UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
  þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 Commission file number 0-49814
 MONARCH COMMUNITY BANCORP, INC.
  Maryland
(State or other jurisdiction of 
incorporation or organization)
    
    04-3627031
(I.R.S. Employer
Identification No.)
 375 North Willowbrook Road, Coldwater, Michigan
    
    49036(Address of principal executive offices)
    
    (Zip Code)
 : (517) 278-4566    Common Stock, par value $.01 per share registered on NASDAQ Capital Market
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  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
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   DOCUMENTS INCORPORATED BY REFERENCE




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PART I
 ITEM 1. Business
 General
         2




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Forward-Looking Statements
  Employees
  Market Area
   Lending Activities
 General.
  3




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##### 



Loan Portfolio Composition .
 December 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006
    
    
    December 31, 2005Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Real Estate Loans:One-to four-family
    
    $
    108,354
    
    
    
    47.70
    %
    
    $
    124,855
    
    
    
    49.80
    %
    
    $
    126,780
    
    
    
    55.80
    %
    
    $
    140,374
    
    
    
    60.30
    %
    
    $
    139,636
    
    
    
    64.40
    %Multi-family
    
    
    5,421
    
    
    
    2.39
    
    
    
    5,728
    
    
    
    2.26
    
    
    
    5,594
    
    
    
    3.22
    
    
    
    7,511
    
    
    
    3.22
    
    
    
    3,534
    
    
    
    1.67Commercial
    
    
    72,689
    
    
    
    32.00
    
    
    
    75,730
    
    
    
    30.19
    
    
    
    56,714
    
    
    
    24.97
    
    
    
    41,079
    
    
    
    17.64
    
    
    
    34,721
    
    
    
    16.03Construction or
development
    
    
    9,528
    
    
    
    4.20
    
    
    
    9,499
    
    
    
    3.79
    
    
    
    6,409
    
    
    
    2.82
    
    
    
    9,529
    
    
    
    4.09
    
    
    
    5,415
    
    
    
    2.50Total real estate loans
    
    
    195,992
    
    
    
    86.29
    
    
    
    215,812
    
    
    
    86.04
    
    
    
    195,497
    
    
    
    85.25
    
    
    
    198,493
    
    
    
    85.25
    
    
    
    183,306
    
    
    
    84.60Other loans:Consumer loans:Home equity
    
    
    18,174
    
    
    
    8.00
    
    
    
    20,677
    
    
    
    8.24
    
    
    
    20,430
    
    
    
    8.99
    
    
    
    19,077
    
    
    
    8.19
    
    
    
    16,170
    
    
    
    7.46Other
    
    
    4,706
    
    
    
    2.07
    
    
    
    5,737
    
    
    
    2.29
    
    
    
    7,014
    
    
    
    3.09
    
    
    
    9,087
    
    
    
    3.90
    
    
    
    10,822
    
    
    
    5.00Total consumer loans
    
    
    22,880
    
    
    
    10.07
    
    
    
    26,414
    
    
    
    10.53
    
    
    
    27,444
    
    
    
    12.08
    
    
    
    28,164
    
    
    
    12.09
    
    
    
    26,992
    
    
    
    12.46Commercial Business Loans
    
    
    8,266
    
    
    
    3.64
    
    
    
    8,609
    
    
    
    3.43
    
    
    
    4,228
    
    
    
    1.86
    
    
    
    6,205
    
    
    
    2.67
    
    
    
    6,364
    
    
    
    2.94Total other loans
    
    
    31,146
    
    
    
    13.71
    
    
    
    35,023
    
    
    
    13.96
    
    
    
    31,672
    
    
    
    13.94
    
    
    
    34,369
    
    
    
    14.76
    
    
    
    33,356
    
    
    
    15.40Total Loans
    
    
    227,138
    
    
    
    100.00
    %
    
    
    250,835
    
    
    
    100.00
    %
    
    
    227,169
    
    
    
    100.00
    %
    
    
    232,862
    
    
    
    100.00
    %
    
    
    216,662
    
    
    
    100.00
    %Less:Allowance for loan losses
    
    
    5,783
    
    
    
    
    
    
    
    2,719
    
    
    
    
    
    
    
    1,824
    
    
    
    
    
    
    
    2,024
    
    
    
    
    
    
    
    2,925Net deferred loan fees
    
    
    480
    
    
    
    
    
    
    
    574
    
    
    
    
    
    
    
    548
    
    
    
    
    
    
    
    591
    
    
    
    
    
    
    
    640Loans in process
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Loans, net
    
    $
    220,875
    
    
    
    
    
    
    $
    247,542
    
    
    
    
    
    
    $
    224,797
    
    
    
    
    
    
    $
    230,247
    
    
    
    
    
    
    $
    213,097
 4




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##### 



December 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Fixed-Rate LoansReal Estate Loans:One-to-four family
    
    $
    80,241
    
    
    
    35.3
    %
    
    $
    92,644
    
    
    
    36.9
    %
    
    $
    83,386
    
    
    
    36.7
    %Multi-family
    
    
    5,396
    
    
    
    2.4
    %
    
    
    5,524
    
    
    
    2.2
    %
    
    
    5,397
    
    
    
    2.4
    %Commercial
    
    
    52,495
    
    
    
    23.1
    %
    
    
    47,689
    
    
    
    19.0
    %
    
    
    36,723
    
    
    
    16.2
    %Construction or development
    
    
    4,127
    
    
    
    1.8
    %
    
    
    8,111
    
    
    
    3.3
    %
    
    
    5,537
    
    
    
    2.4
    %Total real estate loans
    
    
    142,259
    
    
    
    62.6
    %
    
    
    153,968
    
    
    
    61.4
    %
    
    
    131,043
    
    
    
    57.7
    %Consumer
    
    
    15,323
    
    
    
    6.8
    %
    
    
    19,406
    
    
    
    7.7
    %
    
    
    21,354
    
    
    
    9.4
    %Commercial Business
    
    
    6,244
    
    
    
    2.7
    %
    
    
    7,011
    
    
    
    2.8
    %
    
    
    2,932
    
    
    
    1.3
    %Total fixed-rate loans
    
    
    163,826
    
    
    
    72.1
    %
    
    
    180,385
    
    
    
    71.9
    %
    
    
    155,329
    
    
    
    68.4
    %Adjustable-Rate LoansReal Estate Loans:One-to-four family
    
    $
    28,113
    
    
    
    12.4
    %
    
    $
    32,211
    
    
    
    12.8
    %
    
    $
    43,394
    
    
    
    18.3
    %Multi-family
    
    
    25
    
    
    
    0.0
    %
    
    
    204
    
    
    
    0.1
    %
    
    
    197
    
    
    
    0.1
    %Commercial
    
    
    20,194
    
    
    
    8.9
    %
    
    
    28,041
    
    
    
    11.2
    %
    
    
    19,991
    
    
    
    8.8
    %Construction or development
    
    
    5,401
    
    
    
    2.4
    %
    
    
    1,388
    
    
    
    0.6
    %
    
    
    872
    
    
    
    0.3
    %Total real estate loans
    
    
    53,733
    
    
    
    23.7
    %
    
    
    61,844
    
    
    
    24.7
    %
    
    
    64,454
    
    
    
    27.5
    %Consumer
    
    
    7,557
    
    
    
    3.3
    %
    
    
    7,008
    
    
    
    2.8
    %
    
    
    6,090
    
    
    
    2.7
    %Commercial Business
    
    
    2,022
    
    
    
    0.9
    %
    
    
    1,598
    
    
    
    0.6
    %
    
    
    1,296
    
    
    
    0.6
    %Total adjustable-rate loans
    
    
    63,312
    
    
    
    27.9
    %
    
    
    70,450
    
    
    
    28.1
    %
    
    
    71,840
    
    
    
    31.6
    %Total loans
    
    
    227,138
    
    
    
    100
    %
    
    
    250,835
    
    
    
    100.0
    %
    
    
    227,169
    
    
    
    100.0
    %Less:Allowance for loan losses
    
    
    5,783
    
    
    
    
    
    
    
    2,719
    
    
    
    
    
    
    
    1,824Net deferred loan fees
    
    
    480
    
    
    
    
    
    
    
    574
    
    
    
    
    
    
    
    548Loans in process
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Loans, net
    
    $
    220,875
    
    
    
    
    
    
    $
    247,542
    
    
    
    
    
    
    $
    224,797
 5




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Real EstateMulti-family and
    
    
    Construction orOne-to-Four Family
    
    
    Commercial
    
    
    Development
    
    
    Consumer
    
    
    Commercial Business
    
    
    TotalWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(Dollars in Thousands)Due to Mature:One year or less (1)
    
    
    7,070
    
    
    
    5.51
    %
    
    
    6,337
    
    
    
    6.53
    %
    
    
    1,527
    
    
    
    5.30
    %
    
    
    2,567
    
    
    
    6.90
    %
    
    
    1,056
    
    
    
    5.29
    %
    
    
    18,557
    
    
    
    6.02
    %After one year
through five years
    
    
    14,450
    
    
    
    6.78
    %
    
    
    52,415
    
    
    
    6.55
    %
    
    
    1,926
    
    
    
    6.88
    %
    
    
    11,553
    
    
    
    7.25
    %
    
    
    3,079
    
    
    
    6.71
    %
    
    
    83,423
    
    
    
    6.70
    %After five years
    
    
    86,834
    
    
    
    6.39
    %
    
    
    19,358
    
    
    
    5.81
    %
    
    
    6,075
    
    
    
    5.41
    %
    
    
    8,760
    
    
    
    5.14
    %
    
    
    4,131
    
    
    
    7.33
    %
    
    
    125,158
    
    
    
    6.20
    %
 
 (1)
    
    Includes demand loans.  6




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One-to-Four Family Residential Real Estate Lending.
       7




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Multi-family and Commercial Real Estate Lending
     8




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Construction and Land Development Lending
   Consumer and Other Lending
   9




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Commercial Business Lending
    Loan Originations, Purchases, Sales and Repayments
   10




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##### 



Years EndedDecember 31,2009
    
    
    2008(Dollars in thousands)Originations by type:Real Estate:One-to-four family
    
    $
    104,416
    
    
    $
    54,846Multi-family
    
    
    760
    
    
    
    250Commercial
    
    
    9,025
    
    
    
    31,316Construction or development
    
    
    4,943
    
    
    
    5,358Total real estate loans
    
    
    119,144
    
    
    
    91,770Consumer Loans:Home Equity
    
    
    5,073
    
    
    
    5,809Other
    
    
    827
    
    
    
    891Commercial business
    
    
    743
    
    
    
    7,101Total loans originated
    
    
    125,787
    
    
    
    105,571Sales and Repayments:One-to-four family loans sold
    
    
    89,901
    
    
    
    27,838Commercial real estate loans sold
    
    
    
    
    
    
    Principal repayments
    
    
    59,583
    
    
    
    54,067Total reductions
    
    
    149,484
    
    
    
    81,905Increase in other items, net
    
    
    2,970
    
    
    
    921Net increase (decrease)
    
    $
    (26,667
    )
    
    $
    22,745
 Asset Quality
  11




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##### 



Delinquent Loans.
 December 31, 2009Loans Delinquent For:60-89 Days
    
    
    90 Days and Over
    
    
    Total Delinquent LoansPercent of Loan
    
    
    
    
    
    
    
    
    
    
    Percent of Loan
    
    
    
    
    
    
    
    
    
    
    Percent of LoanNumber
    
    
    Amount
    
    
    Category
    
    
    Number
    
    
    Amount
    
    
    Category
    
    
    Number
    
    
    Amount
    
    
    Category(Dollars in Thousands)Real EstateOne-to-four family
    
    
    39
    
    
    $
    2,656
    
    
    
    2.45
    %
    
    
    21
    
    
    $
    1,580
    
    
    
    1.46
    %
    
    
    60
    
    
    $
    4,236
    
    
    
    3.91
    %Multi-family
    
    
    1
    
    
    
    187
    
    
    
    3.45
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    1
    
    
    
    187
    
    
    
    3.45
    %Commercial
    
    
    3
    
    
    
    792
    
    
    
    1.09
    %
    
    
    8
    
    
    
    2,506
    
    
    
    3.45
    %
    
    
    11
    
    
    
    3,298
    
    
    
    4.54
    %Construction or development
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %Total real estate loans
    
    
    43
    
    
    $
    3,635
    
    
    
    1.85
    %
    
    
    29
    
    
    $
    4,086
    
    
    
    2.08
    %
    
    
    72
    
    
    $
    7,721
    
    
    
    3.94
    %Consumer
    
    
    6
    
    
    
    123
    
    
    
    0.54
    %
    
    
    1
    
    
    
    
    
    
    
    0.00
    %
    
    
    7
    
    
    
    123
    
    
    
    0.54
    %Commercial Business
    
    
    1
    
    
    
    5
    
    
    
    0.06
    %
    
    
    1
    
    
    
    77
    
    
    
    0.93
    %
    
    
    2
    
    
    
    82
    
    
    
    0.99
    %Total
    
    
    50
    
    
    $
    3,763
    
    
    
    1.66
    %
    
    
    31
    
    
    $
    4,163
    
    
    
    1.83
    %
    
    
    81
    
    
    $
    7,926
    
    
    
    3.49
    %
 December 31, 2008Loans Delinquent For:60-89 Days
    
    
    90 Days and Over
    
    
    Total Delinquent LoansPercent of Loan
    
    
    
    
    
    
    
    
    
    
    Percent of Loan
    
    
    
    
    
    
    
    
    
    
    Percent of LoanNumber
    
    
    Amount
    
    
    Category
    
    
    Number
    
    
    Amount
    
    
    Category
    
    
    Number
    
    
    Amount
    
    
    Category(Dollars in Thousands)Real EstateOne-to-four family
    
    
    50
    
    
    $
    2,284
    
    
    
    1.83
    %
    
    
    23
    
    
    $
    466
    
    
    
    0.37
    %
    
    
    73
    
    
    $
    2,750
    
    
    
    2.20
    %Multi-family
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    1
    
    
    
    164
    
    
    
    2.86
    %
    
    
    1
    
    
    
    164
    
    
    
    2.86
    %Commercial
    
    
    5
    
    
    
    770
    
    
    
    1.02
    %
    
    
    2
    
    
    
    175
    
    
    
    0.23
    %
    
    
    7
    
    
    
    945
    
    
    
    1.25
    %Construction or development
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    1
    
    
    
    139
    
    
    
    1.46
    %
    
    
    1
    
    
    
    139
    
    
    
    1.46
    %Total real estate loans
    
    
    55
    
    
    $
    3,054
    
    
    
    1.42
    %
    
    
    27
    
    
    $
    944
    
    
    
    0.44
    %
    
    
    82
    
    
    $
    3,998
    
    
    
    1.84
    %Consumer
    
    
    5
    
    
    
    73
    
    
    
    0.28
    %
    
    
    3
    
    
    
    115
    
    
    
    0.44
    %
    
    
    8
    
    
    
    188
    
    
    
    0.71
    %Commercial Business
    
    
    1
    
    
    
    1
    
    
    
    0.01
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    1
    
    
    
    1
    
    
    
    0.01
    %Total
    
    
    61
    
    
    $
    3,128
    
    
    
    1.25
    %
    
    
    30
    
    
    $
    1,059
    
    
    
    0.42
    %
    
    
    91
    
    
    $
    4,187
    
    
    
    1.67
    %
 12




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##### 



Non-performing Assets.
 December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in Thousands)Non-accruing loans:One-to-four family
    
    
    3,484
    
    
    
    622
    
    
    
    607
    
    
    $
    408
    
    
    $
    406Multi-family
    
    
    874
    
    
    
    164
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    7,139
    
    
    
    459
    
    
    
    
    
    
    
    
    
    
    
    397Construction or development
    
    
    2,507
    
    
    
    1,298
    
    
    
    153
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    60
    
    
    
    8Commercial business
    
    
    1,566
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    15,570
    
    
    
    2,571
    
    
    
    760
    
    
    
    468
    
    
    
    811Accruing loans delinquent 90 days or more:One-to-four family
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Multi-family
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    
    
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    Construction or development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial business
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    105
    
    
    
    
    
    
    
    Foreclosed assets:One-to-four family (1)
    
    
    2,577
    
    
    
    1,669
    
    
    
    1,453
    
    
    
    1,580
    
    
    
    2,239Multi-family
    
    
    122
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    140
    
    
    
    407
    
    
    
    62
    
    
    
    
    
    
    
    480Construction or development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    22Commercial business
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70Total
    
    
    2,839
    
    
    
    2,076
    
    
    
    1,515
    
    
    
    1,680
    
    
    
    2,811Total non-performing assets
    
    $
    18,409
    
    
    $
    4,647
    
    
    $
    2,380
    
    
    $
    2,148
    
    
    $
    3,622Total as a percentage of total assets
    
    
    6.50
    %
    
    
    1.59
    %
    
    
    0.85
    %
    
    
    0.74
    %
    
    
    1.31
    %
 
 (1)
    
    Includes $1.1 million, $1.3 million, $630,000, $895,000 and $1.3
million in real estate in judgment and subject to redemption at
December 31, 2009, 2008, 2007, 2006 and 2005 respectively.  13




---



##### 



Classified Assets.
   Provision for Loan Losses
 Allowance for Loan Losses
  14




---



##### 



15




---



##### 



December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Balance at beginning of year
    
    $
    2,719
    
    
    $
    1,824
    
    
    $
    2,024
    
    
    $
    2,925
    
    
    $
    6,420Charge-offs:One-to-four family
    
    
    2,288
    
    
    
    879
    
    
    
    774
    
    
    
    223
    
    
    
    754Multi-family
    
    
    10
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    Commercial real estate
    
    
    4,299
    
    
    
    321
    
    
    
    197
    
    
    
    15
    
    
    
    1,904Construction or development
    
    
    3,075
    
    
    
    50
    
    
    
    
    
    
    
    340
    
    
    
    6Consumer
    
    
    533
    
    
    
    532
    
    
    
    386
    
    
    
    494
    
    
    
    393Commercial business
    
    
    352
    
    
    
    239
    
    
    
    17
    
    
    
    113
    
    
    
    386Total
    
    
    10,557
    
    
    
    2,021
    
    
    
    1,402
    
    
    
    1,185
    
    
    
    3,443Recoveries:One-to-four family
    
    
    20
    
    
    
    4
    
    
    
    16
    
    
    
    4
    
    
    
    78Multi-family
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    14
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    1Construction or development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    215
    
    
    
    198
    
    
    
    175
    
    
    
    275
    
    
    
    230Commercial business
    
    
    22
    
    
    
    
    
    
    
    40
    
    
    
    5
    
    
    
    24Total
    
    
    272
    
    
    
    204
    
    
    
    231
    
    
    
    284
    
    
    
    333Net charge-offs:
    
    
    10,285
    
    
    
    1,817
    
    
    
    1,171
    
    
    
    901
    
    
    
    3,110Allowance acquired in acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additions charged to operations
    
    
    13,349
    
    
    
    2,712
    
    
    
    971
    
    
    
    
    
    
    
    Provision recovered from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (385
    )Balance at end of year
    
    $
    5,783
    
    
    $
    2,719
    
    
    $
    1,824
    
    
    $
    2,024
    
    
    $
    2,925Ratio of net
charge-offs during the year to average loans outstanding during the year
    
    
    4.24
    %
    
    
    0.76
    %
    
    
    0.49
    %
    
    
    0.39
    %
    
    
    1.42
    %Allowance as a percentage of non-performing loans
    
    
    37.14
    %
    
    
    105.76
    %
    
    
    210.87
    %
    
    
    432.48
    %
    
    
    360.67
    %Allowance as a percentage of total loans (end of year)
    
    
    2.55
    %
    
    
    1.08
    %
    
    
    0.81
    %
    
    
    0.93
    %
    
    
    1.37
    %
 16




---



##### 



December 31,2009
    
    
    2008
    
    
    2007Amount of
    
    
    Percentage
    
    
    Amount of
    
    
    Percentage
    
    
    Amount of
    
    
    PercentageLoan Loss
    
    
    of
    
    
    Loan Loss
    
    
    of
    
    
    Loan Loss
    
    
    ofAllowance
    
    
    Allowance
    
    
    Allowance
    
    
    Allowance
    
    
    Allowance
    
    
    AllowanceOne-to-four family
    
    $
    2,576
    
    
    
    44.5
    %
    
    $
    1,618
    
    
    
    59.5
    %
    
    $
    979
    
    
    
    53.7
    %Multi-family and non-residential
real estate
    
    
    903
    
    
    
    15.6
    %
    
    
    533
    
    
    
    19.6
    %
    
    
    351
    
    
    
    19.2
    %Construction or development
    
    
    10
    
    
    
    0.2
    %
    
    
    75
    
    
    
    2.8
    %
    
    
    154
    
    
    
    8.4
    %Consumer
    
    
    393
    
    
    
    6.8
    %
    
    
    305
    
    
    
    11.2
    %
    
    
    287
    
    
    
    15.7
    %Commercial business
    
    
    1,901
    
    
    
    32.9
    %
    
    
    188
    
    
    
    6.9
    %
    
    
    53
    
    
    
    2.9
    %Total
    
    $
    5,783
    
    
    
    100.0
    %
    
    $
    2,719
    
    
    
    100.0
    %
    
    $
    1,824
    
    
    
    100.0
    %
 2006
    
    
    2005Amount of
    
    
    Percentage
    
    
    Amount of
    
    
    PercentageLoan Loss
    
    
    of
    
    
    Loan Loss
    
    
    ofAllowance
    
    
    Allowance
    
    
    Allowance
    
    
    AllowanceOne-to-four family
    
    $
    783
    
    
    
    60.3
    %
    
    $
    1,378
    
    
    
    64.4
    %Multi-family and non-residential
real estate
    
    
    809
    
    
    
    20.8
    %
    
    
    1,091
    
    
    
    17.7
    %Construction or development
    
    
    7
    
    
    
    4.1
    %
    
    
    17
    
    
    
    2.5
    %Consumer
    
    
    302
    
    
    
    12.1
    %
    
    
    284
    
    
    
    12.5
    %Commercial business
    
    
    123
    
    
    
    2.7
    %
    
    
    155
    
    
    
    2.9
    %$
    2,024
    
    
    
    100.0
    %
    
    $
    2,925
    
    
    
    100.0
    %
 Investment Activities
    17




---



##### 



December 31, 2009
    
    
    December 31, 2008Percent of
    
    
    
    
    
    
    
    
    
    
    Percent ofFair
    
    
    Total
    
    
    
    
    
    
    Fair
    
    
    TotalAmortized
    
    
    Market
    
    
    Fair Market
    
    
    Amortized
    
    
    Market
    
    
    Fair MarketCost
    
    
    Value
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    ValueAvailable-for-sale securities:U.S Treasury
    
    
    1,055
    
    
    
    1,071
    
    
    
    6.7
    %U.S. government agency obligations
    
    $
    3,155
    
    
    $
    3,196
    
    
    
    19.9
    %
    
    $
    5,698
    
    
    $
    5,761
    
    
    
    64.3
    %Mortgage-backed securities
    
    
    5,454
    
    
    
    5,536
    
    
    
    34.4
    %
    
    
    739
    
    
    
    734
    
    
    
    8.2
    %Obligations
of states and political subdivisions
    
    
    6,061
    
    
    
    6,260
    
    
    
    38.9
    %
    
    
    2,375
    
    
    
    2,421
    
    
    
    27.0
    %Total available-for-sale securities
    
    $
    15,725
    
    
    $
    16,063
    
    
    
    99.9
    %
    
    $
    8,812
    
    
    $
    8,916
    
    
    
    99.6
    %Held-to-maturity securities:Municipal security
    
    $
    23
    
    
    $
    23
    
    
    
    0.1
    %
    
    $
    37
    
    
    $
    37
    
    
    
    0.4
    %Total investment securities
    
    $
    15,748
    
    
    $
    16,086
    
    
    
    100.0
    %
    
    $
    8,849
    
    
    $
    8,953
    
    
    
    100.0
    %
 December 31, 2007Percent ofFair
    
    
    TotalAmortized
    
    
    Market
    
    
    Fair MarketCost
    
    
    Value
    
    
    ValueAvailable-for-sale securities:U.S. government agency obligations
    
    $
    7,692
    
    
    $
    7,730
    
    
    
    68.3
    %Mortgage-backed securities
    
    
    932
    
    
    
    918
    
    
    
    8.1
    %Obligations of states and
political subdivisions
    
    
    2,381
    
    
    
    2,436
    
    
    
    21.5
    %Total available-for-sale securities
    
    $
    11,005
    
    
    $
    11,084
    
    
    
    97.9
    %Held-to-maturity securities:Municipal security
    
    
    238
    
    
    
    239
    
    
    
    2.1
    %Total investment securities
    
    $
    11,243
    
    
    $
    11,318
    
    
    
    100.0
    %
 18




---



##### 



Less than 1 year
    
    
    1 to 5 years
    
    
    5 to 10 years
    
    
    Over 10 years
    
    
    Total SecuritiesWgt
    
    
    
    
    
    
    Wgt
    
    
    
    
    
    
    Wgt
    
    
    
    
    
    
    Wgt
    
    
    
    
    
    
    WgtAmortized
    
    
    Ave
    
    
    Amortized
    
    
    Ave
    
    
    Amortized
    
    
    Ave
    
    
    Amortized
    
    
    Ave
    
    
    Amortized
    
    
    AveCost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield(Dollars in Thousands)Available-for-sale securities:U.S Treasury
    
    $
    
    
    
    
    0.00
    %
    
    $
    1,055
    
    
    
    4.63
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    1,055
    
    
    
    4.63
    %U.S. government agency obligations
    
    
    
    
    
    
    0.00
    %
    
    
    2,013
    
    
    
    3.95
    %
    
    
    1,141
    
    
    
    6.32
    %
    
    
    
    
    
    
    0.00
    %
    
    
    3,154
    
    
    
    4.81
    %Mortgage-backed securities
    
    
    136
    
    
    
    4.50
    %
    
    
    294
    
    
    
    4.50
    %
    
    
    2,116
    
    
    
    4.30
    %
    
    
    2,908
    
    
    
    4.79
    %
    
    
    5,454
    
    
    
    4.58
    %Obligations
of states and political subdivisions
    
    
    500
    
    
    
    3.00
    %
    
    
    3,178
    
    
    
    4.36
    %
    
    
    2,384
    
    
    
    4.38
    %
    
    
    
    
    
    
    0.00
    %
    
    
    6,062
    
    
    
    4.26
    %Total available-for-sale securities
    
    
    636
    
    
    
    3.32
    %
    
    
    6,540
    
    
    
    4.28
    %
    
    
    5,641
    
    
    
    4.74
    %
    
    
    2,908
    
    
    
    0.00
    %
    
    
    15,725
    
    
    
    3.48
    %Held-to-maturity securities:Municipal security
    
    
    3
    
    
    
    4.50
    %
    
    
    20
    
    
    
    4.45
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    23
    
    
    
    4.46
    %Total investment securities
    
    $
    639
    
    
    
    3.32
    %
    
    $
    6,560
    
    
    
    3.54
    %
    
    $
    5,641
    
    
    
    4.74
    %
    
    $
    2,908
    
    
    
    0.00
    %
    
    $
    15,748
    
    
    
    3.17
    %
 Sources of Funds
 General.
 Deposits .
  19




---



##### 



Year EndedDecember 31,2009
    
    
    2008(Dollars in Thousands)Opening balance
    
    $
    192,156
    
    
    $
    177,936Net deposits (withdrawals)
    
    
    16,206
    
    
    
    8,359Interest credited
    
    
    5,006
    
    
    
    5,861Ending balance
    
    $
    213,368
    
    
    $
    192,156Net increase
    
    $
    21,212
    
    
    $
    14,220Percent increase (decrease)
    
    
    11.04
    %
    
    
    7.99
    %
  Year Ended December 31,2009
    
    
    2008Percent
    
    
    
    
    
    
    PercentAmount
    
    
    of Total
    
    
    Amount
    
    
    of Total(Dollars in Thousands)Transaction and Savings Deposits:Non-interest bearing accounts
    
    $
    14,422
    
    
    
    6.8
    %
    
    $
    13,883
    
    
    
    7.2
    %Savings accounts
    
    
    20,302
    
    
    
    9.5
    %
    
    
    18,488
    
    
    
    9.6
    %Checking & NOW accounts
    
    
    23,084
    
    
    
    10.8
    %
    
    
    16,058
    
    
    
    8.4
    %Money market accounts
    
    
    57,052
    
    
    
    26.7
    %
    
    
    41,156
    
    
    
    21.4
    %Total transaction and savings
    
    $
    114,860
    
    
    
    53.8
    %
    
    $
    89,585
    
    
    
    46.6
    %Certificates:0.00-1.99%
    
    
    26,994
    
    
    
    12.7
    %
    
    
    72
    
    
    
    0.0
    %2.00-3.99%
    
    
    36,459
    
    
    
    17.1
    %
    
    
    45,309
    
    
    
    23.6
    %4.00-5.99%
    
    
    35,055
    
    
    
    16.4
    %
    
    
    57,190
    
    
    
    29.8
    %Total certificates
    
    
    98,508
    
    
    
    46.2
    %
    
    
    102,571
    
    
    
    53.4
    %Total deposits
    
    $
    213,368
    
    
    
    100.0
    %
    
    $
    192,156
    
    
    
    100.0
    %
 20




---



##### 



MaturityOver
    
    
    Over
    
    
    Over3 Months
    
    
    3 to 6
    
    
    6 to 12
    
    
    12or less
    
    
    Months
    
    
    Months
    
    
    Months
    
    
    Total(Dollars in Thousands)Certificates of deposit less than $100,000
    
    $
    7,207
    
    
    $
    10,236
    
    
    $
    11,427
    
    
    $
    28,488
    
    
    $
    57,358Certificates of deposit of $100,000 or more
    
    
    2,911
    
    
    
    7,146
    
    
    
    6,729
    
    
    
    24,364
    
    
    
    41,150Total certificates of deposit
    
    $
    10,118
    
    
    $
    17,382
    
    
    $
    18,157
    
    
    $
    52,851
    
    
    $
    98,508
  Percent0.00-1.99%
    
    
    2.00-3.99%
    
    
    4.00-5.99%
    
    
    6.00-7.99%
    
    
    Total
    
    
    of Total(Dollars in Thousands)Certificate accounts
maturing in quarter ending:March 31, 2010
    
    
    4,351
    
    
    
    1,942
    
    
    
    3,825
    
    
    
    
    
    
    
    10,118
    
    
    
    10.3
    %June 30, 2010
    
    
    6,486
    
    
    
    8,814
    
    
    
    2,083
    
    
    
    
    
    
    
    17,383
    
    
    
    17.6
    %September 30, 2010
    
    
    4,164
    
    
    
    2,587
    
    
    
    4,449
    
    
    
    
    
    
    
    11,200
    
    
    
    11.4
    %December 31, 2010
    
    
    4,006
    
    
    
    1,626
    
    
    
    1,374
    
    
    
    
    
    
    
    7,006
    
    
    
    7.1
    %March 31, 2011
    
    
    96
    
    
    
    1,149
    
    
    
    3,942
    
    
    
    
    
    
    
    5,187
    
    
    
    5.3
    %June 30, 2011
    
    
    7,092
    
    
    
    2,344
    
    
    
    1,381
    
    
    
    
    
    
    
    10,817
    
    
    
    10.9
    %September 30, 2011
    
    
    258
    
    
    
    1,488
    
    
    
    5,159
    
    
    
    
    
    
    
    6,905
    
    
    
    7.0
    %December 31, 2011
    
    
    262
    
    
    
    2,416
    
    
    
    3,509
    
    
    
    
    
    
    
    6,187
    
    
    
    6.3
    %Thereafter
    
    
    280
    
    
    
    14,093
    
    
    
    9,332
    
    
    
    
    
    
    
    23,705
    
    
    
    24.1
    %Total
    
    $
    26,995
    
    
    $
    36,459
    
    
    $
    35,054
    
    
    $
    
    
    
    $
    98,508
    
    
    
    100.0
    %Percent of total
    
    
    27.40
    %
    
    
    37.01
    %
    
    
    35.58
    %
    
    
    0.00
    %
 Borrowings .
   21




---



##### 



Year EndedDecember 31,2009
    
    
    2008(Dollars in Thousands)
    
    
    (Dollars in Thousands)Maximum Balance:FHLB advances
    
    $
    59,178
    
    
    $
    62,330Fed funds purchased
    
    $
    3,000
    
    
    $
    3,000Average Balance:FHLB advances
    
    $
    48,564
    
    
    $
    55,106Fed funds purchased
    
    $
    29
    
    
    $
    55
  December 31,2009
    
    
    2008(Dollars in Thousands)
    
    
    (Dollars in Thousands)FHLB advances
    
    $
    44,518
    
    
    $
    60,177Fed funds purchased
    
    $
    
    
    
    $
    1,000Weighted average interest rate of FHLBFHLB advances
    
    
    4.43
    %
    
    
    4.45
    %Fed funds purchased
    
    
    0.25
    %
    
    
    0.25
    %
 Competition
  Employees
  Federal and State Taxation
 Federal Taxation
 General.
 Method of Accounting.
 22




---



##### 



Bad Debt Reserves.
 Taxable Distributions and Recapture.
 Minimum Tax.
 Corporate Dividends-Received Deduction.
 State Taxation
  Regulation and Supervision
 General
   23




---



##### 



The Company
 General.
 Investments and Activities.
   24




---



##### 



Capital Requirements.
    Dividends.
 25




---



##### 



Recent Developments .
     The Bank
 General.
 Business Activities.
 26




---



##### 



Branching.
  Loans to One Borrower.
 Enforcement.
  Assessments and Fees.
 Regulatory Capital Requirements.
 27




---



##### 



Prompt Corrective Regulatory Action.
   28




---



##### 



Deposit Insurance.
     29




---



##### 



Payment of Dividends by the Bank.
  Loans to Directors, Executive Officers, and Principal Shareholders.
 Certain Transactions With Related Parties.
  Standards for Safety and Soundness.
 30




---



##### 



Reserve Requirement.
 
    
    for transaction accounts totaling $10.7 million or less, a reserve of 0%; and
 
    
    for transaction accounts in excess of $10.7 million up to and including $55.2 million, a
reserve of 3%; and
 
    
    for transaction accounts totaling in excess of $55.2 million, a reserve requirement of
$1.335 million plus 10% of that portion of the total transaction accounts greater than
$55.2 million.
  ITEM 1A.
    
    Risk Factors
  We are dependent on the strength of our local economy for our growth and profitability
  Our future profits may be affected by our inability to grow core deposits
  We are making commercial real estate loans outside of our normal market area
  
 Our loan portfolio possesses increased risk due to our subprime residential lending
  31




---



##### 



If we lose our executive officers, it could adversely affect our operations
  The amount of common stock controlled by insiders, our articles of incorporation and bylaws and
state and federal statutory and regulatory provisions could discourage hostile acquisitions of
control.
  
    
    the staggered terms of the members of the Board of Directors;
 
    
    an 80% shareholder vote requirement for the approval of any merger or consolidation
of Monarch Community Bancorp into any entity that directly or indirectly owns 10% or
more of Monarch Community Bancorp voting stock if the transaction is not approved in
advance by at least a majority of the disinterested members of Monarch Community
Bancorps Board of Directors;
 
    
    supermajority shareholder vote requirements for the approval of certain amendments
to Monarch Community Bancorps articles of incorporation and bylaws;
 
    
    a prohibition of any holder of common stock voting more than 10% of the outstanding
common stock;
 
    
    elimination of cumulative voting by shareholders in the election of directors;
 
    
    restrictions on the acquisition of our equity securities;
 
    
    the authorization of five million shares of preferred stock that could be issued
without shareholder approval on terms or in circumstances that could deter a future
takeover attempt; and
 
    
    the increase in the number of authorized shares and the reclassification of shares
without stockholder approval.
  The low trading volume in our common stock may make the value of the stock volatile and may make it
difficult for shareholders to sell their shares when they desire.
  32




---



##### 



ITEM 1B. Unresolved Staff Comments  None
 ITEM 2. Properties
   Owned/Location
    
    County
    
    LeasedMain Office375 North Willowbrook Road
    
    Branch
    
    OwnedColdwater, Michigan 49036Branch Offices87 Marshall Street
    
    Branch
    
    OwnedColdwater, Michigan 49036365 N. Broadway
    
    Branch
    
    OwnedUnion City, Michigan 490941 West Carleton Road
    
    Hillsdale
    
    OwnedHillsdale, Michigan 4924215975 West Michigan Avenue
    
    Calhoun
    
    OwnedMarshall, Michigan 49068107 North Park
    
    Calhoun
    
    OwnedMarshall, Michigan 49068Other Facilities34 Grand Street (Garage)
    
    Branch
    
    OwnedColdwater, Michigan 4903624 Grand Street (Drive through)
    
    Branch
    
    OwnedColdwater, Michigan 49036
  ITEM 3. Legal Proceedings
  ITEM 4. Reserved
 33




---



##### 



PART II
 ITEM 5. Market for the Companys Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  Year
    
    Quarter ending
    
    
    High
    
    
    Low
    
    
    Dividends2008
    
    March 31
    
    $
    10.37
    
    
    $
    9.80
    
    
    $
    0.09June 30
    
    $
    9.64
    
    
    $
    9.45
    
    
    $
    0.09September 30
    
    $
    9.25
    
    
    $
    8.04
    
    
    $
    0.09December 31
    
    $
    3.84
    
    
    $
    3.50
    
    
    $
    0.092009
    
    March 31
    
    $
    3.48
    
    
    $
    3.30
    
    
    $
    0.09June 30
    
    $
    6.79
    
    
    $
    6.10
    
    
    $
    0.09September 30
    
    $
    3.74
    
    
    $
    3.57
    
    
    $
    0.07December 31
    
    $
    2.80
    
    
    $
    2.51
    
    
    $
    
    (a)

    
    
    (b)

    
    
    (c)

    
    
    (d)Maximum Number (orTotal Number of
    
    
    Approximate DollarShares (or Unit)
    
    
    Value) of SharesPurchased as Part
    
    
    (or Units) that mayTotal Number of
    
    
    
    
    
    of Publicly
    
    
    yet Be PurchasedShares (or Units)
    
    
    Average Price paid
    
    
    Anounced Plans or
    
    
    Under the Plans orPeriod
    
    Purchased
    
    
    per Share (or Unit)
    
    
    Programs
    
    
    Program10/01/09-10/31/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11/01/09-11/30/09
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    12/01/09-12/31/09
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   34




---



##### 



ITEM 6. Selected Financial Data
 SELECTED FINANCIAL AND OTHER DATA
  December 31,2009
    
    

    2008
    
    

    2007
    
    

    2006
    
    

    2005(In Thousands)Selected Financial Condition Data:Total Assets
    
    $
    283,204
    
    
    $
    291,807
    
    
    $
    279,208
    
    
    $
    289,987
    
    
    $
    277,068Loans receivable, net
    
    
    220,875
    
    
    
    247,542
    
    
    
    224,797
    
    
    
    230,247
    
    
    
    213,097Investment securities, at carrying value
    
    
    16,086
    
    
    
    8,953
    
    
    
    11,322
    
    
    
    13,934
    
    
    
    14,584Fed Funds sold and overnight deposits
    
    
    10,723
    
    
    
    677
    
    
    
    6,151
    
    
    
    7,864
    
    
    
    6,988Deposits
    
    
    213,368
    
    
    
    192,156
    
    
    
    177,936
    
    
    
    192,572
    
    
    
    174,715Federal Home Loan Bank Advances
    
    
    44,518
    
    
    
    60,178
    
    
    
    59,330
    
    
    
    54,476
    
    
    
    59,562Equity
    
    
    23,163
    
    
    
    36,270
    
    
    
    39,086
    
    
    
    39,986
    
    
    
    40,576
 December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In Thousands)Selected Operations Data:Total interest income
    
    $
    15,836
    
    
    $
    17,196
    
    
    $
    17,545
    
    
    $
    17,287
    
    
    $
    15,231Total interest expense
    
    
    7,339
    
    
    
    8,536
    
    
    
    9,222
    
    
    
    8,607
    
    
    
    6,567Net interest income
    
    
    8,497
    
    
    
    8,660
    
    
    
    8,323
    
    
    
    8,680
    
    
    
    8,664Provision for loan losses
    
    
    13,349
    
    
    
    2,712
    
    
    
    971
    
    
    
    
    
    
    
    (385
    )Net interest income after provision for loan losses
    
    
    (4,852
    )
    
    
    5,948
    
    
    
    7,352
    
    
    
    8,680
    
    
    
    9,049Fees and service charges
    
    
    2,682
    
    
    
    2,757
    
    
    
    2,921
    
    
    
    2,642
    
    
    
    2,496Gains on sales of loans, mortgage-backed
securities and investment securities
    
    
    2,100
    
    
    
    629
    
    
    
    651
    
    
    
    342
    
    
    
    562Other non-interest income
    
    
    211
    
    
    
    217
    
    
    
    374
    
    
    
    138
    
    
    
    341Total non-interest income
    
    
    4,993
    
    
    
    3,603
    
    
    
    3,946
    
    
    
    3,122
    
    
    
    3,399Total non-interest expense
    
    
    20,085
    
    
    
    9,152
    
    
    
    8,992
    
    
    
    9,710
    
    
    
    10,503Income (loss) before taxes
    
    
    (19,944
    )
    
    
    399
    
    
    
    2,306
    
    
    
    2,092
    
    
    
    1,945Income tax provision
    
    
    (548
    )
    
    
    101
    
    
    
    561
    
    
    
    544
    
    
    
    505Net income (loss)
    
    $
    (19,396
    )
    
    $
    298
    
    
    $
    1,745
    
    
    $
    1,548
    
    
    $
    1,440
 35




---



##### 



ITEM 6. Selected Financial Data, continued
 December 31,2009
    
    2008
    
    2007
    
    2006
    
    2005Selected Financial Ratios and Other Data:Performance Ratios:Return on assets (ratio of net income (loss) to average total
assets)
    
    
    -6.41
    %
    
    
    0.10
    %
    
    
    0.61
    %
    
    
    0.54
    %
    
    
    0.52
    %Return on Equity (ratio of net income (loss) to average equity)
    
    
    -46.88
    %
    
    
    0.78
    %
    
    
    4.30
    %
    
    
    3.85
    %
    
    
    3.59
    %Interest rate spread information:Average during period
    
    
    2.94
    %
    
    
    3.11
    %
    
    
    3.05
    %
    
    
    3.26
    %
    
    
    3.41
    %Net interest margin
    
    
    3.10
    %
    
    
    3.32
    %
    
    
    3.27
    %
    
    
    3.42
    %
    
    
    3.56
    %Ratio of operating expense to average total assets
    
    
    6.64
    %
    
    
    3.20
    %
    
    
    3.17
    %
    
    
    3.41
    %
    
    
    3.80
    %Ratio of average interest-earning assets to average
interest-bearing liabilities
    
    
    1.06
    
    
    
    1.06
    
    
    
    1.06
    
    
    
    1.05
    
    
    
    1.05Efficiency ratio *
    
    
    71.67
    %
    
    
    73.25
    %
    
    
    72.62
    %
    
    
    80.44
    %
    
    
    85.39
    %Asset Quality Ratios:Non-performing assets to total assets at end of period
    
    
    6.50
    %
    
    
    1.59
    %
    
    
    0.81
    %
    
    
    0.74
    %
    
    
    1.31
    %Non-performing loans to total loans,net
    
    
    7.05
    %
    
    
    1.04
    %
    
    
    0.33
    %
    
    
    0.20
    %
    
    
    0.37
    %Allowance for loan losses to non-performing loans
    
    
    37.14
    %
    
    
    105.76
    %
    
    
    240.00
    %
    
    
    432.48
    %
    
    
    360.67
    %Allowance for loan losses to loans receivable, net
    
    
    2.62
    %
    
    
    1.10
    %
    
    
    0.81
    %
    
    
    0.88
    %
    
    
    1.37
    %Capital ratios:Equity to total assets at end of period
    
    
    8.19
    %
    
    
    12.43
    %
    
    
    14.00
    %
    
    
    13.79
    %
    
    
    14.64
    %Other data:Number of full-service offices
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    6
 
 *
    
    Amounts do not include the one time non cash charge for goodwill impairment 36




---



##### 



ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
   Critical Accounting Policies
  Allowance for Loan and Lease Losses
   Income Taxes
   37




---



##### 



Management Strategy
   Changes in Financial Condition from December 31, 2008 to December 31, 2009
 General.
 Loans.
    Credit Risk.
 38




---



##### 



Securities.
 Goodwill.
  39




---



##### 



Liabilities.
  Equity
 40




---



##### 



Average
Balances, Net Interest Income, Yields Earned and Rates Paid
  Year Ended December 31,2009
    
    
    2008Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate
    
    
    Balance
    
    
    Paid
    
    
    Rate(dollars in thousands)Fed Funds and overnight deposits
    
    $
    11,392
    
    
    $
    6
    
    
    
    0.05
    %
    
    $
    8,170
    
    
    $
    102
    
    
    
    1.25
    %Investment securities
    
    
    16,591
    
    
    
    565
    
    
    
    3.41
    
    
    
    9,951
    
    
    
    428
    
    
    
    4.30Other securities
    
    
    4,174
    
    
    
    74
    
    
    
    1.77
    
    
    
    4,174
    
    
    
    209
    
    
    
    5.01Loans receivable (1)
    
    
    242,289
    
    
    
    15,191
    
    
    
    6.27
    
    
    
    238,838
    
    
    
    16,457
    
    
    
    6.89Total earning assets
    
    $
    274,446
    
    
    $
    15,836
    
    
    
    5.77
    
    
    $
    261,133
    
    
    $
    17,196
    
    
    
    6.59Demand and NOW accounts
    
    $
    34,045
    
    
    $
    98
    
    
    
    0.29
    
    
    $
    32,032
    
    
    $
    95
    
    
    
    0.30Money market accounts
    
    
    47,923
    
    
    
    789
    
    
    
    1.65
    
    
    
    35,497
    
    
    
    1,041
    
    
    
    2.93Savings accounts
    
    
    19,113
    
    
    
    71
    
    
    
    0.37
    
    
    
    19,123
    
    
    
    81
    
    
    
    0.42Certificates of deposit
    
    
    104,275
    
    
    
    3,952
    
    
    
    3.79
    
    
    
    103,569
    
    
    
    4,644
    
    
    
    4.48Fed Funds Purchased
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    Federal Home Loan Bank advances
    
    
    53,966
    
    
    
    2,429
    
    
    
    4.50
    
    
    
    55,106
    
    
    
    2,675
    
    
    
    4.85Total interest bearing liabilities
    
    $
    259,350
    
    
    
    7,339
    
    
    
    2.83
    
    
    $
    245,383
    
    
    
    8,536
    
    
    
    3.48Net interest income
    
    
    
    
    
    $
    8,497
    
    
    
    
    
    
    
    
    
    
    $
    8,660Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.94
    %
    
    
    
    
    
    
    
    
    
    
    3.11
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.10
    %
    
    
    
    
    
    
    
    
    
    
    3.32
    %
 2007Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate(dollars in thousands)Fed Funds and overnight deposits
    
    $
    7,373
    
    
    $
    389
    
    
    
    5.28
    %Investment securities
    
    
    13,445
    
    
    
    599
    
    
    
    4.46Other securities
    
    
    4,174
    
    
    
    188
    
    
    
    4.50Loans receivable (1)
    
    
    229,451
    
    
    
    16,369
    
    
    
    7.13Total earning assets
    
    $
    254,443
    
    
    $
    17,545
    
    
    
    6.90Demand and NOW accounts
    
    $
    32,619
    
    
    $
    78
    
    
    
    0.24Money market accounts
    
    
    24,451
    
    
    
    902
    
    
    
    3.69Savings accounts
    
    
    21,502
    
    
    
    90
    
    
    
    0.42Certificates of deposit
    
    
    103,970
    
    
    
    5,037
    
    
    
    4.84Fed Funds PurchasedFederal Home Loan Bank advances
    
    
    57,268
    
    
    
    3,115
    
    
    
    5.44Total interest bearing liabilities
    
    
    239,810
    
    
    
    9,222
    
    
    
    3.85Net interest income
    
    
    
    
    
    
    8,323Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.05
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.27
    %
 
 (1)
    
    Calculated net of deferred loan fees, loan discounts and loans in
process. Nonaccrual loans are included in the average outstanding
balance. 41




---



##### 



Rate/Volume Analysis
  Year Ended December 31,
    
    
    Year Ended December 31,2009 vs. 2008
    
    
    2008 vs. 2007Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalIncrease (Decrease) Due to
    
    
    Increase
    
    
    Increase (Decrease) Due to
    
    
    IncreaseRate
    
    
    Volume
    
    
    Mix
    
    
    (Decrease)
    
    
    Rate
    
    
    Volume
    
    
    Mix
    
    
    (Decrease)(in thousands)
    
    
    (in thousands)Interest-earning assetsFed funds and overnight deposits
    
    $
    (98
    )
    
    $
    40
    
    
    
    (39
    )
    
    
    (96
    )
    
    $
    (297
    )
    
    $
    42
    
    
    
    (32
    )
    
    
    (287
    )Investment securities
    
    $
    (89
    )
    
    $
    286
    
    
    
    (59
    )
    
    
    137
    
    
    
    (21
    )
    
    
    (156
    )
    
    
    5
    
    
    
    (171
    )Other securities
    
    $
    (135
    )
    
    $
    
    
    
    
    
    
    
    
    (135
    )
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Loans receivable
    
    $
    (1,482
    )
    
    $
    238
    
    
    
    (21
    )
    
    
    (1,266
    )
    
    
    (559
    )
    
    
    670
    
    
    
    (23
    )
    
    
    88Total interest-earning assets
    
    $
    (1,804
    )
    
    $
    564
    
    
    $
    (119
    )
    
    $
    (1,360
    )
    
    $
    (855
    )
    
    $
    556
    
    
    $
    (50
    )
    
    $
    (349
    )Interest-bearing liabilitiesDemand and NOW accounts
    
    $
    (3
    )
    
    $
    6
    
    
    
    (0
    )
    
    
    3
    
    
    
    19
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    17Money market accounts
    
    $
    (457
    )
    
    $
    364
    
    
    
    (160
    )
    
    
    (252
    )
    
    
    (185
    )
    
    
    407
    
    
    
    (84
    )
    
    
    139Savings accounts
    
    $
    (10
    )
    
    $
    (0
    )
    
    
    0
    
    
    
    (10
    )
    
    
    1
    
    
    
    (10
    )
    
    
    
    
    
    
    (9
    )Certificates of deposit
    
    $
    (719
    )
    
    $
    32
    
    
    
    (5
    )
    
    
    (692
    )
    
    
    (375
    )
    
    
    (19
    )
    
    
    1
    
    
    
    (393
    )Fed Funds Purchased
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Federal Home Loan Bank advances
    
    $
    (195
    )
    
    $
    (55
    )
    
    
    4
    
    
    
    (246
    )
    
    
    (335
    )
    
    
    (118
    )
    
    
    13
    
    
    
    (440
    )Total interest-bearing liabilities
    
    $
    (1,383
    )
    
    $
    347
    
    
    $
    (161
    )
    
    $
    (1,197
    )
    
    $
    (875
    )
    
    $
    259
    
    
    $
    (71
    )
    
    $
    (686
    )Net interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (163
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    337
 Comparison of Results of Operations for the Years Ended December 31, 2009, 2008, and 2007
 General
 Net Interest Income.
  42




---



##### 



Interest Income.
 Interest Expense.
 Provision for Loan Losses.
  Non-interest Income.
     43




---



##### 



Non-interest Expense.
        44




---



##### 



Federal Income Taxes.
 Liquidity and Commitments
       Off-Balance Sheet Arrangements
  45




---



##### 



Capital
  Impact of Inflation
    MARKET INFORMATION
  Year
    
    Quarter ending
    
    High
    
    Low
    
    Dividends2008
    
    March 31
    
    $
    10.37
    
    
    $
    9.80
    
    
    $
    0.09June 30
    
    $
    9.64
    
    
    $
    9.45
    
    
    $
    0.09September 30
    
    $
    9.25
    
    
    $
    8.04
    
    
    $
    0.09December 31
    
    $
    3.84
    
    
    $
    3.50
    
    
    $
    0.092009
    
    March 31
    
    $
    3.48
    
    
    $
    3.30
    
    
    $
    0.09June 30
    
    $
    6.79
    
    
    $
    6.10
    
    
    $
    0.09September 30
    
    $
    3.74
    
    
    $
    3.57
    
    
    $
    0.07December 31
    
    $
    2.80
    
    
    $
    2.51
    
    
    $
    
   46




---



##### 



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Asset and Liability Management and Market Risk
 Our Risk When Interest Rates Change.
 How We Measure Our Risk of Interest Rate Changes.
    
    
    originating shorter-term commercial real estate loans for retention in
our portfolio;
    
    selling a significant portion of the long-term, fixed rate residential
mortgage loans we make;
    
    managing our deposits to establish stable deposit relationships with an
emphasis on core, non-certificate deposits, supplementing these with
brokered deposits, as appropriate; and
    
    maintaining longer-term borrowings at fixed interest rates to offset the
negative impact of longer-term fixed rate loans in our loan portfolio.
Future borrowings are expected to be short-term to reduce the average
maturity of our borrowings.
   $ Amount
    
    
    $ Change
    
    
    % Change
    
    
    NPV Ratio
    
    
    Change+ 300 bp
    
    
    24,848
    
    
    
    6,148
    
    
    
    -20
    %
    
    
    8.78
    %
    
    -169bp+ 200 bp
    
    
    27,068
    
    
    
    3,928
    
    
    
    -13
    %
    
    
    9.42
    %
    
    -105bp+100 bp
    
    
    29,477
    
    
    
    1,519
    
    
    
    -5
    %
    
    
    10.10
    %
    
    -37bp0 bp
    
    
    30,996
    
    
    
    0
    
    
    
    
    
    
    
    10.47
    %
    
    
    0-100 bp
    
    
    33,829
    
    
    
    2,833
    
    
    
    9
    %
    
    
    11.25
    %
    
    +78bp-200 bp
    
    
    36,891
    
    
    
    5,895
    
    
    
    19
    %
    
    
    12.08
    %
    
    +161bp-300 bp
    
    
    40,838
    
    
    
    9,842
    
    
    
    32
    %
    
    
    13.15
    %
    
    +268bp
 
 (1)
    
    Assumes an instantaneous uniform change in interest rates at all maturities.  47




---



##### 



Principal Amount Maturing In:
 2015 and
    
    
    
    
    
    Fair Value2010
    
    2011
    
    2012
    
    2013
    
    2014
    
    beyond
    
    Total
    
    12/31/2009Rate-sensitive assetsFed funds and overnight deposits
    
    $
    10,723
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    10,723
    
    
    $
    10,723Average interest rate
    
    
    1.25
    %Securities
    
    $
    638
    
    
    $
    2,270
    
    
    $
    1,395
    
    
    $
    1,211
    
    
    $
    1,685
    
    
    $
    8,549
    
    
    $
    15,748
    
    
    $
    16,063Average interest rate
    
    
    3.32
    %
    
    
    4.00
    %
    
    
    4.21
    %
    
    
    4.25
    %
    
    
    4.74
    %
    
    
    4.76
    %Gross loans
    
    $
    18,556
    
    
    $
    20,737
    
    
    $
    23,278
    
    
    $
    26,803
    
    
    $
    12,606
    
    
    $
    125,158
    
    
    $
    227,138
    
    
    
    230,866Average interest rate
    
    
    5.88
    %
    
    
    6.34
    %
    
    
    6.98
    %
    
    
    6.70
    %
    
    
    6.65
    %
    
    
    6.16
    %Rate-sensitive liabilitiesSavings & interest-bearing
demand deposits
    
    $
    100,438
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    100,437
    
    
    $
    100,350Average interest rate
    
    
    0.89
    %Certificates of deposit
    
    $
    45,707
    
    
    $
    29,097
    
    
    $
    6,647
    
    
    $
    12,730
    
    
    $
    3,755
    
    
    $
    572
    
    
    $
    98,508
    
    
    $
    99,978Average interest rate
    
    
    2.63
    %
    
    
    3.46
    %
    
    
    3.99
    %
    
    
    4.17
    %
    
    
    3.76
    %
    
    
    4.18
    %FHLB advances
    
    $
    8,168
    
    
    $
    16,175
    
    
    $
    13,116
    
    
    $
    7,059
    
    
    $
    
    
    
    $
    
    
    
    $
    44,518
    
    
    $
    48,260Average interest rate
    
    
    5.64
    %
    
    
    3.45
    %
    
    
    5.08
    %
    
    
    4.10
    %
 48




---



##### 



ITEM 8. Financial Statements and Supplementary Data
 Monarch Community Bancorp, Inc.
and Subsidiaries
 
 Consolidated Financial Report
December 31, 2009




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 
 ContentsReport Letter
    
    
    3Consolidated Financial StatementsBalance Sheet
    
    
    4Statement of Operations
    
    
    5Statement of Stockholders Equity
    
    
    6Statement of Cash Flows
    
    
    7Notes to Consolidated Financial Statements
    
    
    8-40




---



##### 



(PLANTE MORAN LOGO)
    
    Plante & Moran, PLLCSuite 400634 Front Avenue N.W.Grand Rapids, MI 49504Tel: 616.774.8221Fax: 616.774.0702plantemoran.com
 
  
    /s/ Plante Moran, PLLC
 3




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 
 
 Consolidated Balance Sheet
(000s omitted, except per share data)
 December 31,
    
    
    December 31,2009
    
    
    2008AssetsCash and due from banks
    
    $
    12,631
    
    
    $
    5,595Federal Home Loan Bank overnight time and
other interest bearing deposits
    
    
    10,723
    
    
    
    677Total cash and cash equivalents
    
    
    23,354
    
    
    
    6,272Securities  Available for sale (Note 3)
    
    
    16,063
    
    
    
    8,916Securities  Held to maturity (Note 3)
    
    
    23
    
    
    
    37Other securities (Note 3)
    
    
    4,237
    
    
    
    4,237Loans held for sale
    
    
    809
    
    
    
    860Loans, net (Note 4)
    
    
    220,875
    
    
    
    247,542Foreclosed assets, net (Note 6)
    
    
    2,839
    
    
    
    2,076Premises and equipment (Note 7)
    
    
    4,467
    
    
    
    4,456Goodwill (Note 2)
    
    
    
    
    
    
    9,606Core deposit (Note 2)
    
    
    532
    
    
    
    681Other assets (Notes 5 and 10)
    
    
    10,005
    
    
    
    7,124Total assets
    
    $
    283,204
    
    
    $
    291,807Liabilities and Stockholders EquityLiabilitiesDepositsNoninterest-bearing
    
    
    14,422
    
    
    
    13,883Interest-bearing (Note 8):
    
    
    198,946
    
    
    
    178,273Total deposits
    
    
    213,368
    
    
    
    192,156Federal Home Loan Bank advances (Note 9)
    
    
    44,518
    
    
    
    60,178Fed funds purchased (Note 9)
    
    
    
    
    
    
    1,000Accrued expenses and other liabilities (Note 15)
    
    
    2,155
    
    
    
    2,203Total liabilities
    
    
    260,041
    
    
    
    255,537Stockholders Equity (Notes 12 ,13 , 14 and 19)Preferred stock-$.01 par value, 5,000,000 shares authorized, and 6,785 shares, fixed
rate cumulative perpetual preferred stock, series A, $1,000 per share
liquidation preference, issued and outstanding as of December 31, 2009
    
    
    6,739
    
    
    
    Common stock  $0.01 par value, 20,000,000 shares authorized, 2,044,606
shares issued and outstanding at December 31, 2009
and 2,046,102 issued and outstanding at December 31, 2008
    
    
    20
    
    
    
    20Additional paid-in capital
    
    
    21,216
    
    
    
    21,152Retained earnings (Accumulated deficit)
    
    
    (4,355
    )
    
    
    15,867Accumulated other comprehensive income
    
    
    223
    
    
    
    69Unearned compensation
    
    
    (680
    )
    
    
    (838
    )Total stockholders equity
    
    
    23,163
    
    
    
    36,270Total liabilities and stockholders equity
    
    $
    283,204
    
    
    $
    291,807
  4




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 
 
 Consolidated Statement Of Operations
(000s omitted, except per share data)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Interest IncomeLoans, including fees
    
    $
    15,191
    
    
    $
    16,457
    
    
    $
    16,369Investment securities
    
    
    639
    
    
    
    637
    
    
    
    787Federal funds sold and overnight deposits
    
    
    6
    
    
    
    102
    
    
    
    389Total interest income
    
    
    15,836
    
    
    
    17,196
    
    
    
    17,545Interest ExpenseDeposits
    
    
    4,910
    
    
    
    5,861
    
    
    
    6,107Federal Home Loan Bank advances
    
    
    2,429
    
    
    
    2,675
    
    
    
    3,115Total interest expense
    
    
    7,339
    
    
    
    8,536
    
    
    
    9,222Net Interest Income
    
    
    8,497
    
    
    
    8,660
    
    
    
    8,323Provision for Loan Losses(Note 4)
    
    
    13,349
    
    
    
    2,712
    
    
    
    971Net Interest Income (Loss) After Provision for Loan Losses
    
    
    (4,852
    )
    
    
    5,948
    
    
    
    7,352Noninterest IncomeFees and service charges
    
    
    2,224
    
    
    
    2,314
    
    
    
    2,477Loan servicing fees
    
    
    458
    
    
    
    443
    
    
    
    444Net gain on sale of loans
    
    
    2,090
    
    
    
    627
    
    
    
    668Net gain (loss) on sale of investment securities (Note 3)
    
    
    10
    
    
    
    2
    
    
    
    (17
    )Net gain (loss) on disposal of premises and equipment
    
    
    (7
    )
    
    
    
    
    
    
    49Other income (Note 6)
    
    
    218
    
    
    
    217
    
    
    
    325Total noninterest income
    
    
    4,993
    
    
    
    3,603
    
    
    
    3,946Noninterest ExpenseSalaries and employee benefits (Note 15, 19 and 20)
    
    
    4,818
    
    
    
    4,584
    
    
    
    4,522Occupancy and equipment (Note 7)
    
    
    1,044
    
    
    
    1,032
    
    
    
    1,008Data processing
    
    
    700
    
    
    
    777
    
    
    
    731Mortgage banking
    
    
    546
    
    
    
    406
    
    
    
    359Professional services
    
    
    530
    
    
    
    401
    
    
    
    591Amortization of intangible assets (Note 2)
    
    
    149
    
    
    
    181
    
    
    
    230NOW account processing
    
    
    149
    
    
    
    176
    
    
    
    180ATM/Debit card processing
    
    
    232
    
    
    
    200
    
    
    
    192Repossessed property expense (Note 6)
    
    
    822
    
    
    
    219
    
    
    
    207Other general and administrative
    
    
    1,488
    
    
    
    1,176
    
    
    
    972Goodwill Impairment (Note 2)
    
    
    9,607
    
    
    
    
    
    
    
    Total noninterest expense
    
    
    20,085
    
    
    
    9,152
    
    
    
    8,992Income (Loss)- Before income taxes
    
    
    (19,944
    )
    
    
    399
    
    
    
    2,306Income Taxes(Note 10)
    
    
    (548
    )
    
    
    101
    
    
    
    561Net Income (Loss)
    
    $
    (19,396
    )
    
    $
    298
    
    
    $
    1,745Dividends and accretion of discount on preferred stock
    
    $
    315
    
    
    $
    
    
    
    $
    Net Income (Loss) available to common stockholders
    
    $
    (19,711
    )
    
    $
    298
    
    
    $
    1,745Earnings (Loss) Per ShareBasic
    
    $
    (10.03
    )
    
    $
    0.14
    
    
    $
    0.73Diluted
    
    $
    (10.03
    )
    
    $
    0.14
    
    
    $
    0.73
  5




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 
 
 Consolidated Statement of Stockholders Equity
(000s omitted)
 (Accumulated
    
    
    AccumulatedPreferred
    
    
    
    
    
    
    Common Stock
    
    
    
    
    
    
    
    
    
    
    deficit)
    
    
    OtherStock Number
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Additional Paid
    
    
    Retained
    
    
    Comprehensive
    
    
    Unearnedof Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    in Capital
    
    
    Earnings
    
    
    Income  (Loss)
    
    
    Compensation
    
    
    TotalBalance  January 31, 2007
    
    
    
    
    
    
    
    
    
    
    2,534
    
    
    $
    25
    
    
    $
    26,191
    
    
    $
    15,319
    
    
    $
    (63
    )
    
    $
    (1,486
    )
    
    $
    39,9863,326 shares repurchased at average
price of $11.95/share
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (40
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40
    )Vesting of 17,589 restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235
    
    
    
    235Allocation of ESOP shares (Note 19)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    136Repurchase of 208,570 shares at average
price of $11.78/share
    
    
    
    
    
    
    
    
    
    
    (209
    )
    
    
    (2
    )
    
    
    (2,454
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,456
    )Stock option expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88Comprehensive Income (Loss):Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,745
    
    
    
    
    
    
    
    
    
    
    
    1,745Change in
unrealized loss on securities available-for-sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115
    
    
    
    
    
    
    
    115Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,860Dividends paid ($0.29/share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (723
    )
    
    
    
    
    
    
    
    
    
    
    (723
    )Balance  December 31, 2007
    
    
    
    
    
    
    
    
    
    
    2,322
    
    
    $
    23
    
    
    $
    23,828
    
    
    $
    16,341
    
    
    $
    52
    
    
    $
    (1,158
    )
    
    $
    39,086Vesting of 17,289 restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227
    
    
    
    227Allocation of ESOP shares (Note 19)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    108Repurchase of 275,483 shares at average
price of $9.81/share
    
    
    
    
    
    
    
    
    
    
    (275
    )
    
    
    (3
    )
    
    
    (2,701
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,704
    )Stock option expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10Comprehensive Income (Loss):Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    298
    
    
    
    
    
    
    
    
    
    
    
    298Change in
unrealized loss on securities available-for-sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    17Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    315Dividends paid ($0.36/share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (772
    )
    
    
    
    
    
    
    
    
    
    
    (772
    )Balance  December 31, 2008
    
    
    
    
    
    
    
    
    
    
    2,047
    
    
    $
    20
    
    
    $
    21,152
    
    
    $
    15,867
    
    
    $
    69
    
    
    $
    (838
    )
    
    $
    36,270Vesting of 4,978 restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    65Allocation of ESOP shares (Note 19)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    54Repurchase of 3,013 shares at average
price of $9.48/share
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )Issuance of 6,785 shares of preferred
stock and 260,962 of common stock
warrants through the U.S. Treasurys
Capital Purchase Program
    
    
    6,785
    
    
    
    6,729
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,785Stock option expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Comprehensive Income (Loss):Net (Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,396
    )
    
    
    
    
    
    
    
    
    
    
    (19,396
    )Change in
unrealized loss on
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154
    
    
    
    
    
    
    
    154securities available-for-sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,242
    )Dividends on preferred stock and
accretion of discount
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (315
    )
    
    
    
    
    
    
    
    
    
    
    (305
    )Dividends paid ($0.25/share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (511
    )
    
    
    
    
    
    
    
    
    
    
    (511
    )Balance  December 31, 2009
    
    
    6,785
    
    
    $
    6,739
    
    
    
    2,046
    
    
    $
    20
    
    
    $
    21,216
    
    
    $
    (4,355
    )
    
    $
    223
    
    
    $
    (680
    )
    
    $
    23,163
  6




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 
 
 Consolidated Statement of Cash Flows
(000s omitted)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Cash Flows From Operating ActivitiesNet income (loss)
    
    $
    (19,396
    )
    
    $
    298
    
    
    $
    1,745Adjustments
to reconcile net income (loss) to net cash provided by operating activities:Depreciation and amortization
    
    
    1,297
    
    
    
    1,082
    
    
    
    1,100Provision for loan loss
    
    
    13,349
    
    
    
    2,712
    
    
    
    971Stock option expense
    
    
    50
    
    
    
    10
    
    
    
    88(Gain) loss on sale of foreclosed assets
    
    
    (13
    )
    
    
    (68
    )
    
    
    (138
    )Deferred income taxes
    
    
    (237
    )
    
    
    (270
    )
    
    
    (394
    )Mortgage loans originated for sale
    
    
    (90,197
    )
    
    
    (28,273
    )
    
    
    (28,224
    )Proceeds from sale of mortgage loans
    
    
    92,337
    
    
    
    28,464
    
    
    
    29,407Gain on sale of mortgage loans
    
    
    (2,090
    )
    
    
    (627
    )
    
    
    (668
    )(Gain) Loss on sale of available for sale securities
    
    
    (10
    )
    
    
    (2
    )
    
    
    17(Gain) Loss on sale of premises and equipment
    
    
    7
    
    
    
    
    
    
    
    (49
    )Earned stock compensation
    
    
    119
    
    
    
    335
    
    
    
    371Goodwill Impairment
    
    
    9,607
    
    
    
    
    
    
    
    Net change in:Accrued interest receivable
    
    
    146
    
    
    
    64
    
    
    
    (63
    )Other assets
    
    
    (3,247
    )
    
    
    341
    
    
    
    (226
    )Accrued expenses and other liabilities
    
    
    (72
    )
    
    
    (390
    )
    
    
    (109
    )Net cash provided by operating activities
    
    
    1,650
    
    
    
    3,676
    
    
    
    3,828Cash Flows From Investing ActivitiesActivity in available-for-sale securities:Purchases
    
    
    (17,815
    )
    
    
    (3,519
    )
    
    
    (3,819
    )Proceeds from sale of securities
    
    
    10,774
    
    
    
    5,691
    
    
    
    4,428Proceeds from maturities of securities
    
    
    
    
    
    
    208
    
    
    
    2,173Activity in held-to-maturity securities:Purchases
    
    
    
    
    
    
    (7
    )
    
    
    (30
    )Proceeds from maturities of securities
    
    
    14
    
    
    
    
    
    
    
    20Loan originations and principal collections, net
    
    
    10,846
    
    
    
    (27,672
    )
    
    
    3,001Proceeds from sale of foreclosed assets
    
    
    1,579
    
    
    
    1,715
    
    
    
    1,793Proceeds on sale of premises and equipment
    
    
    
    
    
    
    
    
    
    
    283Purchase of premises and equipment
    
    
    (484
    )
    
    
    (254
    )
    
    
    (131
    )Net cash provided by (used in) investing activities
    
    
    4,914
    
    
    
    (23,838
    )
    
    
    7,718Cash Flows From Financing ActivitiesNet increase (decrease) in deposits
    
    
    21,212
    
    
    
    14,220
    
    
    
    (14,636
    )Repurchases of common stock
    
    
    (3
    )
    
    
    (2,704
    )
    
    
    (2,496
    )Dividends paid
    
    
    (816
    )
    
    
    (772
    )
    
    
    (723
    )Proceeds from FHLB advances
    
    
    
    
    
    
    44,500
    
    
    
    41,500Repayment of Fed Funds Purchased
    
    
    (1,000
    )
    
    
    
    
    
    
    Repayment of FHLB advances
    
    
    (15,660
    )
    
    
    (42,652
    )
    
    
    (36,646
    )Issuance of Preferred Stock
    
    
    6,785
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    10,518
    
    
    
    12,592
    
    
    
    (13,001
    )Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    17,082
    
    
    
    (7,570
    )
    
    
    (1,455
    )Cash and Cash Equivalents Beginning
    
    
    6,272
    
    
    
    13,842
    
    
    
    15,297Cash and Cash Equivalents End
    
    $
    23,354
    
    
    $
    6,272
    
    
    $
    13,842
  7




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 
 
 Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies
 Organization 
   Basis of Presentation and Consolidation 
 Use of Estimates 
 Significant Group Concentrations of Credit Risk 
 Cash and Cash Equivalents 
 8




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies (Continued)
 Securities

  Loans
Held for Sale 
 Loans 
   Allowance for Loan Losses 
  9




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies (Continued)
    Servicing 
  Credit
Related Financial Instruments 
 10




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies (Continued)
 Foreclosed Assets 
 Premises and Equipment 
 Goodwill and Other Intangible Assets 
  Income Taxes 
 Comprehensive Income 
  2009
    
    
    2008
    
    
    2007Change in unrealized holding gain (loss)
on available-for-sale securities
    
    $
    234
    
    
    $
    25
    
    
    $
    158Reclassification adjustment for (gains) losses
realized in income
    
    
    (10
    )
    
    
    (2
    )
    
    
    17Net unrealized gains (losses)
    
    $
    224
    
    
    $
    23
    
    
    $
    175Tax effect
    
    
    (70
    )
    
    
    (6
    )
    
    
    (60
    )Net-of-tax amount
    
    $
    154
    
    
    $
    17
    
    
    $
    115
 11




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies (Continued)
 Earnings (Loss) Per Common Share 
  2009
    
    
    2008
    
    
    2007Basic earnings (loss) per shareNumerator:Net income (loss)
    
    $
    (19,396
    )
    
    $
    298
    
    
    $
    1,745Dividends and accretion of discount on preferred stock
    
    $
    315
    
    
    $
    
    
    
    $
    Net Income (loss) available to common stockholders
    
    $
    (19,711
    )
    
    $
    298
    
    
    $
    1,745Denominator:Weighted average common shares outstanding
    
    
    2,046
    
    
    
    2,159
    
    
    
    2,508Less: Average unallocated ESOP shares
    
    
    (74
    )
    
    
    (83
    )
    
    
    (93
    )Less: Average non-vested RRP shares
    
    
    (6
    )
    
    
    (11
    )
    
    
    (32
    )Weighted average common shares outstanding
for basic earnings per share
    
    
    1,966
    
    
    
    2,065
    
    
    
    2,383Basic earnings (loss) per share
    
    $
    (10.03
    )
    
    $
    0.14
    
    
    $
    0.73Diluted earnings (loss) per shareNumerator:Net Income (loss) available to common stockholders
    
    $
    (19,711
    )
    
    $
    298
    
    
    $
    1,745Denominator:Weighted average common shares outstanding
    
    
    1,966
    
    
    
    2,065
    
    
    
    2,383Add: Dilutive effects of assumed exercises of stock options
    
    
    
    
    
    
    
    
    
    
    Add: Dilutive effects of average non-vested RRP shares
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares and dilutive
potential common shares outstanding
    
    
    1,966
    
    
    
    2,065
    
    
    
    2,383Diluted earnings (loss) per share
    
    $
    (10.03
    )
    
    $
    0.14
    
    
    $
    0.73
 12




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies (Continued)
  Employee
Stock Ownership Plan (ESOP) 
 Stock Based Compensation 
 Recent Accounting Pronouncements 
 13




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies (Continued)
 Supplemental Cash Flow Information (000s omitted)
 December 31,2009
    
    
    2008
    
    
    2007Cash paid for:Interest
    
    $
    7,468
    
    
    $
    8,553
    
    
    $
    9,218Income taxes
    
    $
    210
    
    
    $
    400
    
    
    $
    500Noncash investing activities Loans transferred to real estate in judgement
    
    $
    2,380
    
    
    $
    1,715
    
    
    $
    1,478Real estate in judgement transferred to real estate owned
    
    $
    4,240
    
    
    $
    2,528
    
    
    $
    1,738
 Reclassifications 
 14




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 2  Goodwill and Intangible Assets
   (In thousands of Dollars)Gross
    
    
    Accumulated
    
    
    Net2009Amortized intangible assets:Core deposit premium resulting from
bank and branch acquistionsTotal
    
    $
    2,081
    
    
    $
    1,549
    
    
    $
    5322008Amortized intangible assets:Core deposit premium resulting from
bank and branch acquistionsTotal
    
    $
    2,081
    
    
    $
    1,400
    
    
    $
    681
  Year EndingDecember 312010
    
    $
    1422011
    
    
    1422012
    
    
    1422013
    
    
    106Total
    
    $
    532
 15




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 3  Securities
  Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    Value2009Available-for-sale securities:U.S. Treasury
    
    $
    1,055
    
    
    $
    16
    
    
    $
    
    
    
    $
    1,071U.S. government agency obligations
    
    
    3,155
    
    
    
    41
    
    
    
    
    
    
    
    3,196Mortgage-backed securities
    
    
    5,454
    
    
    
    82
    
    
    
    
    
    
    
    5,536Obligations of states and
political subdivisions
    
    
    6,061
    
    
    
    199
    
    
    
    
    
    
    
    6,260Total available-for-sale securities
    
    $
    15,725
    
    
    $
    338
    
    
    $
    
    
    
    $
    16,063Held-to-maturity securities:Municipal securities
    
    $
    23
    
    
    $
    
    
    
    $
    
    
    
    
    23
 Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    Value2008Available-for-sale securities:U.S. government agency obligations
    
    $
    5,698
    
    
    $
    63
    
    
    $
    
    
    
    $
    5,761Mortgage-backed securities
    
    
    739
    
    
    
    
    
    
    
    (5
    )
    
    
    734Obligations of states and
political subdivisions
    
    
    2,375
    
    
    
    58
    
    
    
    (12
    )
    
    
    2,421Total available-for-sale securities
    
    $
    8,812
    
    
    $
    121
    
    
    $
    (17
    )
    
    $
    8,916Held-to-maturity securities:Municipal securities
    
    $
    37
    
    
    $
    
    
    
    $
    
    
    
    $
    37
 16




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 3  Securities (Continued)
  Held to Maturity
    
    
    Available for SaleAmortized Cost
    
    
    Market Value
    
    
    Amortized Cost
    
    
    Market ValueDue in one year or less
    
    $
    3
    
    
    $
    3
    
    
    $
    500
    
    
    $
    503Due in one through five years
    
    
    20
    
    
    
    20
    
    
    
    6,245
    
    
    
    6,402Due after five years through ten years
    
    
    
    
    
    
    
    
    
    
    3,526
    
    
    
    3,622Due after ten years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    23
    
    
    $
    23
    
    
    
    10,271
    
    
    
    10,527Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    5,454
    
    
    
    5,536Total available-for-sale securities
    
    
    
    
    
    
    
    
    
    $
    15,725
    
    
    $
    16,063
   Less than Twelve Months
    
    
    Twelve Months and OverGross Unrealized
    
    
    
    
    
    
    Gross UnrealizedLosses
    
    
    Estimated Market Value
    
    
    Losses
    
    
    Estimated Market Value2009Available-for-sale securities:Mortgage-backed securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Obligations of states and
political subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total available-for-sale securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2008Available-for-sale securities:Mortgage-backed securities
    
    $
    5
    
    
    $
    734
    
    
    $
    
    
    
    $
    Obligations of states and
political subdivisions
    
    
    12
    
    
    
    528
    
    
    
    
    
    
    
    Total available-for-sale securities
    
    $
    17
    
    
    $
    1,262
    
    
    $
    
    
    
    $
    
 17




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 3  Securities (Continued)
   Note 4  Loans
  December 31,2009
    
    
    2008Mortgage loans on real estate:One-to-four family
    
    $
    108,354
    
    
    $
    124,855Multi-family
    
    
    5,421
    
    
    
    5,728Commercial
    
    
    72,689
    
    
    
    75,730Construction or land development
    
    
    9,528
    
    
    
    9,499Total real estate loans
    
    
    195,992
    
    
    
    215,812Consumer loans:Home equity
    
    
    18,174
    
    
    
    20,677Other
    
    
    4,706
    
    
    
    5,737Total consumer loans
    
    
    22,880
    
    
    
    26,414Commercial business loans
    
    
    8,266
    
    
    
    8,609Subtotal
    
    
    227,138
    
    
    
    250,835Less: Allowance for loan losses
    
    
    5,783
    
    
    
    2,719Net deferred loan fees
    
    
    480
    
    
    
    574Loans, net
    
    $
    220,875
    
    
    $
    247,542
 18




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 4  Loans (Continued)
  December 31,2009
    
    
    2008
    
    
    2007Balance  Beginning
    
    $
    2,719
    
    
    $
    1,824
    
    
    $
    2,024Provision for loan losses
    
    
    13,349
    
    
    
    2,712
    
    
    
    971Loans charged-off
    
    
    (10,557
    )
    
    
    (2,021
    )
    
    
    (1,402
    )Recoveries of loans previously charged off
    
    
    272
    
    
    
    204
    
    
    
    231Balance  Ending
    
    $
    5,783
    
    
    $
    2,719
    
    
    $
    1,824
  December 31,2009
    
    
    2008Impaired loans with a valuation allowance
    
    $
    19,136
    
    
    $
    2,394Valuation allowance related to impaired loans
    
    $
    1,893
    
    
    $
    364Total non-accrual loans
    
    $
    15,570
    
    
    $
    2,571Total loans past-due ninety days or more and still accruing
    
    $
    
    
    
    $
    
  December 31,2009
    
    
    2008
    
    
    2007Average investment in impaired loans
    
    $
    8,163
    
    
    $
    1,661
    
    
    $
    1,748
  19




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 5
 Servicing
    December 31,2009
    
    
    2008
    
    
    2007Mortgage servicing rights  Beginning
    
    $
    862
    
    
    $
    1,016
    
    
    $
    1,129Mortgage servicing rights capitalized
    
    
    840
    
    
    
    252
    
    
    
    246Mortgage servicing rights scheduled amortization
and direct writedown for loan payoffs
    
    
    (546
    )
    
    
    (406
    )
    
    
    (359
    )Mortgage servicing rights  Ending
    
    $
    1,156
    
    
    $
    862
    
    
    $
    1,016
 Note 6
 Foreclosed Assets
  December 31,2009
    
    
    2008Real estate owned
    
    $
    1,713
    
    
    $
    749Real estate in judgment and
subject to redemption
    
    
    1,126
    
    
    
    1,327Total
    
    $
    2,839
    
    
    $
    2,076
 20




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 6
 Foreclosed Assets (Continued)
  December 31,2009
    
    2008
    
    2007Net loss (gain) on sales of real estate
    
    $
    (13
    )
    
    $
    (68
    )
    
    $
    (138
    )Operating expenses
    
    
    822
    
    
    
    219
    
    
    
    207Total
    
    $
    809
    
    
    $
    151
    
    
    $
    69
  (In Thousands of Dollars)
    
    2009
    
    
    2008Balance at beginning of year
    
    $
    749
    
    
    $
    885Properties transferred into OREO
    
    
    4,240
    
    
    
    2,528Valuation impairments recorded
    
    
    (1,684
    )
    
    
    (882
    )Proceeds from Sale of Properties
    
    
    (1,579
    )
    
    
    (1,714
    )Gain or (Loss) on sale of properties
    
    
    (13
    )
    
    
    (68
    )$
    1,713
    
    
    $
    749
 Note 7  Premises and Equipment
  December 31,

    
    DepreciableLife2009
    
    
    2008
    
    
    (in Years)Land
    
    $
    566
    
    
    $
    566Buildings and improvements
    
    
    5,727
    
    
    
    5,550
    
    
    
    5-40Furniture, fixtures and equipment
    
    
    2,837
    
    
    
    2,779
    
    
    
    2-15Total bank premises and equipment
    
    
    9,130
    
    
    
    8,895Less accumulated depreciation
and amortization
    
    
    4,663
    
    
    
    4,439Net carrying amount
    
    $
    4,467
    
    
    $
    4,456
  21




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 8  Deposits
  December 31,2009
    
    
    2008Balances by account type:Demand and NOW accounts
    
    $
    23,084
    
    
    $
    16,057Money market
    
    
    57,052
    
    
    
    41,156Passbook and statement savings
    
    
    20,302
    
    
    
    18,489Total transactional accounts
    
    
    100,438
    
    
    
    75,702Certificates of deposit:$100,000 and over
    
    
    41,150
    
    
    
    46,621Under $100,000
    
    
    57,358
    
    
    
    55,950Total certificates of deposit
    
    
    98,508
    
    
    
    102,571Total
    
    $
    198,946
    
    
    $
    178,273
  December 31, 2009Less than
    
    $100,000 &$100,000
    
    greaterLess than one year
    
    $
    28,871
    
    
    $
    16,785One to two years
    
    
    12,976
    
    
    
    16,144Two to three years
    
    
    4,130
    
    
    
    2,544Three to four years
    
    
    8,345
    
    
    
    4,385Four to five years
    
    
    3,036
    
    
    
    1,292Total
    
    $
    57,358
    
    
    $
    41,150
 Note 9  Federal Home Loan Bank Advances and Fed Funds Purchased
   22




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 9  Federal Home Loan Bank Advances and Fed Funds Purchased (Continued)
     Year EndingDecember 312010
    
    $
    8,1682011
    
    
    16,1752012
    
    
    13,1162013
    
    
    7,059Total
    
    $
    44,518
 Note 10  Income Taxes
  December 31,2009
    
    
    2008
    
    
    2007Current expense (benefit)
    
    $
    (311
    )
    
    $
    371
    
    
    $
    955Deferred expense (benefit)
    
    
    (237
    )
    
    
    (270
    )
    
    
    (394
    )Total tax expense
    
    $
    (548
    )
    
    $
    101
    
    
    $
    561
 23




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 10  Income Taxes (Continued)
  Percent of Pretax Income (Loss)December 31,2009
    
    
    2008
    
    
    2007Statutory federal tax rate
    
    
    34.00
    %
    
    
    34.00
    %
    
    
    34.00
    %Increase (decrease) resulting from:Nondeductible expenses
    
    
    -0.04
    %
    
    
    2.50
    %
    
    
    0.84
    %Tax exempt income
    
    
    0.53
    %
    
    
    -18.70
    %
    
    
    -3.49
    %Goodwill impairment
    
    
    -16.38
    %
    
    
    0.00
    %
    
    
    0.00
    %Valuation allowance
    
    
    -15.52
    %
    
    
    0.00
    %
    
    
    0.00
    %Low income housing credit
    
    
    0.00
    %
    
    
    -20.40
    %
    
    
    -5.93
    %Other
    
    
    0.16
    %
    
    
    27.90
    %
    
    
    -1.09
    %Reported tax expense
    
    
    2.75
    %
    
    
    25.30
    %
    
    
    24.33
    %
 24




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 10  Income Taxes (Continued)
  December 31,2009
    
    
    2008Deferred tax assets:Provision for loan losses
    
    $
    880
    
    
    $
    297Net deferred loan fees
    
    
    164
    
    
    
    195Deferred compensation
    
    
    321
    
    
    
    334General business tax credit carryforward
    
    
    1,097
    
    
    
    480Depreciation
    
    
    285
    
    
    
    224Net NOL Carryforward
    
    
    1,147
    
    
    
    Other Real Estate
    
    
    500
    
    
    
    Other
    
    
    314
    
    
    
    311Total deferred tax assets
    
    
    4,708
    
    
    
    1,841Deferred tax liabilities:Mortgage servicing rights
    
    $
    377
    
    
    $
    274Original issue discount
    
    
    60
    
    
    
    72Net purchase premiums
    
    
    596
    
    
    
    673Unrealized gain on available for sale securities
    
    
    76
    
    
    
    35Other
    
    
    128
    
    
    
    133Total deferred tax liabilities
    
    
    1,237
    
    
    
    1,187Valuation allowance
    
    
    (3,095
    )
    
    
    Net deferred tax asset
    
    $
    376
    
    
    $
    654
   25




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 11 Off-Balance Sheet Activities
 Credit Related Financial Instruments
   Contract AmountDecember 31,2009
    
    
    2008Commitments to grant loans
    
    $
    1,660
    
    
    $
    6,907Unfunded commitments under lines of credit
    
    
    17,787
    
    
    
    18,952Unfunded commitments under letters of credit
    
    
    160
    
    
    
    10
    Collateral Requirements
 26




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note
12  Regulatory Matters
     December 31,2009
    
    
    2008
    
    
    2007Equity per consolidated bank balance sheet
    
    $
    21,204
    
    
    $
    36,186
    
    
    $
    38,309Less: intangible and disallowed assets
    
    
    (1,057
    )
    
    
    (10,440
    )
    
    
    (11,207
    )Tier 1 Capital
    
    
    20,147
    
    
    
    25,746
    
    
    
    27,102Plus: Allowance for loan losses **
    
    
    2,740
    
    
    
    2,719
    
    
    
    1,824Total Capital
    
    $
    22,887
    
    
    $
    28,465
    
    
    $
    28,926
 
 **
    
    Limited to 1.25% of risk weighted assets 27




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 12  Regulatory Matters (Continued)
  To be Well CapitalizedTo Comply With
    
    
    Under PromptMinimum Capital
    
    
    Corrective ActionActual
    
    
    Requirements
    
    
    ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioAs of December 31, 2009Total Capital(to Risk-Weighted Assets)
    
    $
    22,887
    
    
    
    10.59
    %
    
    $
    17,290
    
    
    
    8.00
    %
    
    $
    21,613
    
    
    
    10.00
    %Tier 1 Capital(to Risk-Weighted Assets)
    
    $
    20,147
    
    
    
    9.32
    %
    
    $
    8,645
    
    
    
    4.00
    %
    
    $
    12,968
    
    
    
    6.00
    %Tier 1 Capital(to Average Assets)
    
    $
    20,147
    
    
    
    6.69
    %
    
    $
    15,056
    
    
    
    5.00
    %
    
    $
    15,056
    
    
    
    5.00
    %As of December 31, 2008:Total Capital(to Risk-Weighted Assets)
    
    $
    28,465
    
    
    
    12.54
    %
    
    $
    18,155
    
    
    
    8.00
    %
    
    $
    22,693
    
    
    
    10.00
    %Tier 1 Capital(to Risk-Weighted Assets)
    
    $
    25,746
    
    
    
    11.35
    %
    
    $
    9,077
    
    
    
    4.00
    %
    
    $
    13,616
    
    
    
    6.00
    %Tier 1 Capital(to Average Assets)
    
    $
    25,746
    
    
    
    9.26
    %
    
    $
    13,903
    
    
    
    5.00
    %
    
    $
    13,903
    
    
    
    5.00
    %
 Note
13  Restrictions on Dividends, Loans and Advances
    28




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note
14  Shareholders Equity
       29




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 15  Retirement Plans
     Note 16  Related Party Transactions
  30




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 17  Fair Value of Financial Instruments
   Cash
and Cash Equivalents
 Securities
 Other Securities
 Mortgage Loans Held for Sale
 Loans Receivable
 Deposit Liabilities
 Federal Home Loan Bank Advances
 31




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 17  Fair Value of Financial Instruments (Continued)
 Fed Funds Purchased
 Accrued Interest
  Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueAssets:Cash and cash equivalents
    
    $
    23,354
    
    
    $
    23,354
    
    
    $
    6,272
    
    
    $
    6,272Securities  Held to maturity
    
    
    23
    
    
    
    23
    
    
    
    37
    
    
    
    37Securities  Available for sale
    
    
    16,063
    
    
    
    16,063
    
    
    
    8,916
    
    
    
    8,916Other securities
    
    
    4,237
    
    
    
    4,237
    
    
    
    4,237
    
    
    
    4,237Loans held for sale
    
    
    809
    
    
    
    827
    
    
    
    860
    
    
    
    864Net loans
    
    
    220,875
    
    
    
    230,866
    
    
    
    247,542
    
    
    
    250,068Accrued interest
and late charges receivable
    
    
    1,154
    
    
    
    1,154
    
    
    
    1,300
    
    
    
    1,300Liabilities:Deposits
    
    
    213,368
    
    
    
    214,581
    
    
    
    192,156
    
    
    
    192,045Federal Home Loan Bankadvances
    
    
    44,518
    
    
    
    48,260
    
    
    
    60,178
    
    
    
    63,252Fed funds purchased
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    1,000Accrued interest payable
    
    
    397
    
    
    
    397
    
    
    
    526
    
    
    
    526
 Note 18  Fair Value Measurements
    32




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 18  Fair Value Measurements (Continued)
   Quoted Prices in
    
    
    Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    Unobservable
    
    
    Balance atIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    December(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    31, 2009AssetsInvestment securities
available  for  sale
    
    $
    9,803
    
    
    $
    6,260
    
    
    $
    
    
    
    $
    16,063
 Quoted Prices in
    
    
    Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    Unobservable
    
    
    Balance atIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    December(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    31, 2008AssetsInvestment securities
available  for  sale
    
    $
    5,757
    
    
    $
    3,159
    
    
    $
    
    
    
    $
    8,916
 33




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 18  Fair Value Measurements (Continued)
  Assets Measured at Fair Value on a Nonrecurring BasisQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    Significant
    
    
    Change in Fair ValueBalance at
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    for the year endedDecember 31, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    December 31, 2009Impaired Loans
    
    $
    18,653
    
    
    $
    
    
    
    $
    
    
    
    $
    18,653
    
    
    
    (7,895
    )Foreclosed Assets
    
    
    2,839
    
    
    
    
    
    
    
    
    
    
    
    2,839
    
    
    
    (1,819
    )$
    (9,714
    )
 Assets Measured at Fair Value on a Nonrecurring BasisQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    Significant
    
    
    Change in Fair ValueBalance at December
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    for the year ended31, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    December 31, 2008Impaired Loans
    
    $
    2,377
    
    
    $
    
    
    
    $
    
    
    
    $
    2,377
    
    
    $
    (193
    )
  34




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 19   Employee Stock Ownership Plan (ESOP)
  The scheduled maturities of the loan are as follows (000s omitted):
 Year EndingDecember 312010
    
    $
    942011
    
    
    982012
    
    
    1032013
    
    
    1082014
    
    
    113Thereafter
    
    
    243Total
    
    $
    759
  35




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 19  Employee Stock Ownership Plan (ESOP) (Continued)
  2009
    
    
    2008Allocated shares
    
    
    111,090
    
    
    
    101,833Shares released for allocation
    
    
    9,258
    
    
    
    9,257Shares distributed
    
    
    (38,827
    )
    
    
    (34,516
    )Unreleased shares
    
    
    64,802
    
    
    
    74,060Total ESOP shares
    
    
    146,323
    
    
    
    150,634Fair value of unallocated shares
    
    $
    175
    
    
    $
    259
  Note 20  Stock Compensation Plans
    36




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
  Notes to Consolidated Financial Statements
 Note 20  Stock Compensation Plans (continued)
 The fair value of each option granted in 2009 was $1.02. There were no options granted
in 2008. The fair value of each option granted in 2007 was $2.05. As of December 31,
2009, there was $1,000 of total unrecognized compensation cost related to nonvested
share-based compensation arrangements granted under the Plan. That cost is expected to
be recognized in 2010. The fair value is estimated on the date of the grant using the
following weighted average assumptions:
 2009
    
    2008
    
    2007Dividend yield
    
    
    2.7
    %
    
    
    
    
    
    
    1.8%Expected life
    

    
    5 years

        

    
    


    
    
    
    5 yearsExpected volatility
    
    
    37.9
    %
    
    
    
    
    
    
    22.3%Risk-free interest rate
    
    
    2.5
    %
    
    
    0.00
    %
    
    
    3.02%-4.80%
  2009
    
    
    2008Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at beginning of year
    
    
    162
    
    
    
    13.22
    
    
    
    175
    
    
    
    13.21Granted
    
    
    40
    
    
    
    3.60
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited/expired
    
    
    8
    
    
    
    12.69
    
    
    
    13
    
    
    
    13.00Outstanding at end of year
    
    
    194
    
    
    
    11.27
    
    
    
    162
    
    
    
    13.22Exercisable at year-end
    
    
    194
    
    
    
    11.25
    
    
    
    152
    
    
    
    13.20
  2009
    
    2008Beginning of year
    
    152
    
    
    129Newly Vested
    
    
    42
    
    
    
    23Exercised
    
    
    
    
    
    
    End of year
    
    
    194
    
    
    
    152
 37




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
  Notes to Consolidated Financial Statements
 Note 20  Stock Compensation Plans (continued)
  Outstanding
    
    ExercisableExercise Price
    
    Number
    
    Remaining
    
    NumberPer share
    
    Outstanding
    
    Life (in Months)
    
    Exercisable$14.00
    
    
    39,836
    
    
    
    57
    
    
    
    39,836$13.10
    
    
    5,000
    
    
    
    60
    
    
    
    5,000$13.00
    
    
    108,726
    
    
    
    40
    
    
    
    108,726$11.15
    
    
    1,000
    
    
    
    72
    
    
    
    800$3.60
    
    
    40,000
    
    
    
    115
    
    
    
    40,000
 Note 21  Condensed Financial Statements of Parent Company
  Condensed Balance Sheet (000s omitted)
 December 31,
    
    
    December 31,2009
    
    
    2008AssetsCash
    
    $
    626
    
    
    $
    469Investments
    
    
    1,611
    
    
    
    123Investment in Monarch Community Bank
    
    
    21,204
    
    
    
    36,186Other assets
    
    
    99
    
    
    
    140Total assets
    
    $
    23,540
    
    
    $
    36,918Liabilities and Stockholders EquityAccrued expenses
    
    $
    377
    
    
    $
    648Stockholders equity
    
    
    23,163
    
    
    
    36,270Total liabilities and stockholders equity
    
    $
    23,540
    
    
    $
    36,918
 38




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 21  Condensed Financial Statements of Parent Company (Continued)
 Condensed Income Statement (000s omitted)
 December 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Income  Interest on investments
    
    $
    24
    
    
    $
    15
    
    
    $
    23Dividends from Monarch Community Bank
    
    
    
    
    
    
    2,638
    
    
    
    3,261Operating expense
    
    
    234
    
    
    
    217
    
    
    
    385Income (loss)  Before equity in undistributed
net income (loss) of subsidiary
    
    
    (210
    )
    
    
    2,436
    
    
    
    2,899Equity in undistributed net income (loss) of
subsidiary
    
    
    (19,186
    )
    
    
    (2,138
    )
    
    
    (1,154
    )Net income
    
    $
    (19,396
    )
    
    $
    298
    
    
    $
    1,745
 39




---



##### 



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 21  Condensed Financial Statements of Parent Company (Continued)
 Condensed Statement of Cash Flows (000s omitted)
 December 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    (19,396
    )
    
    $
    298
    
    
    $
    1,745Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:Amortization
    
    
    58
    
    
    
    1
    
    
    
    1Allocation of ESOP and RRP
    
    
    119
    
    
    
    335
    
    
    
    371(Increase) decrease in other assets
    
    
    41
    
    
    
    (112
    )
    
    
    139(Increase) decrease in accrued expenses
    
    
    (271
    )
    
    
    326
    
    
    
    54Undistributed net income (loss) of subsidiary
    
    
    19,186
    
    
    
    2,138
    
    
    
    1,154Net cash (used in) provided by operating activities
    
    
    (263
    )
    
    
    2,986
    
    
    
    3,464Cash flows from investing activities:Purchase of securities
    
    
    (2,560
    )
    
    
    (7
    )
    
    
    (30
    )Investment in subisidary
    
    
    (4,000
    )
    
    
    
    
    
    
    Proceeds from sales and maturities of securities
    
    
    1,014
    
    
    
    208
    
    
    
    20Net cash (used in) provided by investing activities
    
    
    (5,546
    )
    
    
    201
    
    
    
    (10
    )Cash flows from financing activities:Issuance of Preferred Stock
    
    
    6,785
    
    
    
    
    
    
    
    Repurchase of Common Stock
    
    
    (3
    )
    
    
    (2,704
    )
    
    
    (2,496
    )Dividends paid
    
    
    (816
    )
    
    
    (772
    )
    
    
    (723
    )Net cash (used in) provided by financing activities
    
    
    5,966
    
    
    
    (3,476
    )
    
    
    (3,219
    )Net increase (decrease) in cash
    
    
    157
    
    
    
    (289
    )
    
    
    235Cash at beginning of year
    
    
    469
    
    
    
    758
    
    
    
    523Cash at end of year
    
    $
    626
    
    
    $
    469
    
    
    $
    758
 Note
22  Subsequent events
  40




---



##### 



QUARTERLY RESULTS OF OPERATIONS
  Year Ended December 31, 20091st Qtr
    
    
    2nd Qtr
    
    
    3rd Qtr
    
    
    4th Qtr(Dollars in thousands, except per share data)Interest income
    
    $
    4,074
    
    
    $
    4,035
    
    
    $
    3,968
    
    
    $
    3,759Interest expense
    
    
    1,976
    
    
    
    1,917
    
    
    
    1,800
    
    
    
    1,646Net interest income
    
    
    2,098
    
    
    
    2,118
    
    
    
    2,168
    
    
    
    2,113Provision for loan losses
    
    
    722
    
    
    
    3,441
    
    
    
    1,250
    
    
    
    7,936Net interest income (loss) after
provision for loan losses
    
    
    1,376
    
    
    
    (1,323
    )
    
    
    918
    
    
    
    (5,823
    )Noninterest income
    
    
    1,373
    
    
    
    1,468
    
    
    
    1,094
    
    
    
    1,058Noninterest expense
    
    
    2,510
    
    
    
    2,576
    
    
    
    2,485
    
    
    
    12,514Income (loss) before income taxes
    
    
    239
    
    
    
    (2,431
    )
    
    
    (473
    )
    
    
    (17,279
    )Income tax expense
    
    
    60
    
    
    
    (608
    )
    
    
    (121
    )
    
    
    121Net Income (Loss)
    
    $
    179
    
    
    $
    (1,823
    )
    
    $
    (352
    )
    
    $
    (17,400
    )Dividends and amortization of discount on preferred stock
    
    
    51
    
    
    
    87
    
    
    $
    88
    
    
    
    89Net Income (Loss) available to common stock
    
    $
    128
    
    
    $
    (1,910
    )
    
    $
    (440
    )
    
    $
    (17,489
    )Earnings (Loss) per share:Basic
    
    $
    0.07
    
    
    $
    (0.97
    )
    
    $
    (0.22
    )
    
    $
    (8.91
    )Diluted
    
    $
    0.07
    
    
    $
    (0.97
    )
    
    $
    (0.22
    )
    
    $
    (8.91
    )Cash dividends declared per share
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.07
    
    
    $
    
 
 (1)
    
    Includes a $9.6 million goodwill impairment Year Ended December 31, 20081st Qtr
    
    
    2nd Qtr
    
    
    3rd Qtr
    
    
    4th Qtr(Dollars in thousands, except per share data)Interest income
    
    $
    4,285
    
    
    $
    4,295
    
    
    $
    4,297
    
    
    $
    4,319Interest expense
    
    
    2,213
    
    
    
    2,126
    
    
    
    2,112
    
    
    
    2,085Net interest income
    
    
    2,072
    
    
    
    2,169
    
    
    
    2,185
    
    
    
    2,234Provision for loan losses
    
    
    308
    
    
    
    448
    
    
    
    731
    
    
    
    1,225Net interest income after
provision for loan losses
    
    
    1,764
    
    
    
    1,721
    
    
    
    1,454
    
    
    
    1,009Noninterest income
    
    
    1,000
    
    
    
    933
    
    
    
    898
    
    
    
    772Noninterest expense
    
    
    2,322
    
    
    
    2,321
    
    
    
    2,258
    
    
    
    2,251Income before income taxes
    
    
    442
    
    
    
    333
    
    
    
    94
    
    
    
    (470
    )Income tax expense
    
    
    110
    
    
    
    85
    
    
    
    37
    
    
    
    (131
    )Net Income (Loss)
    
    $
    332
    
    
    $
    248
    
    
    $
    57
    
    
    $
    (339
    )Earnings per share:Basic
    
    $
    0.15
    
    
    $
    0.12
    
    
    $
    0.03
    
    
    $
    (0.17
    )Diluted
    
    $
    0.15
    
    
    $
    0.12
    
    
    $
    0.03
    
    
    $
    (0.17
    )Cash dividends declared per share
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
 41




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##### 



ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  ITEM 9A (T). Controls and Procedures
      Internal ControlIntegrated Framework
  /s/ Donald L. DenneyDonald L. DenneyPresident and Chief Executive Officer/s/ Rebecca S. CrabillRebecca S. CrabillVice President and Chief Financial Officer 42




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##### 



ITEM
9B. Other Information 
 PART III
 ITEM 10. Directors, Executive Officers and Corporate Governance
  ITEM 11. Executive Compensation
  ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder
Matters
  Equity Compensation Plan Information
  Number of
    
    
    
    
    
    Number ofsecurities to be
    
    
    
    
    
    securitiesissued upon
    
    Weighted-average
    
    remaining availableexercise of
    
    exercise price of
    
    for future issuanceoutstanding options
    
    outstanding options
    
    under equityPlan Category
    
    warrants and rights
    
    warrants and rights
    
    compensation plansEquity
compensation plans
approved by
security holders
(1)
    
    
    194,562
    
    
    
    11.27
    
    
    
    40,851Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Includes 2003 Stock Option and Incentive Plan and 2003 Recognition and Retention Plan
approved at the 2003 Annual Meeting of Shareholders 43




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##### 



ITEM 13. Certain Relationships and Related Transactions, and Director Independence
  ITEM 14. Principal Accountant Fees and Services
  PART IV
 ITEM 15. Exhibits and Financial Statement Schedules
 Documents Filed As Part Of This Annual Report on Form 10-K
 1.
    
    Financial Statement  See the Financial Statements included in Item 8.2.
    
    Financial Statement Schedules  Financial statement schedules are omitted for
the reason that they are not required or are not applicable, or the required information is
included in the financial statements.3.
    
    Exhibits  The exhibits filed as part of this Annual Report on Form 10-K are
identified in the Exhibit Index, which Exhibit Index specifically identifies those exhibits
that describe or evidence all management contracts and compensation plans or arrangements
required to be filed as exhibits to this report. Such Exhibit Index is incorporated herein
by reference.
 44




---



##### 



SIGNATURES
  MONARCH COMMUNITY BANCORP, INC.Dated: March 31, 2010
    By:
    /s/ Donald L. DenneyDonald L. Denney, Presidentand Chief Executive Officer  Signature
    
    Title
    
    Date/s/ Donald L. Denney

Donald L. Denney
    
    President and Chief Executive Officer (Principal
Executive Officer)
    
    March 31, 2010/s/ Stephen M. Ross

Stephen M. Ross
    
    Chairman of the Board
    
    March 31, 2010/s/ Rebecca S. Crabill

Rebecca S. Crabill
    
    Senior Vice President and Chief Financial Officer (Principal Financial and
Accounting Officer)
    
    March 31, 2010/s/ Harold A. Adamson

Harold A. Adamson
    
    Director
    
    March 31, 2010/s/ Karl F. Loomis

Karl F. Loomis
    
    Director
    
    March 31, 2010/s/ James W. Gordon

James W. Gordon
    
    Director
    
    March 31, 2010/s/ Martin L. Mitchell

Martin L. Mitchell
    
    Director
    
    March 31, 2010/s/ Gordon L. Welch

Gordon L. Welch
    
    Director
    
    March 31, 2010/s/ Craig W. Dally

Craig W. Dally
    
    Director
    
    March 31, 2010/s/ Richard L. Dobbins

Richard L. Dobbins
    
    Director
    
    March 31, 2010
 45




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##### 



Exhibit Index
 Reference toPrior Filing orExhibit
    
    
    
    Exhibit NumberNumber
    
    Document
    
    Attached Hereto3.1 (i)
    
    Registrants Articles of Incorporation
    
    
    *3.1 (ii)
    
    Articles Supplementary (Incorporated by reference from Form 8-K filed 2/9/09)3.2 (i)
    
    Registrants Bylaws ( Incorporated by reference from Form 8-K filed on 12/23/09)4.1
    
    Registrants Specimen Stock Certificate
    
    
    *4.2
    
    Warrant to Purchase 260,962 shares of Common Stock issued to the U.S. Treasury (Incorporated
by reference from Form 8-K filed on 2/12/09)10.1
    
    Employment Agreement between Monarch Community Bancorp, Inc and Donald L. Denney (incorporated by
reference from Form 8-K filed on 9/25/2006)10.2
    
    Management Continuity Agreement between Monarch Community Bancorp, Inc. and William C. Kurtz and
Andrew J. Van Doren (incorporated by reference from Form 8-K filed on 12/21/2004)10.3
    
    Registrants Employee Stock Ownership Plan
    
    
    *10.4
    
    Registrants 2003 Stock Option and Incentive Plan
    
    
    **10.5
    
    Registrants Recognition and Retention Plan
    
    
    **10.6
    
    Form of Stock Option Agreement
    
    
    ***10.7
    
    Management Continuity Agreement with Rebecca S. Crabill (Incorporated by reference from
Form 8-K filed on 02/27/08)10.8
    
    Letter Agreement dated February 6, 2009 including the Securities Purchase Agreement Standard Terms
Incorporated by reference therein between the Company and the U.S. Treasury (incorporated by reference
from Form 8-K filed on 2/12/09)10.9
    
    Form of Waiver of Senior Executive
Officers (Incorporated by reference from Form 8-K, filed on 2/12/09)10.10
    
    Form of Amendment Agreement (Incorporated by reference from Form 8-K filed on 2/12/09)10.11
    
    Amendment to Employment Agreement
with Donald L. Denney (Incorporated by reference from Annual Report
on Form 10-K for the year ended 12/31/08)10.12
    
    Amendment to Employment Agreement
with Andrew J. Van Doren (Incorporated by reference from Annual Report
on Form 10-K for the year ended 12/31/08)10.13
    
    Amendment to Employment Agreement
with Rebecca S. Crabill (Incorporated by reference from Annual Report
on Form 10-K for the year ended 12/31/08)10.14
    
    Amendment No. 2 to Donald L. Denney Employment Agreement (Incorporated by reference from Form 10-Q
filed on 11/16/09)11
    
    Statement re computation of per share earnings
    
    See Note 1 of the
Notes
to Consolidated
Financial
Statements
contained in
this report12
    
    Statements re computation of ratios
    
    None13
    
    Annual Report to Security Holders
    
    Not required14
    
    Registrants Code of Conduct
    
    
    1416
    
    Letter re: change in certifying accountant
    
    None18
    
    Letter re: change in accounting principles
    
    None21
    
    Subsidiaries of the registrant
    
    
    2122
    
    Published report regarding matters submitted to vote of security holders
    
    None23
    
    Consent of Plante & Moran, PLLC
    
    
    2324
    
    Power of Attorney
    
    Not required31.1
    
    Rule 13a-14(a) Certification of the Companys President and Chief Executive Officer
    
    
    31.131.2
    
    Rule 13a-14(a) Certification of the Companys Chief Financial Officer
    
    
    31.232
    
    Section 1350 Certification.
    
    
    32
 46




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##### 



Reference toPrior Filing orExhibit
    
    
    
    Exhibit NumberNumber
    
    Document
    
    Attached Hereto99.1
    
    31 C.F.R. Section 30.15 Certification of Principal Executive Officer
    
    
    99.199.2
    
    31 C.F.R Section 30.15 Certification of Principal Financial Officer
    
    
    99.2
 
 *
    
    Filed on March 27, 2002 as an exhibit to the Registrants Registration Statement on Form
SB-2 (File No. 333-85018), and incorporated herein by reference.**
    
    Filed on March 19, 2003 as part of Registrants Schedule 14A (File No. 000-49814), and
incorporated by reference***
    
    Incorporated by reference from Annual Report on Form 10-KSB for the year ended December 31, 2004 47