is not limited to property taxes, maintenance and management fees, net of rental income decreased $1.5 million, or 48.4%,  to $1.6 million from $3.1 million during the comparable period in 2011.  The decrease in net operating expense compared to the prior period resulted from a decrease in the number and average balance of properties owned.  The average balance of real estate owned totaled $54.9 million for the six months ended June 30, 2012 compared to $61.1 million for the six months ended June 30, 2011.  Net losses recognized on the sale or write-down of real estate owned totaled $2.7 million during the six months ended June 30, 2012, compared to $1.6 million during the comparable period in 2011.

Other noninterest expense increased $3.7 million or 110.4%, to $7.0 million during the six months ended June 30, 2012 from $3.3 million during the comparable period in 2011.  The increase resulted from an increase in operational costs related to the expansion of our mortgage banking operations of $3.7 million to $6.2 million for the six months ended June 30, 2012, compared to $2.5 million during the comparable period in 2011.

Income Taxes - During the six months ended June 30, 2012 the Company recorded income tax expense of $71,000.  This includes state income tax expense of $255,000 related to various states in which our mortgage banking subsidiary does business and to which our state net operating loss carryforwards do not apply.  State tax expense is partially offset by a federal benefit of $184,000 from a prior year over estimate of liability related to an IRS audit of the company's federal income tax returns for the years 2005 through 2009.

During the six months ended June 30, 2011, the Company recorded a net income tax benefit of $736,000 which relates to the intraperiod tax allocation between other comprehensive income and loss from continuing operations, and represents an out-of-period adjustment for an error that originated beginning in 2008 that was corrected during the six months ended June 30, 2011 period.  The correction of the error was not material to the six months ended June 30, 2011.  The impact of this error to all prior periods was not deemed to be material.

-- 51 --

Comparison of Operating Results for the Three Months Ended June 30, 2012 and 2011

General - Net income for the three months ended June 30, 2012 totaled $6.2 million, or $0.20 for both basic and diluted income per share, compared to a net loss of $584,000, or $0.02 for both basic and diluted loss per share, for the three months ended June 30, 2011.  The three months ended June 30, 2012 generated an annualized return on average assets of 1.45% and an annualized return on average equity of 14.12%, compared to an annualized loss on average assets of 0.13% and an annualized loss on average equity of 1.37% for the comparable period in 2011.  The results of operations for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011 reflect a $4.8 million increase in the pre-tax results of operations from our mortgage banking operations, a $3.9 million decrease in the provision for loan losses, partially offset by a $1.1 million decrease in net interest income and a $816,000 increase in income taxes.  The provision for loan losses totaled $1.4 million during the three months ended June 30, 2012, compared to $5.3 million for the three months ended June 30, 2011.  Loan charge-off activity and specific loan loss reserves are discussed in additional detail in the "Asset Quality" section.

Segment Review - As described in Note 14 of the notes to consolidated financial statements, the Company's primary reportable segment is community banking.  Community banking consists of lending and deposit gathering (as well as other banking-related products and services) to consumers and businesses and the support to deliver, fund, and manage such banking services. The Company's mortgage banking segment provides residential mortgage products for the purpose of sale on the secondary market.

Mortgage banking segment assets (which consist predominantly of loans held for sale) increased $37.2 million, or 37.1%, to $137.4 million as of June 30, 2012 compared to $100.2 million as of December 31, 2011.  Additional details are provided in the "Loans Held for Sale" section.  Mortgage banking revenues increased $13.1 million, or 137.2%, to $22.6 million for the three months ended June 30, 2012 compared to $9.5 million during the three months ended June 30, 2011.   The $13.1 million increase in mortgage banking revenues was attributable to both an increase in loan origination volume, as well as increased margins.  Loans originated for sale on the secondary market totaled $440.2 million during the three months ended June 30, 2012, which represents a $219.9 million, or 99.8%, increase in originations from the three months ended June 30, 2011, which totaled $220.3 million.  In addition to the increase in revenues resulting from the increase in origination volume, mortgage banking revenues increased due to an increase in average sales margin.  The increase in average sales margin was driven by an increase in pricing on all products in all geographic markets.  The major components of mortgage banking revenues include fees and premiums associated with the sale of residential loans held for sale, which are discussed in section "Mortgage Banking Income." The major expenses for the mortgage banking segment are compensation, payroll taxes and other employee benefits, as well as occupancy, office furniture and equipment and other expenses, which are covered generally in the consolidated discussion in section "Noninterest Expense."

-- 52 --

Average Balance Sheets, Interest and Yields/Costs

The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated.  No tax-equivalent yield adjustments were made, as the effect thereof was not material.  Non-accrual loans were included in the computation of average balances.  The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

	Three Months Ended June 30,
	2012							2011
	Average Balance		Interest		Yield/Cost			Average Balance		Interest		Yield/Cost
	(Dollars in Thousands)
Assets
Interest-earning assets:
Loans receivable, net(1)	$	1,275,192		16,319		5.13	%	$	1,297,046		18,040		5.58	%
Mortgage related securities(2)		140,792		921		2.62			97,587		1,012		4.16
Debt securities,(2)(6) federal funds sold and short-term investments		195,179		548		1.13			252,300		829		1.32
Total interest-earning assets		1,611,163		17,788		4.43			1,646,933		19,881		4.84
Noninterest-earning assets		96,858							102,554
Total assets	$	1,708,021						$	1,749,487
Liabilities and equity
Interest-bearing liabilities:
Demand accounts	$	40,258		6		0.06		$	38,443		8		0.08
Money market and savings accounts		124,151		77		0.25			119,467		90		0.30
Time deposits		844,806		2,580		1.23			935,653		3,779		1.62
Total interest-bearing deposits		1,009,215		2,663		1.06			1,093,563		3,877		1.42
Borrowings		472,052		4,497		3.82			437,886		4,290		3.93
Total interest-bearing liabilities		1,481,267		7,160		1.94			1,531,449		8,167		2.14
Noninterest-bearing liabilities
Non interest-bearing deposits		32,697							28,714
Other noninterest-bearing liabilities		18,520							18,161
Total noninterest-bearing liabilities		51,217							46,875
Total liabilities		1,532,484							1,578,324
Equity		175,537							171,163
Total liabilities and equity	$	1,708,021						$	1,749,487
Net interest income			$	10,628						$	11,714
Net interest rate spread (3)						2.49	%						2.70	%
Net interest-earning assets (4)	$	129,896						$	115,484
Net interest margin (5)						2.65	%						2.85	%
Average interest-earning assets to average interest-bearing liabilities						108.77	%						107.54	%

⁽¹⁾  Interest income includes net deferred loan fee amortization income of $146,000 and $117,000 for the three months ended June 30, 2012 and 2011, respectively.

⁽²⁾  Average balance of mortgage related and debt securities are based on amortized historical cost.

⁽³⁾  Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of

average interest-bearing liabilities.

⁽⁴⁾  Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

⁽⁵⁾  Net interest margin represents net interest income divided by average total interest-earning assets.

⁽⁶⁾  Interest income from tax exempt securities is not significant to total interest income, therefore, interest yield on interest earning assets are not stated on a tax equivalent basis.  The average balance of

     tax exempt securities totaled $13.7 million and $27.9 million for the three months ended June 30, 2012 and 2011, respectively.

-- 53 --

Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on our net interest income for the periods indicated.  The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume).  The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate).  The net column represents the sum of the prior columns.  For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionately based on the changes due to rate and the changes due to volume.

	Three Months Ended June 30,
	2012 versus 2011
	Increase (Decrease) due to
	Volume			Rate			Net
	(In Thousands)
Interest income:
Loans receivable(1) (2)	$	(300	)		(1,421	)		(1,721	)
Mortgage related securities(3)		359			(450	)		(91	)
Other earning assets(3)		(171	)		(110	)		(281	)
Total interest-earning assets		(112	)		(1,981	)		(2,093	)
Interest expense:
Demand accounts		-			(2	)		(2	)
Money market and savings accounts		3			(16	)		(13	)
Time deposits		(341	)		(858	)		(1,199	)
Total interest-bearing deposits		(338	)		(876	)		(1,214	)
Borrowings		328			(121	)		207
Total interest-bearing liabilities		(10	)		(997	)		(1,007	)
Net change in net interest income	$	(102	)		(984	)		(1,086	)

______________

⁽¹⁾ Interest income includes net deferred loan fee amortization income of $146,000 and $117,000 for the three months ended June 30, 2012 and 2011, respectively.

⁽²⁾    Non-accrual loans have been included in average loans receivable balance.

⁽³⁾    Includes available for sale securities.  Average balance of available for sale securities is based on amortized historical cost.

Total Interest Income - Total interest income decreased $2.1 million, or 10.5%, to $17.8 million during the three months ended June 30, 2012 from $19.9 million during the three months ended June 30, 2011.

Interest income on loans decreased $1.7 million, or 9.5%, to $16.3 million during the three months ended June 30, 2012 from $18.0 million during the three months ended June 30, 2011.  The decrease in interest income was primarily due to a 45 basis point decrease in the average yield on loans to 5.13% for the three-month period ended June 30, 2012 from 5.58% for the comparable period in 2011.  The decrease in interest income on loans also reflects $21.9 million, or 1.7%, decrease in the average balance of loans outstanding to $1.28 billion during the three months ended June 30, 2012 from $1.30 billion during the comparable period in 2011.

-- 54 --

Interest income from mortgage-related securities decreased $91,000, or 9.0%, to $921,000 during the three months ended June 30, 2012 from $1.0 million during the three months ended June 30, 2011.  The decrease in interest income was due to a 154 basis point decrease in the average yield on mortgage-related securities to 2.62% for the three months ended June 30, 2012 from 4.16% for the comparable period in 2011.  The decrease in average yield resulted from a general turnover of the investment security portfolio.  During the six months ended June 30, 2012, the investment portfolio was decreased by $19.8 million maturities of debt securities and $8.8 million in principal repayments in mortgage related securities.  The proceeds from maturities and principal repayments were reinvested at a lower average rate which is reflective of the current interest rate environment.  The decrease in interest income from mortgage-related securities due to a decrease in average yield was partially offset by a $43.2 million, or 44.3%, increase in the average balance of mortgage-related securities to $140.8 million for the three months ended June 30, 2012 from $97.6 million during the comparable period in 2011.

Interest income from other interest earning assets (comprised of debt securities, federal funds sold and short-term investments) decreased $281,000, or 33.9%, to $548,000 for the three months ended June 30, 2012 compared to $829,000 for the three months ended June 30, 2011.  Interest income decreased due to a decrease of $57.1 million, or 22.6%, in the average balance of other earning assets to $195.2 million during the three months ended June 30, 2012 from $252.3 million during the comparable period in 2011.  The decrease in interest income from other earning assets also reflects a 19 basis point decline in the average yield on other earning assets to 1.13% for the three months ended June 30, 2012 from 1.32% for the comparable period in 2011.

Total Interest Expense - Total interest expense decreased by $1.0 million, or 12.3%, to $7.2 million during the three months ended June 30, 2012 from $8.2 million during the three months ended June 30, 2011.  This decrease was the result of both a decrease in the average cost of funds as well as a decrease in the average balance of interest bearing deposits and borrowings.  The average cost of funds decreased 20 basis points to 1.94% for the three months ended June 30, 2012 from 2.14% for the three months ended June 30, 2011.  Total average interest bearing deposits and borrowings outstanding decreased $50.2 million, or 3.3%, to $1.48 billion for the three months ended June 30, 2012 compared to an average balance of $1.53 billion for the three months ended June 30, 2011.

Interest expense on deposits decreased $1.2 million, or 31.3%, to $2.7 million during the three months ended June 30, 2012 from $3.9 million during the comparable period in 2011.  The decrease in interest expense on deposits was primarily due to a decrease in the cost of average deposits of 36 basis points to 1.06% for the three months ended June 30, 2012 compared to 1.42% for the comparable period during 2011.  The decrease in the cost of deposits reflects the low interest rate environment due to the Federal Reserve's low short term interest rate policy.  These rates are typically used by financial institutions in pricing deposit products.  The decrease in interest expense attributable to the decrease in the cost of deposits was compounded by a decrease of $84.3 million, or 7.7%, in the average balance of interest bearing deposits to $1.0 billion during the three months ended June 30, 2012 from $1.1 billion during the comparable period in 2011.  The decrease in average interest-bearing deposits was exclusively the result of a decrease in time deposits, which carry a higher cost than demand, money market or savings accounts.  The decrease in time deposits was consistent with the Bank's liquidity needs and funding obligations.

Interest expense on borrowings increased $207,000, or 4.8%, to $4.5 million during the three months ended June 30, 2012 from $4.3 million during the comparable period in 2011.  The increase primarily resulted from a $34.2 million, or 7.8%, increase in average borrowings outstanding to $472.1 million during the three months ended June 30, 2012 from $437.9 million during the comparable period in 2011.  The increased use of borrowings as a funding source during the three months ended June 30, 2012 reflects an increased use of external lines of credit within our mortgage banking segment to fund loan originations to be sold on the secondary market.  The increase in interest expense on borrowings due to an increase in average balance was partially offset by an 11 basis point decrease in the average cost of borrowings to 3.82% during the three months ended June 30, 2012 compared to 3.93% during the three months ended June 30, 2011.

Net Interest Income - Net interest income decreased by $1.1 million, or 9.3%, to $10.6 million during the three months ended June 30, 2012 as compared to $11.7 million during the comparable period in 2011.  The decrease in net interest income resulted primarily from a 21 basis point decrease in our interest rate spread to 2.49% during the three months ended June 30, 2012 from 2.70% during the three months ended June 30, 2011.  The 21 basis point decrease in the interest rate spread resulted from a 41 basis point decrease in the average yield on interest earning assets, which was partially offset by a 20 basis point decrease in the average cost of interest bearing liabilities.

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Provision for Loan Losses - Our provision for loan losses decreased $3.9 million, or 73.0%, to $1.4 million during the three months ended June 30, 2012, from $5.3 million during the three months ended June 30, 2011.  The decrease in the provision for loan losses resulted from a decrease in loans exhibiting risk characteristics that require estimated loan loss provisions in excess of our historical average experience rates when compared to the same period of the prior year.  See the "Asset Quality" section for an analysis of charge-offs, nonperforming assets, specific reserves and additional provisions.

Noninterest Income - Total noninterest income increased $13.1 million, or 128.5%, to $23.3 million during the three months ended June 30, 2012 from $10.2 million during the comparable period in 2011.  The increase resulted primarily from an increase in mortgage banking income.

Mortgage banking income increased $13.2 million, or 142.6%, to $22.5 million for the three months ended June 30, 2012, compared to $9.3 million during the comparable period in 2011.  The $13.2 million increase in mortgage banking income was the result of an increase in origination and sales volumes as well as an increase in average sales margins.  The increase in average sales margin reflects an increase in pricing and fees on all products in all geographic markets.

Despite the increase in pricing, overall loan origination volumes increased significantly compared to the prior year which reflects the continued strong demand for fixed-rate loans due in large part to historically low interest rates on these products.  Loans originated for sale on the secondary market totaled $440.2 million during the three months ended June 30, 2012, which represents a $219.9 million, or 99.8%, increase in originations from the three months ended June 30, 2011, which totaled $220.3 million.

Our overall margin can be affected by the mix of both loan type (conventional loans versus governmental) and loan purpose (purchase versus refinance).  During the three months ended June 30, 2012, the growth in loan origination volume resulted in a shift towards lower yielding conventional loans and loans made for the purpose of a refinancing, however, margins increased for all loan types and loan purpose, compared to the three months ended June 30, 2011.   Loans originated for the purpose of a residential property purchase, which generally yields a higher margin than loans originated for the purpose of a refinance, comprised 64% of total originations during the three months ended June 30, 2012, compared to 78% during the three months ended June 30, 2011.  The mix of loan type also changed slightly with conventional loans and governmental loans comprising 65% and 35% of all loan originations, respectively during the three months ended June 30, 2012.  During the three months ended June 30, 2011 conventional loans and governmental loans comprised 54% and 46% of all loan originations, respectively.

Noninterest Expense - Total noninterest expense increased $8.3 million, or 46.0%, to $26.2 million during the three months ended June 30, 2012 from $18.0 million during the comparable period in 2011.  The increase was primarily attributable to increased compensation and other noninterest expense.

Compensation, payroll taxes and other employee benefit expense increased $5.6 million, or 59.3%, to $15.0 million during the three months ended June 30, 2012 compared to $9.4 million during the comparable period in 2011.  Due primarily to an increase in loan origination activity, total compensation, payroll taxes and other benefits at our mortgage banking subsidiary increased $5.7 million, or 87.4%, to $12.1 million for the three months ended June 30, 2012 compared to $6.4 million during the comparable period in 2010.  The increase in compensation at our mortgage banking subsidiary correlates to the increase in mortgage banking income due to the commission based compensation structure in place for our mortgage banking loan officers.  The increase in total compensation, payroll taxes and other benefits at our mortgage banking subsidiary was partially offset by a decrease in compensation, payroll taxes and other employee benefits at our banking segment.

-- 56 --

Real estate owned expense decreased $48,000, or 1.7%, to $2.8 million during the three months ended June 30, 2012 from $2.9 million during the comparable period in 2011.  Real estate owned expense includes the net operating and carrying costs related to the properties.  In addition, it includes net gain or loss recognized upon the sale of a foreclosed property, as well as write-downs recognized to maintain the properties at the lower of cost or estimated fair value.  The decrease in real estate owned expense results from a decrease in net property management expense and an increase in gains on the sales of properties partially offset by an increase in write-downs of asset values.  During the three months ended June 30, 2012, net operating expense, which includes but is not limited to property taxes, maintenance and management fees, net of rental income decreased $860000, or 56.1%, to $674,000 from $1.5 million during the comparable period in 2011.  The decrease in net operating expense compared to the prior period resulted from a decrease in average balance of properties owned.  The average balance of real estate owned totaled $53.3 million for the three months ended June 30, 2012 compared to $61.4 million for the three months ended June 30, 2011.  Net losses recognized on the sale or write-down of real estate owned totaled $2.2 million during the three months ended June 30, 2012, compared to $1.4 million during the comparable period in 2011.

Other noninterest expense increased $2.2 million or 130.2%, to $3.9 million during the three months ended June 30, 2012 from $1.7 million during the comparable period in 2011.  The increase resulted from an increase in operational costs related to the expansion of our mortgage banking operations of $2.1 million, or 151.1%,  to $3.4 million for the three months ended June 30, 2012, compared to $1.4 million during the comparable period in 2011.  Increases in other noninterest expenses due to the expansion of our mortgage banking operations were partially offset by a decrease in expense within our community banking segment.

Income Taxes - During the three months ended June 30, 2012 the Company recorded income tax expense of $41,000.  This includes state income tax expense of $225,000 related to various states in which our mortgage banking subsidiary does business and to which our state net operating loss carryforwards do not apply.  State tax expense is partially offset by a federal benefit of $184,000 from a prior year over estimate of liability related to an IRS audit of the company's federal income tax returns for the years 2005 through 2009.

During the three months ended June 30, 2011, the Company recorded a net income tax benefit of $775,000 which primarily relates to the intraperiod tax allocation between other comprehensive income and loss from continuing operations, and represents an out-of-period adjustment for an error that originated beginning in 2008 that was corrected during the six months ended June 30, 2011 period.  The correction of the error was not material to the six months ended June 30, 2011.  The impact of this error to all prior periods was not deemed to be material. 

Comparison of Financial Condition at June 30, 2012 and December 31, 2011

Total Assets - Total assets decreased by $31.7 million, or 1.8%, to $1.68 billion at June 30, 2012 from $1.71 billion at December 31, 2011. The decrease in total assets reflects decreases in loans receivable of $49.5 million, cash and cash equivalents of $15.5 million, real estate owned of $8.9 million and securities held to maturity of $2.6 million.  Funds received from the repayment of loans held in portfolio and from short-term borrowings and escrow deposits were combined with cash and used to reduce deposits by $65.1 million, increase loans held for sale by $34.2 million, reduce other liabilities by $7.5 million and increase securities available for sale by $6.7 million during the six months ended June 30, 2012.

Cash and Cash Equivalents - Cash and cash equivalents decreased by $15.5 million, or 19.3%, to $64.9 million at June 30, 2012 from $80.4 million at December 31, 2011.  The decrease in cash and cash equivalents is not reflective of an overall change in strategy with respect to cash management.  The overall level of cash and cash equivalents continues to reflect the Company's plan to maintain higher than usual liquidity given the current economic environment and relatively low rates of return available on securities and other investments.

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Securities Available for Sale - Securities available for sale increased by $6.7 million, or 3.3%, to $213.2 million at June 30, 2012 from $206.5 million at December 31, 2011.  This increase reflects a $56.4 million increase in mortgage backed securities and a $5.5 million increase in government sponsored enterprise issued collateralized mortgage obligations, partially offset by a $42.3 million decrease in government sponsored enterprise bonds and a $14.1 million decrease in municipal securities.  During the six months ended June 30, 2012, the proceeds from maturities and calls of government sponsored enterprise securities and from the sale of municipal securities were reinvested in mortgage related securities deemed to provide a better risk-adjusted return.  The Company sold $11.6 million in short-term municipal securities at a gain of $241,000 in order to capture the related value of the tax-exempt feature of the securities not otherwise realized due to the Company's taxable loss position.  As of June 30, 2012, the Company holds two available for sale private label issue collateralized mortgage obligations with a total fair value of $18.1 million and an amortized cost of $18.4 million that were determined to be other than temporarily impaired.  The $371,000 unrealized loss (before taxes) is included in other comprehensive income.  During the six months ended June 30, 2012, $4,000 was recognized as additional other than temporary impairment with respect to one of the private label issue collateralized mortgage obligations which was charged against earnings.  As of June 30, 2012, the Company also holds two municipal securities with a total fair value and amortized cost of $215,000 that were determined to be other than temporarily impaired.  During the six months ended June 30, 2012, $100,000 was recognized as additional other than temporary impairment with respect to these municipal securities which was charged against earnings.

Loans Receivable - Loans receivable held for investment decreased $49.5 million, or 4.1%, to $1.17 billion at June 30, 2012 from $1.22 billion at December 31, 2011.  The 2012 decrease in total loans receivable was primarily attributable to a $23.0 million decrease in one- to four-family loans and a $21.5 million decrease in over four-family loans.  The decrease in one- to four-family loans reflects a decline in loan demand for variable-rate real estate mortgage loans as borrowers continue to prefer long-term fixed-rate products that the Company does not generally retain in its portfolio.  As a result of the low interest rate environment with respect to long-term fixed-rate real estate mortgage products, the Company continued to experience a shift in the composition of loan originations during 2012 and 2011 from one- to four-family residential variable-rate loans to residential real estate loans collateralized by over four-family properties and commercial real estate, as these categories of borrowers displayed relatively stable levels of demand for our existing products.  During the six months ended June 30, 2012, $11.0 million in loans were transferred to real estate owned and $4.9 million were charged-off, net of recoveries.

The following table shows loan origination, principal repayment activity, transfers to real estate owned, charge-offs and sales during the periods indicated.

	As of or for the						As of or for the
	Six Months Ended June 30,						Year Ended
		2012			2011		December 31, 2011
	(In Thousands)
Total gross loans receivable and held for sale at beginning of period	$	1,304,947		$	1,443,824			1,443,824
Real estate loans originated for investment:
Residential
One- to four-family		10,352			5,668			13,651
Over four-family		22,930			21,658			60,367
Home equity		1,915			2,069			4,328
Construction and land		238			12,448			3,487
Commercial real estate		10,900			2,810			25,398
Total real estate loans originated for investment		46,335			44,653			107,231
Consumer		35			-			-
Commerical business loans originated for investment		3,013			6,744			9,366
Total loans originated for investment		49,383			51,397			116,597
Principal repayments		(82,992	)		(90,955	)		(200,544	)
Transfers to real estate owned		(11,002	)		(16,167	)		(28,259	)
Loan principal charged-off, net of recoveries		(4,872	)		(5,195	)		(18,821	)
Net activity in loans held for investment		(49,483	)		(60,920	)		(131,027	)
Loans originated for sale		767,092			403,309			1,027,346
Loans sold		(732,886	)		(447,556	)		(1,035,196	)
Net activity in loans held for sale		34,206			(44,247	)		(7,850	)
Total gross loans receivable and held for sale at end of period	$	1,289,670		$	1,338,657			1,304,947

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Allowance for Loan Losses - The allowance for loan losses increased $228,000, or 0.7%, to $32.7 million at June 30, 2012 from $32.4 million at December 31, 2011.  The $228,000 increase in the allowance for loan losses during the six months ended June 30, 2012 is attributable to a $3.5 million increase in specific loan loss reserves related to impaired loans, partially offset by a $3.3 million decrease in the general valuation allowance.  The $3.5 million increase in specific loan loss reserves was primarily the result of an increase in the coverage rate with respect to performing collateral based specific impairment reviews with respect to impaired loans.  This increase in specific reviews and subsequent specific reserves resulted in a corresponding decrease in general reserves.  Along with this shift from general to specific reserves, the decrease in general valuation allowance resulted primarily from a decrease the overall balance of loans outstanding.  As of June 30, 2012, the allowance for loan losses to total loans receivable was 2.80% and was equal to 38.53% of non-performing loans, compared to 2.67% and 41.46%, respectively, at December 31, 2011.  The overall $228,000 increase in the allowance for loan losses during the six months ended June 30, 2012 was primarily the result of increases in the allowance for loan losses related to the over four-family and commercial real estate categories.  The increase in allowance for loan losses related to these categories resulted from an increase in commercial real estate loans classified as impaired and a decrease in collateral values related to over four-family loans previously classified as impaired.  Increases in the allowance for loan losses related to the over four-family and commercial real estate categories were partially offset by a decrease in allowance for loan losses related to the one- to four- family category which was a direct result of a decrease in one- to four-family loans identified as impaired. Weakness in the residential real estate market has continued for the past four years and the risk of loss on loans secured by residential real estate remains at an elevated level.  That portion of the allowance for loan losses attributable to mortgage loans secured by residential real estate remained relatively unchanged at 85.2% of the total allowance for loan losses at June 30, 2012 and 85.5% December 31, 2011.

Real Estate Owned - Total real estate owned decreased $8.9 million, or 15.6%, to $47.8 million at June 30, 2012 from $56.7 million at December 31, 2011.  During the six months ended June 30, 2012, $11.0 million was transferred from loans to real estate owned upon completion of foreclosure.  Declines in property values evidenced by updated appraisals, responses to list prices on properties held for sale and/or deterioration in the condition of properties resulted in write downs totaling $3.4 million during the six months ended June 30, 2012.  During the same period, sales of real estate owned totaled $16.2 million.

Prepaid Expenses and Other Assets - Prepaid expenses and other assets increased by $4.9 million or 58.9%, to $13.3 million at June 30, 2012 from $8.4 million at December 31, 2011.  The increase is primarily due to a decrease in deferred income tax valuation allowances and an increase in mortgage banking derivative assets and other receivables due from third parties related to the origination of loans held for sale as well as an increase in the mortgage servicing rights intangible asset that relates to an increase in loans sold on a servicing retained basis.

Deposits - Total deposits decreased $65.1 million, or 6.2%, to $986.2 million at June 30, 2012 from $1.05 billion at December 31, 2011.  The reduction in deposits reflects management's decision to accept a certain level of deposit run-off during a period of diminished loan demand.  Total time deposits decreased $84.3 million, or 9.6%, to $794.5 million at June 30, 2012 from $878.7 million at December 31, 2011.  The decrease in time deposits was partially offset by an increase in money market and demand deposits.  Total money market and savings deposits increased $10.8 million, or 10.4%, to $114.9 million at June 30, 2012 from $104.1 million at December 31, 2011.  Total demand deposits increased $8.4 million, or 12.2%, to $76.8 million at June 30, 2012 from $68.5 million at December 31, 2011.

Borrowings - Total borrowings increased $17.9 million, or 3.9%, to $479.0 million at June 30, 2012 from $461.1 million at December 31, 2011.  The increase in borrowings relates entirely to an increase in the use of bank lines of credit to finance loans held for sale.  The balance of these lines of credit increased by $17.9 million, to $45.0 million at June 30, 2012, from $27.1 million at December 31, 2011.

Advance Payments by Borrowers for Taxes - Advance payments by borrowers for taxes increased $13.6 million to $14.5 million at June 30, 2012 from $942,000 at December 31, 2011.  The increase was the result of payments received from borrowers for their real estate taxes and is seasonally normal, as balances increase during the course of the calendar year until real estate tax obligations are paid out in the fourth quarter.

Other Liabilities - Other liabilities decreased $7.5 million, or 22.5%, to $25.7 million at June 30, 2012 from $33.1 million at December 31, 2011.  The decrease resulted primarily from a $10.7 million seasonal decrease in outstanding escrow checks.  The Company receives payments from borrowers for their real estate taxes during the course of the calendar year until real estate tax obligations are paid out in the fourth quarter.  These amounts remain classified as other liabilities until settled.  The decrease related to escrow checks was partially offset by an increase in amounts due to third parties related to the origination of loans held for sale.

Shareholders' Equity - Shareholders' equity increased by $9.4 million, or 5.7%, to $175.8 million at June 30, 2012 from $166.4 million at December 31, 2011.  The increase in stockholders' equity was primarily due to an $8.4 million increase in retained earnings reflecting net income for the six months ended June 30, 2012.  In addition to the increase in retained earnings, shareholders' equity was positively impacted by a $841,000 increase in accumulated other comprehensive income and a $427,000 decrease in unearned ESOP shares.

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ASSET QUALITY

NONPERFORMING ASSETS

The following table summarizes nonperforming loans and assets:

	At June 30,			At December 31,
		2012			2011
	(Dollars in Thousands)
Non-accrual loans:
Residential
One- to four-family	$	48,575			55,609
Over four-family		24,739			13,680
Home equity		2,004			1,334
Construction and land		5,826			6,946
Commercial real estate		3,581			514
Consumer		27			-
Commercial		-			135
Total non-accrual loans		84,752			78,218
Real estate owned
One- to four-family		21,637			27,449
Over four-family		13,742			16,231
Construction and land		8,793			8,796
Commercial real estate		3,643			4,194
Total real estate owned		47,815			56,670
Total nonperforming assets	$	132,567			134,888
Total non-accrual loans to total loans, net		7.26	%		6.43	%
Total non-accrual loans and performing troubled debt restructurings to total loans receivable restructurings to total loans receivable		9.77	%		8.45	%
Total non-accrual loans to total assets		5.05	%		4.57	%
Total nonperforming assets to total assets		7.89	%		7.88	%

All loans that exceed 90 days past due with respect to principal and interest are recognized as non-accrual.  Troubled debt restructurings which are nonaccrual either due to being past due greater than 90 days or which have not yet performed under the modified terms for a reasonable period of time, are included in the table above.  In addition, loans which are past due less than 90 days are evaluated to determine the likelihood of collectability given other credit risk factors such as early stage delinquency, the nature of the collateral or the results of a borrower review.  When the collection of all contractual principal and interest is determined to be unlikely, the loan is moved to non-accrual status and an updated appraisal of the underlying collateral is ordered.  This process generally takes place between contractual past due dates 60 to 90 days.  Upon determining the updated estimated value of the collateral, a loan loss provision is recorded to establish a specific reserve to the extent that the outstanding principal balance exceeds the updated estimated net realizable value of the collateral.  When a loan is determined to be uncollectible, typically coinciding with the initiation of foreclosure action, the specific reserve is reviewed for adequacy, adjusted if necessary, and charged-off.

Total non-accrual loans increased by $6.5 million, or 8.4%, to $84.8 million as of June 30, 2012 compared to $78.2 million as of December 31, 2011.  The ratio of non-accrual loans to total loans receivable was 7.26% at June 30, 2012 compared to 6.43% at December 31, 2011.  The $6.5 million net increase in non-accrual loans during the six months ended June 30, 2012 was primarily attributable to one $12.2 million lending relationship that went on to non-accrual status during the period.  During the six months ended June 30, 2012, a total of $31.3 million in loans were placed on non-accrual status.  Offsetting the addition of loans added to non-accrual status were $11.0 million in transfers to real estate owned (net of charge-offs), $8.0 million in loans that were returned to accrual status, $3.4 million in charge-offs and $1.4 million in principal repayments.

-- 60 --

Of the $84.8 million in total non-accrual loans as of June 30, 2012, $75.9 million in loans have been specifically reviewed to assess whether a specific valuation allowance is necessary.  A specific valuation allowance is established for an amount equal to the impairment when the carrying value of the loan exceeds the present value of expected future cash flows, discounted at the loan's original effective interest rate or the fair value of the underlying collateral with an adjustment made for costs to dispose of the asset.  Based upon these specific reviews, a total of $7.4 million in partial charge-offs have been recorded with respect to these loans as of June 30, 2012.  Partially charged-off loans measured for impairment based upon net realizable collateral value are maintained in a "non-performing" status and are disclosed as impaired loans.  In addition, specific reserves totaling $10.9 million have been recorded as of June 30, 2012.  The remaining $8.9 million of non-accrual loans were reviewed on an aggregate basis and $2.1 million in general valuation allowance was deemed necessary as of June 30, 2012.   The $2.1 million in general valuation allowance is based upon a migration analysis performed with respect to similar non-accrual loans in prior periods.

There were no accruing loans past due 90 days or more during the six months ended June 30, 2012 and 2011.

TROUBLED DEBT RESTRUCTURINGS

The following table summarizes troubled debt restructurings:

	At June 30,		At December 31,
		2012		2011
	(In Thousands)
Troubled debt restructurings
Substandard	$	39,796		47,220
Watch		14,729		8,192
Total troubled debt restructurings	$	54,525		55,412

All troubled debt restructurings are considered to be impaired and are risk rated as either substandard or watch and are included in the internal risk rating tables disclosed in Note 3 in the notes to the financial statements.  Specific reserves have been established to the extent that these collateral-based impairment analyses indicate that a collateral shortfall exists.

-- 61 --

LOAN DELINQUENCY

The following table summarizes loan delinquency in total dollars and as a percentage of the total loan portfolio:

	At June 30,			At December 31,
		2012			2011
	(Dollars in Thousands)
Loans past due less than 90 days	$	20,917			36,798
Loans past due 90 days or more		63,464			56,612
Total loans past due	$	84,381			93,410
Total loans past due to total loans receivable		7.23	%		7.68	%

Loans past due decreased by $9.0 million, or 9.7%, to $84.4 million at June 30, 2012 from $93.4 million at December 31, 2011.  Loans past due 90 days or more increased by $6.9 million, or 12.1%, during the six months ended June 30, 2012 while loans past due less than 90 days decreased by $15.9 million, or 43.2%.  The $6.9 million increase in loans past due 90 days or more was primarily attributable to a $9.9 million increase in loans collateralized by over four-family residential real estate.  This increase relates to one borrower relationship that was past due less than 90 days as of December 31, 2011.  Within the category of loans past due less than 90 days, only the category of loans collateralized by commercial real estate experienced an increase in overall delinquent balance when compared to December 31, 2011.  All other loan categories experienced declines in total loan balance past due less than 90 days.

REAL ESTATE OWNED

Total real estate owned decreased by $8.9 million, or 15.6%, to $47.8 million at June 30, 2012, compared to $56.7 million at December 31, 2011.  During the six months ended June 30, 2012, $11.0 million was transferred from loans to real estate owned upon completion of foreclosure.  Declines in property values evidenced by updated appraisals, responses to list prices on properties held for sale and/or deterioration in the condition of properties resulted in write-downs totaling $3.4 million during the six months ended June 30, 2012.  During the same period, sales of real estate owned totaled $16.2 million.  New appraisals received on real estate owned and collateral dependent impaired loans are based upon an "as is value" assumption.  During the period of time in which we are awaiting receipt of an updated appraisal, loans evaluated for impairment based upon collateral value are measured by the following:

•     Confirming that the physical condition of the real estate has not significantly changed since the last valuation date;

•     Applying an updated adjustment factor (as described previously) to an existing appraisal;

•     Comparing the estimated current value of the collateral to that of updated sales values experienced on similar collateral;

•     Comparing the estimated current value of the collateral to that of updated values seen on current appraisals of similar collateral; and

•     Comparing the estimated current value to that of updated listed sales prices on our real estate owned and that of similar properties (not owned by the Company).

We held 283 properties as real estate owned as of June 30, 2012, compared to 323 properties at December 31, 2011.  Of the $47.8 million in real estate owned properties as of June 30, 2012, $39.0 million consist of one- to four-family, over four-family and commercial real estate properties.  Of all real estate owned, these property types present the greatest opportunity to offset operating expenses through the generation of rental income.  Of the $39.0 million in one- to four-family, over four-family and commercial real estate properties, $20.4 million, or 52.2%, represent properties that are generating rental revenue.  Virtually all habitable real estate owned is managed with the intent of attracting a lessee to generate revenue.  Foreclosed properties are recorded at the lower of carrying value or fair value with charge-offs, if any, charged to the allowance for loan losses upon transfer to real estate owned.  The fair value is primarily based upon updated appraisals in addition to an analysis of current real estate market conditions.

-- 62 --

A summary of the allowance for loan losses is shown below:

ALLOWANCE FOR LOAN LOSSES

	At or for the Six Months
	Ended June 30,
		2012			2011
	(Dollars in Thousands)
Balance at beginning of period	$	32,430			29,175
Provision for loan losses		5,100			10,156
Charge-offs:
Mortgage
One- to four-family		4,133			2,901
Over four-family		612			1,591
Home Equity		158			350
Commercial real estate		43			177
Construction and land		192			159
Consumer		-			7
Commercial		59			313
Total charge-offs		5,197			5,498
Recoveries:
Mortgage
One- to four-family		252			126
Over four-family		11			12
Home Equity		22			4
Construction and land		15			-
Consumer		-			1
Commercial		25			10
Total recoveries		325			153
Net charge-offs		4,872			5,345
Allowance at end of period	$	32,658		$	33,986
Ratios:
Allowance for loan losses to non-accrual loans at end of period		38.53	%		42.29	%
Allowance for loan losses to loans receivable at end of period		2.80	%		2.73	%
Net charge-offs to average loans outstanding (annualized)		0.76	%		0.82	%
Current year provision for loan losses to net charge-offs		104.68	%		189.99	%
Net charge-offs (annualized) to beginning of the year allowance		15.02	%		36.95	%

_______________

At June 30, 2012, the allowance for loan losses was $32.7 million, compared to $32.4 million at December 31, 2011.  As of June 30, 2012, the allowance for loan losses represented 2.80% of total loans receivable and was equal to 38.53% of non-performing loans, compared to 2.67% and 41.46%, respectively, at December 31, 2011.  The $228,000 increase in the allowance for loan losses during the six months ended June 30, 2012 is attributable to a $3.5 million increase in specific loan loss reserves related to impaired loans, partially offset by a $3.3 million decrease in the general valuation allowance.  The $3.5 million increase in specific loan loss reserves and was primarily the result of an increase in the coverage rate with respect to performing collateral based specific impairment reviews with respect to impaired loans.  This increase in specific reviews and subsequent specific reserves resulted in a corresponding decrease in general reserves.  Along with this shift from general to specific reserves, the decrease in general valuation allowance resulted primarily from a decrease the overall balance of loans outstanding.

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Net charge-offs totaled $4.9 million, or an annualized 0.76% of average loans for the six months ended June 30, 2012, compared to $5.3 million, or an annualized 0.82% of average loans for the six months ended June 30, 2011.  Of the $4.9 million in net charge-offs during the six months ended June 30, 2012, $3.9 million related to loans secured by one- to four-family residential loans.  Weakness in the residential real estate market has continued for the past three years and the risk of loss on loans secured by residential real estate remains at an elevated level.

The loan loss provision of $5.1 million for the six months ended June 30, 2012 reflects the Company's conclusion as to the need for the ending allowance to be $32.7 million following the net charge-offs recorded during the period and a review of the Bank's loan portfolio and general economic conditions.

Our underwriting policies and procedures emphasize the fact that credit decisions must rely on both the credit quality of the borrower and the estimated value of the underlying collateral.  Credit quality is assured only when the estimated value of the collateral is objectively determined and is not subject to significant fluctuation.  The quantified deterioration of the credit quality of our loan portfolio as described above is the direct result of borrowers who were not financially strong enough to make regular interest and principal payments or maintain their properties when the economic environment no longer allowed them the option of converting estimated real estate value increases into short-term cash flow.

The allowance for loan losses has been determined in accordance with GAAP. We are responsible for the timely and periodic determination of the amount of the allowance required. Future provisions for loan losses will continue to be based upon our assessment of the overall loan portfolio and the underlying collateral, trends in nonperforming loans, current economic conditions and other relevant factors. To the best of management's knowledge, all probable losses have been provided for in the allowance for loan losses.

The establishment of the amount of the loan loss allowance inherently involves judgments by management as to the adequacy of the allowance, which ultimately may or may not be correct. Higher than anticipated rates of loan default would likely result in a need to increase provisions in future years. See "Critical Accounting Policies" above for a discussion on the use of judgment in determining the amount of the allowance for loan losses.

Impact of Inflation and Changing Prices

The financial statements and accompanying notes of the Company have been prepared in accordance with GAAP. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than do the effects of inflation.

Liquidity and Capital Resources

We maintain liquid assets at levels we consider adequate to meet our liquidity needs.  Our liquidity ratio averaged 5.1% and 6.6% for the six months ended June 30, 2012 and 2011, respectively.  The liquidity ratio is equal to average daily cash and cash equivalents for the period divided by average total assets.  We adjust our liquidity levels to fund loan commitments, repay our borrowings, fund deposit outflows and pay real estate taxes on mortgage loans.  We also adjust liquidity as appropriate to meet asset and liability management objectives.  The operational adequacy of our liquidity position at any point in time is dependent upon the judgment of the senior management as supported by the Asset/Liability Committee.  Liquidity is monitored on a daily, weekly and monthly basis using a variety of measurement tools and indicators.

Our primary sources of liquidity are deposits, amortization and repayment of loans, sales of loans held for sale, maturities of investment securities and other short-term investments, and earnings and funds provided from operations.  While scheduled principal repayments on loans are a relatively predictable source of funds, deposit flows and loan repayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competitors.  We set the interest rates on our deposits to maintain a desired level of total deposits.  In addition, we invest excess funds in short-term, interest-earning assets, which provide liquidity to meet lending requirements.  Additional sources of liquidity used for the purpose of managing long- and short-term cash flows include advances from the FHLBC.

-- 64 --

A portion of our liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities.  At June 30, 2012 and 2011, respectively, $64.9 million and $95.5 million of our assets were invested in cash and cash equivalents.  At June 30, 2012 cash and cash equivalents are comprised of the following: $50.4 million in cash held at the Federal Reserve Bank and other depository institutions and $14.5 million in federal funds sold and short-term investments.  Our primary sources of cash are principal repayments on loans, proceeds from the calls and maturities of debt and mortgage-related securities, increases in deposit accounts, federal funds purchased and advances from the FHLBC.

During the six months ended June 30, 2012, the collection of principal payments on loans, net of loan originations provided cash flow of $33.6 million, compared to $38.9 million for the six months ended June 30, 2011.  The decrease in loans receivable is reflective of the general decline in loan demand for variable-rate residential real estate mortgage loans combined with the Company's tightened underwriting standards given the current economic environment.  The decrease in the loan portfolio during the six months ended June 30, 2012 was primarily attributable to a $23.0 million decrease in one- to four-family loans and a $21.5 million decrease in over four-family loans.  The decrease in one- to four-family loans reflects a decline in loan demand for variable-rate real estate mortgage loans as borrowers continue to prefer long-term fixed-rate products that the Company does not generally retain in its portfolio.

Deposit flows are generally affected by the level of interest rates, the interest rates and products offered by local competitors, and other factors.  Deposits decreased by $65.1 million for the six months ended June 30, 2012.  The decrease in deposits was driven by a $84.3 million decrease in time deposits, partially offset by a $10.8 million increase in money market and savings deposits and an $8.4 million increase in demand deposits.  As a result of the consent order issued by state and federal regulators effective December 18, 2009, the Bank is prohibited from accepting or renewing brokered deposits and all other deposit rates are capped by the FDIC.

Liquidity management is both a daily and longer-term function of business management.  If we require funds beyond our ability to generate them internally, borrowing agreements exist with the FHLBC which provide an additional source of funds.  At June 30, 2012, we had $350.0 million in advances from the FHLBC with contractual maturity dates in 2016, 2017 or 2018.  All advances are callable quarterly until maturity.  As an additional source of funds, we also enter into repurchase agreements.  At June 30, 2012, we had $84.0 million in repurchase agreements.  The repurchase agreements mature at various times in 2017, however, all are callable quarterly until maturity.

At June 30, 2012, we had outstanding commitments to originate loans of $22.7 million.  In addition, at June 30, 2012 we had unfunded commitments under construction loans of $5.6 million, unfunded commitments under business lines of credit of $10.4 million and unfunded commitments under home equity lines of credit and standby letters of credit of $19.5 million.  At June 30, 2012 certificates of deposit scheduled to mature in one year or less totaled $561.3 million.  Based on prior experience, management believes that, subject to the Bank's funding needs, a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case.  In the event a significant portion of our deposits is not retained by us, we will have to utilize other funding sources, such as FHLBC advances, in order to maintain our level of assets.  However, we cannot assure that such borrowings would be available on attractive terms, or at all, if and when needed.  Alternatively, we could reduce our level of liquid assets, such as our cash and cash equivalents and securities available-for-sale in order to meet funding needs.  In addition, the cost of such deposits may be significantly higher if market interest rates are higher or there is an increased amount of competition for deposits in our market area at the time of renewal.

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Contractual Obligations, Commitments, Contingent Liabilities, and Off-balance Sheet Arrangements

The following tables present information indicating various contractual obligations and commitments of the Company as of June 30, 2012 and the respective maturity dates.

Contractual Obligations
					More than		More than
					One Year		Three Years		Over
			One Year		Through		Through		Five
	Total		or Less		Three Years		Five Years		Years
	(In Thousands)
Deposits without a stated maturity (4)	$	191,727		191,727		-		-		-
Certificates of deposit (4)		794,471		561,276		209,773		23,422		-
Bank lines of credit (4)		45,031		45,031		-		-		-
Federal Home Loan Bank advances (1)		350,000		-		-		245,000		105,000
Repurchase agreements (2)(4)		84,000		-		-		24,000		60,000
Operating leases (3)		3,348		1,589		1,458		301		-
Salary continuation agreements		850		170		340		340		-
	$	1,469,427		799,793		211,571		293,063		165,000

_____________

⁽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

     one year are callable on a quarterly basis.

⁽²⁾  The repurchase agreements are callable on a quarterly basis until maturity.

⁽³⁾  Represents non-cancelable operating leases for offices and equipment.

⁽⁴⁾  Excludes interest.

The following table details the amounts and expected maturities of significant off-balance sheet commitments as of June 30, 2012.

Other Commitments
					More than		More than
					One Year		Three Years		Over
			One Year		Through		Through		Five
	Total		or Less		Three Years		Five Years		Years
	(In Thousands)
Real estate loan commitments (1)	$	22,713		22,713		-		-		-
Unused portion of home equity lines of credit (2)		18,582		18,582		-		-		-
Unused portion of construction loans (3)		5,550		5,550		-		-		-
Unused portion of business lines of credit		10,395		10,395		-		-		-
Standby letters of credit		922		922		-		-		-
Total Other Commitments	$	58,162		58,162		-		-		-

______________

General:  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 and generally have fixed expiration dates or other termination clauses.

⁽¹⁾  Commitments for loans are extended to customers for up to 90 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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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Management of Market Risk

General.The majority of our assets and liabilities are monetary in nature.  Consequently, our most significant form of market risk is interest rate risk.  Our assets, consisting primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits.  As a result, a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates.  Accordingly, WaterStone Bank's board of directors has established an Asset/Liability Committee which is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.  Management monitors the level of interest rate risk on a regular basis and the Asset/Liability Committee meets at least weekly to review our asset/liability policies and interest rate risk position, which are evaluated quarterly.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates.  We have implemented the following strategies to manage our interest rate risk: (i) emphasizing variable rate loans including variable rate one- to four-family, and commercial real estate loans as well as three to five year commercial real estate balloon loans; (ii) reducing and shortening the expected average life of the investment portfolio; and (iii) whenever possible, lengthening the term structure of our deposit base and our borrowings from the FHLBC.  These measures should reduce the volatility of our net interest income in different interest rate environments.

Income Simulation.  Simulation analysis is an estimate of our interest rate risk exposure at a particular point in time.  At least quarterly we review the potential effect changes in interest rates may have on the repayment or repricing of rate sensitive assets and funding requirements of rate sensitive liabilities.  Our most recent simulation uses projected repricing of assets and liabilities at June 30, 2012 on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments.  Prepayment rate assumptions may have a significant impact on interest income simulation results.  Because of the large percentage of loans and mortgage-backed securities we hold, rising or falling interest rates may have a significant impact on the actual prepayment speeds of our fixed-rate mortgage related assets that may in turn affect our interest rate sensitivity position.  When interest rates rise, prepayment speeds slow and the average expected lives of our fixed-rate assets would tend to lengthen more than the expected average lives of our liabilities and therefore would most likely have a negative impact on net interest income and earnings.  This effect is offset by the impact that variable-rate assets have on net interest income as interest rates rise and fall.

	Percentage Increase (Decrease) in Estimated Annual Net Interest Income Over 12 Months
300 basis point gradual rise in rates		(4.38)
200 basis point gradual rise in rates		(4.99)
100 bassis point gradual rise in rates		(5.57)
Unchanged rate scenario		(6.06)
100 bassis point gradual decline in rates		(7.54)
200 bassis point gradual decline in rates		(11.43)
300 bassis point gradual decline in rates		(13.48)

WaterStone Bank's Asset/Liability policy limits projected changes in net average annual interest income to a maximum decline of 20% for various levels of interest rate changes measured over a 12-month period when compared to the flat rate scenario.  In addition, projected changes in the economic value of equity are limited to a maximum decline of 10% to 80% for interest rate movements of 100 to 300 basis points when compared to the flat rate scenario.  These limits are re-evaluated on a periodic basis and may be modified, as appropriate.  Because our balance sheet is asset sensitive, net interest income is projected to decline as interest rates fall.  At June 30, 2012, a 100 basis point gradual increase in interest rates had the effect of decreasing forecast net interest income by 5.57% while a 100 basis point decrease in rates had the effect of decreasing net interest income by 7.54%.  At June 30, 2012, a 100 basis point gradual increase in interest rates had the effect of decreasing the economic value of equity by 3.33% while a 100 basis point decrease in rates had the effect of decreasing the economic value of equity by 2.70%.  While we believe the assumptions used are reasonable, there can be no assurance that assumed prepayment rates will approximate actual future mortgage-backed security and loan repayment activity.

Item 4. Controls and Procedures

Disclosure Controls and Procedures : Company management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

Internal Control Over Financial Reporting : There have been no changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

-- 67 --

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are not involved in any pending legal proceedings as a defendant other than routine legal proceedings occurring in the ordinary course of business.  At June 30, 2012, we believe that any liability arising from the resolution of any pending legal proceedings will not be material to our financial condition or results of operations.

Item 1A. Risk Factors

In addition to the "Risk Factors" in Item 1A of the Company's annual report on Form 10-K for the year ended December 31, 2011, we set forth the following additional risk factors.

A Significant Portion of our Liabilities are Time Deposits

If interest rates rise, our cost of funds could significantly increase, adversely affecting our ability to generate a profit.  At June 30, 2012, time deposits totaled $794.5 million, comprising 80.6% of our total deposits.  If market rates begin to rise our costs of funds may significantly increase or we may experience significant deposit outflows.  Either of which will adversely affect our ability to operate profitably.

Item 6. Exhibits

    (a) Exhibits: See Exhibit Index, which follows the signature page hereof.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	WATERSTONE FINANCIAL, INC. (Registrant)
Date:  August 3, 2012
	/s/  Douglas S. Gordon
	Douglas S. Gordon
	Chief Executive Officer
Date:  August 3, 2012
	/s/  Richard C. Larson
	Richard C. Larson
	Chief Financial Officer

-- 68 --

EXHIBIT INDEX

WATERSTONE FINANCIAL, INC.

Form 10-Q for Quarter Ended June 30, 2012

Exhibit No.	Description	Filed Herewith
31.1	Sarbanes-Oxley Act Section 302 Certification signed by the Chief Executive Officer of Waterstone Financial, Inc.	X
31.2	Sarbanes-Oxley Act Section 302 Certification signed by the Chief Financial Officer of Waterstone Financial, Inc.	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 Waterstone Financial, Inc.	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 Waterstone Financial, Inc.	X

-- 69 --

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Douglas S. Gordon, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2012 of Waterstone Financial, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  August 3, 2012

/s/  Douglas S Gordon
Douglas S. Gordon Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Richard C. Larson, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2012 of Waterstone Financial, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  August 3, 2012

/s/  Richard C Larson
Richard C. Larson Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Waterstone Financial, Inc. (the "Company") on Form 10-Q for the period ended June 30, 2012, as filed with the Securities and Exchange Commission on or about the date hereof (the "Report"), I, Douglas S. Gordon, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Douglas S. Gordon
Douglas S. GordonChief Executive Officer August 3, 2012

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Waterstone Financial, Inc. and will be retained by Waterstone Financial, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Waterstone Financial, Inc. (the "Company") on Form 10-Q for the period ended June 30, 2012 as filed with the Securities and Exchange Commission on or about the date hereof (the "Report"), I, Richard C. Larson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/   Richard C. Larson
Richard C. LarsonChief Financial Officer August 3, 2012

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Waterstone Financial, Inc. and will be retained by Waterstone Financial, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Loans Receivable (Details) (USD $)	3 Months Ended			6 Months Ended			12 Months Ended
	Jun. 30, 2012		Jun. 30, 2011	Jun. 30, 2012		Jun. 30, 2011	Dec. 31, 2011		Dec. 31, 2010
Mortgage Loans [Abstract]
Loans receivable	$ 1,167,181,000			$ 1,167,181,000			$ 1,216,664,000
Percentage of total loans receivable secured by residential real estate (in hundredths)				89.10%
Mortgage loans receivable located outside the state of Wisconsin				89,800,000
Percentage of total mortgage loans located outside of the state of Wisconsin (in hundredths)				7.70%
Loans originated for sale				767,092,000		403,309,000
Proceeds on sales of loans originated for sale				770,190,000		462,998,000
Noninterest income	22,507,000		9,279,000	36,708,000		15,442,000
Loans sold on a servicing retained basis	213,400,000			213,400,000			29,900,000
Loans receivable pledged as collateral	806,100,000			806,100,000			715,700,000
Advances by Federal Home Loan Bank	350,000,000			350,000,000			350,000,000
Financing Receivable, Recorded Investment, Aging [Abstract]
1 to 59 Days Past Due	9,948,000	[1]		9,948,000	[1]		28,346,000	[1]
60 to 89 Days Past Due	10,969,000	[2]		10,969,000	[2]		8,452,000	[2]
Greater than 90 Days	63,464,000			63,464,000			56,612,000
Total Past Due	84,381,000			84,381,000			93,410,000
Current	1,082,800,000	[3]		1,082,800,000	[3]		1,123,254,000	[3]
Loan Receivable, 1 to 59 Days Past Due, Nonaccrual Status	2,200,000			2,200,000			4,600,000
Loan Receivable, 60 to 89 Days Past Due, Nonaccrual Status	7,200,000			7,200,000			1,400,000
Loan Receivable, Nonaccrual Status	11,800,000			11,800,000			15,700,000
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance				32,430,000		29,175,000	29,175,000		28,494,000
Provision for loan losses				5,100,000			22,077,000		25,832,000
Charge-offs				(5,197,000)			(19,291,000)		(25,341,000)
Recoveries				325,000			469,000		190,000
Balance	32,658,000			32,658,000			32,430,000		29,175,000
Summary of the Allowance for Loan Loss for Loans Evaluated Individually and Collectively for Impairment by Collateral Class [Abstract]
Allowance related to loans individually evaluated for impairment	16,081,000			16,081,000
Allowance related to loans collectively evaluated for impairment	16,577,000			16,577,000
Balance at end of period	32,658,000			32,658,000
Loans individually evaluated for impairment	118,226,000			118,226,000
Loans collectively evaluated for impairment	1,048,955,000			1,048,955,000
Total gross loans	1,167,181,000			1,167,181,000
One-to Four-family [Member]
Mortgage Loans [Abstract]
Loans receivable	473,730,000			473,730,000			496,736,000
Financing Receivable, Recorded Investment, Aging [Abstract]
1 to 59 Days Past Due	8,423,000	[1]		8,423,000	[1]		12,650,000	[1]
60 to 89 Days Past Due	5,444,000	[2]		5,444,000	[2]		5,536,000	[2]
Greater than 90 Days	34,391,000			34,391,000			40,001,000
Total Past Due	48,258,000			48,258,000			58,187,000
Current	425,472,000	[3]		425,472,000	[3]		438,549,000	[3]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance				17,475,000		16,150,000	16,150,000		17,875,000
Provision for loan losses				2,943,000			12,567,000		15,054,000
Charge-offs				(4,133,000)			(11,553,000)		(16,906,000)
Recoveries				252,000			311,000		127,000
Balance	16,537,000			16,537,000			17,475,000		16,150,000
Summary of the Allowance for Loan Loss for Loans Evaluated Individually and Collectively for Impairment by Collateral Class [Abstract]
Allowance related to loans individually evaluated for impairment	7,291,000			7,291,000
Allowance related to loans collectively evaluated for impairment	9,246,000			9,246,000
Balance at end of period	16,537,000			16,537,000
Loans individually evaluated for impairment	62,913,000			62,913,000
Loans collectively evaluated for impairment	410,817,000			410,817,000
Total gross loans	473,730,000			473,730,000
Over Four-family [Member]
Mortgage Loans [Abstract]
Loans receivable	530,752,000			530,752,000			552,240,000
Financing Receivable, Recorded Investment, Aging [Abstract]
1 to 59 Days Past Due	1,046,000	[1]		1,046,000	[1]		13,044,000	[1]
60 to 89 Days Past Due	5,395,000	[2]		5,395,000	[2]		2,630,000	[2]
Greater than 90 Days	18,837,000			18,837,000			8,946,000
Total Past Due	25,278,000			25,278,000			24,620,000
Current	505,474,000	[3]		505,474,000	[3]		527,620,000	[3]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance				8,252,000		6,877,000	6,877,000		5,208,000
Provision for loan losses				1,396,000			5,331,000		5,053,000
Charge-offs				(612,000)			(3,996,000)		(3,439,000)
Recoveries				11,000			40,000		55,000
Balance	9,047,000			9,047,000			8,252,000		6,877,000
Summary of the Allowance for Loan Loss for Loans Evaluated Individually and Collectively for Impairment by Collateral Class [Abstract]
Allowance related to loans individually evaluated for impairment	5,040,000			5,040,000
Allowance related to loans collectively evaluated for impairment	4,007,000			4,007,000
Balance at end of period	9,047,000			9,047,000
Loans individually evaluated for impairment	40,070,000			40,070,000
Loans collectively evaluated for impairment	490,682,000			490,682,000
Total gross loans	530,752,000			530,752,000
Home Equity [Member]
Mortgage Loans [Abstract]
Loans receivable	35,881,000			35,881,000			38,599,000
Financing Receivable, Recorded Investment, Aging [Abstract]
1 to 59 Days Past Due	378,000	[1]		378,000	[1]		1,982,000	[1]
60 to 89 Days Past Due	130,000	[2]		130,000	[2]		131,000	[2]
Greater than 90 Days	829,000			829,000			290,000
Total Past Due	1,337,000			1,337,000			2,403,000
Current	34,544,000	[3]		34,544,000	[3]		36,196,000	[3]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance				1,998,000		1,196,000	1,196,000		1,642,000
Provision for loan losses				374,000			1,429,000		170,000
Charge-offs				(158,000)			(634,000)		(619,000)
Recoveries				22,000			7,000		3,000
Balance	2,236,000			2,236,000			1,998,000		1,196,000
Summary of the Allowance for Loan Loss for Loans Evaluated Individually and Collectively for Impairment by Collateral Class [Abstract]
Allowance related to loans individually evaluated for impairment	1,135,000			1,135,000
Allowance related to loans collectively evaluated for impairment	1,101,000			1,101,000
Balance at end of period	2,236,000			2,236,000
Loans individually evaluated for impairment	2,883,000			2,883,000
Loans collectively evaluated for impairment	32,998,000			32,998,000
Total gross loans	35,881,000			35,881,000
Construction and Land [Member]
Mortgage Loans [Abstract]
Loans receivable	38,875,000			38,875,000			39,528,000
Financing Receivable, Recorded Investment, Aging [Abstract]
1 to 59 Days Past Due	0	[1]		0	[1]		49,000	[1]
60 to 89 Days Past Due	0	[2]		0	[2]		155,000	[2]
Greater than 90 Days	5,826,000			5,826,000			6,790,000
Total Past Due	5,826,000			5,826,000			6,994,000
Current	33,049,000	[3]		33,049,000	[3]		32,534,000	[3]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance				2,922,000		3,252,000	3,252,000		2,635,000
Provision for loan losses				(137,000)			1,346,000		2,934,000
Charge-offs				(192,000)			(1,745,000)		(2,319,000)
Recoveries				15,000			69,000		2,000
Balance	2,608,000			2,608,000			2,922,000		3,252,000
Summary of the Allowance for Loan Loss for Loans Evaluated Individually and Collectively for Impairment by Collateral Class [Abstract]
Allowance related to loans individually evaluated for impairment	1,744,000			1,744,000
Allowance related to loans collectively evaluated for impairment	864,000			864,000
Balance at end of period	2,608,000			2,608,000
Loans individually evaluated for impairment	7,317,000			7,317,000
Loans collectively evaluated for impairment	31,558,000			31,558,000
Total gross loans	38,875,000			38,875,000
Commercial Real Estate [Member]
Mortgage Loans [Abstract]
Loans receivable	70,046,000			70,046,000			65,434,000
Financing Receivable, Recorded Investment, Aging [Abstract]
1 to 59 Days Past Due	101,000	[1]		101,000	[1]		70,000	[1]
60 to 89 Days Past Due	0	[2]		0	[2]		0	[2]
Greater than 90 Days	3,581,000			3,581,000			515,000
Total Past Due	3,682,000			3,682,000			585,000
Current	66,364,000	[3]		66,364,000	[3]		64,849,000	[3]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance				941,000		671,000	671,000		720,000
Provision for loan losses				817,000			998,000		525,000
Charge-offs				(43,000)			(734,000)		(575,000)
Recoveries				0			6,000		1,000
Balance	1,715,000			1,715,000			941,000		671,000
Summary of the Allowance for Loan Loss for Loans Evaluated Individually and Collectively for Impairment by Collateral Class [Abstract]
Allowance related to loans individually evaluated for impairment	795,000			795,000
Allowance related to loans collectively evaluated for impairment	920,000			920,000
Balance at end of period	1,715,000			1,715,000
Loans individually evaluated for impairment	4,175,000			4,175,000
Loans collectively evaluated for impairment	65,871,000			65,871,000
Total gross loans	70,046,000			70,046,000
Consumer [Member]
Mortgage Loans [Abstract]
Loans receivable	165,000			165,000			109,000
Financing Receivable, Recorded Investment, Aging [Abstract]
1 to 59 Days Past Due	0	[1]		0	[1]		8,000	[1]
60 to 89 Days Past Due	0	[2]		0	[2]		0	[2]
Greater than 90 Days	0			0			0
Total Past Due	0			0			8,000
Current	165,000	[3]		165,000	[3]		101,000	[3]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance				28,000		28,000	28,000		43,000
Provision for loan losses				(1,000)			9,000		(3,000)
Charge-offs				0			(10,000)		(13,000)
Recoveries				0			1,000		1,000
Balance	27,000			27,000			28,000		28,000
Summary of the Allowance for Loan Loss for Loans Evaluated Individually and Collectively for Impairment by Collateral Class [Abstract]
Allowance related to loans individually evaluated for impairment	0			0
Allowance related to loans collectively evaluated for impairment	27,000			27,000
Balance at end of period	27,000			27,000
Loans individually evaluated for impairment	27,000			27,000
Loans collectively evaluated for impairment	138,000			138,000
Total gross loans	165,000			165,000
Commercial Loans [Member]
Mortgage Loans [Abstract]
Loans receivable	17,732,000			17,732,000			24,018,000
Financing Receivable, Recorded Investment, Aging [Abstract]
1 to 59 Days Past Due	0	[1]		0	[1]		543,000	[1]
60 to 89 Days Past Due	0	[2]		0	[2]		0	[2]
Greater than 90 Days	0			0			70,000
Total Past Due	0			0			613,000
Current	17,732,000	[3]		17,732,000	[3]		23,405,000	[3]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance				814,000		1,001,000	1,001,000		371,000
Provision for loan losses				(292,000)			397,000		2,099,000
Charge-offs				(59,000)			(619,000)		(1,470,000)
Recoveries				25,000			35,000		1,000
Balance	488,000			488,000			814,000		1,001,000
Summary of the Allowance for Loan Loss for Loans Evaluated Individually and Collectively for Impairment by Collateral Class [Abstract]
Allowance related to loans individually evaluated for impairment	76,000			76,000
Allowance related to loans collectively evaluated for impairment	412,000			412,000
Balance at end of period	488,000			488,000
Loans individually evaluated for impairment	841,000			841,000
Loans collectively evaluated for impairment	16,891,000			16,891,000
Total gross loans	$ 17,732,000			$ 17,732,000

[1] Includes $2.2 million and $4.6 million for June 30, 2012 and December 31, 2011, respectively, which are on non-accrual status.

[2] Includes $7.2 million and $1.4 million for June 30, 2012 and December 31, 2011, respectively, which are on non-accrual status.

[3] Includes $11.8 million and $15.7 million for June 30, 2012 and December 31, 2011, respectively, which are on non-accrual status.

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Segment Reporting (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Segment Reporting Information [Line Items]
Net interest income	$ 10,628	$ 11,714	$ 21,055	$ 23,641
Provision for loan losses	1,425	5,281	5,100	10,156
Net interest income after provision for loan losses	9,203	6,433	15,955	13,485
Noninterest income	23,252	10,177	38,253	16,974
Noninterest expenses [Abstract]
Compensation, payroll taxes, and other employee benefits	14,965	9,397	25,602	17,314
Occupancy, office furniture and equipment	1,688	1,656	3,409	3,275
FDIC insurance premiums	873	1,016	1,814	2,077
Real estate owned	2,838	2,886	4,273	4,681
Segment Reporting Information Other Noninterest Expenses	5,872	3,014	10,653	5,976
Total noninterest expenses	26,236	17,969	45,751	33,323
Income (loss) before income taxes	6,219	(1,359)	8,457	(2,864)
Income taxes (benefits)	41	(775)	71	(736)
Net income (loss)	6,178	(584)	8,386	(2,128)
Total Assets	1,681,181	1,723,320	1,681,181	1,723,320	1,712,851
Mortgage Banking [Member]
Segment Reporting Information [Line Items]
Net interest income	168	137	223	204
Provision for loan losses	(75)	16	0	31
Net interest income after provision for loan losses	243	121	223	173
Noninterest income	22,582	9,520	36,809	15,737
Noninterest expenses [Abstract]
Compensation, payroll taxes, and other employee benefits	12,052	6,431	19,779	10,804
Occupancy, office furniture and equipment	930	834	1,861	1,555
FDIC insurance premiums	0	0	0	0
Real estate owned	0	0	0	0
Segment Reporting Information Other Noninterest Expenses	4,462	1,773	7,959	3,357
Total noninterest expenses	17,444	9,038	29,599	15,716
Income (loss) before income taxes	5,381	603	7,433	194
Income taxes (benefits)	2,159	237	2,983	141
Net income (loss)	3,222	366	4,450	53
Total Assets	137,374	62,373	137,374	62,373
Community Banking [Member]
Segment Reporting Information [Line Items]
Net interest income	10,335	11,452	20,582	23,191
Provision for loan losses	1,500	5,265	5,100	10,125
Net interest income after provision for loan losses	8,835	6,187	15,482	13,066
Noninterest income	670	657	1,444	1,237
Noninterest expenses [Abstract]
Compensation, payroll taxes, and other employee benefits	3,086	3,168	6,213	6,913
Occupancy, office furniture and equipment	758	822	1,548	1,720
FDIC insurance premiums	873	1,016	1,814	2,077
Real estate owned	2,838	2,886	4,273	4,681
Segment Reporting Information Other Noninterest Expenses	1,322	1,170	2,540	2,314
Total noninterest expenses	8,877	9,062	16,388	17,705
Income (loss) before income taxes	628	(2,218)	538	(3,402)
Income taxes (benefits)	(2,313)	(1,012)	(3,107)	(877)
Net income (loss)	2,941	(1,206)	3,645	(2,525)
Total Assets	1,611,757	1,709,955	1,611,757	1,709,955
Holding Company and Other [Member]
Segment Reporting Information [Line Items]
Net interest income	125	125	250	246
Provision for loan losses	0	0	0	0
Net interest income after provision for loan losses	125	125	250	246
Noninterest income	0	0	0	0
Noninterest expenses [Abstract]
Compensation, payroll taxes, and other employee benefits	(173)	(202)	(390)	(403)
Occupancy, office furniture and equipment	0	0	0	0
FDIC insurance premiums	0	0	0	0
Real estate owned	0	0	0	0
Segment Reporting Information Other Noninterest Expenses	88	71	154	305
Total noninterest expenses	(85)	(131)	(236)	(98)
Income (loss) before income taxes	210	256	486	344
Income taxes (benefits)	195	0	195	0
Net income (loss)	15	256	291	344
Total Assets	$ (67,950)	$ (49,008)	$ (67,950)	$ (49,008)

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Financial Instruments with Off-Balance Sheet Risk (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012		Dec. 31, 2011
Commitments to Extend Credit Under Amortizing Loans [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks asset amount	$ 22,713	[1]	$ 14,259	[1]
Commitments to Extend Credit Under Home Equity Lines of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks asset amount	18,582		21,403
Unused Portion of Construction Loans [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks liability amount	5,550		5,684
Unused Portion of Business Lines of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks liability amount	10,395		10,347
Standby Letters of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance sheet risks liability amount	$ 922		$ 970

[1] Excludes commitments to originate loans held for sale addressed in Note 11.

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Regulatory Capital (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Regulatory Capital [Abstract]
Minimum Tier 1 capital ratio (in hundredths)	8.50%
Minimum total risk based capital ratio (in hundredths)	12.00%
Actual [Abstract]
Total capital (to risk-weighted assets)	$ 182,376	$ 174,144
Tier I capital (to risk-weighted assets)	167,074	158,994
Tier I capital (to average assets)	167,074	158,994
State of Wisconsin (to total assets)	167,074	158,994
Total capital (to risk-weighted assets) (in hundredths)	15.11%	14.58%
Tier I capital (to risk-weighted assets) (in hundredths)	13.84%	13.31%
Tier I capital (to average assets) (in hundredths)	9.82%	9.16%
State of Wisconsin (to total assets) (in hundredths)	9.97%	9.31%
For Capital Adequacy Purposes [Abstract]
Total capital (to risk-weighted assets)	96,550	95,579
Tier I capital (to risk-weighted assets)	48,275	47,790
Tier I capital (to average assets)	68,078	69,447
State of Wisconsin (to total assets)	100,560	102,463
Total capital (to risk-weighted assets) (in hundredths)	8.00%	8.00%
Tier I capital (to risk-weighted assets) (in hundredths)	4.00%	4.00%
Tier I capital (to average assets) (in hundredths)	4.00%	4.00%
State of Wisconsin (to total assets) (in hundredths)	6.00%	6.00%
To Be Well-Capitalized Under Prompt Corrective Action Provisions [Abstract]
Total capital (to risk-weighted assets)	120,688	119,474
Tier I capital (to risk-weighted assets)	72,413	71,684
Tier I capital (to average assets)	85,097	86,808
State of Wisconsin (to total assets)
Total capital (to risk-weighted assets) (in hundredths)	10.00%	10.00%
Tier I capital (to risk-weighted assets) (in hundredths)	6.00%	6.00%
Tier I capital (to average assets) (in hundredths)	5.00%	5.00%
State of Wisconsin (to total assets) (in hundredths)

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Regulatory Capital (Tables)

6 Months Ended

Jun. 30, 2012

Regulatory Capital [Abstract]

Actual and required capital amounts and ratios

The actual and required capital amounts and ratios for the Bank as of June 30, 2012 and December 31, 2011 are presented in the table below:

	June 30, 2012
											To Be Well-Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars In Thousands)
Total capital (to risk-weighted assets)	$	182,376		15.11	%		96,550		8.00	%		120,688		10.00	%
Tier I capital (to risk-weighted assets)		167,074		13.84	%		48,275		4.00	%		72,413		6.00	%
Tier I capital (to average assets)		167,074		9.82	%		68,078		4.00	%		85,097		5.00	%
State of Wisconsin (to total assets)		167,074		9.97	%		100,560		6.00	%		N/A		N/A
	December 31, 2011
	(Dollars In Thousands)
Total capital (to risk-weighted assets)	$	174,144		14.58	%		95,579		8.00	%		119,474		10.00	%
Tier I capital (to risk-weighted assets)		158,994		13.31	%		47,790		4.00	%		71,684		6.00	%
Tier I capital (to average assets)		158,994		9.16	%		69,447		4.00	%		86,808		5.00	%
State of Wisconsin (to total assets)		158,994		9.31	%		102,463		6.00	%		N/A		N/A

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Securities Available for Sale (Policies)

6 Months Ended

Jun. 30, 2012

Securities Available for Sale [Abstract]

Impairment of investment securities

The Company reviews the investment securities portfolio on a quarterly basis to monitor its exposure to other-than-temporary impairment.  In evaluating whether a security's decline in market value is other-than-temporary, management considers the length of time and extent to which the fair value has been less than cost, financial condition of the issuer and the underlying obligors, quality of credit enhancements, volatility of the fair value of the security, the expected recovery period of the security and ratings agency evaluations.  In addition the Company may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds and the value of any underlying collateral.  For certain securities in unrealized loss positions, the Company prepares cash flow analyses to compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

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Earnings (loss) per share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Unvested restricted stock included in dilutive earnings per share			105,000
Antidilutive securities excluded from computation of earnings per share (in shares)	210,500		289,000	54,200
Basic and diluted earnings per share calculations [Abstract]
Net income (loss)	$ 6,178	$ (584)	$ 8,386	$ (2,128)
Net income (loss) available to unvested restricted shares	21	0	28	0
Net income (loss) available to common stockholders	$ 6,157	$ (584)	$ 8,358	$ (2,128)
Weighted average shares outstanding	31,045,148	30,919,666	31,034,644	30,909,235
Effect of dilutive potential common shares	90,973	0	34,168	0
Diluted weighted average shares outstanding	31,136,121	30,919,666	31,068,812	30,909,235
Basic earnings (loss) per share	$ 0.20	$ (0.02)	$ 0.27	$ (0.07)
Diluted earnings (loss) per share	$ 0.20	$ (0.02)	$ 0.27	$ (0.07)

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Real Estate Owned (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Real Estate Owned [Line Items]
Real estate owned	$ 47,815	$ 60,120	$ 56,670	$ 57,752
Mortgage loans transferred to real estate owned upon completion of foreclosure	11,002	16,167
Write downs of real estate owned	(3,439)	(2,154)
Other Real Estate Owned	(171)	68
Sales of real estate owned	(16,247)	(11,713)
One- to four-family [Member]
Real Estate Owned [Line Items]
Real estate owned	21,637		27,449
Over four-family [Member]
Real Estate Owned [Line Items]
Real estate owned	13,742		16,231
Construction and land [Member]
Real Estate Owned [Line Items]
Real estate owned	8,793		8,796
Commercial Real Estate [Member]
Real Estate Owned [Line Items]
Real estate owned	$ 3,643		$ 4,194

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

	Six Months ended June 30, 2012
	Community Banking			Mortgage Banking		Holding Company and Other			Consolidated
	(in thousands)
Net interest income	$	20,582			223		250			21,055
Provision for loan losses		5,100			-		-			5,100
Net interest income after provision for loan losses		15,482			223		250			15,955
Noninterest income:		1,444			36,809		-			38,253
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		6,213			19,779		(390	)		25,602
Occupancy, office furniture and equipment		1,548			1,861		-			3,409
FDIC insurance premiums		1,814			-		-			1,814
Real estate owned		4,273			-		-			4,273
Other		2,540			7,959		154			10,653
Total noninterest expenses		16,388			29,599		(236	)		45,751
Income before income taxes (benefit)		538			7,433		486			8,457
Income taxes (benefit)		(3,107	)		2,983		195			71
Net income	$	3,645			4,450		291			8,386
Total Assets	$	1,611,757			137,374		(67,950	)		1,681,181

	As of or for the Six months ended June 30, 2011
	Community Banking			Mortgage Banking		Holding Company and Other			Consolidated
	(in thousands)
Net interest income	$	23,191			204		246			23,641
Provision for loan losses		10,125			31		-			10,156
Net interest income after provision for loan losses		13,066			173		246			13,485
Noninterest income:		1,237			15,737		-			16,974
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		6,913			10,804		(403	)		17,314
Occupancy, office furniture and equipment		1,720			1,555		-			3,275
FDIC insurance premiums		2,077			-		-			2,077
Real estate owned		4,681			-		-			4,681
Other		2,314			3,357		305			5,976
Total noninterest expenses		17,705			15,716		(98	)		33,323
Income (loss) before income taxes (benefit)		(3,402	)		194		344			(2,864	)
Income taxes (benefit)		(877	)		141		-			(736	)
Net income (loss)	$	(2,525	)		53		344			(2,128	)
Total Assets	$	1,709,955			62,373		(49,008	)		1,723,320

	Three Months ended June 30, 2012
	Community Banking			Mortgage Banking			Holding Company and Other			Consolidated
	(in thousands)
Net interest income	$	10,335			168			125			10,628
Provision for loan losses		1,500			(75	)		-			1,425
Net interest income after provision for loan losses		8,835			243			125			9,203
Noninterest income:		670			22,582			-			23,252
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		3,086			12,052			(173	)		14,965
Occupancy, office furniture and equipment		758			930			-			1,688
FDIC insurance premiums		873			-			-			873
Real estate owned		2,838			-			-			2,838
Other		1,322			4,462			88			5,872
Total noninterest expenses		8,877			17,444			(85	)		26,236
Income (loss) before income taxes (benefit)		628			5,381			210			6,219
Income taxes (benefit)		(2,313	)		2,159			195			41
Net income	$	2,941			3,222			15			6,178

	Three Months ended June 30, 2011
	Community Banking			Mortgage Banking		Holding Company and Other			Consolidated
	(in thousands)
Net interest income	$	11,452			137		125			11,714
Provision for loan losses		5,265			16		-			5,281
Net interest income after provision for loan losses		6,187			121		125			6,433
Noninterest income:		657			9,520		-			10,177
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		3,168			6,431		(202	)		9,397
Occupancy, office furniture and equipment		822			834		-			1,656
FDIC insurance premiums		1,016			-		-			1,016
Real estate owned		2,886			-		-			2,886
Other		1,170			1,773		71			3,014
Total noninterest expenses		9,062			9,038		(131	)		17,969
Income (loss) before income taxes (benefit)		(2,218	)		603		256			(1,359	)
Income taxes (benefit)		(1,012	)		237		-			(775	)
Net income (loss)	$	(1,206	)		366		256			(584	)

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Fair Value Measurements, Valuation Techniques (Details)	6 Months Ended
	Jun. 30, 2012
Collateralized Mortgage Obligations, Private-label Issued [Member] | Maximum [Member] | Discounted Cash Flow Valuation Technique [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Prepayment Rate	25.70%
Fair Value Inputs, Probability of Default	6.00%
Fair Value Inputs, Discount Rate	8.00%
Fair Value Inputs, Loss Severity	52.00%
Collateralized Mortgage Obligations, Private-label Issued [Member] | Minimum [Member] | Discounted Cash Flow Valuation Technique [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Prepayment Rate	9.60%
Fair Value Inputs, Probability of Default	5.60%
Fair Value Inputs, Discount Rate	8.00%
Fair Value Inputs, Loss Severity	43.00%
Mortgage Banking Derivatives [Member] | Maximum [Member] | Pricing Models Valuation Technique [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Pull Through Rate	99.00%
Mortgage Banking Derivatives [Member] | Minimum [Member] | Pricing Models Valuation Technique [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Pull Through Rate	64.40%
Impaired Loans, Net [Member] | Maximum [Member] | Pricing Models Valuation Technique [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Discount Rates Applied to Appraisals	30.00%
Impaired Loans, Net [Member] | Minimum [Member] | Pricing Models Valuation Technique [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Discount Rates Applied to Appraisals	15.00%
Real Estate Owned [Member] | Maximum [Member] | Pricing Models Valuation Technique [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Discount Rates Applied to Appraisals	70.00%
Real Estate Owned [Member] | Minimum [Member] | Pricing Models Valuation Technique [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value Inputs, Discount Rates Applied to Appraisals	5.00%

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Income Taxes (Details)	6 Months Ended
	Jun. 30, 2012
Income Taxes [Abstract]
Number of prior year's cumulative loss (in years)	2 years
Number of most recent year's cumulative loss (in years)	3 years

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Basis of Presentation

6 Months Ended

Jun. 30, 2012

Basis of Presentation [Abstract]

Basis of Presentation

Note 1 - Basis of Presentation

The unaudited interim consolidated financial statements include the accounts of Waterstone Financial, Inc. (the "Company") and the Company's subsidiaries.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information, Rule 10-01 of Regulation S-X and the instructions to Form 10-Q. The financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations, changes in shareholders' equity, and cash flows of the Company for the periods presented.

The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the Company's December 31, 2011 Annual Report on Form 10-K. Operating results for the six and three months ended June 30, 2012, are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

The preparation of the unaudited 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, deferred income taxes, certain investment securities and real estate owned.  Actual results could differ from those estimates.

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Mortgage Servicing Rights (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Mortgage servicing rights [Roll Forward]
Mortgage servicing rights, beginning balance	$ 198
Additions	982
Amortization	(77)
Mortgage servicing rights, ending balance	1,103
Valuation allowance at period end	0
Mortgage servicing rights, end of period net	1,103
Estimated future servicing rights amortization expense by period [Abstract]
2012	145
2013	263
2014	220
2015	176
2016	133
2017	90
Thereafter	76
Total	$ 1,103

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Real Estate Owned (Tables)

6 Months Ended

Jun. 30, 2012

Real Estate Owned [Abstract]

Summary of real estate owned

Real estate owned is summarized as follows:

	June 30,		December 31,
		2012		2011
	(In Thousands)
One- to four-family	$	21,637		27,449
Over four-family		13,742		16,231
Construction and land		8,793		8,796
Commercial real estate		3,643		4,194
	$	47,815		56,670

The following table presents the activity in the Company's real estate owned:

	Six months ended June 30,
		2012		2011
	(In Thousands)
Real estate owned at beginning of the period	$	56,670		57,752
Transferred from loans receivable		11,002		16,167
Sales		(16,247	)	(11,713	)
Write downs		(3,439	)	(2,154	)
Other		(171	)	68
Real estate owned at the end of the period	$	47,815		60,120

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Loans Receivable (Tables)

6 Months Ended

Jun. 30, 2012

Loans Receivable [Abstract]

Schedule of Components of Loans Receivable

Loans receivable at June 30, 2012 and December 31, 2011 are summarized as follows:

	June 30,		December 31,
		2012		2011
	(In Thousands)
Mortgage loans:
Residential real estate:
One- to four-family	$	473,730		496,736
Over four-family		530,752		552,240
Home equity		35,881		38,599
Construction and land		38,875		39,528
Commercial real estate		70,046		65,434
Consumer		165		109
Commercial loans		17,732		24,018
		1,167,181		1,216,664

Analysis of Past Due Loans Receivable

An analysis of past due loans receivable as of June 30, 2012 and December 31, 2011 follows:

	As of June 30, 2012
	1-59 Days Past Due (1)		60-89 Days Past Due (2)		Greater Than 90 Days		Total Past Due		Current (3)		Total Loans
	(In Thousands)
Mortgage loans:
Residential real estate:
One- to four-family	$	8,423		5,444		34,391		48,258		425,472		473,730
Over four-family		1,046		5,395		18,837		25,278		505,474		530,752
Home equity		378		130		829		1,337		34,544		35,881
Construction and land		-		-		5,826		5,826		33,049		38,875
Commercial real estate		101		-		3,581		3,682		66,364		70,046
Consumer		-		-		-		-		165		165
Commercial loans		-		-		-		-		17,732		17,732
Total	$	9,948		10,969		63,464		84,381		1,082,800		1,167,181
	As of December 31, 2011
Mortgage loans:
Residential real estate:
One- to four-family	$	12,650		5,536		40,001		58,187		438,549		496,736
Over four-family		13,044		2,630		8,946		24,620		527,620		552,240
Home equity		1,982		131		290		2,403		36,196		38,599
Construction and land		49		155		6,790		6,994		32,534		39,528
Commercial real estate		70		-		515		585		64,849		65,434
Consumer		8		-		-		8		101		109
Commercial loans		543		-		70		613		23,405		24,018
Total	$	28,346		8,452		56,612		93,410		1,123,254		1,216,664

⁽¹⁾ Includes $2.2 million and $4.6 million for June 30, 2012 and December 31, 2011, respectively, which are on non-accrual status.

⁽²⁾ Includes $7.2 million and $1.4 million for June 30, 2012 and December 31, 2011, respectively, which are on non-accrual status.

⁽³⁾ Includes $11.8 million and $15.7 million for June 30, 2012 and December 31, 2011, respectively, which are on non-accrual status.

Allowance for Loan Losses

As of June 30, 2012 and December 31, 2011, there are no loans that are 90 or more days past due and still accruing interest.

A summary of the activity for the six months ended June 30, 2012 and the years ended December 31, 2011 and 2010 in the allowance for loan losses follows:

	One- to Four- Family			Over Four Family			Home Equity			Construction and Land			Commercial Real Estate			Consumer			Commercial			Total
	(In Thousands)
Six months ended June 30, 2012
Balance at beginning of period	$	17,475			8,252			1,998			2,922			941			28			814			32,430
Provision for loan losses		2,943			1,396			374			(137	)		817			(1	)		(292	)		5,100
Charge-offs		(4,133	)		(612	)		(158	)		(192	)		(43	)		-			(59	)		(5,197	)
Recoveries		252			11			22			15			-			-			25			325
Balance at end of period	$	16,537			9,047			2,236			2,608			1,715			27			488			32,658
Year ended December 31, 2011
Balance at beginning of period	$	16,150			6,877			1,196			3,252			671			28			1,001			29,175
Provision for loan losses		12,567			5,331			1,429			1,346			998			9			397			22,077
Charge-offs		(11,553	)		(3,996	)		(634	)		(1,745	)		(734	)		(10	)		(619	)		(19,291	)
Recoveries		311			40			7			69			6			1			35			469
Balance at end of period	$	17,475			8,252			1,998			2,922			941			28			814			32,430
Year ended December 31, 2010
Balance at beginning of period	$	17,875			5,208			1,642			2,635			720			43			371			28,494
Provision for loan losses		15,054			5,053			170			2,934			525			(3	)		2,099			25,832
Charge-offs		(16,906	)		(3,439	)		(619	)		(2,319	)		(575	)		(13	)		(1,470	)		(25,341	)
Recoveries		127			55			3			2			1			1			1			190
Balance at end of period	$	16,150			6,877			1,196			3,252			671			28			1,001			29,175

Schedule of Allowance for Loan Loss for Loans Evaluated Individually and Collectively For Impairment

A summary of the allowance for loan loss for loans evaluated individually and collectively for impairment by collateral class as of June 30, 2012 follows:

	One- to Four- Family		Over Four Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total
	(In Thousands)
Allowance related to loans individually evaluated for impairment	$	7,291		5,040		1,135		1,744		795		-		76		16,081
Allowance related to loans collectively evaluated for impairment		9,246		4,007		1,101		864		920		27		412		16,577
Balance at end of period	$	16,537		9,047		2,236		2,608		1,715		27		488		32,658
Loans individually evaluated for impairment	$	62,913		40,070		2,883		7,317		4,175		27		841		118,226
Loans collectively evaluated for impairment		410,817		490,682		32,998		31,558		65,871		138		16,891		1,048,955
Total gross loans	$	473,730		530,752		35,881		38,875		70,046		165		17,732		1,167,181

A summary of the allowance for loan loss for loans evaluated individually and collectively for impairment by collateral class as of the year ended December 31, 2011 follows:

	One- to Four- Family		Over Four Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total
	(In Thousands)
Allowance related to loans individually evaluated for impairment	$	5,707		3,719		803		2,077		-		-		269		12,575
Allowance related to loans collectively evaluated for impairment		11,768		4,533		1,195		845		941		28		545		19,855
Balance at end of period	$	17,475		8,252		1,998		2,922		941		28		814		32,430
Loans individually evaluated for impairment	$	68,321		40,783		2,227		8,436		515		-		1,115		121,397
Loans collectively evaluated for impairment		428,415		511,457		36,372		31,092		64,919		109		22,903		1,095,267
Total gross loans	$	496,736		552,240		38,599		39,528		65,434		109		24,018		1,216,664

Internal Risk Rating of Loans Receivable

The following table presents information relating to the Company's internal risk ratings of its loans receivable as of June 30, 2012 and December 31, 2011:

	One- to Four- Family		Over Four Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total
	(In Thousands)
At June 30, 2012
Substandard	$	58,026		39,065		3,447		7,316		4,765		27		855		113,501
Watch		26,774		12,311		996		6,089		409		-		1,034		47,613
Pass		388,930		479,376		31,438		25,470		64,872		138		15,843		1,006,067
	$	473,730		530,752		35,881		38,875		70,046		165		17,732		1,167,181
At December 31, 2011
Substandard	$	68,566		37,502		3,188		8,436		1,114		-		1,116		119,922
Watch		14,341		16,993		721		6,199		1,549		-		1,108		40,911
Pass		413,829		497,745		34,690		24,893		62,771		109		21,794		1,055,831
	$	496,736		552,240		38,599		39,528		65,434		109		24,018		1,216,664

Impaired Loan Receivables

The following tables present data on impaired loans at June 30, 2012 and December 31, 2011.

	As of or for the Six Months Ended June 30, 2012
	Recorded Investment		Unpaid Principal		Reserve		Cumulative Charge-Offs		Average Recorded Investment		Int Paid YTD
	(In Thousands)
Total Impaired with Reserve
One- to four-family	$	32,641		33,040		7,291		399		31,085		533
Over four-family		24,389		24,634		5,040		245		24,912		559
Home equity		1,811		1,811		1,135		-		1,864		46
Construction and land		6,871		6,871		1,744		-		6,870		26
Commercial real estate		3,730		3,730		795		-		3,742		36
Consumer		-		-		-		-		-		-
Commercial		841		841		76		-		841		19
	$	70,283		70,927		16,081		644		69,314		1,219
Total Impaired with no Reserve
One- to four-family	$	30,272		35,683		-		5,411		35,840		419
Over four-family		15,681		16,901		-		1,220		17,158		206
Home equity		1,072		1,112		-		40		1,115		6
Construction and land		446		503		-		57		503		3
Commercial real estate		445		469		-		24		474		7
Consumer		27		27		-		-		27		1
Commercial		-		-		-		-		-		-
	$	47,943		54,695		-		6,752		55,117		642
Total Impaired
One- to four-family	$	62,913		68,723		7,291		5,810		66,925		952
Over four-family		40,070		41,535		5,040		1,465		42,070		765
Home equity		2,883		2,923		1,135		40		2,979		52
Construction and land		7,317		7,374		1,744		57		7,373		29
Commercial real estate		4,175		4,199		795		24		4,216		43
Consumer		27		27		-		-		27		1
Commercial		841		841		76		-		841		19
	$	118,226		125,622		16,081		7,396		124,431		1,861

	As of or for the Year Ended December 31, 2011
	Recorded Investment		Unpaid Principal		Reserve		Cumulative Charge-Offs		Average Recorded Investment		Int Paid YTD
	(In Thousands)
Total Impaired with Reserve
One- to four-family	$	25,735		25,913		5,707		178		26,093		579
Over four-family		21,268		21,648		3,719		380		21,846		761
Home equity		1,428		1,428		803		-		1,448		2
Construction and land		6,543		6,543		2,077		-		6,543		113
Commercial real estate		-		-		-		-		-		-
Commercial		1,033		1,033		269		-		1,037		42
	$	56,007		56,565		12,575		558		56,967		1,497
Total Impaired with no Reserve
One- to four-family	$	42,586		48,482		-		5,896		48,552		1,448
Over four-family		19,515		21,264		-		1,749		21,535		780
Home equity		799		799		-		-		833		3
Construction and land		1,893		3,413		-		1,520		3,413		60
Commercial real estate		515		539		-		24		538		17
Commercial		82		100		-		18		90		-
	$	65,390		74,597		-		9,207		74,961		2,308
Total Impaired
One- to four-family	$	68,321		74,395		5,707		6,074		74,645		2,027
Over four-family		40,783		42,912		3,719		2,129		43,381		1,541
Home equity		2,227		2,227		803		-		2,281		5
Construction and land		8,436		9,956		2,077		1,520		9,956		173
Commercial real estate		515		539		-		24		538		17
Commercial		1,115		1,133		269		18		1,127		42
	$	121,397		131,162		12,575		9,765		131,928		3,805

Troubled Debt Restructurings on Loan Receivables

The following presents data on troubled debt restructurings:

	As of June 30, 2012
	Accruing				Non-accruing				Total
	Amount		Number		Amount		Number		Amount		Number
	(dollars in thousands)
One- to four-family	$	16,920		26	$	20,331		90	$	37,251		116
Over four-family		10,765		12		2,022		6		12,787		18
Home equity		148		2		1,047		4		1,195		6
Construction and land		1,408		1		79		1		1,487		2
Commercial real estate		-		-		1,805		2		1,805		2
	$	29,241		41	$	25,284		103	$	54,525		144
	As of December 31, 2011
	Accruing				Non-accruing				Total
	Amount		Number		Amount		Number		Amount		Number
	(dollars in thousands)
One- to four-family	$	8,293		26	$	26,773		93	$	35,066		119
Over four-family		14,845		13		2,453		8		17,298		21
Home equity		43		1		1,024		4		1,067		5
Construction and land		1,408		1		79		1		1,487		2
Commercial real estate		-		-		452		1		452		1
Commercial		-		-		42		2		42		2
	$	24,589		41	$	30,823		109	$	55,412		150

Schedule of Troubled Debt Restructurings by Concession Type

The following presents troubled debt restructurings by concession type as of June 30, 2012 and December 31, 2011:

	As of June 30, 2012
	Performing in accordance with modified terms				In Default				Total
	Amount		Number		Amount		Number		Amount		Number
	(dollars in thousands)
Interest reduction and principal forbearance		26,880		69		2,749		12		29,629		81
Principal forbearance		5,059		33		351		1		5,410		34
Interest reduction		18,710		26		776		3		19,486		29
	$	50,649		128		3,876		16		54,525		144
	As of December 31, 2011
	Performing in accordance with modified terms				In Default				Total
	Amount		Number		Amount		Number		Amount		Number
	(dollars in thousands)
Interest reduction and principal forbearance		22,752		61		6,564		22		29,316		83
Principal forbearance		3,894		29		1,771		9		5,665		38
Interest reduction		20,006		27		425		2		20,431		29
	$	46,652		117		8,760		33		55,412		150

Schedule of Data on Troubled Debt Restructurings

The following presents data on troubled debt restructurings as of June 30, 2012:

	For the Six Months Ended June 30, 2012				For the Three Months Ended June 30, 2012
	Amount		Number		Amount		Number
	(dollars in thousands)				(dollars in thousands)
Loans modified as a troubled debt restructure
One- to four-family	$	6,500		11	$	3,533		4
Over four-family		1,004		2		1,004		2
Home equity		117		2		105		1
	$	7,621		15	$	4,642		7
Troubled debt restructuring modified within the past twelve months for which there was a default
One- to four-family	$	655		2	$	135		1
	$	655		2	$	135		1

Schedule of Loans Receivables, Non Accrual Status

The following table presents data on non-accrual loans as of June 30, 2012 and December 31, 2011:

	June 30,			December 31,
		2012			2011
	(Dollars in Thousands)
Non-accrual loans:
Residential
One- to four-family	$	48,575			55,609
Over four-family		24,739			13,680
Home equity		2,004			1,334
Construction and land		5,826			6,946
Commercial real estate		3,581			514
Commercial		-			135
Consumer		27			-
Total non-accrual loans	$	84,752			78,218
Total non-accrual loans to total loans, net		7.26	%		6.43	%
Total non-accrual loans and performing troubled debt restructurings to total loans receivable		9.77	%		8.45	%
Total non-accrual loans to total assets		5.05	%		4.57	%

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Deposits (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Contractual maturities of time deposits [Abstract]
Within one year	$ 561,276
More than one to two years	174,557
More than two to three years	35,216
More than three to four years	9,939
More than four through five years	13,483
Time deposits	$ 794,471	$ 878,733

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Mortgage Servicing Rights (Tables)

6 Months Ended

Jun. 30, 2012

Mortgage Servicing Rights [Abstract]

Mortgage Servicing Rights Activity

The following table presents the activity in the Company's mortgage servicing rights:

	Six months ended
	June 30, 2012
	(In Thousands)
Mortgage servicing rights at beginning of the period	$	198
Additions		982
Amortization		(77	)
Mortgage servicing rights at end of the period		1,103
Valuation allowance at end of period		-
Mortgage servicing rights at the end of the period, net	$	1,103

Estimated Amortization Expense of Mortgage Servicing Rights

The following table shows the estimated future amortization expense for mortgage servicing rights for the periods indicated:

		(In Thousands)
Estimate for the six months ended December 31:	2012		145
Estimate for the years ended December 31:	2013		263
2014			220
2015			176
2016			133
2017			90
Thereafter			76
Total			1,103

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Deposits (Tables)

6 Months Ended

Jun. 30, 2012

Deposits [Abstract]

Contractual maturities of time deposits

A summary of the contractual maturities of time deposits at June 30, 2012 is as follows:

	(In Thousands)
Within one year	$	561,276
More than one to two years		174,557
More than two to three years		35,216
More than three to four years		9,939
More than four through five years		13,483
	$	794,471

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Operating activities:
Net income (loss)	$ 8,386	$ (2,128)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for loan losses	5,100	10,156
Depreciation	985	928
Deferred income taxes	(2,160)	(795)
Stock based compensation	75	851
Net amortization of premium on debt and mortgage-related securities	576	299
Amortization of unearned ESOP shares	110	107
Net realized and unrealized loss related to real estate owned	2,670	1,570
Gain on sale of loans held for sale	(37,304)	(15,442)
Loans originated for sale	(767,092)	(403,309)
Proceeds on sales of loans originated for sale	770,190	462,998
(Increase) decrease in accrued interest receivable	508	187
Increase in cash surrender value of bank owned life insurance	(409)	(422)
Decrease in accrued interest on deposits and borrowings	(318)	(305)
Increase (decrease) in other liabilities	3,862	(8,404)
Decrease in accrued tax payable	(257)	(9)
Gain on sale or impairment of securities	(241)	0
Net impairment losses recognized in earnings	104	52
Other	(2,887)	3,224
Net cash (used in) provided by operating activities	(18,102)	49,558
Investing activities:
Net decrease in loans receivable	33,609	38,939
Purchases of:
Mortgage-related securities	(77,252)	0
Debt securities	0	(50,115)
Certificate Of Deposits	(1,470)	(4,094)
Premises and equipment, net	(741)	(427)
Bank owned life insurance	(180)	(180)
Proceeds from:
Principal repayments on mortgage-related securities	16,182	17,176
Sales of debt securities	11,908	0
Maturities of debt securities	44,868	29,164
Calls of structured notes	2,648	0
Redemption of FHLB stock	1,146	0
Sales of real estate owned	16,247	11,732
Net cash provided by investing activities	46,965	42,195
Financing activities:
Net decrease in deposits	(65,094)	(63,324)
Net change in short-term borrowings	17,893	(21,715)
Net change in advance payments by borrowers for taxes	2,833	13,442
Net cash used in financing activities	(44,368)	(71,597)
Increase (decrease)in cash and cash equivalents	(15,505)	20,156
Cash and cash equivalents at beginning of period	80,380	75,331
Cash and cash equivalents at end of period	64,875	95,487
Cash paid, credited or (received) during the period for:
Income tax payments	2,488	67
Interest payments	15,195	16,882
Noncash investing activities:
Loans receivable transferred to real estate owned	$ 11,002	$ 16,167

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Borrowings (Tables)

6 Months Ended

Jun. 30, 2012

Borrowings [Abstract]

Borrowings

Borrowings consist of the following:

		June 30, 2012					December 31, 2011
				Weighted					Weighted
				Average					Average
		Balance		Rate			Balance		Rate
		(Dollars in Thousands)
Short term:
Bank lines of credit		$	45,031		3.18	%		27,138		4.50	%
Long term:
Federal Home Loan Bank, Chicago (FHLBC) advances maturing:
	2016		220,000		4.34	%		220,000		4.34	%
	2017		65,000		3.19	%		65,000		3.19	%
	2018		65,000		2.97	%		65,000		2.97	%
Repurchase agreements maturing	2017		84,000		3.96	%		84,000		3.96	%
		$	479,031		3.83	%		461,138		3.93	%

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Loans Receivable, Part II (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	$ 1,167,181,000	$ 1,216,664,000
Loans Requiring An Officers' Loans Committee Review and Approval, Minimum	500,000
Minimum amount of potential loan exposure to be reviewed by credit management personnel	1,000,000
Maximum period of time loan is reviewed if renewed (in years)	1
Period of time sales of real estate owned fair value is based (in years)	2
Impaired Loans Receivable, Recorded Investment [Abstract]
Total Impaired, with Reserve, Recorded Investment	70,283,000	56,007,000
Total Impaired, with no Reserve, Recorded Investment	47,943,000	65,390,000
Total Impaired, Recorded Investment	118,226,000	121,397,000
Impaired Loans Receivable, Unpaid Principal Balance [Abstract]
Total Impaired with Reserve, Unpaid Principal Balance	70,927,000	56,565,000
Total Impaired with no Reserve, Unpaid Principal Balance	54,695,000	74,597,000
Total Impaired, Unpaid Principal Balance, Total	125,622,000	131,162,000
Impaired Loans Receivable, Reserve [Abstract]
Total Impaired with Reserve, Reserve	16,081,000	12,575,000
Total Impaired with no Reserve, Reserve	0	0
Impaired Loans, Reserve	16,081,000	12,575,000
Impaired Loans Receivable, Cumulative Charge-Offs [Abstract]
Total Impaired with Reserve, Cumulative Charge-offs	644,000	558,000
Total Impaired with no Reserve, Cumulative Charge-offs	6,752,000	9,207,000
Total Impaired, Cumulative Charge-offs	7,396,000	9,765,000
Impaired Loans Receivable, Average Recorded Investment [Abstract]
Total Impaired with Reserve, Average Recorded Investment	69,314,000	56,967,000
Total Impaired with no Reserve, Average Recorded Investment	55,117,000	74,961,000
Total Impaired, Average Recorded Investment, Total	124,431,000	131,928,000
Impaired Loans Receivable, Interest Paid YTD [Abstract]
Total Impaired with Reserve, Interest Paid YTD	1,219,000	1,497,000
Total Impaired with no Reserve, Interest Paid YTD	642,000	2,308,000
Total Impaired, Interest Paid YTD	1,861,000	3,805,000
One-to Four-family [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	473,730,000	496,736,000
Impaired Loans Receivable, Recorded Investment [Abstract]
Total Impaired, with Reserve, Recorded Investment	32,641,000	25,735,000
Total Impaired, with no Reserve, Recorded Investment	30,272,000	42,586,000
Total Impaired, Recorded Investment	62,913,000	68,321,000
Impaired Loans Receivable, Unpaid Principal Balance [Abstract]
Total Impaired with Reserve, Unpaid Principal Balance	33,040,000	25,913,000
Total Impaired with no Reserve, Unpaid Principal Balance	35,683,000	48,482,000
Total Impaired, Unpaid Principal Balance, Total	68,723,000	74,395,000
Impaired Loans Receivable, Reserve [Abstract]
Total Impaired with Reserve, Reserve	7,291,000	5,707,000
Total Impaired with no Reserve, Reserve	0	0
Impaired Loans, Reserve	7,291,000	5,707,000
Impaired Loans Receivable, Cumulative Charge-Offs [Abstract]
Total Impaired with Reserve, Cumulative Charge-offs	399,000	178,000
Total Impaired with no Reserve, Cumulative Charge-offs	5,411,000	5,896,000
Total Impaired, Cumulative Charge-offs	5,810,000	6,074,000
Impaired Loans Receivable, Average Recorded Investment [Abstract]
Total Impaired with Reserve, Average Recorded Investment	31,085,000	26,093,000
Total Impaired with no Reserve, Average Recorded Investment	35,840,000	48,552,000
Total Impaired, Average Recorded Investment, Total	66,925,000	74,645,000
Impaired Loans Receivable, Interest Paid YTD [Abstract]
Total Impaired with Reserve, Interest Paid YTD	533,000	579,000
Total Impaired with no Reserve, Interest Paid YTD	419,000	1,448,000
Total Impaired, Interest Paid YTD	952,000	2,027,000
Over Four-family [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	530,752,000	552,240,000
Impaired Loans Receivable, Recorded Investment [Abstract]
Total Impaired, with Reserve, Recorded Investment	24,389,000	21,268,000
Total Impaired, with no Reserve, Recorded Investment	15,681,000	19,515,000
Total Impaired, Recorded Investment	40,070,000	40,783,000
Impaired Loans Receivable, Unpaid Principal Balance [Abstract]
Total Impaired with Reserve, Unpaid Principal Balance	24,634,000	21,648,000
Total Impaired with no Reserve, Unpaid Principal Balance	16,901,000	21,264,000
Total Impaired, Unpaid Principal Balance, Total	41,535,000	42,912,000
Impaired Loans Receivable, Reserve [Abstract]
Total Impaired with Reserve, Reserve	5,040,000	3,719,000
Total Impaired with no Reserve, Reserve	0	0
Impaired Loans, Reserve	5,040,000	3,719,000
Impaired Loans Receivable, Cumulative Charge-Offs [Abstract]
Total Impaired with Reserve, Cumulative Charge-offs	245,000	380,000
Total Impaired with no Reserve, Cumulative Charge-offs	1,220,000	1,749,000
Total Impaired, Cumulative Charge-offs	1,465,000	2,129,000
Impaired Loans Receivable, Average Recorded Investment [Abstract]
Total Impaired with Reserve, Average Recorded Investment	24,912,000	21,846,000
Total Impaired with no Reserve, Average Recorded Investment	17,158,000	21,535,000
Total Impaired, Average Recorded Investment, Total	42,070,000	43,381,000
Impaired Loans Receivable, Interest Paid YTD [Abstract]
Total Impaired with Reserve, Interest Paid YTD	559,000	761,000
Total Impaired with no Reserve, Interest Paid YTD	206,000	780,000
Total Impaired, Interest Paid YTD	765,000	1,541,000
Home Equity [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	35,881,000	38,599,000
Impaired Loans Receivable, Recorded Investment [Abstract]
Total Impaired, with Reserve, Recorded Investment	1,811,000	1,428,000
Total Impaired, with no Reserve, Recorded Investment	1,072,000	799,000
Total Impaired, Recorded Investment	2,883,000	2,227,000
Impaired Loans Receivable, Unpaid Principal Balance [Abstract]
Total Impaired with Reserve, Unpaid Principal Balance	1,811,000	1,428,000
Total Impaired with no Reserve, Unpaid Principal Balance	1,112,000	799,000
Total Impaired, Unpaid Principal Balance, Total	2,923,000	2,227,000
Impaired Loans Receivable, Reserve [Abstract]
Total Impaired with Reserve, Reserve	1,135,000	803,000
Total Impaired with no Reserve, Reserve	0	0
Impaired Loans, Reserve	1,135,000	803,000
Impaired Loans Receivable, Cumulative Charge-Offs [Abstract]
Total Impaired with Reserve, Cumulative Charge-offs	0	0
Total Impaired with no Reserve, Cumulative Charge-offs	40,000	0
Total Impaired, Cumulative Charge-offs	40,000	0
Impaired Loans Receivable, Average Recorded Investment [Abstract]
Total Impaired with Reserve, Average Recorded Investment	1,864,000	1,448,000
Total Impaired with no Reserve, Average Recorded Investment	1,115,000	833,000
Total Impaired, Average Recorded Investment, Total	2,979,000	2,281,000
Impaired Loans Receivable, Interest Paid YTD [Abstract]
Total Impaired with Reserve, Interest Paid YTD	46,000	2,000
Total Impaired with no Reserve, Interest Paid YTD	6,000	3,000
Total Impaired, Interest Paid YTD	52,000	5,000
Construction and Land [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	38,875,000	39,528,000
Impaired Loans Receivable, Recorded Investment [Abstract]
Total Impaired, with Reserve, Recorded Investment	6,871,000	6,543,000
Total Impaired, with no Reserve, Recorded Investment	446,000	1,893,000
Total Impaired, Recorded Investment	7,317,000	8,436,000
Impaired Loans Receivable, Unpaid Principal Balance [Abstract]
Total Impaired with Reserve, Unpaid Principal Balance	6,871,000	6,543,000
Total Impaired with no Reserve, Unpaid Principal Balance	503,000	3,413,000
Total Impaired, Unpaid Principal Balance, Total	7,374,000	9,956,000
Impaired Loans Receivable, Reserve [Abstract]
Total Impaired with Reserve, Reserve	1,744,000	2,077,000
Total Impaired with no Reserve, Reserve	0	0
Impaired Loans, Reserve	1,744,000	2,077,000
Impaired Loans Receivable, Cumulative Charge-Offs [Abstract]
Total Impaired with Reserve, Cumulative Charge-offs	0	0
Total Impaired with no Reserve, Cumulative Charge-offs	57,000	1,520,000
Total Impaired, Cumulative Charge-offs	57,000	1,520,000
Impaired Loans Receivable, Average Recorded Investment [Abstract]
Total Impaired with Reserve, Average Recorded Investment	6,870,000	6,543,000
Total Impaired with no Reserve, Average Recorded Investment	503,000	3,413,000
Total Impaired, Average Recorded Investment, Total	7,373,000	9,956,000
Impaired Loans Receivable, Interest Paid YTD [Abstract]
Total Impaired with Reserve, Interest Paid YTD	26,000	113,000
Total Impaired with no Reserve, Interest Paid YTD	3,000	60,000
Total Impaired, Interest Paid YTD	29,000	173,000
Commercial Real Estate [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	70,046,000	65,434,000
Impaired Loans Receivable, Recorded Investment [Abstract]
Total Impaired, with Reserve, Recorded Investment	3,730,000	0
Total Impaired, with no Reserve, Recorded Investment	445,000	515,000
Total Impaired, Recorded Investment	4,175,000	515,000
Impaired Loans Receivable, Unpaid Principal Balance [Abstract]
Total Impaired with Reserve, Unpaid Principal Balance	3,730,000	0
Total Impaired with no Reserve, Unpaid Principal Balance	469,000	539,000
Total Impaired, Unpaid Principal Balance, Total	4,199,000	539,000
Impaired Loans Receivable, Reserve [Abstract]
Total Impaired with Reserve, Reserve	795,000	0
Total Impaired with no Reserve, Reserve	0	0
Impaired Loans, Reserve	795,000	0
Impaired Loans Receivable, Cumulative Charge-Offs [Abstract]
Total Impaired with Reserve, Cumulative Charge-offs	0	0
Total Impaired with no Reserve, Cumulative Charge-offs	24,000	24,000
Total Impaired, Cumulative Charge-offs	24,000	24,000
Impaired Loans Receivable, Average Recorded Investment [Abstract]
Total Impaired with Reserve, Average Recorded Investment	3,742,000	0
Total Impaired with no Reserve, Average Recorded Investment	474,000	538,000
Total Impaired, Average Recorded Investment, Total	4,216,000	538,000
Impaired Loans Receivable, Interest Paid YTD [Abstract]
Total Impaired with Reserve, Interest Paid YTD	36,000	0
Total Impaired with no Reserve, Interest Paid YTD	7,000	17,000
Total Impaired, Interest Paid YTD	43,000	17,000
Consumer [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	165,000	109,000
Impaired Loans Receivable, Recorded Investment [Abstract]
Total Impaired, with Reserve, Recorded Investment	0
Total Impaired, with no Reserve, Recorded Investment	27,000
Total Impaired, Recorded Investment	27,000
Impaired Loans Receivable, Unpaid Principal Balance [Abstract]
Total Impaired with Reserve, Unpaid Principal Balance	0
Total Impaired with no Reserve, Unpaid Principal Balance	27,000
Total Impaired, Unpaid Principal Balance, Total	27,000
Impaired Loans Receivable, Reserve [Abstract]
Total Impaired with Reserve, Reserve	0
Total Impaired with no Reserve, Reserve	0
Impaired Loans, Reserve	0
Impaired Loans Receivable, Cumulative Charge-Offs [Abstract]
Total Impaired with Reserve, Cumulative Charge-offs	0
Total Impaired with no Reserve, Cumulative Charge-offs	0
Total Impaired, Cumulative Charge-offs	0
Impaired Loans Receivable, Average Recorded Investment [Abstract]
Total Impaired with Reserve, Average Recorded Investment	0
Total Impaired with no Reserve, Average Recorded Investment	27,000
Total Impaired, Average Recorded Investment, Total	27,000
Impaired Loans Receivable, Interest Paid YTD [Abstract]
Total Impaired with Reserve, Interest Paid YTD	0
Total Impaired with no Reserve, Interest Paid YTD	1,000
Total Impaired, Interest Paid YTD	1,000
Commercial Loans [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	17,732,000	24,018,000
Impaired Loans Receivable, Recorded Investment [Abstract]
Total Impaired, with Reserve, Recorded Investment	841,000	1,033,000
Total Impaired, with no Reserve, Recorded Investment	0	82,000
Total Impaired, Recorded Investment	841,000	1,115,000
Impaired Loans Receivable, Unpaid Principal Balance [Abstract]
Total Impaired with Reserve, Unpaid Principal Balance	841,000	1,033,000
Total Impaired with no Reserve, Unpaid Principal Balance	0	100,000
Total Impaired, Unpaid Principal Balance, Total	841,000	1,133,000
Impaired Loans Receivable, Reserve [Abstract]
Total Impaired with Reserve, Reserve	76,000	269,000
Total Impaired with no Reserve, Reserve	0	0
Impaired Loans, Reserve	76,000	269,000
Impaired Loans Receivable, Cumulative Charge-Offs [Abstract]
Total Impaired with Reserve, Cumulative Charge-offs	0	0
Total Impaired with no Reserve, Cumulative Charge-offs	0	18,000
Total Impaired, Cumulative Charge-offs	0	18,000
Impaired Loans Receivable, Average Recorded Investment [Abstract]
Total Impaired with Reserve, Average Recorded Investment	841,000	1,037,000
Total Impaired with no Reserve, Average Recorded Investment	0	90,000
Total Impaired, Average Recorded Investment, Total	841,000	1,127,000
Impaired Loans Receivable, Interest Paid YTD [Abstract]
Total Impaired with Reserve, Interest Paid YTD	19,000	42,000
Total Impaired with no Reserve, Interest Paid YTD	0	0
Total Impaired, Interest Paid YTD	19,000	42,000
Substandard [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	113,501,000	119,922,000
Substandard [Member] | One-to Four-family [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	58,026,000	68,566,000
Substandard [Member] | Over Four-family [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	39,065,000	37,502,000
Substandard [Member] | Home Equity [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	3,447,000	3,188,000
Substandard [Member] | Construction and Land [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	7,316,000	8,436,000
Substandard [Member] | Commercial Real Estate [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	4,765,000	1,114,000
Substandard [Member] | Consumer [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	27,000	0
Substandard [Member] | Commercial Loans [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	855,000	1,116,000
Watch [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	47,613,000	40,911,000
Watch [Member] | One-to Four-family [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	26,774,000	14,341,000
Watch [Member] | Over Four-family [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	12,311,000	16,993,000
Watch [Member] | Home Equity [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	996,000	721,000
Watch [Member] | Construction and Land [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	6,089,000	6,199,000
Watch [Member] | Commercial Real Estate [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	409,000	1,549,000
Watch [Member] | Consumer [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	0	0
Watch [Member] | Commercial Loans [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	1,034,000	1,108,000
Pass [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	1,006,067,000	1,055,831,000
Pass [Member] | One-to Four-family [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	388,930,000	413,829,000
Pass [Member] | Over Four-family [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	479,376,000	497,745,000
Pass [Member] | Home Equity [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	31,438,000	34,690,000
Pass [Member] | Construction and Land [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	25,470,000	24,893,000
Pass [Member] | Commercial Real Estate [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	64,872,000	62,771,000
Pass [Member] | Consumer [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	138,000	109,000
Pass [Member] | Commercial Loans [Member]
Loans Receivable, Recorded Investment [Line Items]
Loans receivable	$ 15,843,000	$ 21,794,000

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Fair Value Measurements, by Balance Sheet Grouping (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Assets
Cash and cash equivalents	$ 64,875
Securities available for sale	213,242
Securities held to maturity	0
Loans held for sale (at fair value)	122,489	88,283
Loans receivable, net	1,173,381
Federal Home loan Bank Stock, Fair Value Disclosure	20,507
Cash surrender value of life insurance	37,339
Real estate owned	47,815
Accrued interest receivable	3,556
Mortgage banking derivative assets	2,245
Liabilities:
Deposits	987,830
Advance Payments by Borrowers for Taxes and Insurance, Fair Value Disclosure	14,518
Borrowings	537,246
Accrued interest payable	1,769
Mortgage banking derivative liabilities	847
Other Financial Instruments [Abstract]
Stand-by Letters of Credit, Fair Value Disclosure	5
Carrying (Reported) Amount, Fair Value Disclosure [Member]
Assets
Cash and cash equivalents	64,875	80,380
Securities available for sale	213,242	206,519
Securities held to maturity	0	2,648
Loans held for sale (at fair value)	122,489	88,283
Loans receivable, net	1,167,181	1,216,664
Federal Home loan Bank Stock, Fair Value Disclosure	20,507	21,653
Cash surrender value of life insurance	37,339	36,749
Real estate owned	47,815	56,670
Accrued interest receivable	3,556	4,064
Mortgage banking derivative assets	2,245	924
Liabilities:
Deposits	986,198	1,051,292
Advance Payments by Borrowers for Taxes and Insurance, Fair Value Disclosure	14,518	942
Borrowings	479,031	461,138
Accrued interest payable	1,769	2,087
Mortgage banking derivative liabilities	847	397
Other Financial Instruments [Abstract]
Stand-by Letters of Credit, Fair Value Disclosure	5	6
Estimate of Fair Value, Fair Value Disclosure [Member]
Assets
Cash and cash equivalents		80,380
Securities available for sale		206,519
Securities held to maturity		2,542
Loans held for sale (at fair value)		88,283
Loans receivable, net		1,225,141
Federal Home loan Bank Stock, Fair Value Disclosure		21,653
Cash surrender value of life insurance		36,749
Real estate owned		56,670
Accrued interest receivable		4,064
Mortgage banking derivative assets		924
Liabilities:
Deposits		1,052,663
Advance Payments by Borrowers for Taxes and Insurance, Fair Value Disclosure		942
Borrowings		517,624
Accrued interest payable		2,087
Mortgage banking derivative liabilities		397
Other Financial Instruments [Abstract]
Stand-by Letters of Credit, Fair Value Disclosure		6
Estimate of Fair Value, Fair Value Disclosure [Member] | Fair Value, Inputs, Level 1 [Member]
Assets
Cash and cash equivalents	64,875
Securities available for sale	5,240
Securities held to maturity	0
Loans held for sale (at fair value)	0
Loans receivable, net	0
Federal Home loan Bank Stock, Fair Value Disclosure	0
Cash surrender value of life insurance	37,339
Real estate owned	0
Accrued interest receivable	3,556
Mortgage banking derivative assets	0
Liabilities:
Deposits	191,727
Advance Payments by Borrowers for Taxes and Insurance, Fair Value Disclosure	14,518
Borrowings	0
Accrued interest payable	1,769
Mortgage banking derivative liabilities	0
Other Financial Instruments [Abstract]
Stand-by Letters of Credit, Fair Value Disclosure	0
Estimate of Fair Value, Fair Value Disclosure [Member] | Fair Value, Inputs, Level 2 [Member]
Assets
Cash and cash equivalents	0
Securities available for sale	189,951
Securities held to maturity	0
Loans held for sale (at fair value)	122,489
Loans receivable, net	0
Federal Home loan Bank Stock, Fair Value Disclosure	20,507
Cash surrender value of life insurance	0
Real estate owned	0
Accrued interest receivable	0
Mortgage banking derivative assets	0
Liabilities:
Deposits	796,103
Advance Payments by Borrowers for Taxes and Insurance, Fair Value Disclosure	0
Borrowings	537,246
Accrued interest payable	0
Mortgage banking derivative liabilities	0
Other Financial Instruments [Abstract]
Stand-by Letters of Credit, Fair Value Disclosure	0
Estimate of Fair Value, Fair Value Disclosure [Member] | Fair Value, Inputs, Level 3 [Member]
Assets
Cash and cash equivalents	0
Securities available for sale	18,051
Securities held to maturity	0
Loans held for sale (at fair value)	0
Loans receivable, net	1,173,381
Federal Home loan Bank Stock, Fair Value Disclosure	0
Cash surrender value of life insurance	0
Real estate owned	47,815
Accrued interest receivable	0
Mortgage banking derivative assets	2,245
Liabilities:
Deposits	0
Advance Payments by Borrowers for Taxes and Insurance, Fair Value Disclosure	0
Borrowings	0
Accrued interest payable	0
Mortgage banking derivative liabilities	847
Other Financial Instruments [Abstract]
Stand-by Letters of Credit, Fair Value Disclosure	$ 5

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Assets
Cash	$ 50,352	$ 72,336
Federal funds sold and short-term investments	14,523	8,044
Cash and cash equivalents	64,875	80,380
Securities available for sale (at fair value)	213,242	206,519
Securities held to maturity (at amortized cost), fair value of $2,542 at December 31, 2011	0	2,648
Loans held for sale (at fair value)	122,489	88,283
Loans receivable	1,167,181	1,216,664
Less: Allowance for loan losses	(32,658)	(32,430)
Loans receivable, net	1,134,523	1,184,234
Office properties and equipment, net	27,115	27,356
Federal Home Loan Bank stock (at cost)	20,507	21,653
Cash surrender value of life insurance	37,339	36,749
Real estate owned	47,815	56,670
Prepaid expenses and other assets	13,276	8,359
Total assets	1,681,181	1,712,851
Liabilities:
Demand deposits	76,841	68,457
Money market and savings deposits	114,886	104,102
Time deposits	794,471	878,733
Total deposits	986,198	1,051,292
Short term borrowings	45,031	27,138
Long term borrowings	434,000	434,000
Advance payments by borrowers for taxes	14,518	942
Other liabilities	25,650	33,107
Total liabilities	1,505,397	1,546,479
Shareholders' equity:
Preferred stock (par value $.01 per share) Authorized 20,000,000 shares, no shares issued	0	0
Common stock (par value $.01 per share). Authorized - 200,000,000 shares in 2012 and 2011. Issued - 33,974,450 shares in 2012 and in 2011. Outstanding - 31,350,097 shares in 2012 and 31,250,097 in 2011	340	340
Additional paid-in capital	110,652	110,894
Retained earnings	109,959	101,573
Unearned ESOP shares	(2,135)	(2,562)
Accumulated other comprehensive income, net of taxes	2,229	1,388
Treasury shares (2,724,353 shares), at cost	(45,261)	(45,261)
Total shareholders' equity	175,784	166,372
Total liabilities and shareholders' equity	$ 1,681,181	$ 1,712,851

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Borrowings (Details) (USD $)	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Short-term Debt [Line Items]
Short term borrowings	$ 45,031,000	$ 27,138,000
Weighted average rate (in hundredths)	3.18%	4.50%
Number of unrelated banks	2
Maximum borrowing capacity	90,000,000
Long-term Debt [Line Items]
Long term borrowings	434,000,000	434,000,000
Weighted average rate (in hundredths)	3.83%	3.93%
FHLB, year of maturity	2016
Year of maturity	2017
Total debt	479,031,000	461,138,000
Interest rate, minimum (in hundredths)	2.89%
Interest rate, maximum (in hundredths)	4.31%
Available for sale securities as collateral	101,900,000
Percentage of carrying value of qualifying unencumbered mortgage loans (in hundredths)	65.00%
Percentage of carrying value of qualifying home equity loans (in hundredths)	30.00%
Percentage of carrying value of qualifying of over four-family loans (in hundredths)	45.00%
FHLBC stock as collateral	20,500,000	21,700,000
FHLB, Chicago, Advances, Maturing 2016 [Member]
Long-term Debt [Line Items]
Long term borrowings	220,000,000	220,000,000
FHLB, weighted average rate (in hundredths)	4.34%	4.34%
Number of Federal Home Loan Bank Advances	8
FHLB, interest rate, minimum (in hundredths)	4.01%
FHLB, interest rate, maximum (in hundredths)	4.82%
FHLB, Chicago, Advances, Maturing 2017 [Member]
Long-term Debt [Line Items]
Long term borrowings	65,000,000	65,000,000
FHLB, weighted average rate (in hundredths)	3.19%	3.19%
Number of Federal Home Loan Bank Advances	3
FHLB, interest rate, minimum (in hundredths)	3.09%
FHLB, interest rate, maximum (in hundredths)	3.46%
FHLB, Chicago, Advances, Maturing 2018 [Member]
Long-term Debt [Line Items]
Long term borrowings	65,000,000	65,000,000
FHLB, weighted average rate (in hundredths)	2.97%	2.97%
Number of Federal Home Loan Bank Advances	3
FHLB, interest rate, minimum (in hundredths)	2.73%
FHLB, interest rate, maximum (in hundredths)	3.11%
Repurchase Agreements [Member]
Long-term Debt [Line Items]
Long term borrowings	$ 84,000,000	$ 84,000,000
Weighted average rate (in hundredths)	3.96%	3.96%

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Other comprehensive income (loss), net of tax
Net unrealized holding gain (loss) on avaliable for sale securities arising during the period, net of tax (expense) benefit	$ (320)	$ 1,089	$ (420)	$ 1,140
Reclassification adjustment for net gains on available for sale securities realized during the period, net of taxes	$ (41)	$ 0	$ 55	$ (21)

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Earnings (loss) per share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings (loss) per share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

Presented below are the calculations for basic and diluted earnings (loss) per share:

	Six Months Ended					Three Months Ended
	June 30,					June 30,
		2012		2011			2012		2011
	(In Thousands except per share amounts)
Net income (loss)	$	8,386	$	(2,128	)	$	6,178	$	(584	)
Net income (loss) available to unvested restricted shares		28		-			21		-
Net income (loss) available to common stockholders	$	8,358	$	(2,128	)	$	6,157	$	(584	)
Weighted average shares outstanding		31,035		30,909			31,045		30,920
Effect of dilutive potential common shares		34		-			91		-
Diluted weighted average shares outstanding		31,069		30,909			31,136		30,920
Basic earnings (loss) per share	$	0.27	$	(0.07	)	$	0.20	$	(0.02	)
Diluted earnings (loss) per share	$	0.27	$	(0.07	)	$	0.20	$	(0.02	)

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Segment Reporting

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Segments and Related Information

Note 14 - Segment Reporting

Selected financial and descriptive information is required to be provided about reportable operating segments, considering a "management approach" concept as the basis for identifying reportable segments. The management approach is based on the way that management organizes the segments within the enterprise for making operating decisions, allocating resources, and assessing performance. Consequently, the segments are evident from the structure of the enterprise's internal organization, focusing on financial information that an enterprise's chief operating decision-makers use to make decisions about the enterprise's operating matters.  The Company has determined that it has two reportable segments: community banking and mortgage banking.  The Company's operating segments are presented based on its management structure and management accounting practices.  The structure and practices are specific to the Company and therefore, the financial results of the Company's business segments are not necessarily comparable with similar information for other financial institutions.

Community Banking

The Community Banking segment provides consumer and business banking products and services to customers primarily within Southeastern Wisconsin. Consumer products include loan and deposit products:  mortgage, home equity loans and lines, personal term loans, demand deposit accounts, interest bearing transaction accounts and time deposits.  Business banking products include secured and unsecured lines and term loans for working capital, inventory and general corporate use, commercial real estate construction loans, demand deposit accounts, interest bearing transaction accounts and time deposits.

Mortgage Banking

The Mortgage Banking segment provides residential mortgage loans for the purpose of sale on the secondary market.  Mortgage banking products and services are provided by offices in: Wisconsin, Arizona, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Maryland, Minnesota, Ohio and Pennsylvania.

	Six Months ended June 30, 2012
	Community Banking			Mortgage Banking		Holding Company and Other			Consolidated
	(in thousands)
Net interest income	$	20,582			223		250			21,055
Provision for loan losses		5,100			-		-			5,100
Net interest income after provision for loan losses		15,482			223		250			15,955
Noninterest income:		1,444			36,809		-			38,253
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		6,213			19,779		(390	)		25,602
Occupancy, office furniture and equipment		1,548			1,861		-			3,409
FDIC insurance premiums		1,814			-		-			1,814
Real estate owned		4,273			-		-			4,273
Other		2,540			7,959		154			10,653
Total noninterest expenses		16,388			29,599		(236	)		45,751
Income before income taxes (benefit)		538			7,433		486			8,457
Income taxes (benefit)		(3,107	)		2,983		195			71
Net income	$	3,645			4,450		291			8,386
Total Assets	$	1,611,757			137,374		(67,950	)		1,681,181

	As of or for the Six months ended June 30, 2011
	Community Banking			Mortgage Banking		Holding Company and Other			Consolidated
	(in thousands)
Net interest income	$	23,191			204		246			23,641
Provision for loan losses		10,125			31		-			10,156
Net interest income after provision for loan losses		13,066			173		246			13,485
Noninterest income:		1,237			15,737		-			16,974
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		6,913			10,804		(403	)		17,314
Occupancy, office furniture and equipment		1,720			1,555		-			3,275
FDIC insurance premiums		2,077			-		-			2,077
Real estate owned		4,681			-		-			4,681
Other		2,314			3,357		305			5,976
Total noninterest expenses		17,705			15,716		(98	)		33,323
Income (loss) before income taxes (benefit)		(3,402	)		194		344			(2,864	)
Income taxes (benefit)		(877	)		141		-			(736	)
Net income (loss)	$	(2,525	)		53		344			(2,128	)
Total Assets	$	1,709,955			62,373		(49,008	)		1,723,320

	Three Months ended June 30, 2012
	Community Banking			Mortgage Banking			Holding Company and Other			Consolidated
	(in thousands)
Net interest income	$	10,335			168			125			10,628
Provision for loan losses		1,500			(75	)		-			1,425
Net interest income after provision for loan losses		8,835			243			125			9,203
Noninterest income:		670			22,582			-			23,252
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		3,086			12,052			(173	)		14,965
Occupancy, office furniture and equipment		758			930			-			1,688
FDIC insurance premiums		873			-			-			873
Real estate owned		2,838			-			-			2,838
Other		1,322			4,462			88			5,872
Total noninterest expenses		8,877			17,444			(85	)		26,236
Income (loss) before income taxes (benefit)		628			5,381			210			6,219
Income taxes (benefit)		(2,313	)		2,159			195			41
Net income	$	2,941			3,222			15			6,178

	Three Months ended June 30, 2011
	Community Banking			Mortgage Banking		Holding Company and Other			Consolidated
	(in thousands)
Net interest income	$	11,452			137		125			11,714
Provision for loan losses		5,265			16		-			5,281
Net interest income after provision for loan losses		6,187			121		125			6,433
Noninterest income:		657			9,520		-			10,177
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		3,168			6,431		(202	)		9,397
Occupancy, office furniture and equipment		822			834		-			1,656
FDIC insurance premiums		1,016			-		-			1,016
Real estate owned		2,886			-		-			2,886
Other		1,170			1,773		71			3,014
Total noninterest expenses		9,062			9,038		(131	)		17,969
Income (loss) before income taxes (benefit)		(2,218	)		603		256			(1,359	)
Income taxes (benefit)		(1,012	)		237		-			(775	)
Net income (loss)	$	(1,206	)		366		256			(584	)

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured On Recurring Basis [Table Text Block]

The following table presents information about our assets recorded in our consolidated statement of financial position at their fair value on a recurring basis as of June 30, 2012 and December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

			Fair Value Measurements Using
	June 30, 2012		Level 1		Level 2		Level 3
	(In Thousands)
Available for sale securities
Mortgage-backed securities	$	91,799		-		91,799		-
Collateralized mortgage obligations
Government sponsored enterprise issued		38,664		-		38,664		-
Private-label issued		18,051		-		-		18,051
Government sponsored enterprise bonds		29,051		-		29,051		-
Municipal securities		25,017		-		25,017		-
Other debt securities		5,240		5,240		-		-
Certificates of Deposit		5,420		-		5,420		-
Loans held for sale		122,489		-		122,489		-
Mortgage banking derivative assets		2,245		-		-		2,245
Mortgage banking derivative liabilities		847		-		-		847
			Fair Value Measurements Using
	December 31, 2011		Level 1		Level 2		Level 3
	(In Thousands)
Available for sale securities
Mortgage-backed securities	$	35,417		-		35,417		-
Collateralized mortgage obligations
Government sponsored enterprise issued		33,196		-		33,196		-
Private-label issued		18,451		-		-		18,451
Government sponsored enterprise bonds		71,349		-		71,349		-
Municipal securities		39,068		-		39,068		-
Other debt securities		5,118		5,118		-		-
Certificates of Deposit		3,920		-		3,920		-
Loans held for sale		88,283		-		88,283		-
Mortgage banking derivative assets		924		-		-		924
Mortgage banking derivative liabilities		397		-		-		397

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The table below presents reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2012 and 2011.

	Available for sale securities			Mortgage banking derivatives
	(In Thousands)
Balance at December 31, 2010	$	20,301			407
Transfer into level 3		-			-
Unrealized holding losses arising during the period:
Included in other comprehensive income		(142	)		-
Other than temporary impairment included in net loss		(456	)		-
Principal repayments		(1,252	)		-
Net accretion of discount/amortization of premium		-			-
Mortgage derivative gain, net		-			120
Balance at December 31, 2011		18,451			527
Transfer into level 3		-			-
Unrealized holding losses arising during the period:
Included in other comprehensive income		652			-
Other than temporary impairment included in net loss		(4	)		-
Principal repayments		(1,048	)		-
Net accretion of discount/amortization of premium		-			-
Mortgage derivative gain, net		-			871
Balance at June 30, 2012	$	18,051			1,398

Fair Value Measurements, Nonrecurring [Table Text Block]

The following table presents information about our assets recorded in our consolidated statement of financial position at their fair value on a non-recurring basis as of June 30, 2012 and December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

			Fair Value Measurements Using
	June 30, 2012		Level 1		Level 2		Level 3
	(In Thousands)
Impaired loans, net (1)	$	54,202		-		-		54,202
Real estate owned		47,815		-		-		47,815
			Fair Value Measurements Using
	December 31, 2011		Level 1		Level 2		Level 3
	(In Thousands)
Impaired loans, net(1)	$	43,432		-		-		43,432
Real estate owned		56,670		-		-		56,670

_________

⁽¹⁾  Represents collateral-dependent impaired loans, net, which are included in loans.

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Table Text Block]

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of June 30, 2012, the significant unobservable inputs used in the fair value measurements were as follows:

				Significant	Significant Unobservable Input Value
	Fair Value at		Valuation	Unobservable	Minimum Value			Maximum Value
	June 30, 2012		Technique	Inputs
Collateralized Mortgage Obligations
Private-label issued	$	18,051	Discounted cash flow	Prepayment rate		9.6	%		25.7	%
				Default rate		5.6	%		6.0	%
				Discount rate		8.0	%		8.0	%
				Loss severity rate		43.0	%		52.0	%
Mortgage banking derivatives		1,398	Pricing models	Pull through rate		64.4	%		99.0	%
Impaired loans		54,202	Market approach	Disount rates applied to appraisals		15.0	%		30.0	%
Real estate owned		47,815	Market approach	Disount rates applied to appraisals		5.0	%		70.0	%

Fair Value, by Balance Sheet Grouping [Table Text Block]

The carrying amounts and fair values of the Company's financial instruments consist of the following at June 30, 2012 and December 31, 2011:

	June 30, 2012										December 31, 2011
	Carrying										Carrying		Fair
	amount		Fair Value								amount		value
			Total		Level 1		Level 2		Level 3
	(In Thousands)
Financial Assets
Cash and cash equivalents	$	64,875		64,875		64,875		-		-		80,380		80,380
Securities available-for-sale		213,242		213,242		5,240		189,951		18,051		206,519		206,519
Securities held-to-maturity		-		-		-		-		-		2,648		2,542
Loans held for sale		122,489		122,489		-		122,489		-		88,283		88,283
Loans receivable		1,167,181		1,173,381		-		-		1,173,381		1,216,664		1,225,141
FHLB stock		20,507		20,507		-		20,507		-		21,653		21,653
Cash surrender value of life insurance		37,339		37,339		37,339		-		-		36,749		36,749
Real estate owned		47,815		47,815		-		-		47,815		56,670		56,670
Accrued interest receivable		3,556		3,556		3,556		-		-		4,064		4,064
Mortgage banking derivative assets		2,245		2,245		-		-		2,245		924		924
Financial Liabilities
Deposits		986,198		987,830		191,727		796,103		-		1,051,292		1,052,663
Advance payments by borrowers for taxes		14,518		14,518		14,518		-		-		942		942
Borrowings		479,031		537,246		-		537,246		-		461,138		517,624
Accrued interest payable		1,769		1,769		1,769		-		-		2,087		2,087
Mortgage banking derivative liabilities		847		847		-		-		847		397		397
Other Financial Instruments
Stand-by letters of credit		5		5		-		-		5		6		6

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2012

Basis of Presentation [Abstract]

Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information, Rule 10-01 of Regulation S-X and the instructions to Form 10-Q. The financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations, changes in shareholders' equity, and cash flows of the Company for the periods presented.

Use of estimates

The preparation of the unaudited 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, deferred income taxes, certain investment securities and real estate owned.  Actual results could differ from those estimates.

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Loss [Member]	Retained Earnings [Member]	Unearned ESOP Shares [Member]	Treasury Stock [Member]
Balances at Dec. 31, 2010	$ 172,220	$ 340	$ 109,953	$ 1,558	$ 109,046	$ (3,416)	$ (45,261)
Balances (in shares) at Dec. 31, 2010	31,250,097
Comprehensive loss:
Net income (loss)	(2,128)				(2,128)
Other comprehensive income (loss):	(170)			(170)
Total comprehensive income (loss)	(2,298)
ESOP shares committed to be released to Plan participants	107		(320)			427
Stock based compensation	851		851
Balances at Jun. 30, 2011	170,880	340	110,484	1,388	106,918	(2,989)	(45,261)
Balances (in shares) at Jun. 30, 2011		31,250,097
Balances at Dec. 31, 2011	166,372	340	110,894	1,388	101,573	(2,562)	(45,261)
Balances (in shares) at Dec. 31, 2011	31,250,097
Comprehensive loss:
Net income (loss)	8,386				8,386
Other comprehensive income (loss):	841			841
Total comprehensive income (loss)	9,227
ESOP shares committed to be released to Plan participants	110		(317)			427
Stock based compensation	75		75
Stock based compensation (in shares)		100,000
Balances at Jun. 30, 2012	$ 175,784	$ 340	$ 110,652	$ 2,229	$ 109,959	$ (2,135)	$ (45,261)
Balances (in shares) at Jun. 30, 2012	31,350,097

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Assets
Securities held to maturity		$ 2,542
Shareholders' equity:
Preferred stock - par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock - shares authorized (in shares)	20,000,000	20,000,000
Preferred stock - shares issued (in shares)	0	0
Common stock - par value (in dollars per share)	$ 0.01	$ 0.01
Common stock - shares authorized (in shares)	200,000,000	200,000,000
Common stock - shares issued (in shares)	33,974,450	33,974,450
Common stock - shares outstanding (in shares)	31,350,097	31,250,097
Treasury shares (in shares)	2,724,353	2,724,353

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Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

Note 9 - Income Taxes

Under generally accepted accounting principles, a deferred tax asset valuation allowance is required to be recognized if it is "more likely than not" that the deferred tax asset will not be realized.  The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management's evaluation of both positive and negative evidence, the forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. We consider both positive and negative evidence regarding the ultimate realizability of our deferred tax assets.  Examples of positive evidence may include the existence, if any, of taxes paid in available carry-back years and the likelihood that taxable income will be generated in future periods.  Examples of negative evidence may include a cumulative loss in the current year and prior two years and negative general business and economic trends.  We currently maintain a valuation allowance against substantially all of our net deferred tax assets because it is "more likely than not" that all of these net deferred tax assets will not be realized.  This determination was based largely on the negative evidence of a cumulative loss in the most recent three-year period caused primarily by the loan loss provisions made during those periods.  In addition, general uncertainty surrounding future economic and business conditions has increased the likelihood of volatility in our future earnings.

The estimated current federal income tax liability for the six months ended June 30, 2012 totals $2.2 million.  This current federal income tax expense is fully offset by deferred federal income tax benefit related to changes in net deferred tax asset valuation allowances as described above resulting in no net federal income tax expense.  A federal income tax benefit of $184,000 was recognized for the three months ended June 30, 2012 as the result of an over estimate of liability related to an IRS audit of the company's federal income tax returns for the years 2005 through 2009.

During the three and six months ended June 30, 2011, the Company recorded a net income tax benefit of $736,000 which relates to the intraperiod tax allocation between other comprehensive income and loss from continuing operations, and represents an out-of-period adjustment for an error that originated beginning in 2008 that was corrected during the three and six months ended June 30, 2011 period.  The correction of the error was not material to the three or six months ended June 30, 2011.  The impact of this error to all prior periods was not deemed to be material. 

During the six months ended June 30, 2012 and 2011, the Company recorded state income tax expense of $255,000 and $59,000, respectively.  The state tax expense relates to various states in which our mortgage banking subsidiary conducts business and to which our state net operating loss carry forwards do not apply.

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Document and Entity Information (USD $)	6 Months Ended
	Jun. 30, 2012	Jul. 31, 2012	Jun. 30, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	Waterstone Financial Inc
Entity Central Index Key	0001329517
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 70,300,000
Entity Common Stock, Shares Outstanding		31,350,097
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2012

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Financial Instruments with Off-Balance Sheet Risk

6 Months Ended

Jun. 30, 2012

Financial Instruments with Off-Balance Sheet Risk [Abstract]

Financial Instruments with Off-Balance Sheet Risk

Note 10- Financial Instruments with Off-Balance Sheet Risk

Off-balance sheet financial instruments or obligations whose contract amounts represent credit and/or interest rate risk are as follows:

	June 30,		December 31,
		2012		2011
	(In Thousands)
Financial instruments whose contract amounts represent potential credit risk:
Commitments to extend credit under amortizing loans (1)	$	22,713		14,259
Commitments to extend credit under home equity lines of credit		18,582		21,403
Unused portion of construction loans		5,550		5,684
Unused portion of business lines of credit		10,395		10,347
Standby letters of credit		922		970

____________

⁽¹⁾ Excludes commitments to originate loans held for sale addressed in Note 11.

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 June 30, 2012 and December 31, 2011.

Residential mortgage loans sold to others are predominantly conventional residential first lien mortgages that are sold on a servicing released basis.  The Company's agreements to sell residential mortgage loans in the normal course of business usually require certain representations and warranties on the underlying loans sold related to credit information, loan documentation and collateral, which if subsequently are untrue or breached, could require the Company to repurchase certain loans affected.  There have been insignificant instances of repurchase under representations and warranties.  The Company's agreements to sell residential mortgage loans also contain limited recourse provisions.  The recourse provisions are limited in that the recourse provision ends after certain payment criteria have been met.  With respect to these loans, repurchase could be required if defined delinquency issues arose during the limited recourse period.  Given that the underlying loans delivered to buyers are predominantly conventional first lien mortgages and that historical experience shows negligible losses and insignificant repurchase activity, management believes that losses and repurchases under the limited recourse provisions will continue to be insignificant.

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Interest income:
Loans	$ 16,319	$ 18,040	$ 32,892	$ 36,506
Mortgage-related securities	921	1,012	1,784	2,048
Debt securities, federal funds sold and short-term investments	548	829	1,255	1,664
Total interest income	17,788	19,881	35,931	40,218
Interest expense:
Deposits	2,663	3,877	5,866	7,976
Borrowings	4,497	4,290	9,010	8,601
Total interest expense	7,160	8,167	14,876	16,577
Net interest income	10,628	11,714	21,055	23,641
Provision for loan losses	1,425	5,281	5,100	10,156
Net interest income after provision for loan losses	9,203	6,433	15,955	13,485
Noninterest income:
Service charges on loans and deposits	382	271	631	520
Increase in cash surrender value of life insurance	264	270	409	422
Total other-than-temporary investment losses	(471)	(1,093)	(475)	(1,093)
Portion of loss recognized in other comprehensive income (before tax)	371	1,041	371	1,041
Net impairment losses recognized in earnings	(100)	(52)	(104)	(52)
Mortgage banking income	22,507	9,279	36,708	15,442
Gain on sale of available for sale securities	0	0	241	0
Other noninterest income	199	409	368	642
Total noninterest income	23,252	10,177	38,253	16,974
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits	14,965	9,397	25,602	17,314
Occupancy, office furniture and equipment	1,688	1,656	3,409	3,275
Advertising	769	330	1,324	651
Data processing	334	345	726	695
Communications	306	229	603	487
Professional fees	533	403	959	797
Real estate owned	2,838	2,886	4,273	4,681
FDIC insurance premiums	873	1,016	1,814	2,077
Other noninterest expense	3,930	1,707	7,041	3,346
Total noninterest expenses	26,236	17,969	45,751	33,323
Income (loss) before income taxes	6,219	(1,359)	8,457	(2,864)
Income tax expense (benefit)	41	(775)	71	(736)
Net income (loss)	$ 6,178	$ (584)	$ 8,386	$ (2,128)
Earnings (loss) per share [Abstract]
Basic	$ 0.20	$ (0.02)	$ 0.27	$ (0.07)
Diluted	$ 0.20	$ (0.02)	$ 0.27	$ (0.07)
Weighted average shares outstanding:
Basic	31,045,148	30,919,666	31,034,644	30,909,235
Diluted	31,136,121	30,919,666	31,068,812	30,909,235

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Real Estate Owned

6 Months Ended

Jun. 30, 2012

Real Estate Owned [Abstract]

Real Estate Owned [Text Block]

Note 4- Real Estate Owned

Real estate owned is summarized as follows:

	June 30,		December 31,
		2012		2011
	(In Thousands)
One- to four-family	$	21,637		27,449
Over four-family		13,742		16,231
Construction and land		8,793		8,796
Commercial real estate		3,643		4,194
	$	47,815		56,670

The following table presents the activity in the Company's real estate owned:

	Six months ended June 30,
		2012		2011
	(In Thousands)
Real estate owned at beginning of the period	$	56,670		57,752
Transferred from loans receivable		11,002		16,167
Sales		(16,247	)	(11,713	)
Write downs		(3,439	)	(2,154	)
Other		(171	)	68
Real estate owned at the end of the period	$	47,815		60,120

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Loans Receivable

6 Months Ended

Jun. 30, 2012

Loans Receivable [Abstract]

Loans Receivable

Note 3 - Loans Receivable

Loans receivable at June 30, 2012 and December 31, 2011 are summarized as follows:

	June 30,		December 31,
		2012		2011
	(In Thousands)
Mortgage loans:
Residential real estate:
One- to four-family	$	473,730		496,736
Over four-family		530,752		552,240
Home equity		35,881		38,599
Construction and land		38,875		39,528
Commercial real estate		70,046		65,434
Consumer		165		109
Commercial loans		17,732		24,018
		1,167,181		1,216,664

The Company provides several types of loans to its customers, including residential, construction, commercial and consumer loans.  Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to one borrower or to multiple borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions.  While credit risks tend to be geographically concentrated in the Company's Milwaukee metropolitan area and while 89.1% of the Company's loan portfolio involves loans that are secured by residential real estate, there are no concentrations with individual or groups of related borrowers.  While the real estate collateralizing these loans is residential in nature, it ranges from owner-occupied single family homes to large apartment complexes.  In addition, real estate collateralizing $89.8 million or 7.7% of total loans is located outside of the state of Wisconsin.

During the three months ended June 30, 2012, $767.1 million in residential loans were originated for sale.  During the same period, sales of loans held for sale totaled $770.2 million, generating mortgage banking income of $36.7 million.   During the year ended December 31, 2011, the Company began selectively selling loans on a servicing retained basis.  The unpaid principal balance of loans serviced for others was $213.4 million and $29.9 million at June 30, 2012 and December 31, 2011, respectively. These loans are not reflected in the consolidated statements of financial condition.

Qualifying loans receivable totaling $806.1 million and $715.7 million are pledged as collateral against $350.0 million in outstanding Federal Home Loan Bank of Chicago advances under a blanket security agreement at both June 30, 2012 and December 31, 2011.

An analysis of past due loans receivable as of June 30, 2012 and December 31, 2011 follows:

	As of June 30, 2012
	1-59 Days Past Due (1)		60-89 Days Past Due (2)		Greater Than 90 Days		Total Past Due		Current (3)		Total Loans
	(In Thousands)
Mortgage loans:
Residential real estate:
One- to four-family	$	8,423		5,444		34,391		48,258		425,472		473,730
Over four-family		1,046		5,395		18,837		25,278		505,474		530,752
Home equity		378		130		829		1,337		34,544		35,881
Construction and land		-		-		5,826		5,826		33,049		38,875
Commercial real estate		101		-		3,581		3,682		66,364		70,046
Consumer		-		-		-		-		165		165
Commercial loans		-		-		-		-		17,732		17,732
Total	$	9,948		10,969		63,464		84,381		1,082,800		1,167,181
	As of December 31, 2011
Mortgage loans:
Residential real estate:
One- to four-family	$	12,650		5,536		40,001		58,187		438,549		496,736
Over four-family		13,044		2,630		8,946		24,620		527,620		552,240
Home equity		1,982		131		290		2,403		36,196		38,599
Construction and land		49		155		6,790		6,994		32,534		39,528
Commercial real estate		70		-		515		585		64,849		65,434
Consumer		8		-		-		8		101		109
Commercial loans		543		-		70		613		23,405		24,018
Total	$	28,346		8,452		56,612		93,410		1,123,254		1,216,664

⁽¹⁾ Includes $2.2 million and $4.6 million for June 30, 2012 and December 31, 2011, respectively, which are on non-accrual status.

⁽²⁾ Includes $7.2 million and $1.4 million for June 30, 2012 and December 31, 2011, respectively, which are on non-accrual status.

⁽³⁾ Includes $11.8 million and $15.7 million for June 30, 2012 and December 31, 2011, respectively, which are on non-accrual status.

As of June 30, 2012 and December 31, 2011, there are no loans that are 90 or more days past due and still accruing interest.

A summary of the activity for the six months ended June 30, 2012 and the years ended December 31, 2011 and 2010 in the allowance for loan losses follows:

	One- to Four- Family			Over Four Family			Home Equity			Construction and Land			Commercial Real Estate			Consumer			Commercial			Total
	(In Thousands)
Six months ended June 30, 2012
Balance at beginning of period	$	17,475			8,252			1,998			2,922			941			28			814			32,430
Provision for loan losses		2,943			1,396			374			(137	)		817			(1	)		(292	)		5,100
Charge-offs		(4,133	)		(612	)		(158	)		(192	)		(43	)		-			(59	)		(5,197	)
Recoveries		252			11			22			15			-			-			25			325
Balance at end of period	$	16,537			9,047			2,236			2,608			1,715			27			488			32,658
Year ended December 31, 2011
Balance at beginning of period	$	16,150			6,877			1,196			3,252			671			28			1,001			29,175
Provision for loan losses		12,567			5,331			1,429			1,346			998			9			397			22,077
Charge-offs		(11,553	)		(3,996	)		(634	)		(1,745	)		(734	)		(10	)		(619	)		(19,291	)
Recoveries		311			40			7			69			6			1			35			469
Balance at end of period	$	17,475			8,252			1,998			2,922			941			28			814			32,430
Year ended December 31, 2010
Balance at beginning of period	$	17,875			5,208			1,642			2,635			720			43			371			28,494
Provision for loan losses		15,054			5,053			170			2,934			525			(3	)		2,099			25,832
Charge-offs		(16,906	)		(3,439	)		(619	)		(2,319	)		(575	)		(13	)		(1,470	)		(25,341	)
Recoveries		127			55			3			2			1			1			1			190
Balance at end of period	$	16,150			6,877			1,196			3,252			671			28			1,001			29,175

A summary of the allowance for loan loss for loans evaluated individually and collectively for impairment by collateral class as of June 30, 2012 follows:

	One- to Four- Family		Over Four Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total
	(In Thousands)
Allowance related to loans individually evaluated for impairment	$	7,291		5,040		1,135		1,744		795		-		76		16,081
Allowance related to loans collectively evaluated for impairment		9,246		4,007		1,101		864		920		27		412		16,577
Balance at end of period	$	16,537		9,047		2,236		2,608		1,715		27		488		32,658
Loans individually evaluated for impairment	$	62,913		40,070		2,883		7,317		4,175		27		841		118,226
Loans collectively evaluated for impairment		410,817		490,682		32,998		31,558		65,871		138		16,891		1,048,955
Total gross loans	$	473,730		530,752		35,881		38,875		70,046		165		17,732		1,167,181

A summary of the allowance for loan loss for loans evaluated individually and collectively for impairment by collateral class as of the year ended December 31, 2011 follows:

	One- to Four- Family		Over Four Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total
	(In Thousands)
Allowance related to loans individually evaluated for impairment	$	5,707		3,719		803		2,077		-		-		269		12,575
Allowance related to loans collectively evaluated for impairment		11,768		4,533		1,195		845		941		28		545		19,855
Balance at end of period	$	17,475		8,252		1,998		2,922		941		28		814		32,430
Loans individually evaluated for impairment	$	68,321		40,783		2,227		8,436		515		-		1,115		121,397
Loans collectively evaluated for impairment		428,415		511,457		36,372		31,092		64,919		109		22,903		1,095,267
Total gross loans	$	496,736		552,240		38,599		39,528		65,434		109		24,018		1,216,664

The following table presents information relating to the Company's internal risk ratings of its loans receivable as of June 30, 2012 and December 31, 2011:

	One- to Four- Family		Over Four Family		Home Equity		Construction and Land		Commercial Real Estate		Consumer		Commercial		Total
	(In Thousands)
At June 30, 2012
Substandard	$	58,026		39,065		3,447		7,316		4,765		27		855		113,501
Watch		26,774		12,311		996		6,089		409		-		1,034		47,613
Pass		388,930		479,376		31,438		25,470		64,872		138		15,843		1,006,067
	$	473,730		530,752		35,881		38,875		70,046		165		17,732		1,167,181
At December 31, 2011
Substandard	$	68,566		37,502		3,188		8,436		1,114		-		1,116		119,922
Watch		14,341		16,993		721		6,199		1,549		-		1,108		40,911
Pass		413,829		497,745		34,690		24,893		62,771		109		21,794		1,055,831
	$	496,736		552,240		38,599		39,528		65,434		109		24,018		1,216,664

Factors that are important to managing overall credit quality include sound loan underwriting and administration, systematic monitoring of existing loans and commitments, effective loan review on an ongoing basis, early identification of potential problems, an allowance for loan losses, and sound non-accrual and charge-off policies.  Our underwriting policies require an officers' loan committee review and approval of all loans in excess of $500,000.  In addition, an independent loan review function exists for all loans.  Our ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans.  To do so, we maintain a loan review system under which our credit management personnel review non-owner occupied one- to four-family, over four-family, construction and land, commercial real estate and commercial loans that individually, or as part of an overall borrower relationship, exceed $1.0 million in potential exposure.  Loans meeting these criteria are reviewed on an annual basis, or more frequently, if the loan renewal is less than one year.  With respect to this review process, management has determined that pass loans include loans that exhibit acceptable financial statements, cash flow and leverage.  Watch loans have potential weaknesses that deserve management's attention, and if left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credit.  Substandard loans are considered inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged.  These loans generally have a well-defined weakness that may jeopardize liquidation of the debt and are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.  Finally, a loan is considered to be impaired when it is probable that the Bank will not be able to collect all amounts due according to the contractual terms of the loan agreement. Management has determined that all non-accrual loans and loans modified under troubled debt restructurings meet the definition of an impaired loan.

The Company's procedures dictate that an updated valuation must be obtained with respect to underlying collateral at the time a loan is deemed impaired.  Updated valuations may also be obtained upon transfer from loans receivable to real estate owned based upon the age of the prior appraisal, changes in market conditions or known changes to the physical condition of the property.

Estimated fair values are reduced to account for sales commissions, broker fees, unpaid property taxes and additional selling expenses to arrive at an estimated net realizable value.  The adjustment factor is based upon the Company's actual experience with respect to sales of real estate owned over the prior two years.  An additional adjustment factor is applied by appraisal vintage to account for downward market pressure since the date of appraisal.  The additional adjustment factor is based upon relevant sales data available for our general operating market as well as company-specific historical net realizable values as compared to the most recent appraisal prior to disposition.

With respect to over-four family income producing real estate, appraisals are reviewed and estimated collateral values are adjusted by updating significant appraisal assumptions to reflect current real estate market conditions.  Significant assumptions reviewed and updated include the capitalization rate, rental income and operating expenses.  These adjusted assumptions are based upon recent appraisals received on similar properties as well as on actual experience related to real estate owned and currently under Company management.

The following tables present data on impaired loans at June 30, 2012 and December 31, 2011.

	As of or for the Six Months Ended June 30, 2012
	Recorded Investment		Unpaid Principal		Reserve		Cumulative Charge-Offs		Average Recorded Investment		Int Paid YTD
	(In Thousands)
Total Impaired with Reserve
One- to four-family	$	32,641		33,040		7,291		399		31,085		533
Over four-family		24,389		24,634		5,040		245		24,912		559
Home equity		1,811		1,811		1,135		-		1,864		46
Construction and land		6,871		6,871		1,744		-		6,870		26
Commercial real estate		3,730		3,730		795		-		3,742		36
Consumer		-		-		-		-		-		-
Commercial		841		841		76		-		841		19
	$	70,283		70,927		16,081		644		69,314		1,219
Total Impaired with no Reserve
One- to four-family	$	30,272		35,683		-		5,411		35,840		419
Over four-family		15,681		16,901		-		1,220		17,158		206
Home equity		1,072		1,112		-		40		1,115		6
Construction and land		446		503		-		57		503		3
Commercial real estate		445		469		-		24		474		7
Consumer		27		27		-		-		27		1
Commercial		-		-		-		-		-		-
	$	47,943		54,695		-		6,752		55,117		642
Total Impaired
One- to four-family	$	62,913		68,723		7,291		5,810		66,925		952
Over four-family		40,070		41,535		5,040		1,465		42,070		765
Home equity		2,883		2,923		1,135		40		2,979		52
Construction and land		7,317		7,374		1,744		57		7,373		29
Commercial real estate		4,175		4,199		795		24		4,216		43
Consumer		27		27		-		-		27		1
Commercial		841		841		76		-		841		19
	$	118,226		125,622		16,081		7,396		124,431		1,861

	As of or for the Year Ended December 31, 2011
	Recorded Investment		Unpaid Principal		Reserve		Cumulative Charge-Offs		Average Recorded Investment		Int Paid YTD
	(In Thousands)
Total Impaired with Reserve
One- to four-family	$	25,735		25,913		5,707		178		26,093		579
Over four-family		21,268		21,648		3,719		380		21,846		761
Home equity		1,428		1,428		803		-		1,448		2
Construction and land		6,543		6,543		2,077		-		6,543		113
Commercial real estate		-		-		-		-		-		-
Commercial		1,033		1,033		269		-		1,037		42
	$	56,007		56,565		12,575		558		56,967		1,497
Total Impaired with no Reserve
One- to four-family	$	42,586		48,482		-		5,896		48,552		1,448
Over four-family		19,515		21,264		-		1,749		21,535		780
Home equity		799		799		-		-		833		3
Construction and land		1,893		3,413		-		1,520		3,413		60
Commercial real estate		515		539		-		24		538		17
Commercial		82		100		-		18		90		-
	$	65,390		74,597		-		9,207		74,961		2,308
Total Impaired
One- to four-family	$	68,321		74,395		5,707		6,074		74,645		2,027
Over four-family		40,783		42,912		3,719		2,129		43,381		1,541
Home equity		2,227		2,227		803		-		2,281		5
Construction and land		8,436		9,956		2,077		1,520		9,956		173
Commercial real estate		515		539		-		24		538		17
Commercial		1,115		1,133		269		18		1,127		42
	$	121,397		131,162		12,575		9,765		131,928		3,805

The difference between a loan's recorded investment and the unpaid principal balance represents a partial charge-off resulting from a confirmed loss due to the value of the collateral securing the loan being below the loan balance and management's assessment that the full collection of the loan balance is not likely.

When a loan is considered impaired, interest payments received are treated as interest income on a cash basis as long as the remaining book value of the loan (i.e., after charge-off of all identified losses) is deemed to be fully collectible. If the remaining book value is not deemed to be fully collectible, all payments received are applied to unpaid principal. Determination as to the ultimate collectability of the remaining book value is supported by an updated credit department evaluation of the borrower's financial condition and prospects for repayment, including consideration of the borrower's sustained historical repayment performance and other relevant factors.

The determination as to whether an allowance is required with respect to impaired loans is based upon an analysis of the value of the underlying collateral and/or the borrower's intent and ability to make all principal and interest payments in accordance with contractual terms.  The evaluation process is subject to the use of significant estimates and actual results could differ from estimates.  This analysis is primarily based upon third party appraisals and/or a discounted cash flow analysis.  In those cases in which no allowance has been provided for an impaired loan, the Company has determined that the estimated value of the underlying collateral exceeds the remaining outstanding balance of the loan.  Of the total $47.9 million of impaired loans as of June 30, 2012 for which no allowance has been provided, $6.8 million in charge-offs have been recorded to reduce the unpaid principal balance to an amount that is commensurate with the loan's net realizable value, using the estimated fair value of the underlying collateral.  To the extent that further deterioration in property values continues, the Company may have to reevaluate the sufficiency of the collateral servicing these impaired loans resulting in additional provisions to the allowance for loans losses or charge-offs.

At June 30, 2012, total impaired loans includes $54.5 million of troubled debt restructurings.  The vast majority of debt restructurings include a modification of terms to allow for an interest only payment and/or reduction in interest rate.  The restructured terms are typically in place for six to twelve months.  At December 31, 2011, total impaired loans included $55.4 million of troubled debt restructurings.

The following presents data on troubled debt restructurings:

	As of June 30, 2012
	Accruing				Non-accruing				Total
	Amount		Number		Amount		Number		Amount		Number
	(dollars in thousands)
One- to four-family	$	16,920		26	$	20,331		90	$	37,251		116
Over four-family		10,765		12		2,022		6		12,787		18
Home equity		148		2		1,047		4		1,195		6
Construction and land		1,408		1		79		1		1,487		2
Commercial real estate		-		-		1,805		2		1,805		2
	$	29,241		41	$	25,284		103	$	54,525		144
	As of December 31, 2011
	Accruing				Non-accruing				Total
	Amount		Number		Amount		Number		Amount		Number
	(dollars in thousands)
One- to four-family	$	8,293		26	$	26,773		93	$	35,066		119
Over four-family		14,845		13		2,453		8		17,298		21
Home equity		43		1		1,024		4		1,067		5
Construction and land		1,408		1		79		1		1,487		2
Commercial real estate		-		-		452		1		452		1
Commercial		-		-		42		2		42		2
	$	24,589		41	$	30,823		109	$	55,412		150

Troubled debt restructurings involve granting concessions to a borrower experiencing financial difficulty by modifying the terms of the loan in an effort to avoid foreclosure.  Typical restructured terms include six to twelve months of principal forbearance, a reduction in interest rate or both.  At June 30, 2012, $54.5 million in loans had been modified in troubled debt restructurings and $25.3 million of these loans were included in the non-accrual loan total.  The remaining $29.2 million, while meeting the internal requirements for modification in a troubled debt restructuring, were current with respect to payments under their original loan terms at the time of the restructuring and thus, continued to be included with accruing loans.  Provided these loans perform in accordance with the modified terms, they will continue to be accounted for on an accrual basis.

All loans that have been modified in a troubled debt restructuring are considered to be impaired.  As such, an analysis has been performed with respect to all of these loans to determine the need for a valuation reserve.  When a loan is expected to perform in accordance with the restructured terms and ultimately return to and perform under contract terms, a valuation allowance is established for an amount equal to the excess of the present value of the expected future cash flows under the original contract terms as compared with the modified terms, including an estimated default rate.  When there is doubt as to the borrower's ability to perform under the restructured terms or ultimately return to and perform under market terms, a valuation allowance is established equal to the impairment when the carrying amount exceeds fair value of the underlying collateral.  As a result of the impairment analysis, a $6.7 million valuation allowance has been established as of June 30, 2012 with respect to the $54.5 million in troubled debt restructurings.  As of December 31, 2011, $6.2 million in valuation allowance had been established with respect to the $55.4 million in troubled debt restructurings.

After a troubled debt restructuring reverts to market terms, a minimum of six consecutive contractual payments must be received prior to consideration for a return to accrual status.  If an updated credit department review indicates no other evidence of elevated credit risk, the loan is returned to accrual status at that time.

The following presents troubled debt restructurings by concession type as of June 30, 2012 and December 31, 2011:

	As of June 30, 2012
	Performing in accordance with modified terms				In Default				Total
	Amount		Number		Amount		Number		Amount		Number
	(dollars in thousands)
Interest reduction and principal forbearance		26,880		69		2,749		12		29,629		81
Principal forbearance		5,059		33		351		1		5,410		34
Interest reduction		18,710		26		776		3		19,486		29
	$	50,649		128		3,876		16		54,525		144
	As of December 31, 2011
	Performing in accordance with modified terms				In Default				Total
	Amount		Number		Amount		Number		Amount		Number
	(dollars in thousands)
Interest reduction and principal forbearance		22,752		61		6,564		22		29,316		83
Principal forbearance		3,894		29		1,771		9		5,665		38
Interest reduction		20,006		27		425		2		20,431		29
	$	46,652		117		8,760		33		55,412		150

The following presents data on troubled debt restructurings as of June 30, 2012:

	For the Six Months Ended June 30, 2012				For the Three Months Ended June 30, 2012
	Amount		Number		Amount		Number
	(dollars in thousands)				(dollars in thousands)
Loans modified as a troubled debt restructure
One- to four-family	$	6,500		11	$	3,533		4
Over four-family		1,004		2		1,004		2
Home equity		117		2		105		1
	$	7,621		15	$	4,642		7
Troubled debt restructuring modified within the past twelve months for which there was a default
One- to four-family	$	655		2	$	135		1
	$	655		2	$	135		1

The following table presents data on non-accrual loans as of June 30, 2012 and December 31, 2011:

	June 30,			December 31,
		2012			2011
	(Dollars in Thousands)
Non-accrual loans:
Residential
One- to four-family	$	48,575			55,609
Over four-family		24,739			13,680
Home equity		2,004			1,334
Construction and land		5,826			6,946
Commercial real estate		3,581			514
Commercial		-			135
Consumer		27			-
Total non-accrual loans	$	84,752			78,218
Total non-accrual loans to total loans, net		7.26	%		6.43	%
Total non-accrual loans and performing troubled debt restructurings to total loans receivable		9.77	%		8.45	%
Total non-accrual loans to total assets		5.05	%		4.57	%

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Recent Accounting Developments

6 Months Ended

Jun. 30, 2012

Recent Accounting Developments [Abstract]

Recent Accounting Developments

Note 15 - Recent Accounting Developments

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.  The amendments change the wording used to describe many of the requirements for measuring fair value and for disclosing information about fair value measurements.  The amendments also clarify the Board's intent about the application of existing fair value measurement and disclosure requirements.  The amendments are effective for interim  and annual periods beginning after December 15, 2011.  The adoption of the standard did not have a material impact on our results of operations, financial position or liquidity.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, to increase the prominence of other comprehensive income in financial statements.  Under this ASU, an entity will have the option to present the components of net income and comprehensive income in either one or two consecutive financial statements.  The ASU eliminates the option in U.S. GAAP to present other comprehensive income in the statement of changes in equity.  An entity should apply the ASU retrospectively.  The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The adoption of the standard did not have a material impact on our results of operations, financial position or liquidity.

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2012

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

Note 11 - Derivative Financial Instruments

In connection with its mortgage banking activities, the Company enters into derivative financial instruments as part of its strategy to manage its exposure to changes in interest rates.   Mortgage banking derivatives include interest rate lock commitments provided to customers to fund mortgage loans to be sold in the secondary market and forward commitments for the future delivery of such loans to third party investors.  It is the Company's practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on its commitments to fund the loans as well as on its portfolio of mortgage loans held-for-sale. The Company's mortgage banking derivatives have not been designated as being in hedge relationships.  These instruments are used to manage the Company's exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of ASC 815. Changes in the fair value of derivatives not designated in hedging relationships are recorded as a component of mortgage banking income in the Company's consolidated statements of operations. The Company does not use derivatives for speculative purposes.

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 interest rate lock commitments to originate loans and loans held for sale.    At June 30, 2012, the Company had forward commitments to sell mortgage loans with an aggregate notional amount of approximately $163.7 million and interest rate lock commitments with an aggregate notional amount of approximately $179.1 million.  The fair value of the mortgage derivatives at June 30, 2012 included a gain of $2.2 million on mortgage banking derivative assets and an $847,000 net loss on mortgage banking liabilities that are reported as a component of other asset and other liabilities, respectively on the Company's consolidated statements of financial condition.

In determining the fair value of its derivative loan commitments, 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.  The fair value of these commitments is recorded on the consolidated statements of financial condition with the changes in fair value recorded as a component of mortgage banking income.

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Borrowings

6 Months Ended

Jun. 30, 2012

Borrowings [Abstract]

Borrowings

Note 7- Borrowings

Borrowings consist of the following:

		June 30, 2012					December 31, 2011
				Weighted					Weighted
				Average					Average
		Balance		Rate			Balance		Rate
		(Dollars in Thousands)
Short term:
Bank lines of credit		$	45,031		3.18	%		27,138		4.50	%
Long term:
Federal Home Loan Bank, Chicago (FHLBC) advances maturing:
	2016		220,000		4.34	%		220,000		4.34	%
	2017		65,000		3.19	%		65,000		3.19	%
	2018		65,000		2.97	%		65,000		2.97	%
Repurchase agreements maturing	2017		84,000		3.96	%		84,000		3.96	%
		$	479,031		3.83	%		461,138		3.93	%

The bank lines of credit are the outstanding portion of revolving lines with two unrelated banks which represent a $90 million commitment.  The lines of credit are utilized by Waterstone Mortgage Corporation to finance loans originated for sale.  The lines of credit are secured by the underlying loans being financed.  Related interest rates are based upon the note rate associated with the loans being financed.

The $220.0 million in advances due in 2016 consist of eight advances with rates ranging from 4.01% to 4.82% callable quarterly until maturity.

The $65.0 million in advances due in 2017 consist of three advances with rates ranging from 3.09% to 3.46% callable quarterly until maturity.

The $65.0 million in advances due in 2018 consist of three callable advances with rates ranging from 2.73% to 3.11% callable quarterly until maturity.

The $84.0 million in repurchase agreements due in 2017 have rates ranging from 2.89% to 4.31% callable quarterly until maturity.  The repurchase agreements are collateralized by securities available for sale with an estimated fair value of $101.9 million at June 30, 2012.

The Company selects loans that meet underwriting criteria established by the FHLBC as collateral for outstanding advances.  The Company's FHLBC borrowings are limited to 65% of the carrying value of qualifying, unencumbered one- to four-family mortgage loans, 30% of the carrying value of home equity loans and 45% of the carrying value of over four-family loans.  In addition, these advances are collateralized by FHLBC stock totaling $20.5 million at June 30, 2012 and $21.7 million at December 31, 2011.  In the event of prepayment, the Company is obligated to pay all remaining contractual interest on long-term borrowings.

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Mortgage Servicing Rights

6 Months Ended

Jun. 30, 2012

Mortgage Servicing Rights [Abstract]

Mortgage Servicing Rights

Note 5- Mortgage Servicing Rights

The following table presents the activity in the Company's mortgage servicing rights:

	Six months ended
	June 30, 2012
	(In Thousands)
Mortgage servicing rights at beginning of the period	$	198
Additions		982
Amortization		(77	)
Mortgage servicing rights at end of the period		1,103
Valuation allowance at end of period		-
Mortgage servicing rights at the end of the period, net	$	1,103

The following table shows the estimated future amortization expense for mortgage servicing rights for the periods indicated:

		(In Thousands)
Estimate for the six months ended December 31:	2012		145
Estimate for the years ended December 31:	2013		263
2014			220
2015			176
2016			133
2017			90
Thereafter			76
Total			1,103

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Deposits

6 Months Ended

Jun. 30, 2012

Deposits [Abstract]

Deposits

Note 6- Deposits

A summary of the contractual maturities of time deposits at June 30, 2012 is as follows:

	(In Thousands)
Within one year	$	561,276
More than one to two years		174,557
More than two to three years		35,216
More than three to four years		9,939
More than four through five years		13,483
	$	794,471

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Regulatory Capital

6 Months Ended

Jun. 30, 2012

Regulatory Capital [Abstract]

Regulatory Capital

Note 8 - Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements, or overall financial performance deemed by the regulators to be inadequate, can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). As of June 30, 2012, the Bank meets all capital adequacy requirements to which it is subject.  On December 18, 2009, WaterStone Bank entered into a consent order with its federal and state bank regulators whereby it has agreed to maintain a minimum Tier 1 capital ratio of 8.50% and a minimum total risk based capital ratio of 12.00%.  At June 30, 2012, WaterStone Bank exceeded these capital requirements.  The consent order prohibits the payment of cash dividends or repurchases of common stock, and restricts the ability of the Company to incur debt, in each case without the prior regulatory non-objection.    At June 30, 2012, the Company is in compliance with all requirements of the consent order.

As of June 30, 2012 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as quantitatively "well capitalized" under the regulatory framework for prompt corrective action. To be categorized as "well capitalized," the Bank must maintain minimum total risk-based, Tier I risk‑based and Tier I leverage ratios, as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank's category, however, the outstanding consent order limits transactions otherwise available to "well capitalized" banks, such as acceptance of brokered deposits.

As a state-chartered savings bank, the Bank is required to meet minimum capital levels established by the state of Wisconsin in addition to federal requirements. For the state of Wisconsin, regulatory capital consists of retained income, paid-in-capital, capital stock equity and other forms of capital considered to be qualifying capital by the Federal Deposit Insurance Corporation.

The actual and required capital amounts and ratios for the Bank as of June 30, 2012 and December 31, 2011 are presented in the table below:

	June 30, 2012
											To Be Well-Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars In Thousands)
Total capital (to risk-weighted assets)	$	182,376		15.11	%		96,550		8.00	%		120,688		10.00	%
Tier I capital (to risk-weighted assets)		167,074		13.84	%		48,275		4.00	%		72,413		6.00	%
Tier I capital (to average assets)		167,074		9.82	%		68,078		4.00	%		85,097		5.00	%
State of Wisconsin (to total assets)		167,074		9.97	%		100,560		6.00	%		N/A		N/A
	December 31, 2011
	(Dollars In Thousands)
Total capital (to risk-weighted assets)	$	174,144		14.58	%		95,579		8.00	%		119,474		10.00	%
Tier I capital (to risk-weighted assets)		158,994		13.31	%		47,790		4.00	%		71,684		6.00	%
Tier I capital (to average assets)		158,994		9.16	%		69,447		4.00	%		86,808		5.00	%
State of Wisconsin (to total assets)		158,994		9.31	%		102,463		6.00	%		N/A		N/A

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Financial Instruments with Off-Balance Sheet Risk (Tables)

6 Months Ended

Jun. 30, 2012

Financial Instruments with Off-Balance Sheet Risk [Abstract]

Financial Instruments with Off-Balance Sheet Risk

Note 10- Financial Instruments with Off-Balance Sheet Risk

Off-balance sheet financial instruments or obligations whose contract amounts represent credit and/or interest rate risk are as follows:

	June 30,		December 31,
		2012		2011
	(In Thousands)
Financial instruments whose contract amounts represent potential credit risk:
Commitments to extend credit under amortizing loans (1)	$	22,713		14,259
Commitments to extend credit under home equity lines of credit		18,582		21,403
Unused portion of construction loans		5,550		5,684
Unused portion of business lines of credit		10,395		10,347
Standby letters of credit		922		970

____________

⁽¹⁾ Excludes commitments to originate loans held for sale addressed in Note 11.

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 June 30, 2012 and December 31, 2011.

Residential mortgage loans sold to others are predominantly conventional residential first lien mortgages that are sold on a servicing released basis.  The Company's agreements to sell residential mortgage loans in the normal course of business usually require certain representations and warranties on the underlying loans sold related to credit information, loan documentation and collateral, which if subsequently are untrue or breached, could require the Company to repurchase certain loans affected.  There have been insignificant instances of repurchase under representations and warranties.  The Company's agreements to sell residential mortgage loans also contain limited recourse provisions.  The recourse provisions are limited in that the recourse provision ends after certain payment criteria have been met.  With respect to these loans, repurchase could be required if defined delinquency issues arose during the limited recourse period.  Given that the underlying loans delivered to buyers are predominantly conventional first lien mortgages and that historical experience shows negligible losses and insignificant repurchase activity, management believes that losses and repurchases under the limited recourse provisions will continue to be insignificant.

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Fair Value Measurements (Details) (USD $)	6 Months Ended			6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Jun. 30, 2012 Securities (Assets) [Member]	Dec. 31, 2011 Securities (Assets) [Member]	Jun. 30, 2012 Derivative Financial Instruments, Assets [Member]	Dec. 31, 2011 Derivative Financial Instruments, Assets [Member]	Jun. 30, 2012 Fair Value, Measurements, Recurring [Member] Estimate of Fair Value, Fair Value Disclosure [Member]	Dec. 31, 2011 Fair Value, Measurements, Recurring [Member] Estimate of Fair Value, Fair Value Disclosure [Member]	Jun. 30, 2012 Fair Value, Measurements, Recurring [Member] Fair Value, Inputs, Level 1 [Member]	Dec. 31, 2011 Fair Value, Measurements, Recurring [Member] Fair Value, Inputs, Level 1 [Member]	Jun. 30, 2012 Fair Value, Measurements, Recurring [Member] Fair Value, Inputs, Level 2 [Member]	Dec. 31, 2011 Fair Value, Measurements, Recurring [Member] Fair Value, Inputs, Level 2 [Member]	Jun. 30, 2012 Fair Value, Measurements, Recurring [Member] Fair Value, Inputs, Level 3 [Member]	Dec. 31, 2011 Fair Value, Measurements, Recurring [Member] Fair Value, Inputs, Level 3 [Member]	Jun. 30, 2012 Fair Value, Measurements, Nonrecurring [Member] Estimate of Fair Value, Fair Value Disclosure [Member]	Dec. 31, 2011 Fair Value, Measurements, Nonrecurring [Member] Estimate of Fair Value, Fair Value Disclosure [Member]	Jun. 30, 2012 Fair Value, Measurements, Nonrecurring [Member] Fair Value, Inputs, Level 1 [Member]	Dec. 31, 2011 Fair Value, Measurements, Nonrecurring [Member] Fair Value, Inputs, Level 1 [Member]	Jun. 30, 2012 Fair Value, Measurements, Nonrecurring [Member] Fair Value, Inputs, Level 2 [Member]	Dec. 31, 2011 Fair Value, Measurements, Nonrecurring [Member] Fair Value, Inputs, Level 2 [Member]	Jun. 30, 2012 Fair Value, Measurements, Nonrecurring [Member] Fair Value, Inputs, Level 3 [Member]	Dec. 31, 2011 Fair Value, Measurements, Nonrecurring [Member] Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage-backed securities								$ 91,799,000	$ 35,417,000	$ 0	$ 0	$ 91,799,000	$ 35,417,000	$ 0	$ 0
Collateralized mortgage obligations, Government sponsored enterprise bonds								38,664,000	33,196,000	0	0	38,664,000	33,196,000	0	0
Collateralized Mortgage Obligations, Private-label issued								18,051,000	18,451,000	0	0	0	0	18,051,000	18,451,000
Government sponsored enterprise bonds								29,051,000	71,349,000	0	0	29,051,000	71,349,000	0	0
Municipal securities								25,017,000	39,068,000	0	0	25,017,000	39,068,000	0	0
Other debt securities								5,240,000	5,118,000	5,240,000	5,118,000	0	0	0	0
Certificates of deposit								5,420,000	3,920,000	0	0	5,420,000	3,920,000	0	0
Loans held for sale (at fair value)	122,489,000		88,283,000					122,489,000	88,283,000	0	0	122,489,000	88,283,000	0	0
Mortgage Banking Derivative Assets								2,245,000	924,000	0	0	0	0	2,245,000	924,000
Mortgage Banking Derivatives Liabilities								847,000	397,000	0	0	0	0	847,000	397,000
Impaired Loans, Fair Value Disclosure																54,202,000	43,432,000	0	0	0	0	54,202,000	43,432,000
Real Estate Owned, Fair Value Disclosure	47,815,000															47,815,000	56,670,000	0	0	0	0	47,815,000	56,670,000
Assets measured on recurring basis, unobservable input reconciliation [Roll Forward]
Beginning balance				18,451,000	20,301,000	527,000	407,000
Transfer into level 3				0	0	0	0
Unrealized holding losses arising during the period [Abstract]
Included in other comprehensive income				652,000	(142,000)	0	0
Other than temporary impairment in net loss				(4,000)	(456,000)	0	0
Principal repayments				(1,048,000)	(1,252,000)	0	0
Net accretion of discount/amortization of premium				0	0	0	0
Mortgage derivative gain, net				0	0	871,000	120,000
Ending balance				18,051,000	18,451,000	1,398,000	527,000
Loans and Leases Receivable, Impaired, Outstanding Balance	70,300,000		56,000,000
Loans and Leases Receivable, Impaired, Specific Reserve	16,100,000		12,600,000
Real Estate Owned, Change in Fair Value	$ 3,400,000	$ 2,200,000

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Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 13 - Fair Value Measurements

The FASB issued an accounting standard (subsequently codified into ASC Topic 820, "Fair Value Measurements and Disclosures") which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This accounting standard applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements. The standard also emphasizes that fair value (i.e., the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date), among other things, is based on exit price versus entry price, should include assumptions about risk such as nonperformance risk in liability fair values, and is a market-based measurement, not an entity-specific measurement. When considering the assumptions that market participants would use in pricing the asset or liability, this accounting standard establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

The fair value hierarchy prioritizes inputs used to measure fair value into three broad levels.

Level 1 inputs - In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that we have the ability to access.

Level 2 inputs - Fair values determined by Level 2 inputs use inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly.  Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets where there are few transactions and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs - Level 3 inputs are unobservable inputs for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.  The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The following table presents information about our assets recorded in our consolidated statement of financial position at their fair value on a recurring basis as of June 30, 2012 and December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

			Fair Value Measurements Using
	June 30, 2012		Level 1		Level 2		Level 3
	(In Thousands)
Available for sale securities
Mortgage-backed securities	$	91,799		-		91,799		-
Collateralized mortgage obligations
Government sponsored enterprise issued		38,664		-		38,664		-
Private-label issued		18,051		-		-		18,051
Government sponsored enterprise bonds		29,051		-		29,051		-
Municipal securities		25,017		-		25,017		-
Other debt securities		5,240		5,240		-		-
Certificates of Deposit		5,420		-		5,420		-
Loans held for sale		122,489		-		122,489		-
Mortgage banking derivative assets		2,245		-		-		2,245
Mortgage banking derivative liabilities		847		-		-		847
			Fair Value Measurements Using
	December 31, 2011		Level 1		Level 2		Level 3
	(In Thousands)
Available for sale securities
Mortgage-backed securities	$	35,417		-		35,417		-
Collateralized mortgage obligations
Government sponsored enterprise issued		33,196		-		33,196		-
Private-label issued		18,451		-		-		18,451
Government sponsored enterprise bonds		71,349		-		71,349		-
Municipal securities		39,068		-		39,068		-
Other debt securities		5,118		5,118		-		-
Certificates of Deposit		3,920		-		3,920		-
Loans held for sale		88,283		-		88,283		-
Mortgage banking derivative assets		924		-		-		924
Mortgage banking derivative liabilities		397		-		-		397

The following summarizes the valuation techniques for assets recorded in our consolidated statements of financial condition at their fair value on a recurring basis:

Available for sale securities - The Company's investment securities classified as available for sale include: mortgage-backed securities, collateralized mortgage obligations, government sponsored enterprise bonds, municipal securities and other debt securities. The fair value of mortgage-backed securities, collateralized mortgage obligations and government sponsored enterprise bonds are determined by a third party valuation source using observable market data utilizing a matrix or multi-dimensional relational pricing model.  Standard inputs to these models include observable market data such as benchmark yields, reported trades, broker quotes, issuer spreads, benchmark securities, prepayment models and bid/offer market data.  For securities with an early redemption feature, an option adjusted spread model is utilized to adjust the issuer spread.  These model and matrix measurements are classified as Level 2 and Level 3 in the fair value hierarchy.  The fair value of municipal securities is determined by a third party valuation source using observable market data utilizing a multi-dimensional relational pricing model.  Standard inputs to this model include observable market data such as benchmark yields, reported trades, broker quotes, rating updates and issuer spreads.  These model measurements are classified as Level 2 in the fair value hierarchy.  The fair value of other debt securities, which includes a trust preferred security issued by a financial institution, is determined through quoted prices in active markets and is classified as Level 1 in the fair value hierarchy.

Loans held for sale - The Company carries loans held for sale at fair value under the fair value option model.  Fair value is generally determined by estimating a gross premium or discount, which is derived from pricing currently observable in the secondary market, principally from observable prices for forward sale commitments.  Loans held-for-sale are considered to be Level 2 in the fair value hierarchy of valuation techniques.

Mortgage banking derivatives - Mortgage banking derivatives include interest rate lock commitments to originate residential loans held for sale to individual customers and forward commitments to sell residential mortgage loans to various investors.  The Company relies on a valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale, which includes applying a pull through rate based upon historical experience and the current interest rate environment and then multiplying by quoted investor prices.  The Company also relies on a valuation model to estimate the fair value of its forward commitments to sell residential loans, which includes matching specific terms and maturities of the forward commitments against applicable investor pricing available.  While there are Level 2 and 3 inputs used in the valuation models, the Company has determined that one or more of the inputs significant in the valuation of both of the mortgage banking derivatives fall within Level 3 of the fair value hierarchy.

The table below presents reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2012 and 2011.

	Available for sale securities			Mortgage banking derivatives
	(In Thousands)
Balance at December 31, 2010	$	20,301			407
Transfer into level 3		-			-
Unrealized holding losses arising during the period:
Included in other comprehensive income		(142	)		-
Other than temporary impairment included in net loss		(456	)		-
Principal repayments		(1,252	)		-
Net accretion of discount/amortization of premium		-			-
Mortgage derivative gain, net		-			120
Balance at December 31, 2011		18,451			527
Transfer into level 3		-			-
Unrealized holding losses arising during the period:
Included in other comprehensive income		652			-
Other than temporary impairment included in net loss		(4	)		-
Principal repayments		(1,048	)		-
Net accretion of discount/amortization of premium		-			-
Mortgage derivative gain, net		-			871
Balance at June 30, 2012	$	18,051			1,398

Level 3 available-for-sale securities include two corporate collateralized mortgage obligations.  The market for these securities was not active as of June 30, 2012.  As such, the Company valued these securities based on the present value of estimated future cash flows   Additional impairment may be incurred in future periods if estimated future cash flows are less than the cost basis of the securities. There were no transfers in or out of Level 1 or Level 2 measurements during the periods.

Assets Recorded at Fair Value on a Non-recurring Basis

The following table presents information about our assets recorded in our consolidated statement of financial position at their fair value on a non-recurring basis as of June 30, 2012 and December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

			Fair Value Measurements Using
	June 30, 2012		Level 1		Level 2		Level 3
	(In Thousands)
Impaired loans, net (1)	$	54,202		-		-		54,202
Real estate owned		47,815		-		-		47,815
			Fair Value Measurements Using
	December 31, 2011		Level 1		Level 2		Level 3
	(In Thousands)
Impaired loans, net(1)	$	43,432		-		-		43,432
Real estate owned		56,670		-		-		56,670

_________

⁽¹⁾  Represents collateral-dependent impaired loans, net, which are included in loans.

Loans - We do not record loans at fair value on a recurring basis.  On a non-recurring basis, loans determined to be impaired are analyzed to determine whether a collateral shortfall exists, and if such a shortfall exists, are recorded on our consolidated statements of financial condition at net realizable value of the underlying collateral.  Fair value is determined based on third party appraisals.  Appraised values are adjusted to consider disposition costs and also to take into consideration the age of the most recent appraisal.  Given the significance of the adjustments made to appraised values necessary to estimate the fair value of impaired loans, loans that have been deemed to be impaired are considered to be Level 3 in the fair value hierarchy of valuation techniques.  At June 30, 2012, loans determined to be impaired with an outstanding balance of $70.3 million were carried net of specific reserves of $16.1 million for a fair value of $54.2 million.  At December 31, 2011, loans determined to be impaired with an outstanding balance of $56.0 million were carried net of specific reserves of $12.6 million for a fair value of $43.4 million.  Impaired loans collateralized by assets which are valued in excess of the net investment in the loan do not require any specific reserves.

Real estate owned - On a non-recurring basis, real estate owned, is recorded in our consolidated statements of financial condition at the lower of cost or fair value.  Fair value is determined based on third party appraisals and, if less than the carrying value of the loan, the carrying value of the loan is adjusted to the fair value.  Appraised values are adjusted to consider disposition costs and also to take into consideration the age of the most recent appraisal.  Given the significance of the adjustments made to appraised values necessary to estimate the fair value of the properties, real estate owned is considered to be Level 3 in the fair value hierarchy of valuation techniques.  Changes in the value of real estate owned totaled $3.4 million and $2.2 million during the six months ended June 30, 2012 and 2011, respectively and are recorded in real estate owned expense. At June 30, 2012 and December 31, 2011, real estate owned totaled $47.8 million and $56.7 million, respectively.

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of June 30, 2012, the significant unobservable inputs used in the fair value measurements were as follows:

				Significant	Significant Unobservable Input Value
	Fair Value at		Valuation	Unobservable	Minimum Value			Maximum Value
	June 30, 2012		Technique	Inputs
Collateralized Mortgage Obligations
Private-label issued	$	18,051	Discounted cash flow	Prepayment rate		9.6	%		25.7	%
				Default rate		5.6	%		6.0	%
				Discount rate		8.0	%		8.0	%
				Loss severity rate		43.0	%		52.0	%
Mortgage banking derivatives		1,398	Pricing models	Pull through rate		64.4	%		99.0	%
Impaired loans		54,202	Market approach	Disount rates applied to appraisals		15.0	%		30.0	%
Real estate owned		47,815	Market approach	Disount rates applied to appraisals		5.0	%		70.0	%

The fair value of the Company's private label-issued collateralize mortgage obligations was determined using a discounted cash flow analysis.  The significant unobservable inputs included a prepayment rate, default rate, discount rate and a loss severity rate.

The significant unobservable inputs used in the fair value measurement of the Company's mortgage banking derivatives, including interest rate lock commitments is the loan pull through rate.  This represents the percentage of loans currently in a lock position which the Company estimates will ultimately close.  Generally, the fair value of an interest rate lock commitment will be positively (negatively) impacted when the prevailing interest rate is lower (higher) than the interest rate lock commitment.  Generally, an increase in the pull through rate will result in the fair value of the interest rate lock increasing when in a gain position, or decrease when in a loss position.  The pull through rate is largely dependent on the loan processing stage that a loan is currently in and the change in prevailing interest rates from the time of the rate lock.  The pull through rate is computed using historical data and the ratio is periodically reviewed by the Company.

The significant unobservable inputs used in the fair value measurement of collateral for collateral-dependent impaired loans and real estate owned included in the above table primarily relate to discounting criteria applied to independent appraisals received with respect to the collateral.  Discounts applied to the appraisals are dependent on the vintage of the appraisal as well as the marketability of the property.  The discount factor is computed using actual realization rates on properties that have been foreclosed upon and liquidated in the open market.

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 June 30, 2012 and December 31, 2011:

	June 30, 2012										December 31, 2011
	Carrying										Carrying		Fair
	amount		Fair Value								amount		value
			Total		Level 1		Level 2		Level 3
	(In Thousands)
Financial Assets
Cash and cash equivalents	$	64,875		64,875		64,875		-		-		80,380		80,380
Securities available-for-sale		213,242		213,242		5,240		189,951		18,051		206,519		206,519
Securities held-to-maturity		-		-		-		-		-		2,648		2,542
Loans held for sale		122,489		122,489		-		122,489		-		88,283		88,283
Loans receivable		1,167,181		1,173,381		-		-		1,173,381		1,216,664		1,225,141
FHLB stock		20,507		20,507		-		20,507		-		21,653		21,653
Cash surrender value of life insurance		37,339		37,339		37,339		-		-		36,749		36,749
Real estate owned		47,815		47,815		-		-		47,815		56,670		56,670
Accrued interest receivable		3,556		3,556		3,556		-		-		4,064		4,064
Mortgage banking derivative assets		2,245		2,245		-		-		2,245		924		924
Financial Liabilities
Deposits		986,198		987,830		191,727		796,103		-		1,051,292		1,052,663
Advance payments by borrowers for taxes		14,518		14,518		14,518		-		-		942		942
Borrowings		479,031		537,246		-		537,246		-		461,138		517,624
Accrued interest payable		1,769		1,769		1,769		-		-		2,087		2,087
Mortgage banking derivative liabilities		847		847		-		-		847		397		397
Other Financial Instruments
Stand-by letters of credit		5		5		-		-		5		6		6

The following methods and assumptions were used by the Company in determining its fair value disclosures for financial instruments.

Cash and Cash Equivalents

The carrying amount reported in the consolidated statements of financial condition for cash and cash equivalents is a reasonable estimate of fair value.

 Securities

The fair value of securities is determined by a third party valuation source using observable market data utilizing a matrix or multi-dimensional relational pricing model.  Standard inputs to these models include observable market data such as benchmark yields, reported trades, broker quotes, issuer spreads, benchmark securities and bid/offer market data.  For securities with an early redemption feature, an option adjusted spread model is utilized to adjust the issuer spread.  Prepayment models are used for mortgage related securities with prepayment features.

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.

Loans Receivable

Loans determined to be impaired are analyzed to determine whether a collateral shortfall exists, and if such a shortfall exists, are recorded on our consolidated statements of financial condition at fair value.  Fair value is determined based on third party appraisals.  Appraised values are adjusted to consider disposition costs and also to take into consideration the age of the most recent appraisal.  With respect to loans that are not considered to be impaired, fair value is estimated by discounting the future contractual cash flows using discount rates that reflect a current rate offered to borrowers of similar credit standing for the remaining term to maturity.  This method of estimating fair value does not incorporate the exit-price concept of fair value prescribed by ASC 820-10 and generally produces a higher fair value.

FHLBC Stock

For FHLBC stock, the carrying amount is the amount at which shares can be redeemed with the FHLBC and is a reasonable estimate of fair value.

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.

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.

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.

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.

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 June 30, 2012 and December 31, 2011.

Mortgage Banking Derivative Assets and Liabilities

Mortgage banking derivatives include interest rate lock commitments to originate residential loans held for sale to individual customers and forward commitments to sell residential mortgage loans to various investors.  The Company relies on a valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale, which includes applying a pull through rate based upon historical experience and the current interest rate environment, and then multiplying by quoted investor prices.  The Company also relies on a valuation model to estimate the fair value of its forward commitments to sell residential loans, which includes matching specific terms and maturities of the forward commitments against applicable investor pricing available.  On the Company's Consolidated Statements of Condition, instruments that have a positive fair value are included in prepaid expenses and other assets, and those instruments that have a negative fair value are included in other liabilities.

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Derivative Financial Instruments (Policies)

6 Months Ended

Jun. 30, 2012

Derivative Financial Instruments [Abstract]

Derivative financial instruments

In connection with its mortgage banking activities, the Company enters into derivative financial instruments as part of its strategy to manage its exposure to changes in interest rates.   Mortgage banking derivatives include interest rate lock commitments provided to customers to fund mortgage loans to be sold in the secondary market and forward commitments for the future delivery of such loans to third party investors.  It is the Company's practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on its commitments to fund the loans as well as on its portfolio of mortgage loans held-for-sale. The Company's mortgage banking derivatives have not been designated as being in hedge relationships.  These instruments are used to manage the Company's exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of ASC 815. Changes in the fair value of derivatives not designated in hedging relationships are recorded as a component of mortgage banking income in the Company's consolidated statements of operations. The Company does not use derivatives for speculative purposes.

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 interest rate lock commitments to originate loans and loans held for sale.    At June 30, 2012, the Company had forward commitments to sell mortgage loans with an aggregate notional amount of approximately $163.7 million and interest rate lock commitments with an aggregate notional amount of approximately $179.1 million.  The fair value of the mortgage derivatives at June 30, 2012 included a gain of $2.2 million on mortgage banking derivative assets and an $847,000 net loss on mortgage banking liabilities that are reported as a component of other asset and other liabilities, respectively on the Company's consolidated statements of financial condition.

In determining the fair value of its derivative loan commitments, 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.  The fair value of these commitments is recorded on the consolidated statements of financial condition with the changes in fair value recorded as a component of mortgage banking income.

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Derivative Financial Instruments (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Forward commitments to sell mortgage loans [Member]
Derivative [Line Items]
Aggregate notional amount of derivatives	$ 163.7
Cumulative net gain reported as a component of other assets	2.2
Interest rate lock commitments [Member]
Derivative [Line Items]
Aggregate notional amount of derivatives	$ 179.1

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Loans Receivable, Part III (Details) (USD $)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	$ 54,525,000	$ 54,525,000	$ 55,412,000
Total number of troubled debt restructurings	144	144	150
Valuation allowance with respect to troubled debt restructurings	6,700,000	6,700,000	6,200,000
Minimum number of consecutive contractual payments received prior to consideration for a return to accrual status		6
Troubled Debt Restructurings by Concession Type [Abstract]
Loans Receivable, Modifications, Loans Performing in Accordance with Modified Terms	50,649,000	50,649,000	46,652,000
Number of loans performing in accordance with modified terms	128	128	117
Loans Receivable, Modifications, Loans in Default	3,876,000	3,876,000	8,760,000
Number of Loans in Default	16	16	33
Data on Troubled Debt Restructuring [Abstract]
Loans modified as a troubled debt restructure	4,642,000	7,621,000
Number of loans modified as a troubled debt restructuring	7	15
Trouble debt restructuring modified within the past twelve months for which there was a default	135,000	655,000
Number of trouble debt restructuring modified within the past twelve months for which there was a default	1	2
Non-accrual Loans [Abstract]
Total non-accrual loans	84,752,000	84,752,000	78,218,000
Ratio of total non-accrual loans to total loans, net of allowance (in hundredths)		7.26%	6.43%
Ratio of total non-accrual loans and performing troubled debt restructurings to total loans receivable (in hundredths)		9.77%	8.45%
Ratio of total non-accrual loans to total assets (in hundredths)		5.05%	4.57%
One-to Four-family [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	37,251,000	37,251,000	35,066,000
Total number of troubled debt restructurings	116	116	119
Data on Troubled Debt Restructuring [Abstract]
Loans modified as a troubled debt restructure	3,533,000	6,500,000
Number of loans modified as a troubled debt restructuring	4	11
Trouble debt restructuring modified within the past twelve months for which there was a default	135,000	655,000
Number of trouble debt restructuring modified within the past twelve months for which there was a default	1	2
Non-accrual Loans [Abstract]
Total non-accrual loans	48,575,000	48,575,000	55,609,000
Over Four-family [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	12,787,000	12,787,000	17,298,000
Total number of troubled debt restructurings	18	18	21
Data on Troubled Debt Restructuring [Abstract]
Loans modified as a troubled debt restructure	1,004,000	1,004,000
Number of loans modified as a troubled debt restructuring	2	2
Non-accrual Loans [Abstract]
Total non-accrual loans	24,739,000	24,739,000	13,680,000
Home Equity [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	1,195,000	1,195,000	1,067,000
Total number of troubled debt restructurings	6	6	5
Data on Troubled Debt Restructuring [Abstract]
Loans modified as a troubled debt restructure	105,000	117,000
Number of loans modified as a troubled debt restructuring	1	2
Non-accrual Loans [Abstract]
Total non-accrual loans	2,004,000	2,004,000	1,334,000
Construction and Land [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	1,487,000	1,487,000	1,487,000
Total number of troubled debt restructurings	2	2	2
Non-accrual Loans [Abstract]
Total non-accrual loans	5,826,000	5,826,000	6,946,000
Commercial Real Estate [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	1,805,000	1,805,000	452,000
Total number of troubled debt restructurings	2	2	1
Non-accrual Loans [Abstract]
Total non-accrual loans	3,581,000	3,581,000	514,000
Consumer [Member]
Non-accrual Loans [Abstract]
Total non-accrual loans	27,000	27,000	0
Commercial Loans [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings			42,000
Total number of troubled debt restructurings			2
Non-accrual Loans [Abstract]
Total non-accrual loans	0	0	135,000
Minimum [Member]
Financing Receivable, Modifications [Line Items]
Period in which restructured terms are typically in place (in months)		6
Troubled Debt Restructuring Note, Debtor [Abstract]
Period of principal forbearance, reduction in interest rate or both included in typical restructured terms (in months)		6
Maximum [Member]
Financing Receivable, Modifications [Line Items]
Period in which restructured terms are typically in place (in months)		12
Troubled Debt Restructuring Note, Debtor [Abstract]
Period of principal forbearance, reduction in interest rate or both included in typical restructured terms (in months)		12
Accruing [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	29,241,000	29,241,000	24,589,000
Total number of troubled debt restructurings	41	41	41
Accruing [Member] | One-to Four-family [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	16,920,000	16,920,000	8,293,000
Total number of troubled debt restructurings	26	26	26
Accruing [Member] | Over Four-family [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	10,765,000	10,765,000	14,845,000
Total number of troubled debt restructurings	12	12	13
Accruing [Member] | Home Equity [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	148,000	148,000	43,000
Total number of troubled debt restructurings	2	2	1
Accruing [Member] | Construction and Land [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	1,408,000	1,408,000	1,408,000
Total number of troubled debt restructurings	1	1	1
Accruing [Member] | Commercial Real Estate [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	0	0	0
Total number of troubled debt restructurings	0	0	0
Accruing [Member] | Commercial Loans [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings			0
Total number of troubled debt restructurings			0
Non-accruing [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	25,284,000	25,284,000	30,823,000
Total number of troubled debt restructurings	103	103	109
Non-accruing [Member] | One-to Four-family [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	20,331,000	20,331,000	26,773,000
Total number of troubled debt restructurings	90	90	93
Non-accruing [Member] | Over Four-family [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	2,022,000	2,022,000	2,453,000
Total number of troubled debt restructurings	6	6	8
Non-accruing [Member] | Home Equity [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	1,047,000	1,047,000	1,024,000
Total number of troubled debt restructurings	4	4	4
Non-accruing [Member] | Construction and Land [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	79,000	79,000	79,000
Total number of troubled debt restructurings	1	1	1
Non-accruing [Member] | Commercial Real Estate [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings	1,805,000	1,805,000	452,000
Total number of troubled debt restructurings	2	2	1
Non-accruing [Member] | Commercial Loans [Member]
Troubled Debt Restructuring Note, Debtor [Abstract]
Amount of troubled debt restructurings			42,000
Total number of troubled debt restructurings			2
Interest Reduction and Principal Forbearance [Member]
Troubled Debt Restructurings by Concession Type [Abstract]
Loans Receivable, Modifications, Loans Performing in Accordance with Modified Terms	26,880,000	26,880,000	22,752,000
Number of loans performing in accordance with modified terms	69	69	61
Loans Receivable, Modifications, Loans in Default	2,749,000	2,749,000	6,564,000
Number of Loans in Default	12	12	22
Interest Reduction [Member]
Troubled Debt Restructurings by Concession Type [Abstract]
Loans Receivable, Modifications, Loans Performing in Accordance with Modified Terms	18,710,000	18,710,000	20,006,000
Number of loans performing in accordance with modified terms	26	26	27
Loans Receivable, Modifications, Loans in Default	776,000	776,000	425,000
Number of Loans in Default	3	3	2
Principal Forbearance [Member]
Troubled Debt Restructurings by Concession Type [Abstract]
Loans Receivable, Modifications, Loans Performing in Accordance with Modified Terms	5,059,000	5,059,000	3,894,000
Number of loans performing in accordance with modified terms	33	33	29
Loans Receivable, Modifications, Loans in Default	$ 351,000	$ 351,000	$ 1,771,000
Number of Loans in Default	1	1	9

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Consolidated Statement Of Income And Comprehensive Income (Loss) (Unaudited) [Abstract]
Net income (loss)	$ 6,178	$ (584)	$ 8,386	$ (2,128)
Other comprehensive income (loss), net of tax
Net unrealized holding gain (loss) on available for sale securities arising during the period, net of tax (expense) benefit of ($420), $1,140, ($320) and $1,089, respectively	582	123	922	(201)
Reclassification adjustment for net gain (loss) on available for sale securities realized during the period, net of tax expense (benefit) of $55, ($21), ($41) and zero, respectively	63	31	(81)	31
Total other comprehensive income (loss)	645	154	841	(170)
Comprehensive income (loss)	$ 6,823	$ (430)	$ 9,227	$ (2,298)

XML

Securities Available for Sale

6 Months Ended

Jun. 30, 2012

Securities Available for Sale [Abstract]

Securities Available for Sale

Note 2- Securities Available for Sale

The amortized cost and fair values of the Company's investment in securities available for sale follow:

	June 30, 2012
			Gross		Gross
	Amortized		unrealized		unrealized
	cost		gains		losses			Fair value
	(In Thousands)
Mortgage-backed securities	$	89,760		2,043		(4	)		91,799
Collateralized mortgage obligations:
Government sponsored enterprise issued		38,163		508		(7	)		38,664
Private-label issued		18,422		-		(371	)		18,051
Mortgage-related securities		146,345		2,551		(382	)		148,514
Government sponsored enterprise bonds		29,006		46		(1	)		29,051
Municipal securities		23,236		1,872		(91	)		25,017
Other debt securities		5,000		240		-			5,240
Debt securities		57,242		2,158		(92	)		59,308
Certificates of Deposit		5,390		32		(2	)		5,420
	$	208,977		4,741		(476	)		213,242

	December 31, 2011
			Gross		Gross
	Amortized		unrealized		unrealized
	cost		gains		losses			Fair value
	(In Thousands)
Mortgage-backed securities	$	33,561		1,857		(1	)		35,417
Collateralized mortgage obligations:
Government sponsored enterprise issued		32,650		559		(13	)		33,196
Private-label issued		19,475		16		(1,040	)		18,451
Mortgage-related securities		85,686		2,432		(1,054	)		87,064
Government sponsored enterprise bonds		71,210		152		(13	)		71,349
Municipal securities		37,644		1,744		(320	)		39,068
Other debt securities		5,000		118		-			5,118
Debt securities		113,854		2,014		(333	)		115,535
Certificates of Deposit		3,920		2		(2	)		3,920
	$	203,460		4,448		(1,389	)		206,519

The majority of the Company's mortgage-backed securities and collateralized mortgage obligations issued by government sponsored enterprises are guaranteed by either Fannie Mae or Freddie Mac.  At June 30, 2012, $24.1 million of the Company's government sponsored enterprise bonds and $77.8 million of mortgage-related securities were pledged as collateral to secure repurchase agreement obligations of the Company.  An additional $1.3 million in municipal securities were pledged as collateral related to mortgage banking activities.

The amortized cost and fair values of investment securities by contractual maturity at June 30, 2012, are shown below. Actual maturities may differ from contractual maturities because issuers have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
	Cost		Value
	(In Thousands)
Debt and other securities
Due within one year	$	3,812		3,821
Due after one year through five years		41,969		43,102
Due after five years through ten years		1,159		1,257
Due after ten years		15,692		16,548
Mortgage-related securities		146,345		148,514
	$	208,977		213,242

Gross unrealized losses on securities available for sale and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows:

	June 30, 2012
	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	$	8,107		(4	)		-		-			8,107		(4	)
Collateralized mortgage obligations:
Government sponsored enterprise issued		5,497		(7	)		-		-			5,497		(7	)
Private-label issued		2,612		(31	)		15,439		(340	)		18,051		(371	)
Government sponsored enterprise bonds		1,499		(1	)		-		-			1,499		(1	)
Municipal securities		215		-			1,358		(91	)		1,573		(91	)
Certificates of Deposit		978		(2	)		-		-			978		(2	)
	$	18,908		(45	)		16,797		(431	)		35,705		(476	)
	December 31, 2011
	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	$	1,167		(1	)		-		-			1,167		(1	)
Collateralized mortgage obligations:
Government sponsored enterprise issued		5,726		(13	)		-		-			5,726		(13	)
Private-label issued		-		-			15,408		(1,040	)		15,408		(1,040	)
Government sponsored enterprise bonds		12,487		(13	)		-		-			12,487		(13	)
Municipal securities		228		(87	)		1,989		(233	)		2,217		(320	)
Certificates of Deposit		1,958		(2	)		-		-			1,958		(2	)
	$	21,566		(116	)		17,397		(1,273	)		38,963		(1,389	)

The Company reviews the investment securities portfolio on a quarterly basis to monitor its exposure to other-than-temporary impairment.  In evaluating whether a security's decline in market value is other-than-temporary, management considers the length of time and extent to which the fair value has been less than cost, financial condition of the issuer and the underlying obligors, quality of credit enhancements, volatility of the fair value of the security, the expected recovery period of the security and ratings agency evaluations.  In addition the Company may also evaluate payment structure, whether there are defaulted payments or expected defaults, prepayment speeds and the value of any underlying collateral.  For certain securities in unrealized loss positions, the Company prepares cash flow analyses to compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

Based upon the aforementioned factors, the Company identified two private-label collateralized mortgage obligation securities at June 30, 2012 with a combined amortized cost of $18.4 million for which a cash flow analysis was performed to determine whether an other-than-temporary impairment was warranted.  This evaluation indicated that the two private-label collateralized mortgage obligations were other-than-temporarily impaired.  Estimates of discounted cash flows based on expected yield at time of original purchase, prepayment assumptions based on actual and anticipated prepayment speed, actual and anticipated default rates and estimated level of severity given the loan to value ratios, credit scores, geographic locations, vintage and levels of subordination related to the security and its underlying collateral resulted in a projected credit loss on the collateralized mortgage obligations.  During the six months ended June 30, 2012, the Company's analysis resulted in $4,000 in credit losses that were charged to earnings with respect to one of these two collateralized mortgage obligations.  This security had an amortized cost of $15.8 million and an estimated fair value of $15.4 million as of June 30, 2012.  The analysis with respect to the second collateralized mortgage obligation indicated no additional estimated credit loss.  This security had an amortized cost of $2.64 million and an estimated fair value of $2.61 million as of June 30, 2012.

In addition to the securities analyzed and discussed above, during the six months ended June 30, 2012, the Company identified two additional municipal securities that were deemed to be other-than-temporarily impaired.  Both securities were issued by a tax incremental district in a municipality located in Wisconsin.  During the quarter ended June 30, 2012, the Company received audited financial statements with respect to the municipal issuer that called into question the ability of the underlying taxing district that issued the securities to operate as a going concern.  During the six months ended June 30, 2012, the Company's analysis of these securities resulted in $100,000 in credit losses that were charged to earnings with respect to these two municipal securities.  As of June 30, 2012, these securities had a combined amortized cost and fair value of $215,000.

The following table presents the change in other-than-temporary credit related impairment charges on securities available for sale for which a portion of the other-than-temporary impairments related to other factors was recognized in other comprehensive loss.

	(In Thousands)
Credit related impairments on securities as of December 31, 2010	$	1,640
Credit related impairments related to securites for which an other-than-temporary impairment was not previously recognized		-
Increase in credit related impairments related to securities for which an other-than-temporary impairment was previously recognized		456
Credit related impairments on securities as of December 31, 2011		2,096
Credit related impairments related to securites for which an other-than-temporary impairment was not previously recognized		100
Increase in credit related impairments related to securities for which an other-than-temporary impairment was previously recognized		4
Credit related impairments on securities as of June 30, 2012	$	2,200

Exclusive of the aforementioned securities, the Company has determined that the decline in fair value of the remaining securities is not attributable to credit deterioration, and based on the foregoing evaluation criteria and as the Company does not intend to sell nor is it more likely than not that it will be required to sell these securities before recovery of the amortized cost basis, these securities are not considered other-than-temporarily impaired.

Continued deterioration of general economic market conditions could result in the recognition of future other-than-temporary impairment losses within the investment portfolio and such amounts could be material to our consolidated financial statements.

Securities Held to Maturity

As of June 30, 2012, the Company does not hold any securities that are designated as held to maturity.  During the six months ended June 30, 2012, the one security held by the Company that had been designated as held to maturity was called by the issuer.  This security had an amortized cost of $2.6 million at the time that it was called.

XML

Securities Available for Sale (Tables)

6 Months Ended

Jun. 30, 2012

Securities Available for Sale [Abstract]

Amortized cost and fair values of investment in securities available for sale

	June 30, 2012
			Gross		Gross
	Amortized		unrealized		unrealized
	cost		gains		losses			Fair value
	(In Thousands)
Mortgage-backed securities	$	89,760		2,043		(4	)		91,799
Collateralized mortgage obligations:
Government sponsored enterprise issued		38,163		508		(7	)		38,664
Private-label issued		18,422		-		(371	)		18,051
Mortgage-related securities		146,345		2,551		(382	)		148,514
Government sponsored enterprise bonds		29,006		46		(1	)		29,051
Municipal securities		23,236		1,872		(91	)		25,017
Other debt securities		5,000		240		-			5,240
Debt securities		57,242		2,158		(92	)		59,308
Certificates of Deposit		5,390		32		(2	)		5,420
	$	208,977		4,741		(476	)		213,242

	December 31, 2011
			Gross		Gross
	Amortized		unrealized		unrealized
	cost		gains		losses			Fair value
	(In Thousands)
Mortgage-backed securities	$	33,561		1,857		(1	)		35,417
Collateralized mortgage obligations:
Government sponsored enterprise issued		32,650		559		(13	)		33,196
Private-label issued		19,475		16		(1,040	)		18,451
Mortgage-related securities		85,686		2,432		(1,054	)		87,064
Government sponsored enterprise bonds		71,210		152		(13	)		71,349
Municipal securities		37,644		1,744		(320	)		39,068
Other debt securities		5,000		118		-			5,118
Debt securities		113,854		2,014		(333	)		115,535
Certificates of Deposit		3,920		2		(2	)		3,920
	$	203,460		4,448		(1,389	)		206,519

Amortized cost and fair values of investment securities by contractual maturity

	Amortized		Fair
	Cost		Value
	(In Thousands)
Debt and other securities
Due within one year	$	3,812		3,821
Due after one year through five years		41,969		43,102
Due after five years through ten years		1,159		1,257
Due after ten years		15,692		16,548
Mortgage-related securities		146,345		148,514
	$	208,977		213,242

Fair value and gross unrealized losses on securities available for sale and in a continuous unrealized loss position

	June 30, 2012
	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	$	8,107		(4	)		-		-			8,107		(4	)
Collateralized mortgage obligations:
Government sponsored enterprise issued		5,497		(7	)		-		-			5,497		(7	)
Private-label issued		2,612		(31	)		15,439		(340	)		18,051		(371	)
Government sponsored enterprise bonds		1,499		(1	)		-		-			1,499		(1	)
Municipal securities		215		-			1,358		(91	)		1,573		(91	)
Certificates of Deposit		978		(2	)		-		-			978		(2	)
	$	18,908		(45	)		16,797		(431	)		35,705		(476	)
	December 31, 2011
	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	$	1,167		(1	)		-		-			1,167		(1	)
Collateralized mortgage obligations:
Government sponsored enterprise issued		5,726		(13	)		-		-			5,726		(13	)
Private-label issued		-		-			15,408		(1,040	)		15,408		(1,040	)
Government sponsored enterprise bonds		12,487		(13	)		-		-			12,487		(13	)
Municipal securities		228		(87	)		1,989		(233	)		2,217		(320	)
Certificates of Deposit		1,958		(2	)		-		-			1,958		(2	)
	$	21,566		(116	)		17,397		(1,273	)		38,963		(1,389	)

Change in other-than-temporary credit related impairment charges on collateralized mortgage obligations for which a portion of OTTI related to other factors was recognized in other comprehensive loss

	(In Thousands)
Credit related impairments on securities as of December 31, 2010	$	1,640
Credit related impairments related to securites for which an other-than-temporary impairment was not previously recognized		-
Increase in credit related impairments related to securities for which an other-than-temporary impairment was previously recognized		456
Credit related impairments on securities as of December 31, 2011		2,096
Credit related impairments related to securites for which an other-than-temporary impairment was not previously recognized		100
Increase in credit related impairments related to securities for which an other-than-temporary impairment was previously recognized		4
Credit related impairments on securities as of June 30, 2012	$	2,200

XML

Securities Available for Sale (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 208,977,000	$ 203,460,000
Gross unrealized gains	4,741,000	4,448,000
Gross unrealized losses	(476,000)	(1,389,000)
Fair value	213,242,000	206,519,000
Amortized cost of investment securities by contractual maturity [Abstract]
Due within one year	3,812,000
Due after one year through five years	41,969,000
Due after five years through ten years	1,159,000
Due after ten years	15,692,000
Mortgage-related securities	146,345,000
Amortized cost	208,977,000
Fair value of investment securities by contractual maturity [Abstract]
Due within one year	3,821,000
Due after one year through five years	43,102,000
Due after five years through ten years	1,257,000
Due after ten years	16,548,000
Mortgage-related securities	148,514,000
Fair value	213,242,000
Fair value of securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	18,908,000	21,566,000
12 months or longer	16,797,000	17,397,000
Fair value	35,705,000	38,963,000
Unrealized loss on securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	(45,000)	(116,000)
12 months or longer	(431,000)	(1,273,000)
Unrealized loss	(476,000)	(1,389,000)
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Fair value	213,242,000
Other-than-temporary impairment charges recognized in other comprehensive loss [Roll Forward]
Credit related impairments on securities as of beginning of period	2,096,000	1,640,000
Credit related impairments related to securities for which an other-than-temporary impairment was not previously recognized	100,000	0
Increase in credit related impairments related to securities for which an other-than-temporary impairment was previously recognized	4,000	456,000
Credit related impairments on securities as of end of period	2,200,000	2,096,000
Securities Held to Maturity [Abstract]
Number of securities held to maturity	0	1
Securities held to maturity, at amortized cost	0	2,648,000
Impaired 1 [Member]
Other-than-temporary impairment charges recognized in other comprehensive loss [Roll Forward]
Increase in credit related impairments related to securities for which an other-than-temporary impairment was previously recognized	4,000
Impaired 2 [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Amortized cost	2,640,000
Collateralized mortgage obligations, private-label issued [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Number of securities for which a cash flow analysis was performed	2
Amortized cost of securities for which a cash flow analysis was performed	18,400,000
Number of securities that were other-than-temporarily impaired	2
Collateralized mortgage obligations, private-label issued [Member] | Impaired 1 [Member]
Fair value of investment securities by contractual maturity [Abstract]
Fair value	15,400,000
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Amortized cost	15,800,000
Fair value	15,400,000
Collateralized mortgage obligations, private-label issued [Member] | Impaired 2 [Member]
Fair value of investment securities by contractual maturity [Abstract]
Fair value	2,610,000
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Fair value	2,610,000
Mortgage-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	89,760,000	33,561,000
Gross unrealized gains	2,043,000	1,857,000
Gross unrealized losses	(4,000)	(1,000)
Fair value	91,799,000	35,417,000
Fair value of securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	8,107,000	1,167,000
12 months or longer	0	0
Fair value	8,107,000	1,167,000
Unrealized loss on securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	(4,000)	(1,000)
12 months or longer	0	0
Unrealized loss	(4,000)	(1,000)
Collateralized mortgage obligations, government sponsored enterprise issued [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	38,163,000	32,650,000
Gross unrealized gains	508,000	559,000
Gross unrealized losses	(7,000)	(13,000)
Fair value	38,664,000	33,196,000
Fair value of securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	5,497,000	5,726,000
12 months or longer	0	0
Fair value	5,497,000	5,726,000
Unrealized loss on securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	(7,000)	(13,000)
12 months or longer	0	0
Unrealized loss	(7,000)	(13,000)
Collateralized mortgage obligations, private-label issued [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	18,422,000	19,475,000
Gross unrealized gains	0	16,000
Gross unrealized losses	(371,000)	(1,040,000)
Fair value	18,051,000	18,451,000
Fair value of securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	2,612,000	0
12 months or longer	15,439,000	15,408,000
Fair value	18,051,000	15,408,000
Unrealized loss on securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	(31,000)	0
12 months or longer	(340,000)	(1,040,000)
Unrealized loss	(371,000)	(1,040,000)
Mortgage-related securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	146,345,000	85,686,000
Gross unrealized gains	2,551,000	2,432,000
Gross unrealized losses	(382,000)	(1,054,000)
Fair value	148,514,000	87,064,000
Securities pledged as collateral to secure repurchase agreements or related to mortgage banking activities	77,800,000
Government-sponsored enterprise bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	29,006,000	71,210,000
Gross unrealized gains	46,000	152,000
Gross unrealized losses	(1,000)	(13,000)
Fair value	29,051,000	71,349,000
Securities pledged as collateral to secure repurchase agreements or related to mortgage banking activities	24,100,000
Fair value of securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	1,499,000	12,487,000
12 months or longer	0	0
Fair value	1,499,000	12,487,000
Unrealized loss on securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	(1,000)	(13,000)
12 months or longer	0	0
Unrealized loss	(1,000)	(13,000)
Municipal securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	23,236,000	37,644,000
Gross unrealized gains	1,872,000	1,744,000
Gross unrealized losses	(91,000)	(320,000)
Fair value	25,017,000	39,068,000
Securities pledged as collateral to secure repurchase agreements or related to mortgage banking activities	1,300,000
Fair value of securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	215,000	228,000
12 months or longer	1,358,000	1,989,000
Fair value	1,573,000	2,217,000
Unrealized loss on securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	0	(87,000)
12 months or longer	(91,000)	(233,000)
Unrealized loss	(91,000)	(320,000)
Other debt securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	5,000,000	5,000,000
Gross unrealized gains	240,000	118,000
Gross unrealized losses	0	0
Fair value	5,240,000	5,118,000
Debt securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	57,242,000	113,854,000
Gross unrealized gains	2,158,000	2,014,000
Gross unrealized losses	(92,000)	(333,000)
Fair value	59,308,000	115,535,000
Certificates of Deposit [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	5,390,000	3,920,000
Gross unrealized gains	32,000	2,000
Gross unrealized losses	(2,000)	(2,000)
Fair value	5,420,000	3,920,000
Fair value of securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	978,000	1,958,000
12 months or longer	0	0
Fair value	978,000	1,958,000
Unrealized loss on securities available for sale in a continuous unrealized loss position [Abstract]
Less than 12 months	(2,000)	(2,000)
12 months or longer	0	0
Unrealized loss	$ (2,000)	$ (2,000)

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Earnings (loss) per share

6 Months Ended

Jun. 30, 2012

Earnings (loss) per share [Abstract]

Earnings (loss) per share

Note 12 - Earnings (loss) per share

Earnings (loss) per share are computed using the two-class method.  Basic earnings per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the applicable period, excluding outstanding participating securities.  Participating securities include unvested restricted shares.  Unvested restricted shares are considered participating securities because holders of these securities have the right to receive dividends at the same rate as holders of the Company's common stock.  Diluted earnings (loss) per share 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.  Unvested restricted stock and stock options are considered outstanding for diluted earnings (loss) per share only.  Unvested restricted stock totaling 105,000 shares is considered outstanding for dilutive earnings per share only for the six and three months ended June 30, 2012.  Unvested stock options totaled 289,000 shares for the six and three months ended June 30, 2012 and unvested restricted stock and stock options totaling 54,200 and 210,500 shares for the six and three months ended June 30, 2011 are antidilutive and are excluded from the loss per share calculation.

Presented below are the calculations for basic and diluted earnings (loss) per share:

	Six Months Ended					Three Months Ended
	June 30,					June 30,
		2012		2011			2012		2011
	(In Thousands except per share amounts)
Net income (loss)	$	8,386	$	(2,128	)	$	6,178	$	(584	)
Net income (loss) available to unvested restricted shares		28		-			21		-
Net income (loss) available to common stockholders	$	8,358	$	(2,128	)	$	6,157	$	(584	)
Weighted average shares outstanding		31,035		30,909			31,045		30,920
Effect of dilutive potential common shares		34		-			91		-
Diluted weighted average shares outstanding		31,069		30,909			31,136		30,920
Basic earnings (loss) per share	$	0.27	$	(0.07	)	$	0.20	$	(0.02	)
Diluted earnings (loss) per share	$	0.27	$	(0.07	)	$	0.20	$	(0.02	)