##### 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, 2007
 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 o þ
 o þ




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##### 



Monarch Community Bancorp, Inc.
 PART I  FINANCIAL INFORMATIONItem 1  Condensed Financial Statements:Condensed Consolidated Balance Sheets  September 30, 2007 and
December 31, 2006
    
    
    1Condensed Consolidated Statements of Income  Nine Months
Ended September 30, 2007 and 2006
    
    
    2Condensed Consolidated Statements of Changes in Stockholders Equity 
Nine Months Ended September 30, 2007 and 2006
    
    
    3Condensed Consolidated Statements of Cash Flows  Nine Months Ended
September 30, 2007 and 2006
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5 - 7Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    7 - 13Item 3  Quantitative and Qualitative Disclosures about Market Risk
    
    
    14Item 4 - Controls and Procedures
    
    
    14PART II  OTHER INFORMATIONItem 1  Legal Proceedings
    
    
    15Item 1A  Risk Factors
    
    
    15Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    15Item 3  Defaults Upon Senior Securities
    
    
    15Item 4  Submission of Matters to a Vote of Security Holders
    
    
    15Item 5  Other Information
    
    
    15Item 6  Exhibits
    
    
    15SIGNATURES
    
    
    16CERTIFICATIONS
    
    
    17-20Certification of President and Chief Executive OfficerCertification of Chief Financial OfficerSection 1350 Certification




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##### Table of Contents



PART IFINANCIAL INFORMATION
 
 Item 1. CONDENSED FINANCIAL STATEMENTS
 
 Condensed Consolidated Balance Sheets
 (Unaudited)September 30,
    
    
    December 31,2007
    
    
    2006(Dollars in thousands,except per share data)AssetsCash and due from banks
    
    
    6,077
    
    
    $
    7,433Federal Home Loan Bank overnight time and
other interest bearing deposits
    
    
    8,695
    
    
    
    7,864Total cash and cash equivalents
    
    
    14,772
    
    
    
    15,297Securities  Available for sale
    
    
    12,532
    
    
    
    13,706Securities  Held to maturity
    
    
    213
    
    
    
    228Other securities
    
    
    4,237
    
    
    
    4,237Real estate investment  Limited partnership, at equity
    
    
    867
    
    
    
    979Loans held for sale
    
    
    1,284
    
    
    
    937Loans, net
    
    
    227,642
    
    
    
    230,247Foreclosed assets, net
    
    
    2,470
    
    
    
    1,680Premises and equipment
    
    
    4,798
    
    
    
    5,261Goodwill
    
    
    9,606
    
    
    
    9,606Core deposit intangible
    
    
    916
    
    
    
    1,092Other assets
    
    
    6,338
    
    
    
    6,717Total assets
    
    $
    285,675
    
    
    $
    289,987Liabilities and Stockholders EquityLiabilitiesDeposits:Non-interest bearing
    
    $
    15,221
    
    
    $
    15,733Interest bearing
    
    
    166,270
    
    
    
    176,839Total deposits
    
    
    181,491
    
    
    
    192,572Federal Home Loan Bank advances
    
    
    60,476
    
    
    
    54,476Accrued expenses and other liabilities
    
    
    2,524
    
    
    
    2,953Total liabilities
    
    
    244,491
    
    
    
    250,001Commitments and Contingencies
    
    
    
    
    
    
    Stockholders EquityCommon stock  $0.01 par value, 20,000,000 shares authorized, 2,530,277
shares issued and outstanding at September 30, 2007 and
2,533,781 shares issued and outstanding at December 31, 2006
    
    
    25
    
    
    
    25Additional paid-in capital
    
    
    26,218
    
    
    
    26,191Retained earnings
    
    
    16,217
    
    
    
    15,319Accumulated other comprehensive income
    
    
    (7
    )
    
    
    (63
    )Unearned compensation
    
    
    (1,269
    )
    
    
    (1,486
    )Total stockholders equity
    
    
    41,184
    
    
    
    39,986Total liabilities and stockholders equity
    
    $
    285,675
    
    
    $
    289,987
  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 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in thousands, except per share data)Interest IncomeLoans, including fees
    
    $
    4,102
    
    
    $
    4,150
    
    
    $
    12,251
    
    
    $
    11,806Investment securities
    
    
    193
    
    
    
    190
    
    
    
    605
    
    
    
    598Federal funds sold and overnight deposits
    
    
    82
    
    
    
    75
    
    
    
    344
    
    
    
    277Total interest income
    
    
    4,377
    
    
    
    4,415
    
    
    
    13,200
    
    
    
    12,681Interest ExpenseDeposits
    
    
    1,461
    
    
    
    1,406
    
    
    
    4,631
    
    
    
    3,824Federal Home Loan Bank advances
    
    
    843
    
    
    
    849
    
    
    
    2,334
    
    
    
    2,396Total interest expense
    
    
    2,304
    
    
    
    2,255
    
    
    
    6,965
    
    
    
    6,220Net Interest Income
    
    
    2,073
    
    
    
    2,160
    
    
    
    6,235
    
    
    
    6,461Provision for Loan Losses
    
    
    219
    
    
    
    
    
    
    
    689
    
    
    
    Net Interest Income After Provision for Loan Losses
    
    
    1,854
    
    
    
    2,160
    
    
    
    5,546
    
    
    
    6,461Non-interest IncomeFees and service charges
    
    
    653
    
    
    
    580
    
    
    
    1,881
    
    
    
    1,617Loan servicing fees
    
    
    108
    
    
    
    109
    
    
    
    329
    
    
    
    338Net gain on sale of loans
    
    
    139
    
    
    
    59
    
    
    
    470
    
    
    
    219Net gain (loss) on sale of securities
    
    
    
    
    
    
    (20
    )
    
    
    (19
    )
    
    
    (20
    )Net gain (loss) on sale of fixed assets
    
    
    71
    
    
    
    
    
    
    
    71
    
    
    
    Other income
    
    
    69
    
    
    
    15
    
    
    
    277
    
    
    
    144Total non-interest income
    
    
    1,040
    
    
    
    743
    
    
    
    3,009
    
    
    
    2,298Non-interest ExpenseSalaries and employee benefits
    
    
    1,065
    
    
    
    1,215
    
    
    
    3,205
    
    
    
    3,702Occupancy and equipment
    
    
    250
    
    
    
    256
    
    
    
    763
    
    
    
    770Data processing
    
    
    180
    
    
    
    176
    
    
    
    546
    
    
    
    526Amortization of mortgage servicing rights
    
    
    92
    
    
    
    88
    
    
    
    265
    
    
    
    293Professional services
    
    
    180
    
    
    
    90
    
    
    
    430
    
    
    
    347Amortization of core deposit intangible
    
    
    54
    
    
    
    68
    
    
    
    176
    
    
    
    223NOW account processing
    
    
    42
    
    
    
    42
    
    
    
    133
    
    
    
    126ATM/Debit card processing
    
    
    51
    
    
    
    64
    
    
    
    144
    
    
    
    183Foreclosed property expense
    
    
    86
    
    
    
    83
    
    
    
    125
    
    
    
    238Other general and administrative
    
    
    266
    
    
    
    356
    
    
    
    862
    
    
    
    1,035Total non-interest expense
    
    
    2,266
    
    
    
    2,438
    
    
    
    6,649
    
    
    
    7,443Income  Before income taxes
    
    
    628
    
    
    
    465
    
    
    
    1,906
    
    
    
    1,316Income Taxes
    
    
    157
    
    
    
    133
    
    
    
    477
    
    
    
    338Net Income
    
    $
    471
    
    
    $
    332
    
    
    $
    1,429
    
    
    $
    978Earnings Per ShareBasic
    
    $
    0.19
    
    
    $
    0.14
    
    
    $
    0.59
    
    
    $
    0.39Diluted
    
    $
    0.19
    
    
    $
    0.14
    
    
    $
    0.59
    
    
    $
    0.39
  2




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##### Table of Contents



Common Stock
    
    
    
    
    
    
    
    
    
    
    AccumulatedNumber
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Otherof
    
    
    
    
    
    
    Paid in
    
    
    Retained
    
    
    Comprehensive
    
    
    UnearnedShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    Compensation
    
    
    TotalBalance- January 1, 2006
    
    
    2,710
    
    
    $
    27
    
    
    $
    28,150
    
    
    $
    14,401
    
    
    $
    (155
    )
    
    $
    (1,847
    )
    
    $
    40,576Issuance of 3,884 shares of common stock at an
average price of $12.03/share in connection with Restricted Stock Plan
    
    
    4
    
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    (46
    )
    
    
    Vesting of restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    215
    
    
    
    215180,578 shares repurchased at $11.89/share
    
    
    (180
    )
    
    $
    (2
    )
    
    
    (2,145
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,147
    )Stock option expenses
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    978
    
    
    
    
    
    
    
    
    
    
    
    978Change in unrealized loss on
securities available-for-sale,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    65Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,043Dividends paid ($0.12/share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (478
    )
    
    
    
    
    
    
    
    
    
    
    (478
    )Balance- September 30, 2006
    
    
    2,534
    
    
    $
    25
    
    
    $
    26,116
    
    
    $
    14,901
    
    
    $
    (90
    )
    
    $
    (1,678
    )
    
    $
    39,274Balance- January 1, 2007
    
    
    2,534
    
    
    $
    25
    
    
    $
    26,191
    
    
    $
    15,319
    
    
    $
    (63
    )
    
    $
    (1,486
    )
    
    $
    39,986Vesting of restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    217
    
    
    
    2173,204 shares repurchased at $11.95/share
    
    
    (3
    )
    
    $
    
    
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38
    )Stock option expenses
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,429
    
    
    
    
    
    
    
    
    
    
    
    1,429Change in unrealized loss on
securities available-for-sale,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    56Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,485Dividends paid ($0.14/share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (531
    )
    
    
    
    
    
    
    
    
    
    
    (531
    )Balance- September 30, 2007
    
    
    2,531
    
    
    $
    25
    
    
    $
    26,218
    
    
    $
    16,217
    
    
    $
    (7
    )
    
    $
    (1,269
    )
    
    $
    41,184
  3




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##### Table of Contents



Nine Months EndedSeptember, 302007
    
    
    2006(Dollars in thousands)Cash Flows From Operating ActivitiesNet Income
    
    $
    1,429
    
    
    $
    978Adjustments to reconcile net income to net cash from operating activitiesDepreciation and amortization
    
    
    826
    
    
    
    953Provision for loan losses
    
    
    689
    
    
    
    Stock option expense
    
    
    65
    
    
    
    65(Gain) loss on sale of investments
    
    
    
    
    
    
    20Gain on sale of foreclosed assets
    
    
    (131
    )
    
    
    11Mortgage loans originated for sale
    
    
    (20,548
    )
    
    
    (10,095
    )Proceeds from sale of mortgage loans
    
    
    20,671
    
    
    
    10,412Gain on sale of mortgage loans
    
    
    (470
    )
    
    
    (219
    )Loss on sale of available for sale securities
    
    
    19
    
    
    
    Earned stock compensation
    
    
    217
    
    
    
    215Gain on disposal of equipment
    
    
    (70
    )
    
    
    Net change in:Deferred loan fees
    
    
    10
    
    
    
    (56
    )Accrued interest receivable
    
    
    18
    
    
    
    (95
    )Other assets
    
    
    195
    
    
    
    846Accrued expenses and other liabilities
    
    
    (422
    )
    
    
    637Net cash provided by operating activities
    
    
    2,498
    
    
    
    3,672Cash Flows From Investing ActivitiesActivity in available-for-sale securities:Purchases
    
    
    (3,819
    )
    
    
    (4,755
    )Proceeds from sales of securities
    
    
    2,928
    
    
    
    5,478Proceeds from maturities of securities
    
    
    2,091
    
    
    
    Activity in held-to-maturity securities:Purchases
    
    
    
    
    
    
    (4
    )Proceeds from maturities of securities
    
    
    15
    
    
    
    10Procceeds from redemption of FHLB stock
    
    
    
    
    
    
    395Loan originations and principal collections, net
    
    
    393
    
    
    
    (22,807
    )Proceeds from sale of foreclosed assets
    
    
    846
    
    
    
    2,542Proceeds from sale of premises and equipment
    
    
    283
    
    
    
    Purchase of premises and equipment
    
    
    (112
    )
    
    
    (104
    )Net cash provided by (used in) investing activities
    
    
    2,625
    
    
    
    (19,245
    )Cash Flows From Financing ActivitiesNet increase in deposits
    
    
    (11,080
    )
    
    
    17,450Repurchase of common stock
    
    
    (37
    )
    
    
    (2,148
    )Dividends paid
    
    
    (531
    )
    
    
    (478
    )Proceeds from FHLB advances
    
    
    33,500
    
    
    
    22,500Repayment of FHLB advances
    
    
    (27,500
    )
    
    
    (21,945
    )Net cash provided by financing activities
    
    
    (5,648
    )
    
    
    15,379Net Increase in Cash and Cash Equivalents
    
    
    (525
    )
    
    
    (194
    )Cash and Cash Equivalents Beginning
    
    
    15,297
    
    
    
    16,286Cash and Cash Equivalents End
    
    $
    14,772
    
    
    $
    16,092Supplemental Cash Flow Information:Cash paid for:Interest
    
    
    6,961
    
    
    
    6,133Income taxes
    
    
    600
    
    
    
    Noncash investing activities:Loans transferred to foreclosed assets
    
    
    1,513
    
    
    
    1,997Issuance of common stock in connection with the 2003 RRP
    
    
    
    
    
    
    46
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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
    RECLASSIFICATIONS
  5




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##### Table of Contents



EARNINGS PER SHARE
  Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSeptember 30, 2007
    
    
    September 30, 2006
    
    
    September 30, 2007
    
    
    September 30, 2006Basic earnings per shareNumerator:Net income
    
    $
    471
    
    
    $
    332
    
    
    $
    1,429
    
    
    $
    978Denominator:Weighted average common shares outstanding
    
    
    2,531
    
    
    
    2,627
    
    
    
    2,532
    
    
    
    2,657Less: Average unallocated ESOP shares
    
    
    (93
    )
    
    
    (111
    )
    
    
    (93
    )
    
    
    (111
    )Less: Average non-vested RRP shares
    
    
    (28
    )
    
    
    (60
    )
    
    
    (35
    )
    
    
    (59
    )Weighted average common shares outstanding
for basic earnings per share
    
    
    2,410
    
    
    
    2,456
    
    
    
    2,404
    
    
    
    2,487Basic earnings per share
    
    $
    0.19
    
    
    $
    0.14
    
    
    $
    0.59
    
    
    $
    0.39Diluted earnings per shareNumerator:Net income
    
    $
    471
    
    
    $
    332
    
    
    $
    1,429
    
    
    $
    978Denominator:Weighted average common shares outstanding
for basic earnings per share
    
    
    2,410
    
    
    
    2,456
    
    
    
    2,404
    
    
    
    2,487Add: Dilutive effects of restricted stock
and stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares and dilutive
potential common shares outstanding
    
    
    2,410
    
    
    
    2,456
    
    
    
    2,404
    
    
    
    2,487Diluted earnings per share
    
    $
    0.19
    
    
    $
    0.14
    
    
    $
    0.59
    
    
    $
    0.39
 RECENT ACCOUNTING PRONOUNCEMENTS
  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
 Foreclosed Assets .
 Goodwill and Other Intangible Assets
 7




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##### Table of Contents



FINANCIAL CONDITION
 Assets
  Securities
  Loans
  September 30, 2007
    
    
    December 31, 2006Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Real Estate Loans:One-to-four family
    
    $
    128,904
    
    
    
    56.0
    
    
    $
    141,679
    
    
    
    60.8
    %Multi-family
    
    
    5,622
    
    
    
    2.5
    
    
    
    6,008
    
    
    
    2.6Commercial
    
    
    56,211
    
    
    
    24.4
    
    
    
    44,513
    
    
    
    19.1Construction or development
    
    
    7,360
    
    
    
    3.2
    
    
    
    9,529
    
    
    
    4.1Total real estate loans
    
    
    198,097
    
    
    
    86.1
    
    
    
    201,729
    
    
    
    86.6Other loans:Consumer loans:Automobile
    
    
    1,014
    
    
    
    0.4
    
    
    
    1,509
    
    
    
    0.6Home equity
    
    
    20,600
    
    
    
    9.0
    
    
    
    19,077
    
    
    
    8.3Manufactured housing
    
    
    419
    
    
    
    0.2
    
    
    
    495
    
    
    
    0.2Other
    
    
    6,043
    
    
    
    2.6
    
    
    
    7,083
    
    
    
    3.0Total consumer loans
    
    
    28,076
    
    
    
    12.2
    
    
    
    28,164
    
    
    
    12.1Commercial Business Loans
    
    
    3,906
    
    
    
    1.7
    
    
    
    2,969
    
    
    
    1.3Total other loans
    
    
    31,982
    
    
    
    13.9
    
    
    
    31,133
    
    
    
    13.4Total Loans
    
    
    230,079
    
    
    
    100.0
    %
    
    
    232,862
    
    
    
    100.0
    %Less:Allowance for loan losses
    
    
    1,864
    
    
    
    
    
    
    
    2,024Net deferred loan fees
    
    
    573
    
    
    
    
    
    
    
    591Loans in process
    
    
    
    
    
    
    
    
    
    
    Total Loans, net
    
    $
    227,642
    
    
    
    
    
    
    $
    230,247
   8




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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, 2007
    
    

Nine Months Ended September 30, 2006Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate
    
    
    Balance
    
    
    Paid
    
    
    Rate(dollars in thousands)Fed Funds and overnight deposits
    
    $
    9,387
    
    
    $
    344
    
    
    
    4.90
    
    
    $
    6,429
    
    
    $
    277
    
    
    
    5.76
    %Investment securities
    
    
    13,465
    
    
    
    464
    
    
    
    4.61
    
    
    
    13,514
    
    
    
    424
    
    
    
    4.19Other securities
    
    
    4,174
    
    
    
    141
    
    
    
    4.52
    
    
    
    4,669
    
    
    
    174
    
    
    
    4.98Loans receivable
    
    
    228,099
    
    
    
    12,251
    
    
    
    7.18
    
    
    
    225,495
    
    
    
    11,806
    
    
    
    7.00Total earning assets
    
    $
    255,125
    
    
    $
    13,200
    
    
    
    6.92
    
    
    $
    250,107
    
    
    $
    12,681
    
    
    
    6.78Demand and NOW Accounts
    
    $
    33,205
    
    
    $
    53
    
    
    
    0.21
    
    
    $
    29,950
    
    
    $
    53
    
    
    
    0.24Money market accounts
    
    
    24,897
    
    
    
    666
    
    
    
    3.58
    
    
    
    18,150
    
    
    
    406
    
    
    
    2.99Savings accounts
    
    
    21,621
    
    
    
    69
    
    
    
    0.43
    
    
    
    25,813
    
    
    
    81
    
    
    
    0.42Certificates of deposit
    
    
    104,394
    
    
    
    3,843
    
    
    
    4.92
    
    
    
    105,085
    
    
    
    3,284
    
    
    
    4.18Federal Home Loan Bank Advances
    
    
    56,775
    
    
    
    2,334
    
    
    
    5.50
    
    
    
    58,510
    
    
    
    2,396
    
    
    
    5.48Total interest bearing liabilities
    
    $
    240,892
    
    
    
    6,965
    
    
    
    3.87
    
    
    $
    237,508
    
    
    
    6,220
    
    
    
    3.50Net interest income
    
    
    
    
    
    $
    6,235
    
    
    
    
    
    
    
    
    
    
    $
    6,461Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.05
    
    
    
    
    
    
    
    
    
    
    
    3.28
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.26
    
    
    
    
    
    
    
    
    
    
    
    3.44
    %
 Provision for Loan Losses
    September 30, 2007
    
    

December 31, 2006(In thousands)Non-performing loans
    
    $
    859
    
    
    $
    468Real estate in judgement
    
    
    1,396
    
    
    
    895Foreclosed and repossessed assets
    
    
    1,073
    
    
    
    785Total non-performing assets
    
    $
    3,328
    
    
    $
    2,148Non-performing loans to total loans
    
    
    0.37
    %
    
    
    0.20
    %Non-performing assets to total assets
    
    
    1.17
    %
    
    
    0.74
    %Allowance for loan losses to non-performing loans
    
    
    217.00
    %
    
    
    432.48
    %Allowance for loan losses to net loans receiveable
    
    
    0.81
    %
    
    
    0.88
    %
  10




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Non-interest Income
   Non-interest Expense
   11




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##### Table of Contents



Federal Income Tax Expense
   LIQUIDITY
     12




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##### Table of Contents



CONTRACTUAL OBLIGATIONS
  Contractual Obligations
    
    Payments Due by PeriodLess than
    
    
    1-3
    
    
    3-5
    
    
    AfterTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 years(Dollars in Thousands)Certificates of deposit
    
    $
    97,327
    
    
    $
    60,611
    
    
    $
    28,455
    
    
    $
    8,261
    
    
    $
    FHLB advances
    
    
    60,476
    
    
    
    14,146
    
    
    
    21,813
    
    
    
    19,342
    
    
    
    5,175Total
    
    $
    157,803
    
    
    $
    74,757
    
    
    $
    50,268
    
    
    $
    27,603
    
    
    $
    5,175
 Other Commitments
    
    Amount of commitment expiration per periodLess than
    
    
    1-3
    
    
    3-5
    
    
    AfterTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 years(Dollars in Thousands)Commitments to grant loans
    
    $
    4,759
    
    
    $
    4,759
    
    
    $
    
    
    
    $
    
    
    
    $
    Unfunded commitments under HELOCs
    
    
    16,180
    
    
    
    1,144
    
    
    
    3,976
    
    
    
    4,388
    
    
    
    6,672Unfunded commitments under Commercial LOCs
    
    
    4,165
    
    
    
    1,894
    
    
    
    937
    
    
    
    888
    
    
    
    446Letters of credit
    
    
    9
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    21,150
    
    
    $
    5,912
    
    
    $
    4,053
    
    
    $
    4,513
    
    
    $
    6,672
  CAPITAL RESOURCES
  13




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4. CONTROLS AND PROCEDURES
   14




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  
 Item 1A. RISK FACTORS
  
 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 14, 2007
    
    By:
    
    
    
    /s/ Donald L. DenneyDonald L. Denney
President and Chief Executive OfficerDate:
November 14, 2007
    
    And:
    
    
    
    /s/ William C. KurtzWilliam C. Kurtz 
Senior Vice President,
Chief Financial Officer
(Principal Financial Officer)
 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