##### 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, 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  June 30, 2007 and December 31, 2006
    
    
    1Condensed Consolidated Statements of Income  Six Months Ended June 30, 2007 and 2006
    
    
    2Condensed Consolidated Statements of Changes in Stockholders Equity  Six Months Ended June 30, 2007 and 2006
    
    
    3Condensed Consolidated Statements of Cash Flows  Six Months Ended June 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
    
    
    17-20Management Continuity Agreement with Scott McQueenRule 13a-14(a) Certification of the Corporation's President and Chief Executive OfficerRule 13a-14(a) Certification of the Corporation's Chief Financial OfficerSection 1350 Certification




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##### Table of Contents



PART IFINANCIAL INFORMATION
 
 Item 1. CONDENSED FINANCIAL STATEMENTS
 
  (Unaudited)June 30,
    
    
    December 31,2007
    
    
    2006(Dollars in thousands,except per share data)AssetsCash and due from banks
    
    $
    6,314
    
    
    $
    7,433Federal Home Loan Bank overnight time and
other interest bearing deposits
    
    
    7,922
    
    
    
    7,864Total cash and cash equivalents
    
    
    14,236
    
    
    
    15,297Securities  Available for sale
    
    
    12,446
    
    
    
    13,706Securities  Held to maturity
    
    
    218
    
    
    
    228Other securities
    
    
    4,237
    
    
    
    4,237Real estate investment  Limited partnership, at equity
    
    
    904
    
    
    
    979Loans held for sale
    
    
    803
    
    
    
    937Loans, net
    
    
    227,362
    
    
    
    230,247Foreclosed assets, net
    
    
    1,316
    
    
    
    1,680Premises and equipment
    
    
    4,973
    
    
    
    5,261Goodwill
    
    
    9,606
    
    
    
    9,606Core deposit intangible
    
    
    970
    
    
    
    1,092Other assets
    
    
    6,532
    
    
    
    6,717Total assets
    
    $
    283,603
    
    
    $
    289,987Liabilities and Stockholders EquityLiabilitiesDeposits:Non-interest bearing
    
    $
    17,899
    
    
    $
    15,733Interest bearing
    
    
    164,815
    
    
    
    176,839Total deposits
    
    
    182,714
    
    
    
    192,572Federal Home Loan Bank advances
    
    
    57,476
    
    
    
    54,476Accrued expenses and other liabilities
    
    
    2,660
    
    
    
    2,953Total liabilities
    
    
    242,850
    
    
    
    250,001Commitments and Contingencies
    
    
    
    
    
    
    Stockholders EquityCommon stock  $0.01 par value, 20,000,000 shares authorized, 2,531,673
shares issued and outstanding at June 30, 2007 and
2,533,781 shares issued and outstanding at December 31, 2006
    
    
    25
    
    
    
    25Additional paid-in capital
    
    
    26,210
    
    
    
    26,191Retained earnings
    
    
    15,923
    
    
    
    15,319Accumulated other comprehensive income
    
    
    (92
    )
    
    
    (63
    )Unearned compensation
    
    
    (1,313
    )
    
    
    (1,486
    )Total stockholders equity
    
    
    40,753
    
    
    
    39,986Total liabilities and stockholders equity
    
    $
    283,603
    
    
    $
    289,987
  1




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##### Table of Contents



Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in thousands, except per share data)Interest IncomeLoans, including fees
    
    $
    4,070
    
    
    $
    3,930
    
    
    $
    8,149
    
    
    $
    7,656Investment securities
    
    
    205
    
    
    
    201
    
    
    
    412
    
    
    
    408Federal funds sold and overnight deposits
    
    
    121
    
    
    
    103
    
    
    
    262
    
    
    
    202Total interest income
    
    
    4,396
    
    
    
    4,234
    
    
    
    8,823
    
    
    
    8,266Interest ExpenseDeposits
    
    
    1,541
    
    
    
    1,275
    
    
    
    3,170
    
    
    
    2,418Federal Home Loan Bank advances
    
    
    767
    
    
    
    774
    
    
    
    1,491
    
    
    
    1,547Total interest expense
    
    
    2,308
    
    
    
    2,049
    
    
    
    4,661
    
    
    
    3,965Net Interest Income
    
    
    2,088
    
    
    
    2,185
    
    
    
    4,162
    
    
    
    4,301Provision for Loan Losses
    
    
    245
    
    
    
    
    
    
    
    470
    
    
    
    Net Interest Income After Provision
for Loan Losses
    
    
    1,843
    
    
    
    2,185
    
    
    
    3,692
    
    
    
    4,301Noninterest IncomeFees and service charges
    
    
    628
    
    
    
    579
    
    
    
    1,228
    
    
    
    1,037Loan servicing fees
    
    
    110
    
    
    
    112
    
    
    
    221
    
    
    
    229Net gain on sale of loans
    
    
    138
    
    
    
    92
    
    
    
    331
    
    
    
    160Net gain (loss) on sale of securities
    
    
    (19
    )
    
    
    
    
    
    
    (19
    )
    
    
    Other income (loss)
    
    
    112
    
    
    
    20
    
    
    
    208
    
    
    
    129Total noninterest income
    
    
    969
    
    
    
    803
    
    
    
    1,969
    
    
    
    1,555Noninterest ExpensesSalaries and employee benefits
    
    
    1,034
    
    
    
    1,293
    
    
    
    2,140
    
    
    
    2,572Occupancy and equipment
    
    
    247
    
    
    
    254
    
    
    
    513
    
    
    
    514Data processing
    
    
    179
    
    
    
    181
    
    
    
    366
    
    
    
    350Amortization of mortgage servicing rights
    
    
    87
    
    
    
    104
    
    
    
    173
    
    
    
    205Professional services
    
    
    145
    
    
    
    136
    
    
    
    250
    
    
    
    257Amortization of core deposit intangible
    
    
    54
    
    
    
    69
    
    
    
    122
    
    
    
    155NOW account processing
    
    
    47
    
    
    
    41
    
    
    
    91
    
    
    
    84ATM/Debit card processing
    
    
    49
    
    
    
    63
    
    
    
    93
    
    
    
    119Foreclosed property expense
    
    
    16
    
    
    
    98
    
    
    
    39
    
    
    
    155Other general and administrative
    
    
    334
    
    
    
    303
    
    
    
    596
    
    
    
    594Total noninterest expense
    
    
    2,192
    
    
    
    2,542
    
    
    
    4,383
    
    
    
    5,005Income  Before income taxes
    
    
    620
    
    
    
    446
    
    
    
    1,278
    
    
    
    851Income Taxes
    
    
    156
    
    
    
    130
    
    
    
    320
    
    
    
    205Net Income
    
    $
    464
    
    
    $
    316
    
    
    $
    958
    
    
    $
    646Earnings Per ShareBasic
    
    $
    0.19
    
    
    $
    0.12
    
    
    $
    0.40
    
    
    $
    0.25Diluted
    
    $
    0.19
    
    
    $
    0.12
    
    
    $
    0.40
    
    
    $
    0.25
  2




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##### Table of Contents



AccumulatedCommon Stock
    
    
    Additional
    
    
    
    
    
    
    OtherNumber
    
    
    
    
    
    
    Paid in
    
    
    Retained
    
    
    Comprehensive
    
    
    Unearnedof Shares
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164
    
    
    
    1642,182 shares repurchased at $11.40/share
    
    
    (2
    )
    
    
    
    
    
    
    (24
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )Repurchase of 50,000 shares
    
    
    
    
    
    
    
    
    
    
    (599
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (599
    )Stock option expenses
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    646
    
    
    
    
    
    
    
    
    
    
    
    646Change in unrealized loss on
securities available-for-sale,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (66
    )
    
    
    
    
    
    
    (66
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    580Dividends paid ($0.12/share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (320
    )
    
    
    
    
    
    
    
    
    
    
    (320
    )Balance- June 30, 2006
    
    
    2,712
    
    
    $
    27
    
    
    $
    27,616
    
    
    $
    14,727
    
    
    $
    (221
    )
    
    $
    (1,729
    )
    
    $
    40,420Balance- January 1, 2007
    
    
    2,534
    
    
    $
    25
    
    
    $
    26,191
    
    
    $
    15,319
    
    
    $
    (63
    )
    
    $
    (1,486
    )
    
    $
    39,986Vesting of restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173
    
    
    
    1732,108 shares repurchased at $11.83/share
    
    
    (2
    )
    
    
    
    
    
    
    (24
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )Stock option expenses
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    958
    
    
    
    
    
    
    
    
    
    
    
    958Change in unrealized loss on
securities available-for-sale,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29
    )
    
    
    
    
    
    
    (29
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    929Dividends paid ($0.14/share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (354
    )
    
    
    
    
    
    
    
    
    
    
    (354
    )Balance- June 30, 2007
    
    
    2,532
    
    
    $
    25
    
    
    $
    26,210
    
    
    $
    15,923
    
    
    $
    (92
    )
    
    $
    (1,313
    )
    
    $
    40,753
  3




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##### Table of Contents



Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2007
    
    
    2006(Dollars in thousands)Cash Flows From Operating ActivitiesNet Income
    
    $
    958
    
    
    $
    646Adjustments to reconcile net income to net cash from operating activitiesDepreciation and amortization
    
    
    534
    
    
    
    647Provision for loan losses
    
    
    470
    
    
    
    Stock option expense
    
    
    43
    
    
    
    43Gain on sale of foreclosed assets
    
    
    (114
    )
    
    
    (8
    )Mortgage loans originated for sale
    
    
    (13,850
    )
    
    
    (7,560
    )Proceeds from sale of mortgage loans
    
    
    13,716
    
    
    
    7,816Gain on sale of mortgage loans
    
    
    (331
    )
    
    
    (160
    )Loss on sale of available for sale securities
    
    
    19
    
    
    
    Earned stock compensation
    
    
    173
    
    
    
    Loss on disposal of equipment
    
    
    6
    
    
    
    164Net change in:Deferred loan fees
    
    
    10
    
    
    
    (55
    )Accrued interest receivable
    
    
    95
    
    
    
    15Other assets
    
    
    6
    
    
    
    657Accrued expenses and other liabilities
    
    
    (286
    )
    
    
    2,417Net cash provided by operating activities
    
    
    1,449
    
    
    
    4,622Cash Flows From Investing ActivitiesActivity in available-for-sale securities:Purchases
    
    
    (3,819
    )
    
    
    (1,993
    )Proceeds from sales of securities
    
    
    2,928
    
    
    
    Proceeds from maturities of securities
    
    
    2,101
    
    
    
    2,862Activity in held-to-maturity securities:Purchases
    
    
    
    
    
    
    (4
    )Proceeds from maturities of securities
    
    
    
    
    
    
    10Loan originations and principal collections, net
    
    
    2,727
    
    
    
    (15,815
    )Proceeds from sale of foreclosed assets
    
    
    748
    
    
    
    1,479Proceeds from sale of premises and equipment
    
    
    102
    
    
    
    Purchase of premises and equipment
    
    
    (61
    )
    
    
    (88
    )Net cash provided by (used in) investing activities
    
    
    4,726
    
    
    
    (13,549
    )Cash Flows From Financing ActivitiesNet increase (decrease) in deposits
    
    
    (9,858
    )
    
    
    7,009Repurchase of common stock
    
    
    (24
    )
    
    
    (623
    )Dividends paid
    
    
    (354
    )
    
    
    (320
    )Proceeds from FHLB advances
    
    
    13,500
    
    
    
    10,000Repayment of FHLB advances
    
    
    (10,500
    )
    
    
    (8,970
    )Net cash provided by financing activities
    
    
    (7,236
    )
    
    
    7,096Net Increase in Cash and Cash Equivalents
    
    
    (1,061
    )
    
    
    (1,831
    )Cash and Cash Equivalents- Beginning
    
    
    15,297
    
    
    
    16,286Cash and Cash Equivalents End
    
    $
    14,236
    
    
    $
    14,455Supplemental Cash Flow Information:Cash paid for:Interest
    
    
    4,733
    
    
    
    3,891Income taxes
    
    
    450
    
    
    
    Noncash investing activities:Loans transferred to foreclosed assets
    
    
    278
    
    
    
    1,201Issuance of common stock in connection with the 2003
Recognition and Retention Plan
    
    
    
    
    
    
    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
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2007
    
    
    June 30, 2006
    
    
    June 30, 2007
    
    
    June 30, 2006Basic earnings per shareNumerator:Net income
    
    $
    464
    
    
    $
    316
    
    
    $
    958
    
    
    $
    646Denominator:Weighted average common shares outstanding
    
    
    2,532
    
    
    
    2,711
    
    
    
    2,533
    
    
    
    2,709Less: Average unallocated ESOP shares
    
    
    (93
    )
    
    
    (111
    )
    
    
    (93
    )
    
    
    (111
    )Less: Average non-vested RRP shares
    
    
    (33
    )
    
    
    (60
    )
    
    
    (38
    )
    
    
    (58
    )Weighted average common shares outstanding
for basic earnings per share
    
    
    2,406
    
    
    
    2,540
    
    
    
    2,402
    
    
    
    2,540Basic earnings per share
    
    $
    0.19
    
    
    $
    0.12
    
    
    $
    0.40
    
    
    $
    0.25Diluted earnings per shareNumerator:Net income
    
    $
    464
    
    
    $
    316
    
    
    $
    958
    
    
    $
    646Denominator:Weighted average common shares outstanding
for basic earnings per share
    
    
    2,406
    
    
    
    2,540
    
    
    
    2,402
    
    
    
    2,540Add: Dilutive effects of restricted stock and stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares and dilutivepotential common shares outstanding
    
    
    2,406
    
    
    
    2,540
    
    
    
    2,402
    
    
    
    2,540Diluted earnings per share
    
    $
    0.19
    
    
    $
    0.12
    
    
    $
    0.40
    
    
    $
    0.25
 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
  June 30, 2007
    
    
    December 31, 2006Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Real Estate Loans:One-to-four family
    
    $
    133,988
    
    
    
    58.2
    %
    
    $
    141,679
    
    
    
    60.8
    %Multi-family
    
    
    5,597
    
    
    
    2.4
    
    
    
    6,008
    
    
    
    2.6Commercial
    
    
    49,194
    
    
    
    21.4
    
    
    
    44,513
    
    
    
    19.1Construction or development
    
    
    8,985
    
    
    
    3.9
    
    
    
    9,529
    
    
    
    4.1Total real estate loans
    
    
    197,764
    
    
    
    85.9
    
    
    
    201,729
    
    
    
    86.6Other loans:Consumer loans:Automobile
    
    
    1,304
    
    
    
    0.6
    
    
    
    1,509
    
    
    
    0.6Home equity
    
    
    20,441
    
    
    
    8.9
    
    
    
    19,077
    
    
    
    8.3Manufactured housing
    
    
    433
    
    
    
    0.2
    
    
    
    495
    
    
    
    0.2Other
    
    
    6,295
    
    
    
    2.7
    
    
    
    7,083
    
    
    
    3.0Total consumer loans
    
    
    28,473
    
    
    
    12.4
    
    
    
    28,164
    
    
    
    12.1Commercial Business Loans
    
    
    3,888
    
    
    
    1.7
    
    
    
    2,969
    
    
    
    1.3Total other loans
    
    
    32,361
    
    
    
    14.1
    
    
    
    31,133
    
    
    
    13.4Total Loans
    
    
    230,125
    
    
    
    100.0
    %
    
    
    232,862
    
    
    
    100.0
    %Less:Allowance for loan losses
    
    
    2,182
    
    
    
    
    
    
    
    2,024Net deferred loan fees
    
    
    581
    
    
    
    
    
    
    
    591Loans in process
    
    
    
    
    
    
    
    
    
    
    Total Loans, net
    
    $
    227,362
    
    
    
    
    
    
    $
    230,247
   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



Six Months Ended June 30,2007
    
    
    2006Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate
    
    
    Balance
    
    
    Paid
    
    
    Rate(dollars in thousands)Fed Funds and overnight deposits
    
    $
    10,266
    
    
    $
    262
    
    
    
    5.15
    %
    
    $
    6,644
    
    
    $
    202
    
    
    
    6.13
    %Investment securities
    
    
    14,334
    
    
    
    318
    
    
    
    4.47
    
    
    
    13,724
    
    
    
    281
    
    
    
    4.13Other securities
    
    
    4,174
    
    
    
    94
    
    
    
    4.54
    
    
    
    4,773
    
    
    
    127
    
    
    
    5.37Loans receivable
    
    
    229,480
    
    
    
    8,149
    
    
    
    7.16
    
    
    
    221,616
    
    
    
    7,656
    
    
    
    6.97Total earning assets
    
    $
    258,254
    
    
    $
    8,823
    
    
    
    6.89
    
    
    $
    246,757
    
    
    $
    8,266
    
    
    
    6.76Demand and NOW Accounts
    
    $
    32,601
    
    
    $
    34
    
    
    
    0.21
    
    
    $
    29,178
    
    
    
    35
    
    
    
    0.24Money market accounts
    
    
    23,069
    
    
    
    428
    
    
    
    3.74
    
    
    
    17,109
    
    
    
    231
    
    
    
    2.72Savings accounts
    
    
    22,559
    
    
    
    47
    
    
    
    0.42
    
    
    
    26,293
    
    
    
    55
    
    
    
    0.42Certificates of deposit
    
    
    110,521
    
    
    
    2,662
    
    
    
    4.86
    
    
    
    105,758
    
    
    
    2,097
    
    
    
    4.00Federal Home Loan Bank Advances
    
    
    54,362
    
    
    
    1,490
    
    
    
    5.53
    
    
    
    56,976
    
    
    
    1,547
    
    
    
    5.48Total interest bearing liabilities
    
    $
    243,112
    
    
    
    4,661
    
    
    
    3.87
    
    
    $
    235,314
    
    
    
    3,965
    
    
    
    3.40Net interest income
    
    
    
    
    
    $
    4,162
    
    
    
    
    
    
    
    
    
    
    $
    4,301Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.02
    %
    
    
    
    
    
    
    
    
    
    
    3.37
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.22
    %
    
    
    
    
    
    
    
    
    
    
    3.49
    %
 Provision for Loan Losses
    June 30, 2007
    
    
    December 31, 2006(Dollars in thousands)Non-performing loans
    
    $
    1,489
    
    
    $
    468Real estate in judgment
    
    
    468
    
    
    
    895Foreclosed and repossessed assets
    
    
    856
    
    
    
    785Total non-performing assets
    
    $
    2,813
    
    
    $
    2,148Non-performing loans to total loans
    
    
    0.65
    %
    
    
    0.20
    %Non-performing assets to total assets
    
    
    0.99
    %
    
    
    0.74
    %Allowance for loan losses to non-performing loans
    
    
    146.59
    %
    
    
    432.48
    %Allowance for loan losses to net loans receivable
    
    
    105.50
    %
    
    
    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
    
    $
    99,531
    
    
    $
    64,681
    
    
    $
    26,191
    
    
    $
    8,659
    
    
    $
    FHLB advances
    
    
    57,476
    
    
    
    17,146
    
    
    
    14,813
    
    
    
    15,342
    
    
    
    10,175Total
    
    $
    157,007
    
    
    $
    81,827
    
    
    $
    41,004
    
    
    $
    24,001
    
    
    $
    10,175
 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
    
    
    7,478
    
    
    $
    7,478
    
    
    $
    
    
    
    $
    
    
    
    $
    Unfunded commitments under HELOCs
    
    
    16,430
    
    
    
    842
    
    
    
    4,392
    
    
    
    4,292
    
    
    
    6,904Unfunded commitments under Commercial LOCs
    
    
    5,537
    
    
    
    1,401
    
    
    
    2,688
    
    
    
    1,107
    
    
    
    341Letters of credit
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    29,448
    
    
    $
    9,724
    
    
    $
    7,080
    
    
    $
    5,399
    
    
    $
    7,245
  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
 Election of Directors with terms ending in 2010
 Craig W. Dally

Donald L. Denney

Richard L. Dobbins
    
    For: 2,042,869
For: 2,074,030
For: 2,079,913
    
    Withheld: 117,058
Withheld: 85,897
Withheld: 80,014
  Harold A. Adamson

Lauren L. Bracy
James R. Vozar

Stephen M. Ross

Martin M. Mitchell

Gordon L. Welch
    
    Term Expires: 2008
Term Expires: 2008
Term Expires: 2008
Term Expires: 2009
Term Expires: 2009
Term Expires: 2009
  For: 2,120,834
    
    Against: 35,594
    
    Abstain: 3,499
 
 Item 5. OTHER INFORMATION
  
 Item 6. EXHIBITS
  15




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##### Table of Contents



SIGNATURES
  MONARCH COMMUNITY BANCORP, INC.Date: August 14, 2007
    
    By:
    
    /s/Donald L. DenneyDonald L. DenneyPresident and Chief Executive OfficerDate: August 14, 2007
    
    And:
    
    /s/William C. KurtzWilliam C. KurtzSenior Vice President,Chief Financial Officer(Principal Financial Officer)
 16




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit No
    
    Description of Exhibit10.1
    
    Management Continuity Agreement with Scott McQueen31.1
    
    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