##### 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, 2008or
 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
  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, 2008 and
December 31, 2007
    
    
    1Condensed Consolidated Statements of Income  Six Months
Ended June 30, 2008 and 2007
    
    
    2Condensed Consolidated Statements of Changes in Stockholders Equity 
Six Months Ended June 30, 2008 and 2007
    
    
    3Condensed Consolidated Statements of Cash Flows  Six Months Ended
June 30, 2008 and 2007
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5-7Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    7-14Item 3  Quantitative and Qualitative Disclosures about Market Risk
    
    
    14Item 4T Controls and Procedures
    
    
    15PART 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
    
    
    16Item 4  Submission of Matters to a Vote of Security Holders
    
    
    16Item 5  Other Information
    
    
    16Item 6  Exhibits
    
    
    16SIGNATURES
    
    
    17CERTIFICATIONS
    
    
    18-21Certification of President and CEOCertification of the CFOSection 1350 Certifications




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##### Table of Contents



PART IFINANCIAL INFORMATION
 
 Item 1. CONDENSED FINANCIAL STATEMENTS
 
 Condensed Consolidated Balance Sheets
 (Unaudited)June
    
    
    December 31,2008
    
    
    2007(Dollars in thousands,except per share data)AssetsCash and due from banks
    
    
    7,962
    
    
    $
    7,691Federal Home Loan Bank overnight time and
other interest bearing deposits
    
    
    857
    
    
    
    6,151Total cash and cash equivalents
    
    
    8,819
    
    
    
    13,842Securities  Available for sale
    
    
    10,945
    
    
    
    11,084Securities  Held to maturity
    
    
    37
    
    
    
    238Other securities
    
    
    4,237
    
    
    
    4,237Loans held for sale
    
    
    148
    
    
    
    422Loans, net
    
    
    238,527
    
    
    
    224,797Foreclosed assets, net
    
    
    830
    
    
    
    1,515Premises and equipment
    
    
    4,626
    
    
    
    4,675Goodwill
    
    
    9,606
    
    
    
    9,606Core deposit intangible
    
    
    766
    
    
    
    862Other assets
    
    
    8,539
    
    
    
    7,930Total assets
    
    $
    287,080
    
    
    $
    279,208Liabilities and Stockholders EquityLiabilitiesDeposits:Non-interest bearing
    
    $
    16,206
    
    
    $
    13,609Interest bearing
    
    
    175,828
    
    
    
    164,327Total deposits
    
    
    192,034
    
    
    
    177,936Federal Home Loan Bank advances
    
    
    54,830
    
    
    
    59,330Accrued expenses and other liabilities
    
    
    2,637
    
    
    
    2,856Total liabilities
    
    
    249,501
    
    
    
    240,122Commitments and Contingencies
    
    
    
    
    
    
    Stockholders EquityCommon stock  $0.01 par value, 20,000,000 shares authorized, 2,142,543
shares issued and outstanding at June 30, 2008 and
2,321,585 shares issued and outstanding at December 31, 2007
    
    
    21
    
    
    
    23Additional paid-in capital
    
    
    21,998
    
    
    
    23,828Retained earnings
    
    
    16,521
    
    
    
    16,341Accumulated other comprehensive income
    
    
    28
    
    
    
    52Unearned compensation
    
    
    (989
    )
    
    
    (1,158
    )Total stockholders equity
    
    
    37,579
    
    
    
    39,086Total liabilities and stockholders equity
    
    $
    287,080
    
    
    $
    279,208
  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 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands, except per share data)Interest IncomeLoans, including fees
    
    $
    4,090
    
    
    $
    4,070
    
    
    $
    8,148
    
    
    $
    8,149Investment securities
    
    
    169
    
    
    
    205
    
    
    
    339
    
    
    
    412Federal funds sold and overnight
deposits
    
    
    29
    
    
    
    121
    
    
    
    87
    
    
    
    262Total interest income
    
    
    4,288
    
    
    
    4,396
    
    
    
    8,574
    
    
    
    8,823Interest ExpenseDeposits
    
    
    1,483
    
    
    
    1,541
    
    
    
    3,038
    
    
    
    3,170Federal Home Loan Bank advances
    
    
    643
    
    
    
    767
    
    
    
    1,302
    
    
    
    1,491Total interest expense
    
    
    2,126
    
    
    
    2,308
    
    
    
    4,340
    
    
    
    4,661Net Interest Income
    
    
    2,162
    
    
    
    2,088
    
    
    
    4,234
    
    
    
    4,162Provision for Loan Losses
    
    
    448
    
    
    
    245
    
    
    
    757
    
    
    
    470Net Interest Income After Provision
for Loan Losses
    
    
    1,714
    
    
    
    1,843
    
    
    
    3,477
    
    
    
    3,692Non-interest IncomeFees and service charges
    
    
    573
    
    
    
    628
    
    
    
    1,144
    
    
    
    1,228Loan servicing fees
    
    
    111
    
    
    
    110
    
    
    
    220
    
    
    
    221Net gain on sale of loans
    
    
    195
    
    
    
    138
    
    
    
    461
    
    
    
    331Net gain (loss) on sale of securities
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    (19
    )Other income
    
    
    60
    
    
    
    93
    
    
    
    113
    
    
    
    208Total non-interest income
    
    
    941
    
    
    
    969
    
    
    
    1,940
    
    
    
    1,969Non-interest ExpenseSalaries and employee benefits
    
    
    1,121
    
    
    
    1,074
    
    
    
    2,267
    
    
    
    2,140Occupancy and equipment
    
    
    254
    
    
    
    247
    
    
    
    517
    
    
    
    513Data processing
    
    
    189
    
    
    
    179
    
    
    
    391
    
    
    
    366Amortization of mortgage servicing
rights
    
    
    112
    
    
    
    87
    
    
    
    231
    
    
    
    173Professional services
    
    
    107
    
    
    
    145
    
    
    
    193
    
    
    
    250Amortization of core deposit
intangible
    
    
    43
    
    
    
    54
    
    
    
    97
    
    
    
    122NOW account processing
    
    
    42
    
    
    
    47
    
    
    
    87
    
    
    
    91ATM/Debit card processing
    
    
    51
    
    
    
    49
    
    
    
    97
    
    
    
    93Foreclosed property expense
    
    
    27
    
    
    
    16
    
    
    
    85
    
    
    
    39Other general and administrative
    
    
    376
    
    
    
    294
    
    
    
    677
    
    
    
    596Total non-interest
expense
    
    
    2,322
    
    
    
    2,192
    
    
    
    4,641
    
    
    
    4,383Income  Before income taxes
    
    
    332
    
    
    
    620
    
    
    
    775
    
    
    
    1,278Income Taxes
    
    
    85
    
    
    
    156
    
    
    
    195
    
    
    
    320Net Income
    
    $
    247
    
    
    $
    464
    
    
    $
    580
    
    
    $
    958Earnings Per ShareBasic
    
    $
    0.12
    
    
    $
    0.19
    
    
    $
    0.27
    
    
    $
    0.40Diluted
    
    $
    0.12
    
    
    $
    0.19
    
    
    $
    0.27
    
    
    $
    0.40
  2




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##### Table of Contents



AccumulatedCommon Stock
    
    
    
    
    
    
    
    
    
    
    OtherNumber of
    
    
    
    
    
    
    Additional Paid
    
    
    Retained
    
    
    Comprehensive
    
    
    UnearnedShares
    
    
    Amount
    
    
    in Capital
    
    
    Earnings
    
    
    Income
    
    
    Compensation
    
    
    TotalBalance 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, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (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
    )
    
    
    40,753Balance 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
    )
    
    
    37,579
  3




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##### Table of Contents



Six Months EndedJune, 302008
    
    
    2007(Dollars in thousands)Cash Flows From Operating ActivitiesNet Income
    
    $
    580
    
    
    $
    958Adjustments to reconcile net income to net cash from operating activitiesDepreciation and amortization
    
    
    574
    
    
    
    534Provision for loan losses
    
    
    757
    
    
    
    470Stock option expense
    
    
    5
    
    
    
    43Gain on sale of foreclosed assets
    
    
    (35
    )
    
    
    (114
    )Mortgage loans originated for sale
    
    
    (21,718
    )
    
    
    (13,850
    )Proceeds from sale of mortgage loans
    
    
    21,196
    
    
    
    13,716Gain on sale of mortgage loans
    
    
    (461
    )
    
    
    (331
    )(Gain) Loss on sale of available for sale
securities
    
    
    (2
    )
    
    
    19Earned stock compensation
    
    
    169
    
    
    
    173Gain on disposal of equipment
    
    
    
    
    
    
    6Net change in:Deferred loan fees
    
    
    (47
    )
    
    
    10Accrued interest receivable
    
    
    21
    
    
    
    95Other assets
    
    
    (848
    )
    
    
    6Accrued expenses and other liabilities
    
    
    (208
    )
    
    
    (286
    )Net cash provided by operating activities
    
    
    (17
    )
    
    
    1,449Cash Flows From Investing ActivitiesActivity in available-for-sale securities:Purchases
    
    
    (2,269
    )
    
    
    (3,819
    )Proceeds from sales of securities
    
    
    
    
    
    
    2,928Proceeds from maturities of securities
    
    
    2,364
    
    
    
    2,101Activity in held-to-maturity securities:Purchases
    
    
    (7
    )
    
    
    Proceeds from maturities of securities
    
    
    208
    
    
    
    Loan originations and principal
collections, net
    
    
    (13,723
    )
    
    
    2,727Proceeds from sale of foreclosed assets
    
    
    1,249
    
    
    
    748Proceeds from sale of premises and
equipment
    
    
    
    
    
    
    102Purchase of premises and equipment
    
    
    (189
    )
    
    
    (61
    )Net cash provided by (used in) investing
activities
    
    
    (12,367
    )
    
    
    4,726Cash Flows From Financing ActivitiesNet increase in deposits
    
    
    14,098
    
    
    
    (9,858
    )Repurchase of common stock
    
    
    (1,837
    )
    
    
    (24
    )Dividends paid
    
    
    (400
    )
    
    
    (354
    )Proceeds from FHLB advances
    
    
    8,500
    
    
    
    13,500Repayment of FHLB advances
    
    
    (13,000
    )
    
    
    (10,500
    )Net cash provided by financing activities
    
    
    7,361
    
    
    
    (7,236
    )Net Increase in Cash and Cash Equivalents
    
    
    (5,023
    )
    
    
    (1,061
    )Cash and Cash Equivalents Beginning
    
    
    13,842
    
    
    
    15,297Cash and Cash Equivalents End
    
    $
    8,819
    
    
    $
    14,236Supplemental Cash Flow Information:Cash paid for:Interest
    
    
    4,343
    
    
    
    4,733Income taxes
    
    
    325
    
    
    
    450Noncash investing activities:Loans transferred to foreclosed assets
    
    
    540
    
    
    
    278Issuance of common stock in connection
with the 2003 RRP
    
    
    
    
    
    
    
  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, 2008
    
    
    June 30, 2007
    
    
    June 30, 2008
    
    
    June 30, 2007Basic earnings per shareNumerator:Net income
    
    $
    247
    
    
    $
    464
    
    
    $
    580
    
    
    $
    958Denominator:Weighted average common shares outstanding
    
    
    2,209
    
    
    
    2,532
    
    
    
    2,246
    
    
    
    2,533Less: Average unallocated ESOP shares
    
    
    (83
    )
    
    
    (93
    )
    
    
    (83
    )
    
    
    (93
    )Less: Average non-vested RRP shares
    
    
    (15
    )
    
    
    (33
    )
    
    
    (35
    )
    
    
    (38
    )Weighted average common shares outstanding
for basic earnings per share
    
    
    2,111
    
    
    
    2,406
    
    
    
    2,128
    
    
    
    2,402Basic earnings per share
    
    $
    0.12
    
    
    $
    0.19
    
    
    $
    0.27
    
    
    $
    0.40Diluted earnings per shareNumerator:Net income
    
    $
    247
    
    
    $
    464
    
    
    $
    580
    
    
    $
    958Denominator:Weighted average common shares outstanding
for basic earnings per share
    
    
    2,111
    
    
    
    2,406
    
    
    
    2,128
    
    
    
    2,402Add: Dilutive effects of restricted stock
and stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares and dilutive
potential common shares outstanding
    
    
    2,111
    
    
    
    2,406
    
    
    
    2,128
    
    
    
    2,402Diluted earnings per share
    
    $
    0.12
    
    
    $
    0.19
    
    
    $
    0.27
    
    
    $
    0.40
 RECENT ACCOUNTING PRONOUNCEMENTS
   FAIR VALUE MEASUREMENTS
    6




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##### Table of Contents



SignificantOther
    
    SignificantQuoted Prices in Active
    
    Observable
    
    UnobservableMarkets for Identical
    
    Inputs (Level
    
    Inputs (Level
    
    Balance at June 30,Assets (Level 1)
    
    2)
    
    3)
    
    2008AssetsInvestment securities- available  for  sale
    
    $
    7,752
    
    
    $
    3,193
    
    
    
    
    $
    10,945
   
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   FORWARD-LOOKING STATEMENTS
   CRITICAL ACCOUNTING POLICIES
  7




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##### Table of Contents



Allowance for Loan Losses
 Foreclosed Assets .
 Goodwill and Other Intangible Assets
 FINANCIAL CONDITION
 Assets
  Securities
 nd
 Loans
  8




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##### Table of Contents



June 30, 2008
    
    
    December 31, 2007Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Real Estate Loans:One-to-four family
    
    $
    124,140
    
    
    
    51.5
    
    
    $
    126,780
    
    
    
    55.8
    %Multi-family
    
    
    5,828
    
    
    
    2.4
    
    
    
    5,594
    
    
    
    2.5Commercial
    
    
    71,218
    
    
    
    29.5
    
    
    
    56,714
    
    
    
    25.0Construction or development
    
    
    5,514
    
    
    
    2.3
    
    
    
    6,409
    
    
    
    2.8Total real estate loans
    
    
    206,700
    
    
    
    85.7
    
    
    
    195,497
    
    
    
    86.0Other loans:Consumer loans:Home equity
    
    
    19,897
    
    
    
    8.3
    
    
    
    20,430
    
    
    
    9.0Other
    
    
    6,251
    
    
    
    2.6
    
    
    
    7,014
    
    
    
    3.1Total consumer loans
    
    
    26,148
    
    
    
    10.8
    
    
    
    27,444
    
    
    
    12.1Commercial Business Loans
    
    
    8,281
    
    
    
    3.4
    
    
    
    4,228
    
    
    
    1.9Total other loans
    
    
    34,429
    
    
    
    14.3
    
    
    
    31,672
    
    
    
    14.0Total Loans
    
    
    241,129
    
    
    
    100.0
    %
    
    
    227,169
    
    
    
    100.0
    %Allowance for loan losses
    
    
    2,006
    
    
    
    
    
    
    
    1,824Less: Net deferred loan fees
    
    
    596
    
    
    
    
    
    
    
    548Loans in process
    
    
    
    
    
    
    
    
    
    
    Total Loans, net
    
    $
    238,527
    
    
    
    
    
    
    $
    224,797
   Deposits
  9




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##### Table of Contents



Federal Home Loan Bank Advances
  Equity
   RESULTS OF OPERATIONS
 Net Interest Income
     Six Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate
    
    
    Balance
    
    
    Paid
    
    
    Rate(dollars in thousands)Fed Funds and overnight deposits
    
    $
    9,323
    
    
    $
    87
    
    
    
    1.87
    %
    
    $
    10,266
    
    
    $
    262
    
    
    
    5.15
    %Investment securities
    
    
    10,849
    
    
    
    235
    
    
    
    4.34
    
    
    
    14,334
    
    
    
    318
    
    
    
    4.47Other securities
    
    
    4,174
    
    
    
    104
    
    
    
    5.00
    
    
    
    4,174
    
    
    
    94
    
    
    
    4.54Loans receivable
    
    
    233,220
    
    
    
    8,148
    
    
    
    7.01
    
    
    
    229,480
    
    
    
    8,149
    
    
    
    7.16Total earning assets
    
    $
    257,566
    
    
    $
    8,574
    
    
    
    6.68
    
    
    $
    258,254
    
    
    $
    8,823
    
    
    
    6.89Demand and NOW Accounts
    
    $
    32,413
    
    
    $
    49
    
    
    
    0.30
    
    
    $
    32,601
    
    
    $
    34
    
    
    
    0.21Money market accounts
    
    
    31,469
    
    
    
    491
    
    
    
    3.13
    
    
    
    23,069
    
    
    
    428
    
    
    
    3.74Savings accounts
    
    
    19,273
    
    
    
    41
    
    
    
    0.43
    
    
    
    22,559
    
    
    
    47
    
    
    
    0.42Certificates of deposit
    
    
    106,224
    
    
    
    2,457
    
    
    
    4.64
    
    
    
    110,521
    
    
    
    2,662
    
    
    
    4.86Federal Home Loan Bank Advances
    
    
    52,557
    
    
    
    1,302
    
    
    
    4.97
    
    
    
    54,362
    
    
    
    1,490
    
    
    
    5.53Total interest bearing liabilities
    
    $
    241,936
    
    
    
    4,340
    
    
    
    3.60
    
    
    $
    243,112
    
    
    
    4,661
    
    
    
    3.87Net interest income
    
    
    
    
    
    $
    4,234
    
    
    
    
    
    
    
    
    
    
    $
    4,162Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.08
    %
    
    
    
    
    
    
    
    
    
    
    3.02
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.29
    %
    
    
    
    
    
    
    
    
    
    
    3.22
    %
 10




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##### Table of Contents



Provision for Loan Losses
    June 30, 2008
    
    

December 31, 2007(In thousands)Non-performing loans
    
    $
    1,947
    
    
    $
    865Real estate in judgement
    
    
    331
    
    
    
    630Foreclosed and repossessed assets
    
    
    499
    
    
    
    885Total non-performing assets
    
    $
    2,777
    
    
    $
    2,380Non-performing loans to total loans
    
    
    0.81
    %
    
    
    0.38
    %Non-performing assets to total assets
    
    
    0.97
    %
    
    
    0.85
    %Allowance
for loan losses to non-performing loans
    
    
    103.10
    %
    
    
    210.80
    %Allowance for loan losses to net loans recieveable
    
    
    0.83
    %
    
    
    0.81
    %
 
 Non-interest Income
  11




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##### Table of Contents



Non-interest Expense
   Federal Income Tax Expense
  12




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##### Table of Contents



LIQUIDITY
     13




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##### Table of Contents



CONTRACTUAL OBLIGATIONS AND OFF BALANCE SHEET ARRANGEMENTS
  Contractual Obligations
 Payments Due by PeriodLess than
    
    
    1-3
    
    
    3-5
    
    
    AfterTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 years(Dollars in Thousands)Certificates of deposit
    
    $
    100,290
    
    
    $
    60,390
    
    
    $
    30,211
    
    
    $
    9,689
    
    
    $
    FHLB advances
    
    
    54,830
    
    
    
    20,152
    
    
    
    21,328
    
    
    
    13,350
    
    
    
    Total
    
    $
    155,120
    
    
    $
    80,542
    
    
    $
    51,539
    
    
    $
    23,039
    
    
    $
    
 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
    
    $
    10,650
    
    
    $
    10,650
    
    
    $
    
    
    
    $
    
    
    
    $
    Unfunded commitments under HELOCs
    
    
    15,441
    
    
    
    1,631
    
    
    
    3,726
    
    
    
    3,741
    
    
    
    6,343Unfunded commitments under Commercial LOCs
    
    
    4,870
    
    
    
    688
    
    
    
    1,093
    
    
    
    923
    
    
    
    2,166Letters of credit
    
    
    16
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    30,977
    
    
    $
    12,985
    
    
    $
    4,819
    
    
    $
    4,664
    
    
    $
    8,509
  CAPITAL RESOURCES
  
 ITEM 3. QUANTITATIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK
   14




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##### Table of Contents



ITEM 4T. CONTROLS AND PROCEDURES
   
 PART IIOTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  
 Item 1A. RISK FACTORS
  
 Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c)
  (a)
    
    
    (b)
    
    
    (c)
    
    
    (d)Total Number of Shares
    
    
    Maximum Number (or(or Unit) Purchased as
    
    
    Approximate Dollar Value) ofTotal Number of
    
    
    
    
    
    Part of Publicly
    
    
    Shares (or Units) that may yetShares (or Units)
    
    
    Average Price paid
    
    
    Anounced Plans or
    
    
    Be Purchased Under thePeriod
    
    Purchased
    
    
    per Share (or Unit)
    
    
    Programs
    
    
    Plans or Program4/01/08-4/30/08
    
    
    44,950
    
    
    $
    10.19
    
    
    
    44,950
    
    
    
    168,2755/01/08-5/31/08
    
    
    39,470
    
    
    $
    10.12
    
    
    
    39,470
    
    
    
    130,1056/01/08-6/30/08
    
    
    33,500
    
    
    $
    9.94
    
    
    
    33,500
    
    
    
    95,305Total
    
    
    117,920
    
    
    $
    10.10
    
    
    
    117,920
    
    
    
    95,305
  15




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##### Table of Contents



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 2011
 Harold A. Adamson
    
    For: 1,612,471
    
    Withheld: 350,964James W. Gordon
    
    For: 1,625,412
    
    Withheld: 338,023Karl F. Loomis
    
    For: 1,620,408
    
    Withheld: 343,027
  Stephen M. Ross
    
    Term Expires: 2009Martin M. Mitchell
    
    Term Expires: 2009Gordon L. Welch
    
    Term Expires: 2009Craig W. Dally
    
    Term Expires: 2010Donald L. Denney
    
    Term Expires: 2010Richard L. Dobbins
    
    Term Expires: 2010
 2.
    
    Ratification of appointment of Plante & Moran, LLP as independent auditors for the
fiscal year ending December 31, 2008:
 For: 1,905,947
    
    Against:      54,575
    

    Abstain:      2,912
 
 Item 5. OTHER INFORMATION
  
 Item 6. EXHIBITS
  16




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##### Table of Contents



SIGNATURES
  MONARCH COMMUNITY BANCORP, INC.Date: August 13, 2008
    By:

/s/ Donald L. DenneyDonald L. DenneyPresident and Chief Executive Officer Date: August 13, 2008
    And:

/s/ Rebecca S. CrabillRebecca S. CrabillSenior Vice President, Chief Financial Officer 17




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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.
 18