##### 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 September 30, 2005
 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
    
    04-3627031(State or other jurisdiction
    
    (I.R.S. employerof incorporation or organization)
    
    identification no.)
 (Address of principal executive offices)
 (Registrants telephone number)
 þ o
 o þ
 o þ




---



Monarch Community Bancorp, Inc.
 PART I  FINANCIAL INFORMATIONItem 1  Condensed Financial Statements:Condensed Consolidated Balance Sheets  September 30, 2005 and December 31, 2004
    
    
    1Condensed Consolidated Statements of Income  Three and Nine Months Ended September 30, 2005 and 2004
    
    
    2Condensed Consolidated Statements of Changes in Stockholders Equity  Nine Months Ended September 30, 2005 and 2004
    
    
    3Condensed Consolidated Statements of Cash Flow  Nine Months ended September 30, 2005 and 2004
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    6-11Item 3  Quantitative and Qualitative Disclosures about Market Risk
    
    
    12Item 4  Controls and Procedures
    
    
    13PART II  OTHER INFORMATIONItem 1  Legal Proceedings
    
    
    14Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    14Item 3  Defaults Upon Senior Securities
    
    
    14Item 4  Submission of Matters to a Vote of Security Holders
    
    
    14Item 5  Other Information
    
    
    14Item 6  Exhibits
    
    
    14SIGNATURES
    
    
    15Rule 13a-14(a) Certification of President and Chief Executive OfficerRule 13a-14(a) Certification of the Chief Financial OfficerSection 1350 Certification




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##### Table of Contents



PART IFINANCIAL INFORMATION
 
 Item 1. CONDENSED FINANCIAL STATEMENTS
 
  (unaudited)September 30,
    
    
    December 31,2005
    
    
    2004(Dollars in
thousands, except per share data)ASSETSCash and due from banks
    
    $
    9,315
    
    
    $
    9,529Federal Home Loan Bank overnight time and other interest bearing deposits
    
    
    8,304
    
    
    
    6,120Total cash and cash equivalents
    
    
    17,619
    
    
    
    15,649Securities-Available for sale
    
    
    14,537
    
    
    
    8,057Securities-Held to maturity
    
    
    252
    
    
    
    267Other investments
    
    
    4,831
    
    
    
    4,720Real Estate Investment  Limited partnership, at equity
    
    
    1,167
    
    
    
    1,278Loans, net of allowance for loan losses
    
    
    210,876
    
    
    
    219,678Foreclosed assets, net
    
    
    2,573
    
    
    
    1,960Premises and equipment
    
    
    5,828
    
    
    
    6,444Goodwill
    
    
    9,606
    
    
    
    9,606Core deposit
    
    
    1,470
    
    
    
    1,752Other assets
    
    
    7,250
    
    
    
    7,719Total assets
    
    $
    276,009
    
    
    $
    277,130LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    8,115
    
    
    $
    5,198Interest-bearing
    
    
    162,703
    
    
    
    162,535Total deposits
    
    
    170,818
    
    
    
    167,733Federal Home Loan Bank advances
    
    
    59,725
    
    
    
    65,955Accrued expenses and other liabilities
    
    
    5,218
    
    
    
    4,023Total liabilities
    
    
    235,761
    
    
    
    237,711Commitments and contingent liabilities
    
    
    
    
    
    
    Stockholders equityCommon stock-$0.01 par value authorized-20,000,000 shares
issued and outstanding-2,707,596 shares at September 30, 2005
and 2,709,220 shares at December 31, 2004
    
    
    27
    
    
    
    27Additional paid in capital
    
    
    28,039
    
    
    
    28,059Retained earnings
    
    
    14,252
    
    
    
    13,529Accumulated other comprehensive income
    
    
    (73
    )
    
    
    2Unearned Compensation
    
    
    (1,997
    )
    
    
    (2,198
    )Total stockholders equity
    
    
    40,248
    
    
    
    39,419Total liabilities and stockholders equity
    
    $
    276,009
    
    
    $
    277,130
  1




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##### Table of Contents



Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSept 30,
    
    
    Sept 30,
    
    
    Sept 30,
    
    
    Sept 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Dollars in thousands, except per share data)Interest IncomeLoans, including fees
    
    $
    3,550
    
    
    $
    3,597
    
    
    
    10,651
    
    
    $
    9,511Investment securities
    
    
    186
    
    
    
    176
    
    
    
    512
    
    
    
    483Federal funds sold and overnight deposits
    
    
    82
    
    
    
    14
    
    
    
    184
    
    
    
    90Total interest income
    
    
    3,818
    
    
    
    3,787
    
    
    
    11,347
    
    
    
    10,084Interest ExpenseDeposits
    
    
    860
    
    
    
    709
    
    
    
    2,368
    
    
    
    2,018Federal Home Loan bank advances
    
    
    806
    
    
    
    893
    
    
    
    2,440
    
    
    
    2,573Total interest expense
    
    
    1,666
    
    
    
    1,602
    
    
    
    4,808
    
    
    
    4,591Net Interest Income
    
    
    2,152
    
    
    
    2,185
    
    
    
    6,539
    
    
    
    5,493Provisions for Loan Losses
    
    
    
    
    
    
    375
    
    
    
    (385
    )
    
    
    825Net Interest Income after Provision
for Loan Losses
    
    
    2,152
    
    
    
    1,810
    
    
    
    6,924
    
    
    
    4,668Noninterest IncomeFees and service charges
    
    
    532
    
    
    
    588
    
    
    
    1,529
    
    
    
    1,261Loan servicing fees
    
    
    119
    
    
    
    118
    
    
    
    348
    
    
    
    276Net gain on sale of loans
    
    
    189
    
    
    
    245
    
    
    
    449
    
    
    
    690Net gain (loss) on sale of securities
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    14Other income (loss)
    
    
    44
    
    
    
    125
    
    
    
    (101
    )
    
    
    290Total noninterest income
    
    
    884
    
    
    
    1,080
    
    
    
    2,225
    
    
    
    2,531Noninterest ExpensesSalaries and employees benefits
    
    
    1,267
    
    
    
    1,780
    
    
    
    3,798
    
    
    
    3,913Occupancy and equipment
    
    
    262
    
    
    
    326
    
    
    
    835
    
    
    
    761Data processing
    
    
    182
    
    
    
    157
    
    
    
    519
    
    
    
    430Mortgage banking
    
    
    118
    
    
    
    88
    
    
    
    333
    
    
    
    199Professional fees
    
    
    123
    
    
    
    151
    
    
    
    421
    
    
    
    392Amortization of core deposit intangible
    
    
    87
    
    
    
    109
    
    
    
    283
    
    
    
    219NOW account processing
    
    
    40
    
    
    
    64
    
    
    
    139
    
    
    
    129ATM/Debit card processing
    
    
    60
    
    
    
    87
    
    
    
    167
    
    
    
    160Foreclosed property expense
    
    
    58
    
    
    
    82
    
    
    
    125
    
    
    
    184Other general and administrative
    
    
    344
    
    
    
    351
    
    
    
    999
    
    
    
    893Total noninterest expense
    
    
    2,541
    
    
    
    3,195
    
    
    
    7,619
    
    
    
    7,280Income  Before Income Taxes
    
    
    495
    
    
    
    (305
    )
    
    
    1,530
    
    
    
    (81
    )Income Taxes
    
    
    129
    
    
    
    (45
    )
    
    
    401
    
    
    
    (20
    )Net Income
    
    $
    366
    
    
    $
    (260
    )
    
    $
    1,129
    
    
    $
    (61
    )Earnings Per ShareBasic
    
    $
    0.14
    
    
    $
    (0.10
    )
    
    $
    0.43
    
    
    $
    (0.02
    )Diluted
    
    $
    0.14
    
    
    $
    (0.10
    )
    
    $
    0.43
    
    
    $
    (0.02
    )
  2




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##### Table of Contents



Common Stock
    
    
    
    
    
    
    
    
    
    
    AccumulatedNumber
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Otherof
    
    
    
    
    
    
    Paid in
    
    
    Retained
    
    
    Comprehensive
    
    
    UnearnedShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    Compensation
    
    
    Total(Dollars in thousands, except per share data)Balance January 1, 2004
    
    
    2,399
    
    
    $
    24
    
    
    $
    23,352
    
    
    $
    16,567
    
    
    $
    75
    
    
    $
    (2,588
    )
    
    $
    37,430Issuance of 310,951 shares of common
stock at $14.75/share in connection
with purchase of MSB Financial, Inc.
    
    
    311
    
    
    
    3
    
    
    
    4,583
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,586Vesting of restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    221
    
    
    
    221797 shares repurchased at $14.15/share
    
    
    (1
    )
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61
    )
    
    
    
    
    
    
    
    
    
    
    (61
    )Change in unrealized gain on
securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68
    )
    
    
    
    
    
    
    (68
    )Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (129
    )Dividends paid ($0.15/share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (391
    )
    
    
    
    
    
    
    
    
    
    
    (391
    )Balance September 30, 2004
    
    
    2,709
    
    
    $
    27
    
    
    $
    27,924
    
    
    $
    16,115
    
    
    $
    7
    
    
    $
    (2,367
    )
    
    $
    41,706Balance January 1, 2005
    
    
    2,709
    
    
    $
    27
    
    
    $
    28,059
    
    
    $
    13,529
    
    
    $
    2
    
    
    $
    (2,198
    )
    
    $
    39,419Issuance of 1,000 shares of common
stock at $12.10/share in connection
with Restricted Stock Plan
    
    
    1
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    $
    Vesting of restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    213
    
    
    
    2132,624 shares repurchased at average
price of $12.27/share
    
    
    (2
    )
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32
    )Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,129
    
    
    
    
    
    
    
    
    
    
    
    1,129Change in unrealized gain (loss)
on securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75
    )

    
    
    
    
    
    
    (75
    )Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,054Dividends paid ($0.15/share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (406
    )
    
    
    
    
    
    
    
    
    
    
    (406
    )Balance September 30, 2005
    
    
    2,708
    
    
    $
    27
    
    
    $
    28,039
    
    
    $
    14,252
    
    
    $
    (73
    )
    
    $
    (1,997
    )
    
    $
    40,248
  3




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##### Table of Contents



Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedSept 30,
    
    
    Sept 30,2005
    
    
    2004(Dollars in thousands)Cash Flows from Operating ActivitiesNet Income
    
    $
    1,129
    
    
    $
    (61
    )Adjustments to reconcile net income to net cash from operating activities:Depreciation
    
    
    435
    
    
    
    385Provision for Loan Losses
    
    
    (385
    )
    
    
    875Amortization
    
    
    344
    
    
    
    601Stock dividends on other securities
    
    
    (100
    )
    
    
    (123
    )(Gain) Loss on sale of foreclosed assets
    
    
    29
    
    
    
    (97
    )Mortgage loans originated for sale
    
    
    (20,650
    )
    
    
    (22,545
    )Proceeds from sale of mortgage loans
    
    
    20,295
    
    
    
    23,129Gain on sale of mortgage loans
    
    
    (449
    )
    
    
    (696
    )(Gain) Loss on disposal of premises and equipment
    
    
    (45
    )
    
    
    Net change in:Deferred loan fees
    
    
    174
    
    
    
    (348
    )Accrued interest receivable
    
    
    19
    
    
    
    111Other assets
    
    
    (1,417
    )
    
    
    95Accrued expenses and other liabilities
    
    
    3,077
    
    
    
    315Net cash provided by (used in) operating activities
    
    
    2,456
    
    
    
    1,641Cash Flows from Investing ActivitiesProceeds from maturities of HTM securities
    
    
    15
    
    
    
    Purchases of HTM securities
    
    
    
    
    
    
    (21
    )Proceeds from sale and maturities of AFS securities
    
    
    1,808
    
    
    
    12,430Purchases of available for sale securities
    
    
    (8,408
    )
    
    
    (5,499
    )Purchases of other securities
    
    
    (10
    )
    
    
    (17
    )Proceeds from maturities of other securities
    
    
    
    
    
    
    19Loan originations and principal collections, net
    
    
    7,201
    
    
    
    (9,800
    )Proceeds from sale of foreclosed assets
    
    
    1,974
    
    
    
    2,233Proceeds from sale of premises and equipment
    
    
    343
    
    
    
    Purchases of premises and equipment
    
    
    (117
    )
    
    
    (350
    )Acquisition, net of cash acquired
    
    
    
    
    
    
    (12,010
    )Net cash provided by (used in) investing activities
    
    
    2,806
    
    
    
    (13,015
    )Cash Flows from Financing ActivitiesNet increase (decrease) in deposits
    
    
    3,224
    
    
    
    (7,721
    )Proceeds of FHLB advances
    
    
    1,000
    
    
    
    1,000Repayment of FHLB advances
    
    
    (7,090
    )
    
    
    (1,625
    )Issuance of Common Stcok
    
    
    12
    
    
    
    4,586Repurchase of Common Stock
    
    
    (32
    )
    
    
    (11
    )Issuance of dividend
    
    
    (406
    )
    
    
    (391
    )Net cash provided by (used in) financing activities
    
    
    (3,292
    )
    
    
    (4,162
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,970
    
    
    
    (15,536
    )Cash and
cash equivalents  January 1
    
    
    15,649
    
    
    
    27,331Cash and
cash equivalents  September 30
    
    $
    17,619
    
    
    $
    11,795Supplemental Cash Flow Information:Cash paid for interest
    
    
    5,040
    
    
    
    4,726Cash paid for income taxes
    
    
    125
    
    
    
    23Noncash investing activity  loans transferred to foreclosed assets
    
    
    2,616
    
    
    
    2,060
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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



EARNINGS PER SHARE
  Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSept. 30, 2005
    
    
    Sept. 30, 2004
    
    
    Sept. 30, 2005
    
    
    Sept. 30, 2004Weighted average shares outstanding
    
    
    2,708,513
    
    
    
    2,709,704
    
    
    
    2,708,850
    
    
    
    2,589,744Less: Average nonvested RRP shares
    
    
    (55,646
    )
    
    
    (68,135
    )
    
    
    (60,761
    )
    
    
    (75,225
    )Weighted average for basic EPS
    
    
    2,652,867
    
    
    
    2,641,569
    
    
    
    2,648,089
    
    
    
    2,514,519Dilutive effect of restricted stock and stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average for dilutive EPS
    
    
    2,652,867
    
    
    
    2,641,569
    
    
    
    2,648,089
    
    
    
    2,514,519
 STOCK-BASED COMPENSATION
  Nine months endedSept. 30,
    
    
    Sept. 30,2005
    
    
    2004As reported net income
    
    $
    1,129
    
    
    $
    (61
    )less: additional stock-based compensation determined
under the fair value method, net of tax
    
    
    66
    
    
    
    36$
    1,063
    
    
    $
    (97
    )As reported earnings per share
    
    $
    0.43
    
    
    $
    (0.02
    )Proforma earnings per share
    
    $
    0.40
    
    
    $
    (0.04
    )As reported earnings per diluted share
    
    $
    0.43
    
    
    $
    (0.02
    )Proforma earnings per diluted share
    
    $
    0.40
    
    
    $
    (0.04
    )
 6




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   FORWARD-LOOKING STATEMENTS
  CRITICAL ACCOUNTING POLICIES
  Allowance for Loan Losses
 Goodwill.
 FINANCIAL CONDITION
 Total Assets
  Securities
  7




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##### Table of Contents



Loans
  Sept. 30, 2005
    
    
    December 31, 2004Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Real estate loans:One-to four-family
    
    $
    135,565
    
    
    
    63.5
    %
    
    $
    141,251
    
    
    
    62.4
    %Multi-family
    
    
    3,177
    
    
    
    1.5
    
    
    
    4,042
    
    
    
    1.8Commercial
    
    
    34,824
    
    
    
    16.3
    
    
    
    42,746
    
    
    
    18.9Construction or development
    
    
    5,960
    
    
    
    2.8
    
    
    
    8,853
    
    
    
    3.9Total real estate loans
    
    
    179,526
    
    
    
    84.1
    
    
    
    196,892
    
    
    
    86.9Other loans:Consumer loans:Automobile
    
    
    2,576
    
    
    
    1.2
    
    
    
    2,631
    
    
    
    1.2Home equity
    
    
    15,498
    
    
    
    7.3
    
    
    
    14,234
    
    
    
    6.3Manufactured housing
    
    
    685
    
    
    
    0.3
    
    
    
    784
    
    
    
    0.3Other
    
    
    8,052
    
    
    
    3.8
    
    
    
    6,645
    
    
    
    2.9Total consumer loans
    
    
    26,811
    
    
    
    12.6
    
    
    
    24,294
    
    
    
    10.7Commercial business loans
    
    
    6,988
    
    
    
    3.3
    
    
    
    5,330
    
    
    
    2.4Total other loans
    
    
    33,799
    
    
    
    15.9
    
    
    
    29,624
    
    
    
    13.1Total loans
    
    
    213,325
    
    
    
    100.0
    %
    
    
    226,516
    
    
    
    100.0
    %Less:Allowance for loan losses
    
    
    2,981
    
    
    
    
    
    
    
    6,385Net deferred loan fees
    
    
    633
    
    
    
    
    
    
    
    808Loans in process
    
    
    
    
    
    
    
    
    
    
    6Total loans, net
    
    $
    209,711
    
    
    
    
    
    
    $
    219,317
    8




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##### Table of Contents



Deposits
  Federal Home Loan Bank Advances
  Equity
  RESULTS OF OPERATIONS
 Net Interest Income
     9




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##### Table of Contents



Nine Months Ended September 30,2005
    
    
    2004Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate
    
    
    Balance
    
    
    Paid
    
    
    Rate(dollars in thousands)Fed Funds and overnight deposits
    
    $
    6,781
    
    
    $
    184
    
    
    
    3.63
    %
    
    $
    10,947
    
    
    $
    90
    
    
    
    1.10
    %Investment securities
    
    
    13,072
    
    
    
    359
    
    
    
    3.67
    
    
    
    19,368
    
    
    
    416
    
    
    
    2.86Other securities
    
    
    4,746
    
    
    
    153
    
    
    
    4.31
    
    
    
    3,900
    
    
    
    123
    
    
    
    4.20Loans receivable
    
    
    215,144
    
    
    
    10,651
    
    
    
    6.62
    
    
    
    188,185
    
    
    
    9,455
    
    
    
    6.73Total earning assets
    
    $
    239,743
    
    
    $
    11,347
    
    
    
    6.33
    
    
    $
    222,400
    
    
    $
    10,084
    
    
    
    6.04Demand and NOW Accounts
    
    $
    33,645
    
    
    $
    59
    
    
    
    0.23
    
    
    $
    22,606
    
    
    
    73
    
    
    
    0.43Money market accounts
    
    
    17,045
    
    
    
    142
    
    
    
    1.11
    
    
    
    14,635
    
    
    
    124
    
    
    
    1.13Savings accounts
    
    
    29,035
    
    
    
    91
    
    
    
    0.42
    
    
    
    22,350
    
    
    
    85
    
    
    
    0.51Certificates of deposit
    
    
    90,262
    
    
    
    2,076
    
    
    
    3.08
    
    
    
    77,055
    
    
    
    1,736
    
    
    
    3.00Federal Home Loan Bank Advances
    
    
    62,726
    
    
    
    2,440
    
    
    
    5.20
    
    
    
    61,680
    
    
    
    2,573
    
    
    
    5.56Total interest bearing liabilities
    
    $
    232,713
    
    
    
    4,808
    
    
    
    2.76
    
    
    $
    198,326
    
    
    
    4,591
    
    
    
    3.08Net interest income
    
    
    
    
    
    $
    6,539
    
    
    
    
    
    
    
    
    
    
    $
    5,493Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.57
    %
    
    
    
    
    
    
    
    
    
    
    2.96
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.64
    %
    
    
    
    
    
    
    
    
    
    
    3.29
    %
 Provision for Loan Losses
    September 30, 2005
    
    
    December 31, 2004(Dollars in thousands)Non-performing loans
    
    $
    1,272
    
    
    $
    4,231Real estate in judgment
    
    
    817
    
    
    
    726Foreclosed and repossessed assets
    
    
    1,756
    
    
    
    1,243Total non-performing assets
    
    $
    3,845
    
    
    $
    6,200Non-performing loans to total loans
    
    
    .60
    %
    
    
    1.87
    %Non-performing assets to total assets
    
    
    1.39
    %
    
    
    2.23
    %Allowance for loan losses to non-performing loans
    
    
    234.4
    %
    
    
    150.9
    %Allowance for loan losses to loans receivable
    
    
    1.40
    %
    
    
    2.82
    %
  Noninterest Income
  10




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Noninterest Expense






Federal Income Tax Expense




LIQUIDITY


11




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##### Table of Contents













CONTRACTUAL OBLIGATIONS




Payments due by periodLess than
    
    
    1-3
    
    
    3-5
    
    
    AfterTotal
    
    
    One year
    
    
    Years
    
    
    Years
    
    
    5 Years(in thousands)Certificates of deposit
    
    $
    89,432
    
    
    $
    54,366
    
    
    $
    30,741
    
    
    $
    4,199
    
    
    $
    126FHLB advances
    
    
    59,697
    
    
    
    6,579
    
    
    
    31,287
    
    
    
    313
    
    
    
    21,518Total
    
    $
    149,129
    
    
    $
    60,945
    
    
    $
    62,028
    
    
    $
    4,512
    
    
    $
    21,644




Amount of commitment expiration per periodLess than
    
    
    1-3
    
    
    3-5
    
    
    AfterTotal
    
    
    One year
    
    
    Years
    
    
    Years
    
    
    5 Years(in thousands)Commitments to grant loans
    
    $
    528
    
    
    $
    528
    
    
    $
    
    
    
    $
    
    
    
    $
    Unfunded commitments under HELOCs
    
    
    15,784
    
    
    
    981
    
    
    
    2,744
    
    
    
    3,364
    
    
    
    8,695Unfunded commitments under Commercial LOCs
    
    
    711
    
    
    
    705
    
    
    
    6
    
    
    
    
    
    
    
    Letters of credit
    
    
    113
    
    
    
    3
    
    
    
    110
    
    
    
    
    
    
    
    Total
    
    $
    17,136
    
    
    $
    2,217
    
    
    $
    2,860
    
    
    $
    3,364
    
    
    $
    8,695




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##### Table of Contents



CAPITAL RESOURCES
  
 ITEM 3. QUANTITATIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK
    Principal Amount Maturing In:Fair2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    Thereafter
    
    Total
    
    ValueRATE-SENSITIVE ASSETSOvernight deposits
    
    $
    6,120
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,120
    
    
    $
    6,120Average interest rate
    
    
    1.85
    %Securities
    
    
    1,535
    
    
    
    770
    
    
    
    2,761
    
    
    
    
    
    
    
    2,968
    
    
    
    267
    
    
    
    8,301
    
    
    
    8,325Average interest rate
    
    
    2.06
    %
    
    
    3.05
    %
    
    
    3.42
    %
    
    
    
    
    
    
    4.21
    %
    
    
    4.30
    %Gross Loans
    
    
    23,112
    
    
    
    5,483
    
    
    
    9,915
    
    
    
    6,380
    
    
    
    10,889
    
    
    
    170,737
    
    
    
    226,516
    
    
    
    229,128Average interest rate
    
    
    6.00
    %
    
    
    7.63
    %
    
    
    7.33
    %
    
    
    7.02
    %
    
    
    6.60
    %
    
    
    6.46
    %RATE-SENSITIVE LIABILITIESSavings & interest bearing
demand deposits
    
    
    76,134
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,134
    
    
    
    76,134Average interest rate
    
    
    0.51
    %Certificates of deposit
    
    
    56,171
    
    
    
    13,297
    
    
    
    10,918
    
    
    
    4,164
    
    
    
    1,714
    
    
    
    137
    
    
    
    86,401
    
    
    
    87,380Average interest rate
    
    
    2.51
    %
    
    
    3.64
    %
    
    
    4.45
    %
    
    
    3.52
    %
    
    
    3.47
    %
    
    
    3.24
    %FHLB advances
    
    
    9,393
    
    
    
    8,585
    
    
    
    6,146
    
    
    
    20,153
    
    
    
    160
    
    
    
    21,518
    
    
    
    65,955
    
    
    
    68,155Average interest rate
    
    
    5.01
    %
    
    
    5.22
    %
    
    
    6.43
    %
    
    
    5.67
    %
    
    
    5.64
    %
    
    
    4.97
    %
 13




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
   14




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##### Table of Contents



OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  
 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
  
 Item 5. OTHER INFORMATION
  
 Item 6. EXHIBITS
  15




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##### Table of Contents



SIGNATURES
  MONARCH COMMUNITY BANCORP, INC.Date: November 9, 2005
    
    By:
    
    /s/ Donald L. DenneyDonald L. DenneyPresident and Chief Executive OfficerDate: November 9, 2005
    
    And:
    
    /s/ William C. KurtzWilliam C. KurtzSenior Vice President and Treasurer
 16




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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.
 17