##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2009 or
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act
 For the transition period from ________ to ________
 Commission file number: 000-49814
 MONARCH COMMUNITY BANCORP, INC.
 (Exact name of registrant as specified in its charter)
 Maryland(State or other jurisdiction 
of incorporation or organization)
    
    04-3627031(I.R.S. employer
identification no.)
 (Address of principal executive offices)
 (Registrants telephone number)
 þ o
 o o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



Monarch Community Bancorp, Inc.
 PART
I   FINANCIAL INFORMATIONItem 1   Condensed Financial Statements:Condensed Consolidated Balance Sheets  June 30, 2009 and December 31, 2008Condensed Consolidated Statements of Income  Three and Six Months Ended June 30, 2009 and 2008
    
    
    2Condensed Consolidated Statements of Changes in Stockholders Equity  Six Months Ended June 30, 2009 and 2008
    
    
    3Condensed Consolidated Statements of Cash Flows  Six Months Ended June 30, 2009 and 2008
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5-9Item 2   Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9-16Item 3   Quantitative and Qualitative Disclosures about Market Risk
    
    
    16Item 4T  Controls and Procedures
    
    
    17PART II  OTHER INFORMATIONItem 1   Legal Proceedings
    
    
    17Item 1A   Risk Factors
    
    
    17Item 2   Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 3   Defaults Upon Senior Securities
    
    
    17Item 4   Submission of Matters to a Vote of Security Holders
    
    
    17Item 5   Other Information
    
    
    17Item 6   Exhibits
    
    
    17SIGNATURES
    
    
    18CERTIFICATIONS
    
    
    19-22EX-31.1EX-31.2EX-32




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##### Table of Contents



PART IFINANCIAL INFORMATION
 
 Item 1.
    
    CONDENSED FINANCIAL STATEMENTS
 
 Condensed Consolidated Balance Sheets
 (Unaudited)June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands,except per share data)AssetsCash and due from banks
    
    
    11,769
    
    
    
    5,595Federal Home Loan Bank overnight time and
other interest bearing deposits
    
    
    1,135
    
    
    
    677Total cash and cash equivalents
    
    
    12,904
    
    
    
    6,272Securities - Available for sale
    
    
    20,470
    
    
    
    8,916Securities - Held to maturity
    
    
    23
    
    
    
    37Other securities
    
    
    4,237
    
    
    
    4,237Loans held for sale
    
    
    1,227
    
    
    
    860Loans, net
    
    
    236,148
    
    
    
    247,542Foreclosed assets, net
    
    
    3,344
    
    
    
    2,076Premises and equipment
    
    
    4,357
    
    
    
    4,456Goodwill
    
    
    9,606
    
    
    
    9,606Core deposit intangible
    
    
    603
    
    
    
    681Other assets
    
    
    8,769
    
    
    
    7,124Total assets
    
    $
    301,688
    
    
    $
    291,807Liabilities and Stockholders EquityLiabilitiesDeposits:Non-interest bearing
    
    $
    14,734
    
    
    $
    13,883Interest bearing
    
    
    187,648
    
    
    
    178,273Total deposits
    
    
    202,382
    
    
    
    192,156Federal Home Loan Bank advances
    
    
    56,678
    
    
    
    60,178Fed Funds Purchased
    
    
    
    
    
    
    1,000Accrued expenses and other liabilities
    
    
    1,712
    
    
    
    2,203Total liabilities
    
    
    260,772
    
    
    
    255,537Stockholders EquityPreferred stock-$.01 par value, 5,000,000 shares authorized, and 6,785
shares, fixed
rate cumulative perpetual preferred stock, series A, $1,000 per share
liquidation preference, issued and outstanding as of June 30, 2009
    
    
    6,734
    
    
    
    Common stock
- $0.01 par value, 20,000,000 shares authorized, 2,046,102
shares issued and outstanding at June 30, 2009 and December 31, 2008
    
    
    20
    
    
    
    20Common stock warrants issued and outstanding 260,962 as of June 30, 2009
    
    
    56
    
    
    
    Additional paid-in capital
    
    
    21,156
    
    
    
    21,152Retained earnings
    
    
    13,758
    
    
    
    15,867Accumulated other comprehensive income
    
    
    21
    
    
    
    69Unearned compensation
    
    
    (829
    )
    
    
    (838
    )Total stockholders equity
    
    
    40,916
    
    
    
    36,270Total liabilities and stockholders equity
    
    $
    301,688
    
    
    $
    291,807




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##### Table of Contents



Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands, except per share data)Interest IncomeLoans, including fees
    
    $
    3,873
    
    
    $
    4,090
    
    
    $
    7,827
    
    
    $
    8,148Investment securities
    
    
    162
    
    
    
    169
    
    
    
    280
    
    
    
    339Federal funds sold and overnight deposits
    
    
    1
    
    
    
    29
    
    
    
    3
    
    
    
    87Total interest income
    
    
    4,036
    
    
    
    4,288
    
    
    
    8,110
    
    
    
    8,574Interest ExpenseDeposits
    
    
    1,274
    
    
    
    1,483
    
    
    
    2,593
    
    
    
    3,038Federal Home Loan Bank advances
    
    
    643
    
    
    
    643
    
    
    
    1,302
    
    
    
    1,302Total interest expense
    
    
    1,917
    
    
    
    2,126
    
    
    
    3,895
    
    
    
    4,340Net Interest Income
    
    
    2,119
    
    
    
    2,162
    
    
    
    4,215
    
    
    
    4,234Provision for Loan Losses
    
    
    3,441
    
    
    
    448
    
    
    
    4,163
    
    
    
    757Net Interest Income After Provision for Loan Losses
    
    
    (1,322
    )
    
    
    1,714
    
    
    
    52
    
    
    
    3,478Non-interest IncomeFees and service charges
    
    
    549
    
    
    
    573
    
    
    
    1,064
    
    
    
    1,144Loan servicing fees
    
    
    111
    
    
    
    111
    
    
    
    217
    
    
    
    220Net gain on sale of loans
    
    
    748
    
    
    
    195
    
    
    
    1,457
    
    
    
    461Net gain (loss) on sale of securities
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Other income
    
    
    58
    
    
    
    60
    
    
    
    102
    
    
    
    113Total non-interest income
    
    
    1,468
    
    
    
    941
    
    
    
    2,842
    
    
    
    1,940Non-interest ExpenseSalaries and employee benefits
    
    
    1,129
    
    
    
    1,121
    
    
    
    2,278
    
    
    
    2,267Occupancy and equipment
    
    
    239
    
    
    
    254
    
    
    
    511
    
    
    
    517Data processing
    
    
    200
    
    
    
    189
    
    
    
    407
    
    
    
    391Amortization of mortgage servicing rights
    
    
    136
    
    
    
    112
    
    
    
    335
    
    
    
    231Professional services
    
    
    123
    
    
    
    107
    
    
    
    252
    
    
    
    193Amortization of core deposit intangible
    
    
    35
    
    
    
    43
    
    
    
    78
    
    
    
    97NOW account processing
    
    
    40
    
    
    
    42
    
    
    
    79
    
    
    
    87ATM/Debit card processing
    
    
    57
    
    
    
    51
    
    
    
    118
    
    
    
    97Foreclosed property expense
    
    
    77
    
    
    
    27
    
    
    
    110
    
    
    
    85Other general and administrative
    
    
    540
    
    
    
    376
    
    
    
    917
    
    
    
    677Total non-interest expense
    
    
    2,576
    
    
    
    2,322
    
    
    
    5,085
    
    
    
    4,641Income - Before income taxes
    
    
    (2,430
    )
    
    
    332
    
    
    
    (2,191
    )
    
    
    776Income Taxes
    
    
    (607
    )
    
    
    85
    
    
    
    (547
    )
    
    
    195Net Income
    
    $
    (1,823
    )
    
    $
    247
    
    
    $
    (1,644
    )
    
    $
    581Dividends and amortization of discount on preferred stock
    
    $
    87
    
    
    $
    
    
    
    $
    138
    
    
    $
    Net Income available to common stock
    
    $
    (1,910
    )
    
    $
    247
    
    
    $
    (1,782
    )
    
    $
    581Earnings Per ShareBasic
    
    $
    (0.97
    )
    
    $
    0.12
    
    
    $
    (0.91
    )
    
    $
    0.27Diluted
    
    $
    (0.97
    )
    
    $
    0.12
    
    
    $
    (0.91
    )
    
    $
    0.27
 2




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##### Table of Contents



AccumulatedPreferred Stock
    
    
    Common Stock
    
    
    Additional
    
    
    
    
    
    
    OtherNumber of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Paid in
    
    
    Retained
    
    
    Comprehensive
    
    
    UnearnedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Compensation
    
    
    TotalBalance- January 1 , 2008
    
    
    
    
    
    
    
    
    
    
    2,322
    
    
    
    23
    
    
    
    23,828
    
    
    
    16,341
    
    
    
    52
    
    
    
    (1,158
    )
    
    
    39,086Vesting of restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169
    
    
    
    169179,042 shares repurchased at an average price $10.24/share
    
    
    
    
    
    
    
    
    
    
    (179
    )
    
    
    (2
    )
    
    
    (1,835
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,837
    )Stock option expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    580
    
    
    
    
    
    
    
    
    
    
    
    580Change in unrealized loss on
securities available-for-sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    
    
    
    
    (24
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    556Dividends paid ($0.18/share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (400
    )
    
    
    
    
    
    
    
    
    
    
    (400
    )Balance - June 30, 2008
    
    
    
    
    
    
    
    
    
    
    2,143
    
    
    
    21
    
    
    
    21,998
    
    
    
    16,521
    
    
    
    28
    
    
    
    (989
    )
    
    
    37,579Balance - January 1, 2009
    
    
    
    
    
    
    
    
    
    
    2,047
    
    
    $
    20
    
    
    $
    21,152
    
    
    $
    15,867
    
    
    $
    69
    
    
    $
    (838
    )
    
    $
    36,2709
    
    
    
    9Issuance of preferred stock
    
    
    6785
    
    
    
    6785
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,785Discount on preferred stock
    
    
    
    
    
    
    (56
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (56
    )Common stock warrants
    
    
    261
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56Stock option expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Accretion of preferred stock disocunt
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,644
    )
    
    
    
    
    
    
    
    
    
    
    (1,644
    )Change in unrealized loss on
securities available-for-sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    (48
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,692
    )Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (93
    )
    
    
    
    
    
    
    
    
    
    
    (93
    )Dividends paid ($0.09/share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (367
    )
    
    
    
    
    
    
    
    
    
    
    (367
    )Balance - June 30, 2009
    
    
    7,046
    
    
    
    6,790
    
    
    
    2,047
    
    
    
    20
    
    
    
    21,156
    
    
    
    13,758
    
    
    
    21
    
    
    
    (829
    )
    
    $
    40,916
 3




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##### Table of Contents



Six Months EndedJune, 30
    
    
    June, 302009
    
    
    2008(Dollars in thousands)
    
    
    (Dollars in thousands)Cash Flows From Operating ActivitiesNet Income
    
    $
    (1,644
    )
    
    $
    581Adjustments to reconcile net income to net cash from operating activitiesDepreciation and amortization
    
    
    693
    
    
    
    574Provision for loan losses
    
    
    4,163
    
    
    
    757Stock option expense
    
    
    4
    
    
    
    5Gain on sale of foreclosed assets
    
    
    24
    
    
    
    (35
    )Mortgage loans originated for sale
    
    
    (65,280
    )
    
    
    (21,718
    )Proceeds from sale of mortgage loans
    
    
    66,370
    
    
    
    21,196Gain on sale of mortgage loans
    
    
    (1,458
    )
    
    
    (461
    )(Gain) Loss on sale of available for sale securities
    
    
    (2
    )
    
    
    (2
    )Earned stock compensation
    
    
    9
    
    
    
    169Net change in:Deferred loan fees
    
    
    62
    
    
    
    (47
    )Accrued interest receivable
    
    
    (50
    )
    
    
    21Other assets
    
    
    (1,980
    )
    
    
    (848
    )Accrued expenses and other liabilities
    
    
    (416
    )
    
    
    (209
    )Net cash provided by operating activities
    
    
    495
    
    
    
    (17
    )Cash Flows From Investing ActivitiesActivity in available-for-sale securities:Purchases
    
    
    (17,814
    )
    
    
    (2,269
    )Proceeds from maturities of securities
    
    
    6,141
    
    
    
    2,364Activity in held-to-maturity securities:Purchases
    
    
    
    
    
    
    (7
    )Proceeds from maturities of securities
    
    
    14
    
    
    
    208Loan originations and principal collections, net
    
    
    5,370
    
    
    
    (13,723
    )Proceeds from sale of foreclosed assets
    
    
    508
    
    
    
    1,249Purchase of premises and equipment
    
    
    (133
    )
    
    
    (189
    )Net cash provided by (used in) investing activities
    
    
    (5,914
    )
    
    
    (12,367
    )Cash Flows From Financing ActivitiesNet increase in deposits
    
    
    10,226
    
    
    
    14,098Repurchase of common stock
    
    
    
    
    
    
    (1,837
    )Issuance of preferred stock, net
    
    
    6,734Issuance of Warrants
    
    
    56Dividends paid
    
    
    (465
    )
    
    
    (400
    )Proceeds from FHLB advances
    
    
    
    
    
    
    8,500Repayment of FHLB advances
    
    
    (3,500
    )
    
    
    (13,000
    )Repayment of Fed Funds purchased
    
    
    (1,000
    )
    
    
    Net cash provided by financing activities
    
    
    12,051
    
    
    
    7,361Net Increase in Cash and Cash Equivalents
    
    
    6,632
    
    
    
    (5,023
    )Cash and Cash Equivalents- Beginning
    
    
    6,272
    
    
    
    13,842Cash and Cash Equivalents -End
    
    $
    12,904
    
    
    $
    8,819Supplemental Cash Flow Information:Cash paid for:Interest
    
    
    3,932
    
    
    
    4,343Income taxes
    
    
    215
    
    
    
    325Noncash investing activities:Loans transferred to foreclosed assets
    
    
    1,800
    
    
    
    540
 4




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##### Table of Contents



MONARCH COMMUNITY BANCORP, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 ORGANIZATION
   BASIS OF PRESENTATION
     ALLOWANCE FOR LOAN LOSSES
    5




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##### Table of Contents



RECLASSIFICATIONS
  EARNINGS PER SHARE
  Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2009
    
    
    June 30, 2008
    
    
    June 30, 2009
    
    
    June 30, 2008Basic earnings per shareNumerator:Net income
    
    $
    (1,823
    )
    
    $
    247
    
    
    $
    (1,644
    )
    
    $
    581Dividends and amortization of discount on preferred stock
    
    $
    87
    
    
    $
    
    
    
    $
    138
    
    
    $
    Net Income available to common stock
    
    $
    (1,910
    )
    
    $
    247
    
    
    $
    (1,782
    )
    
    $
    581Denominator:Weighted average common shares outstanding
    
    
    2,046
    
    
    
    2,209
    
    
    
    2,046
    
    
    
    2,246Less: Average unallocated ESOP shares
    
    
    (74
    )
    
    
    (83
    )
    
    
    (74
    )
    
    
    (83
    )Less: Average non-vested RRP shares
    
    
    (7
    )
    
    
    (15
    )
    
    
    (7
    )
    
    
    (35
    )Weighted average common shares outstandingfor basic earnings per share
    
    
    1,965
    
    
    
    2,111
    
    
    
    1,965
    
    
    
    2,128Basic earnings per share
    
    $
    (0.97
    )
    
    $
    0.12
    
    
    $
    (0.91
    )
    
    $
    0.27Diluted earnings per shareNumerator:Net Income available to common stock
    
    $
    (1,910
    )
    
    $
    247
    
    
    $
    (1,782
    )
    
    $
    581Denominator:Weighted average common shares outstanding
for basic earnings per share
    
    
    1,965
    
    
    
    2,111
    
    
    
    1,965
    
    
    
    2,128Add: Dilutive effects of restricted stock,
stock options and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares and dilutive
potential common shares outstanding
    
    
    1,965
    
    
    
    2,111
    
    
    
    1,965
    
    
    
    2,128Diluted earnings per share
    
    $
    (0.97
    )
    
    $
    0.12
    
    
    $
    (0.91
    )
    
    $
    0.27
 RECENT ACCOUNTING PRONOUNCEMENTS
  Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,
 Interim Disclosures about Fair Value of Financial Instruments,
 Recognition and Presentation of Other-Than-Temporary Impairments,
 6




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##### Table of Contents



Subsequent Events
 FAIR VALUE MEASUREMENTS
      SignificantQuoted Prices in Active
    
    
    Other
    
    
    SignificantMarkets for Identical
    
    
    Observable
    
    
    Unobservable
    
    
    Balance at June 30,Assets (Level 1)
    
    

Inputs (Level 2)
    
    
    Inputs (Level 3)
    
    
    2009AssetsInvestment
securities- available - for - sale
    
    $
    8,230
    
    
    $
    12,240
    
    
    $
    
    
    
    $
    20,470
   Balance at
    
    Quoted Prices in Active
    
    Significant Other
    
    SignificantJune 30,
    
    Markets for Identical
    
    Observable Inputs
    
    Unobservable Inputs
    
    Change in Fair Value for the2009
    
    Assets (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    quarter ended June 30, 2009Impaired Loans accounted for under SFAS 114
    
    
    11,074
    
    
    
    
    
    
    
    
    
    
    
    9,513
    
    
    
    2,437Foreclosed Assets
    
    
    1,030
    
    
    
    
    
    
    
    
    
    
    
    515
    
    
    
    515
 7




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##### Table of Contents



Fair Value of Financial Instruments
   Securities
 Mortgage Loans Held for Sale
 Loans Receivable
 Deposit Liabilities
 Federal Home Loan Bank Advances
 8




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##### Table of Contents



June 30,
    
    December 31,2009
    
    2008Carrying Amount
    
    Fair Value
    
    Carrying Amount
    
    Fair ValueAssets:Cash and cash equivalents
    
    $
    12,904
    
    
    $
    12,904
    
    
    $
    6,272
    
    
    $
    6,272Securities - Held to maturity
    
    
    23
    
    
    
    23
    
    
    
    37
    
    
    
    37Securities
- Available for sale
    
    
    20,470
    
    
    
    20,470
    
    
    
    8,916
    
    
    
    8,916Other securities
    
    
    4,237
    
    
    
    4,237
    
    
    
    4,237
    
    
    
    4,237Loans held for sale
    
    
    1,227
    
    
    
    1,237
    
    
    
    860
    
    
    
    864Net loans
    
    
    236,148
    
    
    
    250,857
    
    
    
    247,542
    
    
    
    250,068Accrued interest
and late charges receivable
    
    
    1,350
    
    
    
    1,350
    
    
    
    1,300
    
    
    
    1,300Liabilities:Federal Home Loan Bank
advances
    
    
    56,678
    
    
    
    61,233
    
    
    
    60,178
    
    
    
    63,252Fed funds purchased
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    1,000Deposits
    
    
    202,382
    
    
    
    190,190
    
    
    
    192,156
    
    
    
    192,045Accrued interest payable
    
    
    488
    
    
    
    488
    
    
    
    526
    
    
    
    526
 
 ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   FORWARD-LOOKING STATEMENTS
   9




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES
  Allowance for Loan Losses
 Foreclosed Assets .
 Goodwill and Other Intangible Assets
 FINANCIAL CONDITION
 Assets
  Securities
  10




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##### Table of Contents



Loans
  June 30, 2009
    
    
    December 31, 2008Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Real Estate Loans:One-to-four family
    
    $
    114,303
    
    
    
    47.2
    
    
    $
    124,855
    
    
    
    49.8Multi-family
    
    
    5,501
    
    
    
    2.3
    
    
    
    5,728
    
    
    
    2.2Commercial
    
    
    81,230
    
    
    
    33.5
    
    
    
    75,730
    
    
    
    30.2Construction or development
    
    
    7,867
    
    
    
    3.2
    
    
    
    9,499
    
    
    
    3.8Total real estate loans
    
    
    208,901
    
    
    
    86.2
    
    
    
    215,812
    
    
    
    86.0Other loans:Consumer loans:Home equity
    
    
    19,584
    
    
    
    8.1
    
    
    
    20,677
    
    
    
    8.2Other
    
    
    5,094
    
    
    
    2.1
    
    
    
    5,737
    
    
    
    2.3Total consumer loans
    
    
    24,678
    
    
    
    10.2
    
    
    
    26,414
    
    
    
    10.5Commercial Business Loans
    
    
    8,630
    
    
    
    3.6
    
    
    
    8,609
    
    
    
    3.5Total other loans
    
    
    33,308
    
    
    
    13.8
    
    
    
    35,023
    
    
    
    14.0Total Loans
    
    
    242,209
    
    
    
    100.0
    %
    
    
    250,835
    
    
    
    100.0
    %Allowance for loan losses
    
    
    5,550
    
    
    
    
    
    
    
    2,719Less: Net deferred loan fees
    
    
    511
    
    
    
    
    
    
    
    574Total Loans, net
    
    $
    236,148
    
    
    
    
    
    
    $
    247,542
 ,
  Deposits
  11




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##### Table of Contents



Federal Home Loan Bank Advances
  Equity
  RESULTS OF OPERATIONS
 Net Interest Income
     12




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##### Table of Contents



Six Months Ended June 30,
        
    Six Months Ended June 30,2009
     
    2008Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate
    
    
    Balance
    
    
    Paid
    
    
    Rate(dollars in thousands)
    
    
    (dollars in thousands)Fed Funds and overnight deposits
    
    $
    9,779
    
    
    $
    3
    
    
    
    0.06
    %
    
    $
    9,323
    
    
    $
    87
    
    
    
    1.87
    %Investment securities
    
    
    14,654
    
    
    
    261
    
    
    
    3.59
    
    
    
    10,849
    
    
    
    235
    
    
    
    4.34Other securities
    
    
    4,174
    
    
    
    19
    
    
    
    0.92
    
    
    
    4,174
    
    
    
    104
    
    
    
    5.00Loans receivable
    
    
    246,448
    
    
    
    7,827
    
    
    
    6.40
    
    
    
    233,220
    
    
    
    8,148
    
    
    
    7.01Total earning assets
    
    $
    275,055
    
    
    $
    8,110
    
    
    
    5.95
    
    
    $
    257,566
    
    
    $
    8,574
    
    
    
    6.68Demand and NOW Accounts
    
    $
    32,788
    
    
    $
    43
    
    
    
    0.26
    
    
    $
    32,413
    
    
    $
    49
    
    
    
    0.30Money market accounts
    
    
    42,290
    
    
    
    417
    
    
    
    1.99
    
    
    
    31,469
    
    
    
    491
    
    
    
    3.13Savings accounts
    
    
    18,914
    
    
    
    37
    
    
    
    0.39
    
    
    
    19,273
    
    
    
    41
    
    
    
    0.43Certificates of deposit
    
    
    105,506
    
    
    
    2,097
    
    
    
    4.01
    
    
    
    106,224
    
    
    
    2,457
    
    
    
    4.64Fed Funds Purchased
    
    
    
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    
    
    
    
    0.00Federal Home Loan Bank Advances
    
    
    57,672
    
    
    
    1,301
    
    
    
    4.55
    
    
    
    52,557
    
    
    
    1,302
    
    
    
    4.97Total interest bearing liabilities
    
    $
    257,170
    
    
    
    3,895
    
    
    
    3.05
    
    
    $
    241,936
    
    
    
    4,340
    
    
    
    3.60Net interest income
    
    
    
    
    
    $
    4,215
    
    
    
    
    
    
    
    
    
    
    $
    4,234Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.89
    %
    
    
    
    
    
    
    
    
    
    
    3.08
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.06
    %
    
    
    
    
    
    
    
    
    
    
    3.29
    %
 Provision for Loan Losses
    June 30, 2009
    
    
    December 31, 2008(In thousands)Non-performing loans
    
    $
    7,979
    
    
    $
    2,571Real estate in judgement
    
    
    2,303
    
    
    
    1,327Foreclosed and repossessed assets
    
    
    1,041
    
    
    
    749Total non-performing assets
    
    $
    11,323
    
    
    $
    4,647Non-performing loans to total loans
    
    
    3.29
    %
    
    
    1.04
    %Non-performing assets to total assets
    
    
    3.75
    %
    
    
    1.59
    %Allowance
for loan losses to non-performing loans
    
    
    69.60
    %
    
    
    105.76
    %Allowance
for loan losses to net loans receivable
    
    
    2.29
    %
    
    
    1.10
    %
  13




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##### Table of Contents



Non-interest Income
    Non-interest Expense
   Federal Income Tax Expense
   LIQUIDITY
  14




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##### Table of Contents



CONTRACTUAL OBLIGATIONS AND OFF BALANCE SHEET ARRANGEMENTS
  Payments Due by PeriodLess than
    
    
    1-3
    
    
    3-5
    
    
    AfterContractual Obligations
    
    Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 years(Dollars in Thousands)Certificates of deposit
    
    $
    105,351
    
    
    $
    57,412
    
    
    $
    32,128
    
    
    $
    15,811
    
    
    $
    560FHLB advances
    
    
    56,678
    
    
    
    12,160
    
    
    
    32,343
    
    
    
    12,175
    
    
    
    Total
    
    $
    162,029
    
    
    $
    69,572
    
    
    $
    64,471
    
    
    $
    27,986
    
    
    $
    560
 Amount of commitment expiration per periodLess than
    
    
    1-3
    
    
    3-5
    
    
    AfterOther Commitments
    
    Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 years(Dollars in Thousands)Commitments to grant loans
    
    $
    3,131
    
    
    $
    3,131
    
    
    $
    
    
    
    $
    
    
    
    $
    Unfunded commitments under HELOCs
    
    
    15,505
    
    
    
    1,743
    
    
    
    3,808
    
    
    
    2,713
    
    
    
    7,241Unfunded commitments under Commercial LOCs
    
    
    2,431
    
    
    
    1,184
    
    
    
    885
    
    
    
    340
    
    
    
    22Letters of credit
    
    
    172
    
    
    
    172
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    21,239
    
    
    $
    6,230
    
    
    $
    4,693
    
    
    $
    3,053
    
    
    $
    7,263
  15




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##### Table of Contents



CAPITAL RESOURCES
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4T.
    
    CONTROLS AND PROCEDURES
   
 PART II-OTHER INFORMATION
 
 Item 1.
    
    LEGAL PROCEEDINGS
  
 Item 1A.
    
    RISK FACTORS
  16




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##### Table of Contents



Item 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 Item 3.
    
    DEFAULTS UPON SENIOR SECURITIES
  
 Item 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 1.
    
    Election of Directors with terms ending in 2012
 Martin M. Mitchell
    
    For: 1,437,501
    
    Withheld: 158,340Stephen M. Ross
    
    For: 1,437,501
    
    Withheld: 158,340Gordon L. Welch
    
    For: 1,436,501
    
    Withheld: 159,340
  Craig W. Dally
    
    Term Expires: 2010Donald L. Denney
    
    Term Expires: 2010Richard L. Dobbins
    
    Term Expires: 2010Harold A. Adamson
    
    Term Expires: 2011James W. Gordon
    
    Term Expires: 2011Karl F. Loomis
    
    Term Expires: 2011
 2.
    
    Advisory vote on executive compensation of the Company:
 For: 1,273,569
    
    Against: 266,767
    
    Abstain: 55,505
 3.
    
    Ratification of appointment of Plante & Moran, LLP as independent auditors for the
fiscal year ending December 31, 2009:
 For: 1,527,923
    
    Against: 64,946
    
    Abstain: 1,972
 
 Item 5.
    
    OTHER INFORMATION
  
 Item 6.
    
    EXHIBITS
  17




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##### Table of Contents



SIGNATURES
  MONARCH COMMUNITY BANCORP, INC.Date: August 14, 2009
    By:

/s/ Donald L. DenneyDonald L. DenneyPresident and Chief Executive OfficerDate: August 14, 2009
    And:

/s/ Rebecca S. CrabillRebecca S. CrabillSenior Vice President, Chief Financial Officer 18




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit No.
    
    Description of Exhibit31.1
    
    
    Rule 13a-14(a) Certification of the Corporations President and Chief Executive Officer.31.2
    
    
    Rule 13a-14(a) Certification of the Corporations Chief Financial Officer.32
    
    
    Section 1350 Certification.
 19