WATERSTONE BANK SSB SECOND AMENDMENT AND RESTATEMENT OF THE EXECUTIVE DEFERRED COMPENSATION PLAN

1.01      Establishment of Plan .  WaterStone Bank SSB (formerly known as Wauwatosa Savings Bank) (the “Company”) established this Executive Deferred Compensation Plan (the “Plan”), effective as of September 1, 2006.  The Plan is a deferred compensation arrangement intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).  Final Treasury Regulations under Code Section 409A were issued in April 2007, and require non-qualified deferred compensation plans to be in compliance with said Final Treasury Regulations by no later than December 31, 2008.  Accordingly, the Plan was amended and restated, effective September 1, 2006, to comply with Final Treasury Regulations issued under Code Section 409A and a Form 8-K was filed with the Securities and Exchange Commission.  This Second Amendment and Restatement of the Plan, effective September 1, 2006, adds specified payment dates as a new distribution feature of the Plan, in accordance with the transition rules under Code Section 409A.

1.02      Purpose of Plan .  Under the Plan, selected senior management and highly compensated employees are permitted to defer, until a future designated date, a portion of the compensation which may otherwise be payable to them at an earlier date.  By allowing key management employees to participate in the Plan, the Company expects the Plan to benefit it and its Subsidiaries by attracting and retaining the most capable individuals to fill its executive positions.

As used herein, the following words shall have the following meanings:

2.01      Definitions .

(a)   Account .  The bookkeeping account maintained for each Participant pursuant to Article V below.

(b)   Administrator .  The person or persons selected pursuant to Article VIII below to control and manage the operation and administration of the Plan.

(c)   Beneficiaries .  Those persons or entities designated by a Participant on the Beneficiary Designation Election Form (Exhibit A hereto) to receive his benefits under the Plan upon his death.

(d)   Change of Control .  (i) Any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) other than Lamplighter Financial, MHC (“MHC”) becomes the beneficial owner, directly or indirectly, of a majority of the capital stock of Waterstone Financial, Inc. (formerly known as Wauwatosa Holdings, Inc.) in a transaction or transactions subject to either the notice provisions of the Change in Bank Control Act of 1978 (12 U.S.C. § 1817 (j), as amended from time to time), or approval under the Bank Holding Company Act of 1956 (12 U.S.C. § 1841, as amended from time to time); (ii) during any period of two consecutive years, the individuals, who at the beginning of any such period constituted the directors of Waterstone Financial, Inc., cease for any reason to constitute at least a majority thereof; (iii) Waterstone Financial, Inc. files a report or proxy statement with the Securities and Exchange Commission and/or the Federal Reserve Board disclosing in response to Item 5.01 of Form 8-K or Item 5 of Part II of Form 10-Q, each promulgated pursuant to the Exchange Act or Item 6(e) of Schedule 14A promulgated thereunder, or successor Items, that a change in control of Waterstone Financial, Inc. has or may have occurred pursuant to any contract or transaction; or (iv) any person other than Waterstone Financial, Inc. or MHC becomes the owner of more than 25% of the voting securities of the Company.  However, notwithstanding the foregoing provisions, a reorganization of Waterstone Financial, Inc. and MHC in which the shareholders of Waterstone Financial, Inc. prior to such reorganization, the members of MHC and any members of the public, which acquire shares of such entity pursuant to a public offering of securities approved in advance by the board of directors of MHC, together control the successor entity shall not constitute a “Change in Control” hereunder.

(e)   Company .  Waterstone Bank, SSB, a Wisconsin-chartered savings bank, or a successor thereof.

(f)   Compensation .  The total of the Participant’s base salary, commissions, bonuses and other cash incentive pay, which shall include amounts deferred by the Participant under this Plan or any other employee benefit plan of the Company. In all cases, Compensation shall include only compensation paid while a Participant in the Plan and employed by the Company or a Subsidiary.  Compensation shall not include any severance or salary continuation payments.

(g)   Participants .  Such senior management and highly compensated employees of the Company or a Subsidiary whom the Administrator has identified as eligible to defer Compensation hereunder and who elect to participate by deferring Compensation.

(h)   Plan .  The Waterstone Bank SSB Executive Deferred Compensation Plan, as stated herein and as amended from time to time.

(i)   Plan Year .  The period beginning on September 1, 2006 and ending on December 31, 2006, and, thereafter, each 12-month period ending on each subsequent December 31.

(j)   Separation from Service .  Separation from Service means the Participant’s retirement or other termination of employment with the Company within the meaning of Code Section 409A.  No Separation from Service shall be deemed to occur due to military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed six months or, if longer, so long as the Participant’s right to reemployment is provided by law or contract.  If the leave exceeds six months and the Participant’s right to reemployment is not provided by law or by contract, then the Participant shall have a Separation from Service on the first date immediately following such six-month period.

Whether a Separation from Service has occurred is determined based on whether the facts and circumstances indicate that the Company and the Participant reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Participant would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than 50% of the average level of bona fide services performed over the immediately preceding 36 months (or such lesser period of time in which the Participant performed services for the Company).  The determination of whether a Participant has had a Separation from Service shall be made by applying the presumptions set forth in the Treasury Regulations under Code Section 409A.

(k)   Subsidiary .  An entity of which the Company is the direct or indirect beneficial owner of not less than 50% of all issued and outstanding equity interest of such entity.

(l)   Unforeseeable Emergency .  A severe financial hardship of a Participant resulting from an illness or accident of the Participant or of the Participant’s spouse or dependent (as defined in Code Section 152(a)), loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances beyond the control of the Participant.  The existence of an Unforeseeable Emergency shall be determined by the Administrator in its sole discretion.

3.01      Conditions of Eligibility .  The Administrator shall, from time to time, specify the senior management and highly compensated employees of the Company or a Subsidiary eligible to participate herein. Eligibility to participate in the Plan for one Plan Year does not guarantee eligibility for a subsequent Plan Year.

3.02      Commencement of Participation .  An individual identified as eligible to participate in the Plan for that Plan Year shall, by electing a deferral of Compensation on the Deferral Election Form (Exhibit B hereto) provided by the Administrator, commence participation as of (a) the first day of such Plan Year or (b) such later date in that Plan Year as he first becomes eligible to participate in the Plan.

3.03      Termination of Participation .  A Participant’s right to defer Compensation hereunder shall cease as of the earlier of the (a) termination of his employment with the Company and all Subsidiaries or (b) failure of the Administrator to designate him as eligible to participate herein.

4.01      Amount and Manner of Deferral .

(a)   Each Participant must make an annual election with respect to his Compensation deferrals.  The Participant must return the Deferral Election Form to the Administrator no later than the date specified by the Administrator, which date shall be prior to (i) the first day of the Plan Year for which the Compensation is to be deferred, (ii) in the case of a new Participant, the 30 ^th day after first becoming eligible to participate in the Plan, with respect to Compensation earned for services performed subsequent to the election, or (iii) in the case of the first Plan Year, September 30, 2006, with respect to Compensation earned for services performed subsequent to the election.  The Deferral Election Form shall become irrevocable as of the date it is to be effective.

(b)   The Participant must indicate on the Deferral Election Form the amount of his Compensation for such Plan Year, or portion thereof, which he elects to defer hereunder.  A Participant may defer (i) up to 80% of his salary or commissions and/or (ii) up to 100% of his bonus or incentive pay; provided, however, that (A) the Participant may not defer less than $5,000 in a Plan Year (or a prorated amount for any period shorter than a full Plan Year) and (B) the Participant’s deferral election for a Plan Year shall relate to Compensation earned by him during such Plan Year, whether or not paid during that Plan Year.

(c)   If a Participant elects to defer a portion of his salary or commissions, the Company shall reduce the Participant’s salary or commissions by an equal amount in each pay period during the Plan Year of deferral. If a Participant elects to defer all or a portion of his bonus or incentive pay, the Company shall reduce each such Compensation payment by the percentage elected by the Participant.

(d)   Effective January 1, 2009, no deferrals with respect to Compensation earned on or after January 1, 2009 shall be permitted under this Plan.

4.02      Cessation of Deferral .  In the event of an Unforeseeable Emergency, a Participant may request in writing that deferrals elected by the Participant hereunder cease for the then current Plan Year. If the Administrator determines that such an Unforeseeable Emergency exists, the Participant’s deferrals for such Plan Year shall cease for the remainder of the Plan Year.  In addition, if required in order for a Participant to receive a hardship distribution under any tax-qualified retirement plan subject to Code Section 401(k) maintained by the Company or a Subsidiary, the Participant’s deferrals under this Plan shall cease for the remainder of the Plan Year.

4.03      Distribution of Account .

(a)   Each Participant shall elect, at the time the Participant files his Deferral Election Form, the date on which such Compensation deferrals, as well as any investment earnings attributable to such Compensation deferrals, are to be distributed to him.  All payments shall be made in the form of a cash lump sum in accordance with Section 7.01.  The date of distribution must be in a calendar year subsequent to the calendar year of deferral.  Notwithstanding the foregoing, if the Participant fails to elect a time for distribution, such amount will be distributed no later than 60 days after the date on which the Participant Separates from Service with the Company and all Subsidiaries.

(b)   A Participant may change the date as of which any portion of his Account is to be distributed to him by filing a Change of Distribution Date Form (Exhibit C hereto) with the Administrator, provided that (i) the election shall not take effect until at least 12 months after the date on which the election is made and (ii) the first payment with respect to which such election is made is deferred for at least five years from the date such payment would otherwise have been made.

(c)   Notwithstanding anything in the Plan to the contrary, a Participant who previously designated the date on which his or her Compensation deferrals shall be distributed may elect to change the date on which the Participant receives his or her Compensation deferrals by filing with the Company a Transition Year Election Form (Exhibit D hereto), provided that such election is made by December 31, 2008.  For elections after December 31, 2008, please refer to Section 4.03(b).

5.01      Establishment of Account .  The Company shall credit the amounts deferred by a Participant under Section 4.01 to the Participant’s Account.

5.02      Investment Elections .

(a)   A Participant may file an Investment Election Form (Exhibit E hereto) with the Administrator setting forth the investment alternatives used to value his Account.  The initial investment options available to each Participant are (i) the Moody’s A Long-Term Corporate Bond Rate, adjusted as of the first day of each Plan Year to equal the average yield for the month of September of the previous Plan Year and (ii) the total return of the Standard & Poor&