##### Table of Contents



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, 2010
 Commission file number 0-49814
 MONARCH COMMUNITY BANCORP, INC.
  Maryland
    
    04-3627031(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    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
 o þ
 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of
Section 15(d) of the Exchange Act. Yes o No þ
 þ o
 Yes o No o
 o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    

Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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TABLE OF CONTENTS  PART IITEM 1. BusinessITEM 1A. Risk FactorsITEM 1B. Unresolved Staff Comments  NoneITEM 2. PropertiesITEM 3. Legal ProceedingsITEM 4. ReservedITEM 5. Market for the Companys Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesITEM 6. Selected Financial DataITEM 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskITEM 8. Financial Statements and Supplementary DataITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureITEM 9A. Controls and ProceduresITEM 9B. Other InformationPART IIIITEM 10. Directors, Executive Officers and Corporate GovernanceITEM 11. Executive CompensationITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder MattersITEM 13. Certain Relationships and Related Transactions, and Director IndependenceITEM 14. Principal Accountant Fees and ServicesPART IVITEM 15. Exhibits and Financial Statement SchedulesSIGNATURESExhibit IndexEX-14EX-21EX-23EX-31.1EX-31.2EX-32EX-99.1EX-99.2    Table of Contents  DOCUMENTS
INCORPORATED BY REFERENCE
 
 PART I
 
 ITEM 1. Business
 General
        2




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##### Table of Contents



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




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##### Table of Contents



Loan Portfolio Composition .
 December 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Real Estate Loans:One-to four-family
    
    $
    93,294
    
    
    
    49.09
    %
    
    $
    108,354
    
    
    
    47.70
    %
    
    $
    124,855
    
    
    
    49.80
    %
    
    $
    126,780
    
    
    
    55.80
    %
    
    $
    140,374
    
    
    
    60.30
    %Multi-family
    
    
    4,783
    
    
    
    2.52
    
    
    
    5,421
    
    
    
    2.39
    
    
    
    5,728
    
    
    
    2.26
    
    
    
    5,594
    
    
    
    3.22
    
    
    
    7,511
    
    
    
    3.22Commercial
    
    
    62,998
    
    
    
    33.14
    
    
    
    72,689
    
    
    
    32.00
    
    
    
    75,730
    
    
    
    30.19
    
    
    
    56,714
    
    
    
    24.97
    
    
    
    41,079
    
    
    
    17.64Construction or development
    
    
    3,873
    
    
    
    2.04
    
    
    
    9,528
    
    
    
    4.20
    
    
    
    9,499
    
    
    
    3.79
    
    
    
    6,409
    
    
    
    2.82
    
    
    
    9,529
    
    
    
    4.09Total real estate loans
    
    
    164,948
    
    
    
    86.79
    
    
    
    195,992
    
    
    
    86.29
    
    
    
    215,812
    
    
    
    86.04
    
    
    
    195,497
    
    
    
    85.25
    
    
    
    198,493
    
    
    
    85.25Other loans:Consumer loans:Home equity
    
    
    14,814
    
    
    
    7.80
    
    
    
    18,174
    
    
    
    8.00
    
    
    
    20,677
    
    
    
    8.24
    
    
    
    20,430
    
    
    
    8.99
    
    
    
    19,077
    
    
    
    8.19Other
    
    
    3,403
    
    
    
    1.79
    
    
    
    4,706
    
    
    
    2.07
    
    
    
    5,737
    
    
    
    2.29
    
    
    
    7,014
    
    
    
    3.09
    
    
    
    9,087
    
    
    
    3.90Total consumer loans
    
    
    18,217
    
    
    
    9.59
    
    
    
    22,880
    
    
    
    10.07
    
    
    
    26,414
    
    
    
    10.53
    
    
    
    27,444
    
    
    
    12.08
    
    
    
    28,164
    
    
    
    12.09Commercial Business Loans
    
    
    6,882
    
    
    
    3.62
    
    
    
    8,266
    
    
    
    3.64
    
    
    
    8,609
    
    
    
    3.43
    
    
    
    4,228
    
    
    
    1.86
    
    
    
    6,205
    
    
    
    2.67Total other loans
    
    
    25,099
    
    
    
    13.21
    
    
    
    31,146
    
    
    
    13.71
    
    
    
    35,023
    
    
    
    13.96
    
    
    
    31,672
    
    
    
    13.94
    
    
    
    34,369
    
    
    
    14.76Total Loans
    
    
    190,047
    
    
    
    100.00
    %
    
    
    227,138
    
    
    
    100.00
    %
    
    
    250,835
    
    
    
    100.00
    %
    
    
    227,169
    
    
    
    100.00
    %
    
    
    232,862
    
    
    
    100.00
    %Less:Allowance for loan losses
    
    
    6,850
    
    
    
    
    
    
    
    5,783
    
    
    
    
    
    
    
    2,719
    
    
    
    
    
    
    
    1,824
    
    
    
    
    
    
    
    2,024Net deferred loan fees
    
    
    429
    
    
    
    
    
    
    
    480
    
    
    
    
    
    
    
    574
    
    
    
    
    
    
    
    548
    
    
    
    
    
    
    
    591Loans in process
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Loans, net
    
    $
    182,768
    
    
    
    
    
    
    $
    220,875
    
    
    
    
    
    
    $
    247,542
    
    
    
    
    
    
    $
    224,797
    
    
    
    
    
    
    $
    230,247
 4




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December 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2008Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Fixed-Rate LoansReal Estate Loans:One-to-four family
    
    $
    70,080
    
    
    
    36.9
    %
    
    $
    80,241
    
    
    
    35.3
    %
    
    $
    92,644
    
    
    
    36.9
    %Multi-family
    
    
    4,762
    
    
    
    2.5
    %
    
    
    5,396
    
    
    
    2.4
    %
    
    
    5,524
    
    
    
    2.2
    %Commercial
    
    
    55,959
    
    
    
    29.5
    %
    
    
    52,495
    
    
    
    23.1
    %
    
    
    47,689
    
    
    
    19.0
    %Construction or development
    
    
    1,942
    
    
    
    1.0
    %
    
    
    4,127
    
    
    
    1.8
    %
    
    
    8,111
    
    
    
    3.3
    %Total real estate loans
    
    
    132,743
    
    
    
    69.9
    %
    
    
    142,259
    
    
    
    62.6
    %
    
    
    153,968
    
    
    
    61.4
    %Consumer
    
    
    17,985
    
    
    
    9.5
    %
    
    
    15,323
    
    
    
    6.8
    %
    
    
    19,406
    
    
    
    7.7
    %Commercial Business
    
    
    6,154
    
    
    
    3.2
    %
    
    
    6,244
    
    
    
    2.7
    %
    
    
    7,011
    
    
    
    2.8
    %Total fixed-rate loans
    
    
    156,882
    
    
    
    82.6
    %
    
    
    163,826
    
    
    
    72.1
    %
    
    
    180,385
    
    
    
    71.9
    %Adjustable-Rate LoansReal Estate Loans:One-to-four family
    
    $
    23,214
    
    
    
    12.2
    %
    
    $
    28,113
    
    
    
    12.4
    %
    
    $
    32,211
    
    
    
    12.8
    %Multi-family
    
    
    21
    
    
    
    0.0
    %
    
    
    25
    
    
    
    0.0
    %
    
    
    204
    
    
    
    0.1
    %Commercial
    
    
    7,039
    
    
    
    3.7
    %
    
    
    20,194
    
    
    
    8.9
    %
    
    
    28,041
    
    
    
    11.2
    %Construction or development
    
    
    1,931
    
    
    
    1.0
    %
    
    
    5,401
    
    
    
    2.4
    %
    
    
    1,388
    
    
    
    0.6
    %Total real estate loans
    
    
    32,205
    
    
    
    16.9
    %
    
    
    53,733
    
    
    
    23.7
    %
    
    
    61,844
    
    
    
    24.7
    %Consumer
    
    
    233
    
    
    
    0.1
    %
    
    
    7,557
    
    
    
    3.3
    %
    
    
    7,008
    
    
    
    2.8
    %Commercial Business
    
    
    727
    
    
    
    0.4
    %
    
    
    2,022
    
    
    
    0.9
    %
    
    
    1,598
    
    
    
    0.6
    %Total adjustable-rate loans
    
    
    33,165
    
    
    
    17.4
    %
    
    
    63,312
    
    
    
    27.9
    %
    
    
    70,450
    
    
    
    28.1
    %Total loans
    
    
    190,047
    
    
    
    100
    %
    
    
    227,138
    
    
    
    100
    %
    
    
    250,835
    
    
    
    100.0
    %Less:Allowance for loan losses
    
    
    6,850
    
    
    
    
    
    
    
    5,783
    
    
    
    
    
    
    
    2,719Net deferred loan fees
    
    
    429
    
    
    
    
    
    
    
    480
    
    
    
    
    
    
    
    574Loans in process
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Loans, net
    
    $
    182,768
    
    
    
    
    
    
    $
    220,875
    
    
    
    
    
    
    $
    247,542
 5




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##### Table of Contents



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)
    
    $
    5,644
    
    
    
    6.23
    %
    
    $
    11,331
    
    
    
    5.44
    %
    
    $
    1,295
    
    
    
    5.96
    %
    
    $
    3,326
    
    
    
    7.34
    %
    
    $
    959
    
    
    
    5.87
    %
    
    $
    22,555
    
    
    
    5.97
    %After one year through five years
    
    
    16,987
    
    
    
    6.57
    %
    
    
    42,730
    
    
    
    6.10
    %
    
    
    
    
    
    
    0.00
    %
    
    
    8,191
    
    
    
    6.85
    %
    
    
    5,561
    
    
    
    7.12
    %
    
    
    73,469
    
    
    
    6.37
    %After five years
    
    
    70,663
    
    
    
    6.16
    %
    
    
    13,720
    
    
    
    5.41
    %
    
    
    2,578
    
    
    
    6.20
    %
    
    
    6,700
    
    
    
    5.03
    %
    
    
    362
    
    
    
    5.53
    %
    
    
    94,023
    
    
    
    5.97
    %$
    93,294
    
    
    
    
    
    
    $
    67,781
    
    
    
    
    
    
    $
    3,873
    
    
    
    
    
    
    $
    18,217
    
    
    
    
    
    
    $
    6,882
    
    
    
    
    
    
    $
    190,047
 
 (1)
    
    Includes demand loans.  6




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##### Table of Contents



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




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##### Table of Contents



Multi-family and Commercial Real Estate Lending
     8




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##### Table of Contents



Construction and Land Development Lending
   Consumer and Other Lending
   9




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##### Table of Contents



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




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##### Table of Contents



Years Ended2010
    
    
    2009(Dollars in thousands)Originations by type:Real Estate:One-to-four family
    
    $
    39,062
    
    
    $
    104,416Multi-family
    
    
    469
    
    
    
    760Commercial
    
    
    9,456
    
    
    
    9,025Construction or development
    
    
    1,712
    
    
    
    4,943Total real estate loans
    
    
    50,699
    
    
    
    119,144Consumer Loans:Home Equity
    
    
    1,383
    
    
    
    5,073Other
    
    
    367
    
    
    
    827Commercial business
    
    
    693
    
    
    
    743Total loans originated
    
    
    53,142
    
    
    
    125,787Sales and Repayments:One-to-four family loans sold
    
    
    32,614
    
    
    
    89,901Commercial real estate loans sold
    
    
    
    
    
    
    Principal repayments
    
    
    55,895
    
    
    
    59,583Total reductions
    
    
    88,509
    
    
    
    149,484Increase in other items, net
    
    
    2,896
    
    
    
    2,970Net increase (decrease)
    
    $
    (38,263
    )
    
    $
    (26,667
    )
 Asset Quality
  11




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Delinquent Loans.
 December 31, 2010Loans Delinquent For:60-89 Days
    
    
    90 Days and Over
    
    
    Total Delinquent LoansPercent of
    
    
    
    
    
    
    
    
    
    
    Percent ofLoan
    
    
    
    
    
    
    
    
    
    
    Loan
    
    
    
    
    
    
    
    
    
    
    Percent of LoanNumber
    
    
    Amount
    
    
    Category
    
    
    Number
    
    
    Amount
    
    
    Category
    
    
    Number
    
    
    Amount
    
    
    Category(Dollars in Thousands)Real EstateOne-to-four family
    
    
    10
    
    
    $
    888
    
    
    
    0.95
    %
    
    
    12
    
    
    $
    1,098
    
    
    
    1.18
    %
    
    
    22
    
    
    $
    1,986
    
    
    
    2.13
    %Multi-family
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    1
    
    
    
    339
    
    
    
    7.09
    %
    
    
    1
    
    
    
    339
    
    
    
    7.09
    %Commercial
    
    
    2
    
    
    
    2,752
    
    
    
    4.37
    %
    
    
    10
    
    
    
    3,751
    
    
    
    5.95
    %
    
    
    12
    
    
    
    6,503
    
    
    
    10.32
    %Construction or development
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    0.00
    %Total real estate loans
    
    
    12
    
    
    $
    3,640
    
    
    
    2.21
    %
    
    
    23
    
    
    $
    5,188
    
    
    
    3.15
    %
    
    
    35
    
    
    $
    8,828
    
    
    
    5.35
    %Consumer
    
    
    1
    
    
    
    19
    
    
    
    0.10
    %
    
    
    6
    
    
    
    192
    
    
    
    1.05
    %
    
    
    7
    
    
    
    211
    
    
    
    1.16
    %Commercial Business
    
    
    
    
    
    
    
    
    
    
    0.00
    %
    
    
    3
    
    
    
    1,118
    
    
    
    16.25
    %
    
    
    3
    
    
    
    1,118
    
    
    
    16.25
    %Total
    
    
    13
    
    
    $
    3,659
    
    
    
    1.93
    %
    
    
    32
    
    
    $
    6,498
    
    
    
    3.42
    %
    
    
    45
    
    
    $
    10,157
    
    
    
    5.34
    %
 December 31, 2009Loans Delinquent For:60-89 Days
    
    
    90 Days and Over
    
    
    Total Delinquent LoansPercent of
    
    
    
    
    
    
    
    
    
    
    Percent ofLoan
    
    
    
    
    
    
    
    
    
    
    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
    %
 12




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##### Table of Contents



Non-performing Assets.
 December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(Dollars in Thousands)Non-accruing loans:One-to-four family
    
    $
    3,106
    
    
    $
    3,484
    
    
    $
    622
    
    
    $
    607
    
    
    $
    408Multi-family
    
    
    803
    
    
    
    874
    
    
    
    164
    
    
    
    
    
    
    
    Commercial real estate
    
    
    8,288
    
    
    
    7,139
    
    
    
    459
    
    
    
    Construction or development
    
    
    
    
    
    
    2,507
    
    
    
    1,298
    
    
    
    153
    
    
    
    Consumer
    
    
    253
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    60Commercial business
    
    
    1,625
    
    
    
    1,566
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    14,075
    
    
    
    15,570
    
    
    
    2,571
    
    
    
    760
    
    
    
    468Accruing 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)
    
    
    1,198
    
    
    
    2,577
    
    
    
    1,669
    
    
    
    1,453
    
    
    
    1,580Multi-family
    
    
    292
    
    
    
    122
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    908
    
    
    
    140
    
    
    
    407
    
    
    
    62
    
    
    
    Construction or development
    
    
    574
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100Commercial business
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    2,972
    
    
    
    2,839
    
    
    
    2,076
    
    
    
    1,515
    
    
    
    1,680Total non-performing assets
    
    $
    17,047
    
    
    $
    18,409
    
    
    $
    4,647
    
    
    $
    2,380
    
    
    $
    2,148Total as a percentage of total
assets
    
    
    6.64
    %
    
    
    6.50
    %
    
    
    1.59
    %
    
    
    0.85
    %
    
    
    0.74
    %
 
 (1)
    
    Includes $1.4 million, $1.1 million, $1.3 million, $630,000 and
$895,000 in real estate in judgment and subject to redemption at
December 31, 2010, 2009, 2008, 2007 and 2006 respectively.  13




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##### Table of Contents



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




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##### Table of Contents



15




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##### Table of Contents



December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Balance at beginning of year
    
    $
    5,783
    
    
    $
    2,719
    
    
    $
    1,824
    
    
    $
    2,024
    
    
    $
    2,925Charge-offs:One-to-four family
    
    
    3,901
    
    
    
    2,288
    
    
    
    879
    
    
    
    774
    
    
    
    223Multi-family
    
    
    372
    
    
    
    10
    
    
    
    
    
    
    
    28
    
    
    
    Commercial real estate
    
    
    4,801
    
    
    
    4,299
    
    
    
    321
    
    
    
    197
    
    
    
    15Construction or development
    
    
    1,319
    
    
    
    3,075
    
    
    
    50
    
    
    
    
    
    
    
    340Consumer
    
    
    389
    
    
    
    533
    
    
    
    532
    
    
    
    386
    
    
    
    494Commercial business
    
    
    110
    
    
    
    352
    
    
    
    239
    
    
    
    17
    
    
    
    113Total
    
    
    10,892
    
    
    
    10,557
    
    
    
    2,021
    
    
    
    1,402
    
    
    
    1,185Recoveries:One-to-four family
    
    
    62
    
    
    
    20
    
    
    
    4
    
    
    
    16
    
    
    
    4Multi-family
    
    
    32
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    9
    
    
    
    14
    
    
    
    2
    
    
    
    
    
    
    
    Construction or development
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    213
    
    
    
    215
    
    
    
    198
    
    
    
    175
    
    
    
    275Commercial business
    
    
    5
    
    
    
    22
    
    
    
    
    
    
    
    40
    
    
    
    5Total
    
    
    357
    
    
    
    272
    
    
    
    204
    
    
    
    231
    
    
    
    284Net charge-offs:
    
    
    10,535
    
    
    
    10,285
    
    
    
    1,817
    
    
    
    1,171
    
    
    
    901Additions charged to operations
    
    
    11,602
    
    
    
    13,349
    
    
    
    2,712
    
    
    
    971
    
    
    
    Balance at end of year
    
    $
    6,850
    
    
    $
    5,783
    
    
    $
    2,719
    
    
    $
    1,824
    
    
    $
    2,024Ratio of net charge-offs during the year to average loans
outstanding during the year
    
    
    4.91
    %
    
    
    4.24
    %
    
    
    0.75
    %
    
    
    0.49
    %
    
    
    0.39
    %Allowance as a percentage of non-performing loans
    
    
    48.67
    %
    
    
    37.14
    %
    
    
    105.76
    %
    
    
    210.87
    %
    
    
    432.48
    %Allowance as a percentage of total loans (end of year)
    
    
    3.60
    %
    
    
    2.55
    %
    
    
    1.08
    %
    
    
    0.81
    %
    
    
    0.93
    %
 16




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##### Table of Contents



December 31,2010
    
    
    2009
    
    
    2008Amount of
    
    
    Percentage
    
    
    Amount of
    
    
    Percentage
    
    
    Amount of
    
    
    PercentageLoan Loss
    
    
    of
    
    
    Loan Loss
    
    
    of
    
    
    Loan Loss
    
    
    ofAllowance
    
    
    Allowance
    
    
    Allowance
    
    
    Allowance
    
    
    Allowance
    
    
    AllowanceOne-to-four family
    
    $
    3,953
    
    
    
    57.7
    %
    
    $
    2,576
    
    
    
    44.5
    %
    
    $
    1,618
    
    
    
    59.5
    %Multi-family and
non-residential
real estate
    
    
    2,084
    
    
    
    30.4
    %
    
    
    903
    
    
    
    15.6
    %
    
    
    533
    
    
    
    19.6
    %Construction or development
    
    
    130
    
    
    
    1.9
    %
    
    
    10
    
    
    
    0.2
    %
    
    
    75
    
    
    
    2.8
    %Consumer
    
    
    503
    
    
    
    7.3
    %
    
    
    393
    
    
    
    6.8
    %
    
    
    305
    
    
    
    11.2
    %Commercial business
    
    
    180
    
    
    
    2.6
    %
    
    
    1,901
    
    
    
    32.9
    %
    
    
    188
    
    
    
    6.9
    %Total
    
    $
    6,850
    
    
    
    100.0
    %
    
    $
    5,783
    
    
    
    100.0
    %
    
    $
    2,719
    
    
    
    100.0
    %
 2007
    
    
    2006Amount of
    
    
    Percentage
    
    
    Amount of
    
    
    PercentageLoan Loss
    
    
    of
    
    
    Loan Loss
    
    
    ofAllowance
    
    
    Allowance
    
    
    Allowance
    
    
    AllowanceOne-to-four family
    
    $
    979
    
    
    
    53.7
    %
    
    $
    783
    
    
    
    60.3
    %Multi-family and non-residential
real estate
    
    
    351
    
    
    
    19.2
    %
    
    
    809
    
    
    
    20.8
    %Construction or development
    
    
    154
    
    
    
    8.4
    %
    
    
    7
    
    
    
    4.1
    %Consumer
    
    
    287
    
    
    
    15.7
    %
    
    
    302
    
    
    
    12.1
    %Commercial business
    
    
    53
    
    
    
    2.9
    %
    
    
    123
    
    
    
    2.7
    %$
    1,824
    
    
    
    100.0
    %
    
    $
    2,024
    
    
    
    100.0
    %
 Investment Activities
    17




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##### Table of Contents



December 31, 2010
    
    
    December 31, 2009Percent of
    
    
    
    
    
    
    
    
    
    
    Percent ofFair
    
    
    Total
    
    
    
    
    
    
    Fair
    
    
    TotalAmortized
    
    
    Market
    
    
    Fair Market
    
    
    Amortized
    
    
    Market
    
    
    Fair MarketCost
    
    
    Value
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    ValueAvailable-for-sale securities:U.S Treasury
    
    $
    
    
    
    $
    
    
    
    
    0.0
    %
    
    $
    1,055
    
    
    $
    1,071
    
    
    
    6.7
    %U.S. government agency obligations
    
    
    1,619
    
    
    
    1,682
    
    
    
    14.7
    %
    
    
    3,155
    
    
    
    3,196
    
    
    
    19.9
    %Mortgage-backed securities
    
    
    3,914
    
    
    
    4,024
    
    
    
    35.0
    %
    
    
    5,454
    
    
    
    5,536
    
    
    
    34.4
    %Obligations of states and
political subdivisions
    
    
    5,543
    
    
    
    5,760
    
    
    
    50.2
    %
    
    
    6,061
    
    
    
    6,260
    
    
    
    38.9
    %Total available-for-sale securities
    
    $
    11,076
    
    
    $
    11,466
    
    
    
    99.9
    %
    
    $
    15,725
    
    
    $
    16,063
    
    
    
    99.9
    %Held-to-maturity securities:Municipal security
    
    $
    10
    
    
    $
    10
    
    
    
    0.1
    %
    
    $
    23
    
    
    $
    23
    
    
    
    0.1
    %Total investment securities
    
    $
    11,086
    
    
    $
    11,476
    
    
    
    100.0
    %
    
    $
    15,748
    
    
    $
    16,086
    
    
    
    100.0
    %
 December 31, 2008Percent ofFair
    
    
    TotalAmortized
    
    
    Market
    
    
    Fair MarketCost
    
    
    Value
    
    
    ValueAvailable-for-sale securities:U.S. government agency obligations
    
    $
    5,698
    
    
    $
    5,761
    
    
    
    64.4
    %Mortgage-backed securities
    
    
    739
    
    
    
    734
    
    
    
    8.2
    %Obligations of states and
political subdivisions
    
    
    2,375
    
    
    
    2,421
    
    
    
    27.0
    %Total available-for-sale securities
    
    $
    8,812
    
    
    $
    8,916
    
    
    
    99.6
    %Held-to-maturity securities:Municipal security
    
    
    37
    
    
    
    37
    
    
    
    0.4
    %Total investment securities
    
    $
    8,849
    
    
    $
    8,953
    
    
    
    100.0
    %
 18




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##### Table of Contents



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. government agency obligations
    
    
    500
    
    
    
    1.63
    %
    
    
    1,119
    
    
    
    6.32
    %
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0.00
    %
    
    
    1,619
    
    
    
    4.87
    %Mortgage-backed securities
    
    
    179
    
    
    
    4.50
    %
    
    
    
    
    
    
    0.00
    %
    
    
    1,574
    
    
    
    4.31
    %
    
    
    2,161
    
    
    
    4.79
    %
    
    
    3,914
    
    
    
    4.58
    %Obligations of states and
political subdivisions
    
    
    400
    
    
    
    4.95
    %
    
    
    3,885
    
    
    
    4.04
    %
    
    
    1,288
    
    
    
    4.46
    %
    
    
    
    
    
    
    0.00
    %
    
    
    5,543
    
    
    
    4.20
    %Total available-for-sale securities
    
    
    1,079
    
    
    
    3.34
    %
    
    
    4,974
    
    
    
    4.55
%
    
    
    2,862
    
    
    
    4.38
    %
    
    
    2,161
    
    
    
    4.79
    %
    
    
    11,076
    
    
    
    4.44
%Held-to-maturity securities:Municipal security
    
    
    10
    
    
    
    4.45
    %
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    10
    
    
    
    4.45
    %Total investment securities
    
    $
    1,089
    
    
    
    3.35
    %
    
    $
    4,974
    
    
    
    4.55
    %
    
    $
    2,862
    
    
    
    4.38
    %
    
    $
    2,161
    
    
    
    4.79
    %
    
    $
    11,086
    
    
    
    4.44
    %
 Sources of Funds
 General.
 Deposits .
  19




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##### Table of Contents



Year EndedDecember 31,2010
    
    
    2009(Dollars in Thousands)Opening balance
    
    $
    213,368
    
    
    $
    192,156Net deposits (withdrawals)
    
    
    (10,721
    )
    
    
    16,206Interest credited
    
    
    3,381
    
    
    
    5,006Ending balance
    
    $
    206,028
    
    
    $
    213,368Net increase (decrease)
    
    $
    (7,340
    )
    
    $
    21,212Percent increase (decrease)
    
    
    -3.44
    %
    
    
    11.04
    %
  Year Ended December 31,2010
    
    
    
    
    
    
    2009Percent
    
    
    
    
    
    
    PercentAmount
    
    
    of Total
    
    
    Amount
    
    
    of Total(Dollars in Thousands)Transaction and Savings Deposits:Non-interest bearing accounts
    
    $
    15,394
    
    
    
    7.4
    %
    
    $
    14,422
    
    
    
    6.8
    %Savings accounts
    
    
    20,335
    
    
    
    9.9
    %
    
    
    20,302
    
    
    
    9.5
    %Checking & NOW accounts
    
    
    24,452
    
    
    
    11.9
    %
    
    
    23,084
    
    
    
    10.8
    %Money market accounts
    
    
    40,785
    
    
    
    19.8
    %
    
    
    57,052
    
    
    
    26.7
    %Total transaction and savings
    
    $
    100,966
    
    
    
    49.0
    %
    
    $
    114,860
    
    
    
    53.8
    %Certificates:0.00-1.99%
    
    
    53,979
    
    
    
    26.2
    %
    
    
    26,994
    
    
    
    12.7
    %2.00-3.99%
    
    
    28,033
    
    
    
    13.6
    %
    
    
    36,459
    
    
    
    17.1
    %4.00-5.99%
    
    
    23,049
    
    
    
    11.2
    %
    
    
    35,055
    
    
    
    16.4
    %Total certificates
    
    
    105,062
    
    
    
    51.0
    %
    
    
    98,508
    
    
    
    46.2
    %Total deposits
    
    $
    206,028
    
    
    
    100.0
    %
    
    $
    213,368
    
    
    
    100.0
    %
 20




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##### Table of Contents



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
    
    $
    6,903
    
    
    $
    11,216
    
    
    $
    11,254
    
    
    $
    23,131
    
    
    $
    52,504Certificates of deposit of $100,000 or more
    
    
    3,039
    
    
    
    6,530
    
    
    
    16,681
    
    
    
    26,308
    
    
    
    52,558Total certificates of deposit
    
    $
    9,942
    
    
    $
    17,746
    
    
    $
    27,935
    
    
    $
    49,439
    
    
    $
    105,062
  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, 2011
    
    $
    4,769
    
    
    $
    1,136
    
    
    $
    4,038
    
    
    $
    
    
    
    $
    9,943
    
    
    
    9.5
    %June 30, 2011
    
    
    14,606
    
    
    
    1,904
    
    
    
    1,236
    
    
    
    
    
    
    
    17,746
    
    
    
    16.9
    %September 30, 2011
    
    
    7,657
    
    
    
    1,526
    
    
    
    4,879
    
    
    
    
    
    
    
    14,062
    
    
    
    13.4
    %December 31, 2011
    
    
    7,941
    
    
    
    2,409
    
    
    
    3,523
    
    
    
    
    
    
    
    13,873
    
    
    
    13.2
    %March 31, 2012
    
    
    443
    
    
    
    1,303
    
    
    
    1,010
    
    
    
    
    
    
    
    2,756
    
    
    
    2.6
    %June 30, 2012
    
    
    2,232
    
    
    
    940
    
    
    
    750
    
    
    
    
    
    
    
    3,922
    
    
    
    3.7
    %September 30, 2012
    
    
    3,346
    
    
    
    631
    
    
    
    768
    
    
    
    
    
    
    
    4,745
    
    
    
    4.5
    %December 31, 2012
    
    
    3,909
    
    
    
    136
    
    
    
    949
    
    
    
    
    
    
    
    4,994
    
    
    
    4.8
    %Thereafter
    
    
    9,075
    
    
    
    18,049
    
    
    
    5,897
    
    
    
    
    
    
    
    33,021
    
    
    
    31.4
    %Total
    
    $
    53,978
    
    
    $
    28,034
    
    
    $
    23,050
    
    
    $
    
    
    
    $
    105,062
    
    
    
    100.0
    %Percent of total
    
    
    51.38
    %
    
    
    26.68
    %
    
    
    21.94
    %
    
    
    0.00
    %
 Borrowings .
   21




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##### Table of Contents



Year EndedDecember 31,2010
    
    
    2009(Dollars in Thousands)
    
    
    (Dollars in Thousands)Maximum Balance:FHLB advances
    
    $
    44,518
    
    
    $
    59,178Fed funds purchased
    
    $
    1,000
    
    
    $
    3,000Average Balance:FHLB advances
    
    $
    43,836
    
    
    $
    48,564Fed funds purchased
    
    $
    3
    
    
    $
    29
  December 31,2010
    
    
    2009(Dollars in Thousands)
    
    
    (Dollars in Thousands)FHLB advances
    
    $
    36,350
    
    
    $
    44,518Fed funds purchased
    
    $
    
    
    
    $
    Weighted average
interest rate of FHLBFHLB advances
    
    
    4.16
    %
    
    
    4.43
    %Fed funds purchased
    
    
    0.25
    %
    
    
    0.25
    %
 Competition
  Employees
  Federal and State Taxation
 Federal Taxation
 General.
 Method of Accounting.
 Bad Debt Reserves.
 22




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##### Table of Contents



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




---



##### Table of Contents



The Company
 General.
 Investments and Activities.
     24




---



##### Table of Contents



Capital Requirements.
    Regulatory Agreement.
 Dividends.
 Recent Developments .
 25




---



##### Table of Contents



26




---



##### Table of Contents



The Bank
 General.
 Business Activities.
  Branching.
  Loans to One Borrower.
 27




---



##### Table of Contents



Enforcement.
  Assessments and Fees.
 Regulatory Capital Requirements.
   28




---



##### Table of Contents



Prompt Corrective Regulatory Action.
   Deposit Insurance.
  29




---



##### Table of Contents



30




---



##### Table of Contents



Bank Regulatory Agreement.
 Payment of Dividends by the Bank.
  Loans to Directors, Executive Officers, and Principal Shareholders.
 Certain Transactions With Related Parties.
  Standards for Safety and Soundness.
 31




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##### Table of Contents



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 $58.8 million, a
reserve of 3%; and
    
    for transaction accounts totaling in excess of $58.8 million, a reserve requirement of
$1.443 million plus 10% of that portion of the total transaction accounts greater than
$58.8 million.
  
 ITEM 1A. Risk Factors
  
 ITEM 1B. Unresolved Staff Comments  None
 
 ITEM 2. Properties
   Owned/Location
    
    County
    
    LeasedMain Office375 North Willowbrook Road
    
    Branch
    
    OwnedColdwater, Michigan 49036Branch Offices365 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 4903687 Marshall Street
    
    Branch
    
    OwnedColdwater, Michigan 4903624 Grand Street (Drive through)
    
    Branch
    
    OwnedColdwater, Michigan 49036
  32




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##### Table of Contents



ITEM 3. Legal Proceedings
  
 ITEM 4. Reserved
 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
    
    Dividends2009
    
    
    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
    
    
    $
    2010
    
    
    March 31
    
    $
    2.25
    
    
    $
    2.16
    
    
    $
    June 30
    
    $
    1.27
    
    
    $
    1.08
    
    
    $
    September 30
    
    $
    1.54
    
    
    $
    1.30
    
    
    $
    December 31
    
    $
    1.23
    
    
    $
    1.15
    
    
    $
    
   ISSUER PURCHASES OF SECURITIES
 (d)(a)

    
    
    (b)

    
    
    (c)

    
    
    Maximum Number (or Approximate DollarTotal Number of
    
    
    
    
    
    
    Total Number of Shares (or Unit)
    
    
    Value) of Shares (or Units) that may yetShares (or Units)
    
    
    Average Price paid
    
    
    Purchased as Part of Publicly
    
    
    Be Purchased Under the Plans orPeriod
    
    Purchased
    
    
    per Share (or Unit)
    
    
    Anounced Plans or Programs
    
    
    Program10/01/10-10/31/10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11/01/10-11/30/10
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    12/01/10-12/31/10
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  33




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##### Table of Contents



ITEM 6. Selected Financial Data
 SELECTED FINANCIAL AND OTHER DATA
  December 31,2010
    
    2009
    
    2008
    
    2007
    
    2006(In Thousands)Selected Financial Condition Data:Total Assets
    
    $
    256,868
    
    
    $
    283,204
    
    
    $
    291,807
    
    
    $
    279,208
    
    
    $
    289,987Loans receivable, net
    
    
    182,768
    
    
    
    220,875
    
    
    
    247,542
    
    
    
    224,797
    
    
    
    230,247Investment securities, at carrying value
    
    
    11,476
    
    
    
    16,086
    
    
    
    8,953
    
    
    
    11,322
    
    
    
    13,934Fed Funds sold and overnight deposits
    
    
    34,909
    
    
    
    10,723
    
    
    
    677
    
    
    
    6,151
    
    
    
    7,864Deposits
    
    
    206,028
    
    
    
    213,368
    
    
    
    192,156
    
    
    
    177,936
    
    
    
    192,572Federal Home Loan Bank Advances
    
    
    36,350
    
    
    
    44,518
    
    
    
    60,178
    
    
    
    59,330
    
    
    
    54,476Equity
    
    
    12,018
    
    
    
    23,163
    
    
    
    36,270
    
    
    
    39,086
    
    
    
    39,986
 December 31,2010
    
    
    2009
    
    

2008
    
    
    2007
    
    
    2006(In Thousands)Selected Operations Data:Total interest income
    
    $
    12,837
    
    
    $
    15,836
    
    
    $
    17,196
    
    
    $
    17,545
    
    
    $
    17,287Total interest expense
    
    
    5,372
    
    
    
    7,339
    
    
    
    8,536
    
    
    
    9,222
    
    
    
    8,607Net interest income
    
    
    7,465
    
    
    
    8,497
    
    
    
    8,660
    
    
    
    8,323
    
    
    
    8,680Provision for loan losses
    
    
    11,602
    
    
    
    13,349
    
    
    
    2,712
    
    
    
    971
    
    
    
    Net interest income after provision for
loan losses
    
    
    (4,137
    )
    
    
    (4,852
    )
    
    
    5,948
    
    
    
    7,352
    
    
    
    8,680Fees and service charges
    
    
    2,496
    
    
    
    2,682
    
    
    
    2,757
    
    
    
    2,921
    
    
    
    2,642Gains on sales of loans, mortgage-backed
securities and investment securities
    
    
    1,082
    
    
    
    2,100
    
    
    
    629
    
    
    
    651
    
    
    
    342Other non-interest income
    
    
    119
    
    
    
    211
    
    
    
    217
    
    
    
    374
    
    
    
    138Total non-interest income
    
    
    3,697
    
    
    
    4,993
    
    
    
    3,603
    
    
    
    3,946
    
    
    
    3,122Total non-interest expense
    
    
    10,237
    
    
    
    20,085
    
    
    
    9,152
    
    
    
    8,992
    
    
    
    9,710Income (loss) before taxes
    
    
    (10,677
    )
    
    
    (19,944
    )
    
    
    399
    
    
    
    2,306
    
    
    
    2,092Income tax provision
    
    
    205
    
    
    
    (548
    )
    
    
    101
    
    
    
    561
    
    
    
    544Net income (loss)
    
    $
    (10,882
    )
    
    $
    (19,396
    )
    
    $
    298
    
    
    $
    1,745
    
    
    $
    1,548
 34




---



##### Table of Contents



ITEM 6. Selected Financial Data, continued
 December 31,2010
    
    2009
    
    2008
    
    2007
    
    2006Selected Financial Ratios and Other Data:Performance Ratios:Return on assets (ratio of net income (loss) to average total assets)
    
    
    -4.00
    %
    
    
    -6.41
    %
    
    
    0.10
    %
    
    
    0.61
    %
    
    
    0.54
    %Return on Equity (ratio of net income (loss) to average equity)
    
    
    -59.86
    %
    
    
    -46.88
    %
    
    
    0.78
    %
    
    
    4.30
    %
    
    
    3.85
    %Interest rate spread information:Average during period
    
    
    2.96
    %
    
    
    2.94
    %
    
    
    3.11
    %
    
    
    3.05
    %
    
    
    3.26
    %Net interest margin
    
    
    2.96
    %
    
    
    3.10
    %
    
    
    3.32
    %
    
    
    3.27
    %
    
    
    3.42
    %Ratio of operating expense to average total assets
    
    
    3.77
    %
    
    
    6.64
    %
    
    
    3.20
    %
    
    
    3.17
    %
    
    
    3.41
    %Ratio of average interest-earning assets to average
interest-bearing liabilities
    
    
    1.00
    
    
    
    1.06
    
    
    
    1.06
    
    
    
    1.06
    
    
    
    1.05Efficiency ratio *
    
    
    85.84
    %
    
    
    71.67
    %
    
    
    73.25
    %
    
    
    72.62
    %
    
    
    80.44
    %Asset Quality Ratios:Non-performing assets to total assets at end of period
    
    
    6.64
    %
    
    
    6.50
    %
    
    
    1.59
    %
    
    
    0.81
    %
    
    
    0.74
    %Non-performing loans to total loans,net
    
    
    7.70
    %
    
    
    7.05
    %
    
    
    1.04
    %
    
    
    0.33
    %
    
    
    0.20
    %Allowance for loan losses to non-performing loans
    
    
    48.67
    %
    
    
    37.14
    %
    
    
    105.76
    %
    
    
    240.00
    %
    
    
    432.48
    %Allowance for loan losses to loans receivable, net
    
    
    3.75
    %
    
    
    2.62
    %
    
    
    1.10
    %
    
    
    0.81
    %
    
    
    0.88
    %Capital ratios:Equity to total assets at end of period
    
    
    4.67
    %
    
    
    8.19
    %
    
    
    12.43
    %
    
    
    14.00
    %
    
    
    13.79
    %Other data:Number of full-service offices
    
    
    5
    
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    6
 
 *
    
    Amounts do not include the one time non cash charge for goodwill impairment 35




---



##### Table of Contents



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
  36




---



##### Table of Contents



Allowance for Loan and Lease Losses
   Income Taxes
    Management Strategy
   37




---



##### Table of Contents



Changes in Financial Condition from December 31, 2009 to December 31, 2010
 General.
 Loans.
    Credit Risk.
    38




---



##### Table of Contents



Securities.
 Liabilities.
   Equity.
 39




---



##### Table of Contents



Average Balances, Net Interest Income, Yields Earned and Rates Paid
  Year Ended December 31,2010
    
    
    2009Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate
    
    
    Balance
    
    
    Paid
    
    
    Rate(dollars in thousands)Fed Funds and overnight deposits
    
    $
    18,380
    
    
    $
    4
    
    
    
    0.02
    %
    
    $
    11,392
    
    
    $
    6
    
    
    
    0.05
    %Investment securities
    
    
    14,927
    
    
    
    466
    
    
    
    3.12
    
    
    
    16,591
    
    
    
    565
    
    
    
    3.41Other securities
    
    
    4,142
    
    
    
    97
    
    
    
    2.34
    
    
    
    4,174
    
    
    
    74
    
    
    
    1.77Loans receivable
    
    
    214,488
    
    
    
    12,270
    
    
    
    5.72
    
    
    
    242,289
    
    
    
    15,191
    
    
    
    6.27Total earning assets
    
    $
    251,937
    
    
    $
    12,837
    
    
    
    5.10
    
    
    $
    274,446
    
    
    $
    15,836
    
    
    
    5.77Demand and NOW accounts
    
    $
    40,655
    
    
    $
    94
    
    
    
    0.23
    
    
    $
    34,045
    
    
    $
    98
    
    
    
    0.29Money market accounts
    
    
    49,963
    
    
    
    412
    
    
    
    0.82
    
    
    
    47,923
    
    
    
    789
    
    
    
    1.65Savings accounts
    
    
    20,955
    
    
    
    50
    
    
    
    0.24
    
    
    
    19,113
    
    
    
    71
    
    
    
    0.37Certificates of deposit
    
    
    95,831
    
    
    
    2,848
    
    
    
    2.97
    
    
    
    104,275
    
    
    
    3,952
    
    
    
    3.79Fed Funds Purchased
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    Federal Home Loan Bank advances
    
    
    43,843
    
    
    
    1,968
    
    
    
    4.49
    
    
    
    53,966
    
    
    
    2,429
    
    
    
    4.50Total interest bearing liabilities
    
    $
    251,250
    
    
    
    5,372
    
    
    
    2.14
    
    
    $
    259,350
    
    
    
    7,339
    
    
    
    2.83Net interest income
    
    
    
    
    
    $
    7,465
    
    
    
    
    
    
    
    
    
    
    $
    8,497Net interest spread
    
    
    
    
    
    
    
    
    
    
    2.96
    %
    
    
    
    
    
    
    
    
    
    
    2.94
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.96
    %
    
    
    
    
    
    
    
    
    
    
    3.10
    %
 2008Average
    
    
    InterestOutstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate(dollars in thousands)Fed Funds and overnight deposits
    
    $
    8,170
    
    
    $
    102
    
    
    
    1.25
    %Investment securities
    
    
    9,951
    
    
    
    428
    
    
    
    4.30Other securities
    
    
    4,174
    
    
    
    209
    
    
    
    5.01Loans receivable
    
    
    238,838
    
    
    
    16,457
    
    
    
    6.89Total earning assets
    
    $
    261,133
    
    
    $
    17,196
    
    
    
    6.59Demand and NOW accounts
    
    $
    32,032
    
    
    $
    95
    
    
    
    0.30Money market accounts
    
    
    35,497
    
    
    
    1,041
    
    
    
    2.93Savings accounts
    
    
    19,123
    
    
    
    81
    
    
    
    0.42Certificates of deposit
    
    
    103,569
    
    
    
    4,644
    
    
    
    4.48Fed Funds Purchased
    
    
    56
    
    
    
    
    
    
    
    Federal Home Loan Bank advances
    
    
    55,106
    
    
    
    2,675
    
    
    
    4.85Total interest bearing liabilities
    
    $
    245,383
    
    
    
    8,536
    
    
    
    3.48Net interest income
    
    
    
    
    
    $
    8,660Net interest spread
    
    
    
    
    
    
    
    
    
    
    3.11
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.32
    %
 
 (1)
    
    Calculated net of deferred loan fees, loan discounts and loans in process. Nonaccrual
loans are included in the average outstanding balance. 40




---



##### Table of Contents



Rate/Volume Analysis
  Year Ended December 31,
    
    Year Ended December 31,2010 vs. 2009
    
    2009 vs. 2008Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    
    $
    (4
    )
    
    $
    4
    
    
    
    (2
    )
    
    
    (2
    )
    
    $
    (98
    )
    
    $
    40
    
    
    $
    (39
    )
    
    $
    (96
    )Investment securities
    
    $
    (47
    )
    
    $
    (57
    )
    
    
    5
    
    
    
    (99
    )
    
    
    (89
    )
    
    
    286
    
    
    
    (59
    )
    
    
    137Other securities
    
    $
    24
    
    
    $
    (1
    )
    
    
    (0
    )
    
    
    23
    
    
    
    (135
    )
    
    
    
    
    
    
    
    
    
    
    (135
    )Loans receivable
    
    $
    (1,331
    )
    
    $
    (1,743
    )
    
    
    153
    
    
    
    (2,921
    )
    
    
    (1,482
    )
    
    
    238
    
    
    
    (21
    )
    
    
    (1,266
    )Total interest-earning assets
    
    $
    (1,357
    )
    
    $
    (1,797
    )
    
    $
    155
    
    
    $
    (2,999
    )
    
    $
    (1,804
    )
    
    $
    564
    
    
    $
    (119
    )
    
    $
    (1,360
    )Interest-bearing liabilitiesDemand and NOW accounts
    
    $
    (19
    )
    
    $
    19
    
    
    
    (4
    )
    
    
    (4
    )
    
    
    (3
    )
    
    
    6
    
    
    
    (0
    )
    
    
    3Money market accounts
    
    $
    (394
    )
    
    $
    34
    
    
    
    (17
    )
    
    
    (377
    )
    
    
    (457
    )
    
    
    364
    
    
    
    (160
    )
    
    
    (252
    )Savings accounts
    
    $
    (25
    )
    
    $
    7
    
    
    
    (2
    )
    
    
    (21
    )
    
    
    (10
    )
    
    
    (0
    )
    
    
    0
    
    
    
    (10
    )Certificates of deposit
    
    $
    (853
    )
    
    $
    (320
    )
    
    
    69
    
    
    
    (1,104
    )
    
    
    (719
    )
    
    
    32
    
    
    
    (5
    )
    
    
    (692
    )Fed Funds Purchased
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Federal Home Loan Bank advances
    
    $
    (7
    )
    
    $
    (456
    )
    
    
    1
    
    
    
    (461
    )
    
    
    (195
    )
    
    
    (55
    )
    
    
    4
    
    
    
    (246
    )Total interest-bearing liabilities
    
    $
    (1,298
    )
    
    $
    (716
    )
    
    $
    47
    
    
    $
    (1,967
    )
    
    $
    (1,383
    )
    
    $
    347
    
    
    $
    (161
    )
    
    $
    (1,197
    )Net interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (1,032
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (163
    )
 Comparison of Results of Operations for the Years Ended December 31, 2010, 2009, and 2008
 General.
 Net Interest Income.
  41




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##### Table of Contents



Interest Income.
 Interest Expense.
 Provision
for Loan Losses.
  Non-interest Income.
     42




---



##### Table of Contents



Non-interest Expense
        Federal Income Taxes.
 43




---



##### Table of Contents



Liquidity and Commitments
       Off-Balance Sheet Arrangements
  44




---



##### Table of Contents



Capital
  Impact of Inflation
    Regulatory Orders
   
    
    The Bank is required to have and retain qualified management.
    
    The Bank is required to retain an independent third party to develop an analysis and assessment of the Banks
management needs for the purpose of providing qualified management for the Bank.
    
    The board of directors is required to assume responsibility for the supervision of all of the
Banks activities.
    
    The Bank must increase the Banks level of Tier 1 capital as a percentage of total assets to
at least nine percent
and its total capital as a percentage of risk-weighted assets at a minimum of eleven percent.
    
    The Bank is required to charge off any loans classified as loss.
    
    The Bank may not extend credit to borrowers that have had loans with the Bank that were
classified substandard,
doubtful or special mention without prior board approval.
    
    The Bank may not extend credit to borrowers that have had loans charged off or classified as
loss.
    
    The Bank is required to adopt a plan to reduce the Banks risk position in each asset in
excess of $250,000 which
 45




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##### Table of Contents



is more than sixty days delinquent or classified substandard or doubtful.
    
    The Bank may not declare or pay any cash dividend without prior written consent of the FDIC
and OFIR.
    
    Prior to submission or publication of all Reports of Condition, the board is required to
review the adequacy of the
Banks allowance for loan and lease losses.
    
    The Bank is required to adopt written lending and collection policies to provide effective
guidance and control over
the Banks lending function.
    
    The Bank is required to implement revised comprehensive loan grading review procedures.
    
    Within sixty days of the Consent Order, the Bank is required to adopt a written profit plan
and comprehensive budget.
    
    Within sixty days of the Consent Order, the Bank is required to adopt a written plan to manage
concentrations of
credit in a safe and sound manner.
    
    Within sixty days of the Consent Order, the Bank is required to formulate a written plan to
reduce the Banks
reliance on brokered deposits.
    
    While the Consent Order is in effect, the Bank is required to prepare and submit quarterly
progress reports the
FDIC and OFIR.
   1.
    
    Hiring a new President and CEO2.
    
    Hiring a new Chief Lending Officer3.
    
    Implementing a Reduction-In-Staff program that decreased the Banks Full Time
Equivalent (FTE) by 21 and
reduced expenses by approximately $825,000 on an annualized basis.4.
    
    Appointing a Chief Risk Management Officer.5.
    
    Purchasing and implementing advanced credit analysis software and document tracking
system to enhance credit
analysis and credit monitoring functions6.
    
    The development and initial execution of plans to reduce classified assets and
concentrations of credit. This
includes the completion of a loan review by an outside consulting firm. The firm reviewed
approximately 79% of
the total loan portfolio and made no recommendations for charge-offs or special reserves on
the loans they
reviewed. In addition, they reviewed the methodology and adequacy of the Allowance for Loan
and Lease Losses
and found them to be reasonable.7.
    
    The formation of an executive level committee to review the status of all substandard
and doubtful loans on a
weekly basis and to review all special mention loans on at least a monthly basis.8.
    
    The initiation of multiple dialogues with investment bankers regarding the raising of
additional capital. No
substantive plans have been developed to date. The Bank continues to evaluate options.9.
    
    The enhancement of loan policies and procedures.10.
    
    The evaluation of initiatives to enhance non-interest income for the bank
  46




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##### Table of Contents



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.
 47




---



##### Table of Contents




    
    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.
   Change in Interest Rates
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Portfolio Value as %Basis Points (bp)
    
    Net Portfolio Value
    
    of Present Value of Assets(Rate Shock in Rates) (1)
    
    $ Amount
    
    $ Change
    
    % Change
    
    NPV Ratio
    
    Change+ 300 bp
    
    
    21,718
    
    
    
    2,991
    
    
    
    16
    %
    
    
    8.57
    %
    
    
    145
    bp+ 200 bp
    
    
    21,077
    
    
    
    2,350
    
    
    
    13
    %
    
    
    8.20
    %
    
    
    108
    bp+100 bp
    
    
    19,822
    
    
    
    1,095
    
    
    
    6
    %
    
    
    7.62
    %
    
    
    50
    bp0 bp
    
    
    18,727
    
    
    
    0
    
    
    
    
    
    
    
    7.12
    %
    
    
    
    0-100 bp
    
    
    18,170
    
    
    
    -577
    
    
    
    -3
    %
    
    
    6.83
    %
    
    
    -29
    bp-200 bp
    
    
    19,495
    
    
    
    769
    
    
    
    4
    %
    
    
    7.24
    %
    
    
    +12
    bp-300 bp
    
    
    21,678
    
    
    
    2,951
    
    
    
    16
    %
    
    
    7.97
    %
    
    
    +85
    bp
 48




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##### Table of Contents



(1)
    
    Assumes an instantaneous uniform change in interest rates at all maturities.      49




---



##### Table of Contents



Principal Amount Maturing In:
 2015 and
    
    
    
    
    
    Fair Value2010
    
    2011
    
    2012
    
    2013
    
    2014
    
    beyond
    
    Total
    
    12/31/2010Rate-sensitive assetsFed funds and overnight
deposits
    
    $
    34,909
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    34,909
    
    
    $
    34,909Average interest rate
    
    
    0.05
    %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
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    100,438
    
    
    $
    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
    %
 50




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##### Table of Contents



ITEM 8. Financial Statements and Supplementary Data
 Monarch Community Bancorp, Inc. and Subsidiaries
 Contents
  
 Report Letter
    
    
    3Consolidated Financial StatementsBalance Sheet
    
    
    4Statement of Operations
    
    
    5Statement of Stockholders Equity
    
    
    6Statement of Cash Flows
    
    
    7Notes to Consolidated Financial Statements
    
    
    8-51




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 
  
     /s/
 
 3




---



##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 
 Consolidated Balance Sheet
(000s omitted, except per share data)
 December 31,
    
    
    December 31,2010
    
    
    2009AssetsCash and due from banks
    
    $
    7,065
    
    
    $
    12,631Federal Home Loan Bank overnight time and
other interest bearing deposits
    
    
    34,909
    
    
    
    10,723Total cash and cash equivalents
    
    
    41,974
    
    
    
    23,354Securities  Available for sale (Note 4)
    
    
    11,466
    
    
    
    16,063Securities  Held to maturity (Note 4)
    
    
    10
    
    
    
    23Other securities (Note 4)
    
    
    3,865
    
    
    
    4,237Loans held for sale
    
    
    693
    
    
    
    809Loans, net (Note 5)
    
    
    182,768
    
    
    
    220,875Foreclosed assets, net (Note 7)
    
    
    2,972
    
    
    
    2,839Premises and
equipment (Note 8)
    
    
    4,122
    
    
    
    4,467Core deposit (Note 3)
    
    
    390
    
    
    
    532Other assets (Notes 6 and 11)
    
    
    8,608
    
    
    
    10,005Total assets
    
    $
    256,868
    
    
    $
    283,204Liabilities and Stockholders EquityLiabilitiesDepositsNoninterest-bearing
    
    $
    15,394
    
    
    $
    14,422Interest-bearing (Note 9):
    
    

    190,634
    
    
    
    198,946Total deposits
    
    
    206,028
    
    
    
    213,368Federal Home Loan Bank advances (Note 10)
    
    
    36,350
    
    
    
    44,518Accrued expenses and other liabilities (Note 16)
    
    
    2,472
    
    
    
    2,155Total liabilities
    
    
    244,850
    
    
    
    260,041Stockholders Equity (Notes 13, 14, 15 and 20)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, 2010 and 2009
    
    
    6,750
    
    
    
    6,739Common stock
 $0.01 par value, 20,000,000 shares authorized, 2,049,485 shares issued and outstanding at December 31, 2010 and 2,044,606 issued and outstanding at December 31, 2009
    
    
    20
    
    
    
    20Additional paid-in capital
    
    
    21,146
    
    
    
    21,212(Accumulated deficit)
    
    
    (15,591
    )
    
    
    (4,355
    )Accumulated other comprehensive income
    
    
    257
    
    
    
    223Unearned compensation
    
    
    (564
    )
    
    
    (676
    )Total stockholders equity
    
    
    12,018
    
    
    
    23,163Total liabilities and stockholders equity
    
    $
    256,868
    
    
    $
    283,204
  4




---



##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 
 Consolidated Statement of Operations

(000s omitted)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Interest IncomeLoans, including fees
    
    $
    12,270
    
    
    $
    15,191
    
    
    $
    16,457Investment securities
    
    
    563
    
    
    
    639
    
    
    
    637Federal funds sold and overnight deposits
    
    
    4
    
    
    
    6
    
    
    
    102Total interest income
    
    
    12,837
    
    
    
    15,836
    
    
    
    17,196Interest ExpenseDeposits
    
    
    3,404
    
    
    
    4,910
    
    
    
    5,861Federal Home Loan Bank advances
    
    
    1,968
    
    
    
    2,429
    
    
    
    2,675Total interest expense
    
    
    5,372
    
    
    
    7,339
    
    
    
    8,536Net Interest Income
    
    
    7,465
    
    
    
    8,497
    
    
    
    8,660Provision for Loan Losses(Note 5)
    
    
    11,602
    
    
    
    13,349
    
    
    
    2,712Net Interest Income (Loss) After Provision for Loan Losses
    
    
    (4,137
    )
    
    
    (4,852
    )
    
    
    5,948Noninterest IncomeFees and service charges
    
    
    2,019
    
    
    
    2,224
    
    
    
    2,314Loan servicing fees
    
    
    477
    
    
    
    458
    
    
    
    443Net gain on sale of loans
    
    
    1,006
    
    
    
    2,090
    
    
    
    627Net gain (loss) on sale of investment securities (Note 4)
    
    
    76
    
    
    
    10
    
    
    
    2Net gain (loss) on disposal of premises and equipment
    
    
    
    
    
    
    (7
    )
    
    
    Other income (Note 7)
    
    
    119
    
    
    
    218
    
    
    
    217Total noninterest income
    
    
    3,697
    
    
    
    4,993
    
    
    
    3,603Noninterest ExpenseSalaries and employee benefits (Note 16, 20 and 21)
    
    
    4,274
    
    
    
    4,818
    
    
    
    4,584Occupancy and equipment (Note 8)
    
    
    914
    
    
    
    1,044
    
    
    
    1,032Data processing
    
    
    807
    
    
    
    700
    
    
    
    777Mortgage banking
    
    
    424
    
    
    
    546
    
    
    
    406Professional services
    
    
    809
    
    
    
    530
    
    
    
    401Amortization of intangible assets (Note 3)
    
    
    142
    
    
    
    149
    
    
    
    181NOW account processing
    
    
    209
    
    
    
    149
    
    
    
    176ATM/Debit card processing
    
    
    235
    
    
    
    232
    
    
    
    200Repossessed property expense (Note 7)
    
    
    631
    
    
    
    822
    
    
    
    219Other general and administrative
    
    
    1,792
    
    
    
    1,488
    
    
    
    1,176Goodwill Impairment (Note 3)
    
    
    
    
    
    
    9,607
    
    
    
    Total noninterest expense
    
    
    10,237
    
    
    
    20,085
    
    
    
    9,152Income (Loss)- Before income taxes
    
    
    (10,677
    )
    
    
    (19,944
    )
    
    
    399Income Taxes(Note 11)
    
    
    205
    
    
    
    (548
    )
    
    
    101Net Income (Loss)
    
    $
    (10,882
    )
    
    $
    (19,396
    )
    
    $
    298Dividends and accretion of discount on preferred stock
    
    $
    354
    
    
    $
    315
    
    
    $
    Net Income (Loss) available to common stockholders
    
    $
    (11,236
    )
    
    $
    (19,711
    )
    
    $
    298Earnings (Loss) Per ShareBasic
    
    $
    (5.68
    )
    
    $
    (10.03
    )
    
    $
    0.14Diluted
    
    $
    (5.68
    )
    
    $
    (10.03
    )
    
    $
    0.14




---



##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 
 Consolidated Statement of Stockholders Equity

(000s omitted)
 Preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Accumulated
    
    
    AccumulatedStock
    
    
    
    
    
    
    Common
    
    
    
    
    
    
    Additional
    
    
    deficit)
    
    
    OtherNumber of
    
    
    
    
    
    
    Stock Number
    
    
    
    
    
    
    Paid in
    
    
    Retained
    
    
    Comprehensive
    
    
    UnearnedShares
    
    
    Amount
    
    
    of Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Compensation
    
    
    TotalBalance - January 1, 2008
    
    
    
    
    
    $
    
    
    
    
    2,321,585
    
    
    $
    23
    
    
    $
    23,828
    
    
    $
    16,341
    
    
    $
    52
    
    
    $
    (1,158
    )
    
    $
    39,086Vesting of 17,289 restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227
    
    
    
    227Allocation
of ESOP shares (Note 20)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    108Repurchase of 275,483 shares at average
price of $9.81/share
    
    
    
    
    
    
    
    
    
    
    (275,483
    )
    
    
    (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
    
    
    
    
    
    
    
    
    
    
    2,046,102
    
    
    $
    20
    
    
    $
    21,152
    
    
    $
    15,867
    
    
    $
    69
    
    
    $
    (838
    )
    
    $
    36,270Vesting of
4,978 restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    65
    
    
    
    65Allocation of ESOP shares (Note 20)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (39
    )
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    54400 of
forfeited shares at an average price of
$11.17/share
    
    
    
    
    
    
    
    
    
    
    (400
    )
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    Repurchase
of 3,013 shares at average price
of $3.90/share
    
    
    
    
    
    
    
    
    
    
    (1,096
    )
    
    
    
    
    
    
    (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
    
    
    
    2,044,606
    
    
    $
    20
    
    
    $
    21,212
    
    
    $
    (4,355
    )
    
    $
    223
    
    
    $
    (676
    )
    
    $
    23,163Issuance of 8,333 shares of common stock at
an average price of $1.20/share in connection
with employment of CEO
    
    
    
    
    
    
    
    
    
    
    8,333
    
    
    
    
    
    
    $
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10Vesting of 1,178 restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14
    
    
    
    14Allocation of ESOP shares (Note 20)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77
    )
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    16400 of forfeited shares at an average price of
$11.50/share
    
    
    
    
    
    
    
    
    
    
    (400
    )
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    Repurchase of 3,054 shares at average price
of $1.20/share
    
    
    
    
    
    
    
    
    
    
    (3,054
    )
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Stock option expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10Comprehensive Loss:Net (Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (10,882
    )
    
    
    
    
    
    
    
    
    
    
    (10,882
    )Change in unrealized loss on
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    securities
available-for-sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    34
    
    
    
    
    
    
    
    34Total comprehensive (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,848
    )Dividends on preferred stock and accretion of
discount
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (354
    )
    
    
    
    
    
    
    
    
    
    
    (343
    )Balance - December 31, 2010
    
    
    6,785
    
    
    $
    6,750
    
    
    
    2,049,485
    
    
    $
    20
    
    
    $
    21,146
    
    
    $
    (15,591
    )
    
    $
    257
    
    
    $
    (564
    )
    
    $
    12,018
  6




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 
 Consolidated Statement of Cash Flows
(000s omitted)
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Cash Flows From Operating ActivitiesNet (loss) income
    
    $
    (10,882
    )
    
    $
    (19,396
    )
    
    $
    298Adjustments to reconcile net (loss) income to net cash provided by
operating activities:Depreciation and amortization
    
    
    1,133
    
    
    
    1,297
    
    
    
    1,082Provision for loan loss
    
    
    11,602
    
    
    
    13,349
    
    
    
    2,712Stock option expense
    
    
    10
    
    
    
    50
    
    
    
    10(Gain) on sale of foreclosed assets
    
    
    (203
    )
    
    
    (13
    )
    
    
    (68
    )Deferred income taxes
    
    
    338
    
    
    
    237
    
    
    
    (270
    )Mortgage loans originated for sale
    
    
    (33,504
    )
    
    
    (90,197
    )
    
    
    (28,273
    )Proceeds from sale of mortgage loans
    
    
    33,620
    
    
    
    92,337
    
    
    
    28,464Gain on sale of mortgage loans
    
    
    (1,006
    )
    
    
    (2,090
    )
    
    
    (627
    )Gain on sale of available for sale securities
    
    
    (76
    )
    
    
    (10
    )
    
    
    (2
    )Loss on sale of premises and equipment
    
    
    
    
    
    
    7
    
    
    
    Earned stock compensation
    
    
    40
    
    
    
    119
    
    
    
    335Goodwill Impairment
    
    
    
    
    
    
    9,607
    
    
    
    Net change in:Accrued interest receivable
    
    
    798
    
    
    
    146
    
    
    
    64Other assets
    
    
    (458
    )
    
    
    (3,721
    )
    
    
    341Accrued expenses and other liabilities
    
    
    317
    
    
    
    (72
    )
    
    
    (390
    )Net cash provided by operating activities
    
    
    1,729
    
    
    
    1,650
    
    
    
    3,676Cash Flows From Investing ActivitiesActivity in available-for-sale securities:Purchases
    
    
    (4,217
    )
    
    
    (17,815
    )
    
    
    (3,519
    )Repurchase of FHLB Stock
    
    
    372
    
    
    
    
    
    
    
    Proceeds from sale of securities
    
    
    4,808
    
    
    
    10,774
    
    
    
    5,691Proceeds from maturities of securities
    
    
    4,000
    
    
    
    
    
    
    
    208Activity in held-to-maturity securities:Purchases
    
    
    
    
    
    
    
    
    
    
    (7
    )Proceeds from maturities of securities
    
    
    13
    
    
    
    14
    
    
    
    Loan originations and principal collections, net
    
    
    24,763
    
    
    
    10,846
    
    
    
    (27,672
    )Proceeds from sale of foreclosed assets
    
    
    2,753
    
    
    
    1,579
    
    
    
    1,715Purchase of premises and equipment
    
    
    (89
    )
    
    
    (484
    )
    
    
    (254
    )Net cash provided by (used in) investing activities
    
    
    32,403
    
    
    
    4,914
    
    
    
    (23,838
    )Cash Flows From Financing ActivitiesNet (decrease)increase in deposits
    
    
    (7,340
    )
    
    
    21,212
    
    
    
    14,220Repurchases of common stock
    
    
    (4
    )
    
    
    (3
    )
    
    
    (2,704
    )Dividends paid
    
    
    
    
    
    
    (816
    )
    
    
    (772
    )Proceeds from FHLB advances
    
    
    (8,168
    )
    
    
    
    
    
    
    44,500Repayment of Fed Funds Purchased
    
    
    
    
    
    
    (1,000
    )
    
    
    Repayment of FHLB advances
    
    
    
    
    
    
    (15,660
    )
    
    
    (42,652
    )Issuance of Preferred Stock
    
    
    
    
    
    
    6,785
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (15,512
    )
    
    
    10,518
    
    
    
    12,592Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    18,620
    
    
    
    17,082
    
    
    
    (7,570
    )Cash and Cash Equivalents- Beginning
    
    
    23,354
    
    
    
    6,272
    
    
    
    13,842Cash and Cash Equivalents- End
    
    $
    41,974
    
    
    $
    23,354
    
    
    $
    6,272




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##### Table of Contents



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




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##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



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
  2010
    
    
    2009
    
    
    2008Change in unrealized holding gain
on available-for-sale securities
    
    $
    128
    
    
    $
    234
    
    
    $
    25Reclassification adjustment
for (gains) losses realized in
income
    
    
    (76
    )
    
    
    (10
    )
    
    
    (2
    )Net unrealized gains (losses)
    
    $
    52
    
    
    $
    224
    
    
    $
    23Tax effect
    
    
    (18
    )
    
    
    (70
    )
    
    
    (6
    )Net-of-tax amount
    
    $
    34
    
    
    $
    154
    
    
    $
    17




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes To Consolidated Financial Statements
 Note 1  Summary of Significant Accounting Policies (Continued)
 Earnings (Loss) Per Common Share 
  2010
    
    
    2009
    
    
    2008Basic earnings (loss) per shareNumerator:Net income (loss)
    
    $
    (10,882
    )
    
    $
    (19,396
    )
    
    $
    298Dividends and accretion of discount on preferred stock
    
    $
    354
    
    
    $
    315
    
    
    $
    Net Income (loss) available to common stockholders
    
    $
    (11,236
    )
    
    $
    (19,711
    )
    
    $
    298Denominator:Weighted average common shares outstanding
    
    
    2,045
    
    
    
    2,046
    
    
    
    2,159Less: Average unallocated ESOP shares
    
    
    (65
    )
    
    
    (74
    )
    
    
    (83
    )Less: Average non-vested RRP shares
    
    
    (1
    )
    
    
    (6
    )
    
    
    (11
    )Weighted average common shares outstanding for basic earnings
per share
    
    
    1,979
    
    
    
    1,966
    
    
    
    2,065Basic earnings (loss) per share
    
    $
    (5.68
    )
    
    $
    (10.03
    )
    
    $
    0.14Diluted earnings (loss) per shareNumeratorNet Income (loss) available to common stockholders
    
    $
    (11,236
    )
    
    $
    (19,711
    )
    
    $
    298Denominator:Weighted average common shares outstanding
    
    
    1,979
    
    
    
    1,966
    
    
    
    2,065Add: 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
    
    
    1,979
    
    
    
    1,966
    
    
    
    2,065Diluted earnings (loss) per share
    
    $
    (5.68
    )
    
    $
    (10.03
    )
    
    $
    0.14




---



##### Table of Contents



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




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##### Table of Contents



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 31,2010
    
    2009
    
    2008Cash paid for:Interest
    
    $
    5,428
    
    
    $
    7,468
    
    
    $
    8,553Income taxes
    
    $
    
    
    
    $
    210
    
    
    $
    400Noncash investing activities -Loans transferred to real estate in judgement
    
    $
    5,033
    
    
    $
    2,380
    
    
    $
    1,715Real estate
in judgement transferred to real estate owned
    
    $
    3,671
    
    
    $
    4,240
    
    
    $
    2,528
 Reclassifications
 Note 2  Managements Plan (Unaudited)
   14




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 2  Managements Plan (Unaudited) (Continued)
       15




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 2  Managements Plan (Unaudited) (Continued)
       16




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 2  Managements Plan (Unaudited) (Continued)
   Note 3  Goodwill and Intangible Assets
 (In thousands of Dollars)Gross
    
    
    Accumulated
    
    
    Net2010Amortized intangible assets:Core deposit premium resulting from bank and branch acquistionsTotal
    
    $
    2,081
    
    
    $
    1,691
    
    
    $
    3902009Amortized intangible assets:Core deposit premium resulting from bank and branch acquistionsTotal
    
    $
    2,081
    
    
    $
    1,549
    
    
    $
    532
  Year EndingDecember 312011
    
    $
    1422012
    
    
    1422013
    
    
    106Total
    
    $
    390
  17




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 4  Securities
  Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    Value2010Available-for-sale securities:U.S. government agency obligations
    
    $
    1,619
    
    
    $
    63
    
    
    $
    
    
    
    $
    1,682Mortgage-backed securities
    
    
    3,914
    
    
    
    110
    
    
    
    
    
    
    
    4,024Obligations of states and political subdivisions
    
    
    5,543
    
    
    
    217
    
    
    
    
    
    
    
    5,760Total available-for-sale securities
    
    $
    11,076
    
    
    $
    390
    
    
    $
    
    
    
    $
    11,466Held-to-maturity securities:Municipal securities
    
    $
    10
    
    
    $
    
    
    
    $
    
    
    
    $
    10
 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
 18




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 4  Securities (Continued)
  Held to Maturity
    
    
    Available for SaleAmortized
    
    
    Market
    
    
    Amortized
    
    
    MarketCost
    
    
    Value
    
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    10
    
    
    $
    10
    
    
    $
    900
    
    
    $
    910Due in one through five years
    
    
    
    
    
    
    
    
    
    
    4,974
    
    
    
    5,183Due after five years through ten years
    
    
    
    
    
    
    
    
    
    
    1,288
    
    
    
    1,349Due after ten years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    10
    
    
    $
    10
    
    
    
    7,162
    
    
    
    7,442Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    3,914
    
    
    
    4,024Total available-for-sale securities
    
    
    
    
    
    
    
    
    
    $
    11,076
    
    
    $
    11,466
     19




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 5  Loans And Allowance For Loan Loss
  December 31,2010
    
    
    2009Mortgage loans on real estate:One-to-four family
    
    $
    93,294
    
    
    $
    108,354Multi-family
    
    
    4,783
    
    
    
    5,421Commercial
    
    
    62,998
    
    
    
    72,689Construction or land development
    
    
    3,873
    
    
    
    9,528Total real estate loans
    
    
    164,948
    
    
    
    195,992Consumer loans:Home equity
    
    
    14,814
    
    
    
    18,174Other
    
    
    3,403
    
    
    
    4,706Total consumer loans
    
    
    18,217
    
    
    
    22,880Commercial business loans
    
    
    6,882
    
    
    
    8,266190,047
    
    
    
    227,138SubtotalLess: Allowance for loan losses
    
    
    6,850
    
    
    
    5,783Net deferred loan fees
    
    
    429
    
    
    
    480Loans, net
    
    $
    182,768
    
    
    $
    220,875
 20




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 5  Loans And Allowance For Loan Loss (Continued)
  30-69
    
    
    60-89
    
    
    Loans 90DaysPast
    
    
    DaysPast
    
    
    Days or More
    
    
    Total Past
    
    
    CurrentDue
    
    
    Due
    
    
    Past Due
    
    
    due Loans
    
    
    Loans
    
    
    Total LoansCommercial
    
    $
    89
    
    
    $
    
    
    
    $
    1,118
    
    
    $
    1,207
    
    
    $
    5,675
    
    
    $
    6,882Commercial Real Estate:Multi-family
    
    
    
    
    
    
    
    
    
    
    339
    
    
    
    339
    
    
    
    4,444
    
    
    
    4,783Commercial Real Estate  other
    
    
    125
    
    
    
    2,752
    
    
    
    3,751
    
    
    
    6,628
    
    
    
    56,370
    
    
    
    62,998Consumer:Consumer  other
    
    
    239
    
    
    
    19
    
    
    
    192
    
    
    
    450
    
    
    
    17,437
    
    
    
    17,887Consumer  auto
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    323
    
    
    
    330Residential:Residential  prime
    
    
    1,090
    
    
    
    797
    
    
    
    935
    
    
    
    2,822
    
    
    
    73,729
    
    
    
    76,551Residential  subprime
    
    
    284
    
    
    
    91
    
    
    
    163
    
    
    
    538
    
    
    
    16,205
    
    
    
    16,743Construction:Construction  prime
    
    
    169
    
    
    
    
    
    
    
    
    
    
    
    169
    
    
    
    3,704
    
    
    
    3,873Construction  subprime
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    2,003
    
    
    $
    3,659
    
    
    $
    6,498
    
    
    $
    12,160
    
    
    $
    177,887
    
    
    $
    190,047
   1.
    
    Zero (0) Unclassified. Any loan which has not been assigned a classification.
 21




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 5  Loans And Allowance For Loan Loss (Continued)
 2.
    
    One (1) Excellent. A well structured credit relationship to an established borrower.
Loans to entities with a strong financial condition and solid earnings
history, characterized by:
 
    
    High liquidity, strong cash flow, low leverage.
    
    Unquestioned ability to meet all obligations when due.
    
    Experienced management, with management succession in place.
    
    Debt to worth ratio of 1:1 or less.
    
    Steady and above average earnings history.
    
    If loan is secured, collateral is of high quality and
readily marketable.
    
    Readily accessible to capital markets and alternative
financing.
    
    Industry is mature with favorable outlook.
    
    Loan structure within policy guidelines.
    
    Loan is performing as agreed.
    
    The probability of serious, rapid financial deterioration is
extremely small.
    
    Outstanding primary and secondary sources of repayment.
 3.
    
    Two (2) Above Average Quality. Loans to borrowers with a sound financial condition
and
positive trend in earnings supplemented by:
 
    
    Favorable liquidity and leverage and strong cash flow.
    
    Ability to meet all obligations when due.
    
    Management has successful track record.
    
    Debt to worth ratio of 1.5:1 or less.
    
    Steady and satisfactory earnings history.
    
    If loan is secured, collateral is of high quality and readily
marketable.
    
    Access to alternative financing.
    
    Excellent prospects for continued growth.
    
    Industry outlook is favorable.
    
    Loan structure is within policy guidelines.
    
    Loan is performing to terms.
    
    Probability of serious financial deterioration is unlikely.
    
    Well defined primary and secondary source of repayment.
    
    If supported by a guaranty, the financial strength and liquidity of the guarantor(s)
are clearly evident.
 22




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 5  Loans And Allowance For Loan Loss (Continued)
 4.
    
    Three (3) Acceptable. Loans to entities with a satisfactory
financial condition and
further characterized by:
 
    
    Working capital adequate to support operations.
    
    Cash flow sufficient to pay debts as scheduled.
    
    Management experience and depth appear favorable.
    
    Debt to worth ratio of 2.50:1 or less.
    
    Acceptable sales and steady earning history.
    
    Industry outlook is stable.
    
    Loan structure within policy guidelines.
    
    Loan performing according to terms.
    
    If loan is secured, collateral is acceptable and loan is fully
protected.
 5.
    
    Four (4) Average. Loans to entities which are considered bankable
risks, although some signs of weaknesses are shown:
 
    
    Marginal liquidity and working capital.
    
    Short or unstable earnings history.
    
    Would include most start-up businesses.
    
    Would be enrolled in Small Business Administration or
Michigan Strategic Fund programs.
    
    Occasional instances of trade slowness or repayment
delinquency  may have been 10-30 days slow within the past 12 months.
    
    Management abilities are apparent yet unproven.
    
    Debt to worth ratio of 3.50 or less.
    
    Weakness in primary source of repayment with adequate
secondary source of repayment.
    
    If secured, loan is protected but collateral is marginal.
    
    Industry outlook is uncertain; may be cyclical or highly competitive.
    
    Loan structure generally in accordance with policy.
 23




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 5
 Loans And Allowance For Loan Loss (Continued)
 6.
    
    Five (5) Special Mention. Special Mention loans have potential weaknesses which
may, if not checked or corrected, weaken the asset or inadequately protect the
Banks credit position at some future date. Loans to entities that constitute an
undue and unwarranted credit risk but not to the point of justifying or
classification of substandard. The credit risk may be relatively minor yet
constitute an unwarranted risk in light of the circumstances surrounding a
specific loan. The following characteristics may apply:
 
    
    Downward trend in sales, profit levels and
margins.
    
    Impaired working capital positions.
    
    Cash flow is strained in order to meet debt
repayment.
    
    Loan delinquency (30-60 days) and overdrafts
may occur.
    
    Management abilities are
questionable.
    
    Highly leveraged, debt to worth ratio over
3.50:1.
    
    Industry conditions are weak.
    
    Inadequate or outdated financial information.
    
    Litigation pending against borrower.
    
    Loan may need to be restructured to improve
collateral position and/or reduce payment
amount.
    
    Collateral / guaranty offers limited protection.
 7.
    
    Six (6) Substandard. A substandard loan is inadequately protected by
the current sound worth and repayment capacity of the borrower. Loans so
classified must have a well-defined weakness that jeopardizes the liquidation of
the debt. There is a distinct possibility that the Bank will implement collection
procedures if the loan deficiencies are
not corrected. The following characteristics may apply:
 
    
    Sustained losses have severely eroded the equity and cash flow.
    
    Deteriorating liquidity.
    
    Serious management problems.
    
    Chronic trade slowness; may be placed on COD by vendors.
    
    Likelihood of bankruptcy.
    
    Inability to access other funding sources.
    
    Reliance on secondary source of repayment.
    
    Interest non-accrual may be warranted.
    
    Collateral provided is of little or no value.
    
    Repayment dependent upon the liquidation of non-current assets.
    
    Repayment may require litigation.
 
 24




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 5  Loans And Allowance For Loan Loss (Continued)
 8.
    
    Seven (7) Doubtful. A doubtful loan has all the weakness inherent in
a substandard loan with the added characteristic that collection and/or
liquidation is pending. Loans or portions of loans with one or more weaknesses
which, on the basis of currently existing facts, conditions, and values, makes
ultimate collection of all principal highly questionable. The possibility of loss
is high and specific loan loss reserve allocations should be made or charge offs
taken on anticipated collateral shortfalls. However, the amount or the certainty
of eventual loss may not allow for a specific reserve or charge off because of
specific pending factors. Pending factors include proposed merger or acquisition,
completion or liquidation in progress, injection of new capital in progress,
refinancing plans in progress, etc. Pending Factors not resolved after six
months must be disregarded. The following characteristics may apply:
 
    
    Normal operations are severely diminished or have ceased.
    
    Seriously impaired cash flow.
    
    Secondary source of repayment is inadequate.
    
    Survivability as a going concern is impossible.
    
    Placement on interest non-accrual
    
    Collection process has begun.
    
    Bankruptcy petition has been filed.
    
    Judgments have been filed.
    
    Portion of the loan balance has been charged-off.
 9.
    
    Eight (8) Loss. Loans classified loss are considered uncollectible
and of such little value that their continuance as bankable asset is not
warranted. This classification is for charged-off loans but does not mean that
the asset has absolutely no recovery or salvage value. Further
characterized by:
 
    
    Liquidation or reorganization under bankruptcy, with poor prospects of
collection.
    
    Fraudulently overstated assets and/or earnings.
    
    Collateral has marginal or no value.
    
    Debtor cannot be located.
 25




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##### Table of Contents



Monarch Community Bancorp, inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 5  Loans And Allowance For Loan Loss (Continued)
  Commercial Real Estate
    
    
    Commercial Real EstateCommercial
    
    
    Multi-family
    
    
    Other2010
    
    
    2010
    
    
    20100-2
    
    
    
    
    
    
    37
    
    
    
    3,5093
    
    
    14
    
    
    
    209
    
    
    
    4,9934
    
    
    3,698
    
    
    
    131
    
    
    
    17,5375
    
    
    1,533
    
    
    
    3,603
    
    
    
    18,8496
    
    
    427
    
    
    
    464
    
    
    
    13,7417
    
    
    1,210
    
    
    
    339
    
    
    
    4,369Total
    
    $
    6,882
    
    
    $
    4,783
    
    
    $
    62,998
  Residential - Prime
    
    
    Residential - Subprime2010GradePass
    
    
    75,616
    
    
    
    16,580Substandard
    
    
    935
    
    
    
    163Total
    
    $
    76,551
    
    
    $
    16,743
 Consumer - Other
    
    
    Consumer- Auto2010Performing
    
    
    17,695
    
    
    
    330Nonperforming
    
    
    192
    
    
    
    Total
    
    $
    17,887
    
    
    $
    330
 Construction - Prime2010Performing
    
    
    3,873Nonperforming
    
    
    Total
    
    $
    3,873
 26




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 5  Loans And Allowance For Loan Loss (Continued)
  Unpaid
    
    
    
    
    
    
    AverageRecorded
    
    
    Principal
    
    
    Related
    
    
    Recorded
    
    
    InterestInvestment
    
    
    Balance
    
    
    Allowance
    
    
    Investment
    
    
    IncomeWith no related allowance recorded:Commercial
    
    $
    1,463
    
    
    $
    1,492
    
    
    $
    
    
    
    $
    1,486
    
    
    $
    Commercial Real Estate:Commercial Real Estate  Mulit-family
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial Real Estate  other
    
    
    15,862
    
    
    
    22,183
    
    
    
    
    
    
    
    15,689
    
    
    
    403Consumer:Consumer  other
    
    
    346
    
    
    
    346
    
    
    
    
    
    
    
    350
    
    
    
    15Consumer  auto
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential:Residential  prime
    
    
    3,367
    
    
    
    3,965
    
    
    
    
    
    
    
    3,665
    
    
    
    139Residential  subprime
    
    
    4,993
    
    
    
    4,993
    
    
    
    
    
    
    
    4,586
    
    
    
    358With an allowance recorded:Commercial
    
    
    162
    
    
    
    165
    
    
    
    109
    
    
    
    173
    
    
    
    Commercial Real Estate:Commercial Real Estate  Multi-family
    
    
    803
    
    
    
    808
    
    
    
    366
    
    
    
    765
    
    
    
    Commercial Real Estate  other
    
    
    341
    
    
    
    354
    
    
    
    147
    
    
    
    357
    
    
    
    Consumer:Consumer  other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer  auto
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential:Residential  prime
    
    
    502
    
    
    
    643
    
    
    
    236
    
    
    
    575
    
    
    
    Residential  subprime
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalCommercial
    
    $
    18,631
    
    
    $
    25,002
    
    
    $
    622
    
    
    $
    18,470
    
    
    $
    403Consumer
    
    $
    346
    
    
    $
    346
    
    
    $
    
    
    
    $
    350
    
    
    $
    15Residental
    
    $
    8,862
    
    
    $
    9,601
    
    
    $
    236
    
    
    $
    8,826
    
    
    $
    497
 27




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 5  Loans And Allowance For Loan Loss (Continued)
  December 31, 2010Commercial
    
    $
    1,625Commercial real estate:Commercial Real Estate  mulit-family
    
    
    803Commercial Real Estate  other
    
    
    7,949Consumer:Consumer  other
    
    
    253Consumer  auto
    
    
    Residential:Residential  prime
    
    
    2,849Residential  subprime
    
    
    257ConstructionConstruction  prime
    
    
    339Construction  subprime
    
    
    Total
    
    $
    14,075
 28




---



##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 5  Loans And Allowance For Loan Loss (Continued)
  CommercialReal Estate
    
    
    Multi
    
    
    
    
    
    
    Residential -
    
    
    Residential -Commercial
    
    
    Other
    
    
    Family
    
    
    Consumer
    
    
    Prime
    
    
    Subprime
    
    
    Construction
    
    
    TotalALLOWANCE FOR CREDIT LOSSES:Beginning Balance
    
    $
    1,901
    
    
    $
    573
    
    
    $
    330
    
    
    $
    393
    
    
    $
    2,037
    
    
    $
    539
    
    
    $
    10
    
    
    $
    5,783Charge-Offs
    
    
    (110
    )
    
    
    (4,801
    )
    
    
    (372
    )
    
    
    (389
    )
    
    
    (3,401
    )
    
    
    (500
    )
    
    
    (1,319
    )
    
    
    (10,892
    )Recoveries
    
    
    5
    
    
    
    9
    
    
    
    32
    
    
    
    213
    
    
    
    53
    
    
    
    9
    
    
    
    36
    
    
    
    357Provision
    
    
    (1,616
    )
    
    
    5,829
    
    
    
    483
    
    
    
    286
    
    
    
    4,807
    
    
    
    410
    
    
    
    1,403
    
    
    
    11,602Ending Balance
    
    $
    180
    
    
    $
    1,610
    
    
    $
    473
    
    
    $
    503
    
    
    $
    3,496
    
    
    $
    458
    
    
    $
    130
    
    
    $
    6,850Ending Balance: individually evaluated for impairment
    
    $
    109
    
    
    $
    147
    
    
    $
    366
    
    
    $
    
    
    
    $
    236
    
    
    $
    
    
    
    $
    
    
    
    $
    858Ending Balance: collectively evaluate for impairment
    
    $
    71
    
    
    $
    1,463
    
    
    $
    108
    
    
    $
    503
    
    
    $
    3,259
    
    
    $
    458
    
    
    $
    130
    
    
    $
    5,992Ending Balance: loans acquired with deteriorated credit quality
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    FINANCING LOANS:Ending Balance
    
    $
    6,882
    
    
    $
    62,998
    
    
    $
    4,783
    
    
    $
    18,217
    
    
    $
    77,079
    
    
    $
    16,215
    
    
    $
    3,873
    
    
    $
    190,047Ending Balance: individually evaluated for impairment
    
    $
    1,625
    
    
    $
    16,203
    
    
    $
    803
    
    
    $
    346
    
    
    $
    3,869
    
    
    $
    4,993
    
    
    $
    
    
    
    $
    27,839Ending Balance: collectively evaluate for impairment
    
    $
    5,257
    
    
    $
    46,795
    
    
    $
    3,980
    
    
    $
    17,871
    
    
    $
    73,210
    
    
    $
    11,222
    
    
    $
    3,873
    
    
    $
    162,208Ending Balance: loans acquired with deteriorated credit quality
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 29




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 5  Loans And Allowance For Loan Loss (Continued)
  December 31,2009
    
    
    2008Balance  Beginning
    
    $
    2,719
    
    
    $
    1,824Provision for loan losses
    
    
    13,349
    
    
    
    2,712Loans charged-off
    
    
    (10,557
    )
    
    
    (2,021
    )Recoveries of loans previously charged off
    
    
    272
    
    
    
    204Balance  Ending
    
    $
    5,783
    
    
    $
    2,719
  December 31,2009
    
    
    2008Impaired loans with a valuation allowance
    
    $
    26,423
    
    
    $
    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
    
    
    2008Average investment in impaired loans
    
    $
    9,994
    
    
    $
    1,661
  30




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes To Consolidated Financial Statements
 Note 6  Servicing
    December 31,2010
    
    
    2009Mortgage servicing rights  Beginning
    
    $
    1,156
    
    
    $
    862Mortgage servicing rights capitalized
    
    
    335
    
    
    
    840Mortgage servicing rights scheduled
amortization and direct writedown for loan
payoffs
    
    
    (425
    )
    
    
    (546
    )Mortgage servicing rights  Ending
    
    $
    1,066
    
    
    $
    1,156
 Note 7  Foreclosed Assets
  December 31,2010
    
    
    2009Real estate owned
    
    $
    1,542
    
    
    $
    1,713Real estate in judgment and
subject to redemption
    
    
    1,430
    
    
    
    1,126Total
    
    $
    2,972
    
    
    $
    2,839
 31




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 7  Foreclosed Assets (Continued)
  December 31,2010
    
    
    2009
    
    
    2008Net (gain) on sales of real estate
    
    $
    (203
    )
    
    $
    (13
    )
    
    $
    (68
    )Operating expenses
    
    
    631
    
    
    
    822
    
    
    
    219Total
    
    $
    428
    
    
    $
    809
    
    
    $
    151
  2010
    
    
    2009
    
    
    2008Balance at beginning of year
    
    $
    1,713
    
    
    $
    749
    
    
    $
    885Properties transferred into OREO
    
    
    3,671
    
    
    
    4,240
    
    
    
    2,528Valuation impairments recorded
    
    
    (1,116
    )
    
    
    (1,684
    )
    
    
    (882
    )Proceeds from Sale of Properties
    
    
    (2,523
    )
    
    
    (1,579
    )
    
    
    (1,714
    )(Gain) or Loss on sale of properties
    
    
    (203
    )
    
    
    (13
    )
    
    
    (68
    )$
    1,542
    
    
    $
    1,713
    
    
    $
    749
 Note 8  Premises and Equipment
  DepreciableDecember 31,
    
    
    Life2010
    
    
    2009
    
    
    (in Years)Land
    
    $
    566
    
    
    $
    566Buildings and improvements
    
    
    5,754
    
    
    
    5,727
    
    
    5-40Furniture, fixtures and equipment
    
    
    2,899
    
    
    
    2,837
    
    
    2-15Total bank premises and equipment
    
    
    9,219
    
    
    
    9,130Less accumulated depreciation
and amortization
    
    
    5,097
    
    
    
    4,663Net carrying amount
    
    $
    4,122
    
    
    $
    4,467
  32




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 9  Deposits
  December 31,2010
    
    
    2009Balances by account type:Demand and NOW accounts
    
    $
    24,453
    
    
    $
    23,084Money market
    
    
    40,785
    
    
    
    57,052Passbook and statement savings
    
    
    20,334
    
    
    
    20,302Total transactional accounts
    
    
    85,572
    
    
    
    100,438Certificates of deposit:$100,000 and over
    
    
    52,558
    
    
    
    41,150Under $100,000
    
    
    52,504
    
    
    
    57,358Total certificates of deposit
    
    
    105,062
    
    
    
    98,508Total
    
    $
    190,634
    
    
    $
    198,946
  December 31, 2010Less than
    
    
    $100,000 &$100,000
    
    
    greaterLess than one year
    
    $
    29,373
    
    
    $
    26,250One to two years
    
    
    7,295
    
    
    
    9,122Two to three years
    
    
    9,292
    
    
    
    10,514Three to four years
    
    
    4,855
    
    
    
    3,168Four to five years
    
    
    1,689
    
    
    
    3,504Total
    
    $
    52,504
    
    
    $
    52,558
 Note 10  Federal Home Loan Bank Advances
  33




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 10  Federal Home Loan Bank Advances(Continued)
     Year EndingDecember 312011
    
    $
    16,1752012
    
    
    13,1162013
    
    
    7,059Total
    
    $
    36,350
 Note 11  Income Taxes
  December 31,2010
    
    
    2009
    
    
    2008Current expense (benefit)
    
    $
    (133
    )
    
    $
    (785
    )
    
    $
    371Deferred expense (benefit)
    
    
    (3,886
    )
    
    
    (2,858
    )
    
    
    (270
    )Valuation allowance
    
    
    4,224
    
    
    
    3,095
    
    
    
    Total tax expense
    
    $
    205
    
    
    $
    (548
    )
    
    $
    101
 34




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 11  Income Taxes (Continued)
  Percent of Pretax Income (Loss)December 31,2010
    
    2009
    
    2008Statutory federal tax rate
    
    
    34.00
    %
    
    
    34.00
    %
    
    
    34.00
    %Increase (decrease) resulting from:Nondeductible expenses
    
    
    -6.00
    %
    
    
    -0.04
    %
    
    
    2.50
    %Tax exempt income
    
    
    2.76
    %
    
    
    0.53
    %
    
    
    -18.70
    %Goodwill impairment
    
    
    0.00
    %
    
    
    -16.38
    %
    
    
    0.00
    %Valuation allowance
    
    
    -32.68
    %
    
    
    -15.52
    %
    
    
    0.00
    %Low income housing credit
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    -20.40
    %Other
    
    
    0,00
    %
    
    
    0.16
    %
    
    
    27.90
    %Reported tax expense
    
    
    -1.92
    %
    
    
    2.75
    %
    
    
    25.30
    %
 35




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 11  Income Taxes (Continued)
  December 31,2010
    
    
    2009Deferred tax assets:Provision for loan losses
    
    $
    1,021
    
    
    $
    880Net deferred loan fees
    
    
    126
    
    
    
    164Deferred compensation
    
    
    311
    
    
    
    321General business tax credit carryforward
    
    
    1,289
    
    
    
    1,097Depreciation
    
    
    337
    
    
    
    285Net NOL Carryforward
    
    
    4,025
    
    
    
    1,147Other Real Estate
    
    
    494
    
    
    
    500Other
    
    
    888
    
    
    
    314Total deferred tax assets
    
    
    8,491
    
    
    
    4,708Deferred tax liabilities:Mortgage servicing rights
    
    $
    350
    
    
    $
    377Original issue discount
    
    
    49
    
    
    
    60Net purchase premiums
    
    
    528
    
    
    
    596Unrealized gain on available for sale
securities
    
    
    133
    
    
    
    115Other
    
    
    112
    
    
    
    89Total deferred tax liabilities
    
    
    1,172
    
    
    
    1,237Valuation allowance
    
    
    (7,319
    )
    
    
    (3,095
    )Net deferred tax asset
    
    $
    
    
    
    $
    376
   36




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note
12  Off-Balance Sheet Activities
 Credit Related Financial Instruments
   Contract AmountDecember 31,2010
    
    2009Commitments to grant loans
    
    $
    1,411
    
    
    $
    1,660Unfunded commitments under lines of credit
    
    
    14,721
    
    
    
    17,787Unfunded commitments under letters of credit
    
    
    150
    
    
    
    160
    Collateral Requirements
 37




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note
13  Regulatory Matters
  
    
    The Bank is required to have and retain qualified management.
    
    The Bank is required to retain an independent third party to develop an analysis and
assessment of the Banks management needs for the purpose of providing qualified
management for the Bank.
    
    The board of directors is required to assume responsibility for the supervision of all of
the Banks activities.
    
    The Bank must increase the Banks level of Tier 1 capital as a percentage of total
assets to at least nine percent and its total capital as a percentage of risk-weighted
assets at a minimum of eleven percent.
    
    The Bank is required to charge off any loans classified as loss.
    
    The Bank may not extend credit to borrowers that have had loans with the Bank that
were classified substandard, doubtful or special mention without prior board approval.
    
    The Bank may not extend credit to borrowers that have had loans charged off or
classified as loss.
    
    The Bank is required to adopt a plan to reduce the Banks risk position in each asset
in excess of $250,000 which is more than sixty days delinquent or classified
substandard or doubtful.
    
    The Bank may not declare or pay any cash dividend without prior written consent of
the FDIC and OFIR.
    
    Prior to submission or publication of all Reports of Condition, the board is required to
review the adequacy of the Banks allowance for loan and lease losses.
    
    The Bank is required to adopt written lending and collection policies to provide
effective guidance and control over the Banks lending function
    
    The Bank is required to implement revised comprehensive loan grading review
procedures.
    
    Within sixty days of the Consent Order, the Bank is required to adopt a written profit
plan and comprehensive budget.
    
    Within sixty days of the Consent Order, the Bank is required to adopt a written plan to
manage concentrations of credit in a safe and sound manner.
    
    Within sixty days of the Consent Order, the Bank is required to formulate a written
plan to reduce the Banks reliance on brokered deposits.
    
    While the Consent Order is in effect, the Bank is required to prepare and submit
quarterly progress reports the FDIC and OFIR.
  38




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 13 Regulatory Matters (Continued)
  December 31,2010
    
    
    2009Equity per consolidated bank balance sheet
    
    $
    12,132
    
    
    $
    21,204Less: intangible and disallowed assets
    
    
    (646
    )
    
    
    (1,057
    )Tier 1 Capital
    
    
    11,486
    
    
    
    20,147Plus: Allowance for loan losses **
    
    
    2,172
    
    
    
    2,740Total Capital
    
    $
    13,658
    
    
    $
    22,887
 
 **
    
    Limited to 1.25% of risk weighted assets   To be Well CapitalizedTo Comply With
    
    Under PromptMinimum Capital
    
    Corrective ActionActual
    
    Requirements
    
    ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2010Total Capital
(to Risk-Weighted Assets)
    
    $
    13,658
    
    
    
    8.08
    %
    
    $
    13,526
    
    
    
    8.00
    %
    
    $
    16,908
    
    
    
    10.00
    %Tier 1 Capital 
(to Risk-Weighted Assets)
    
    $
    11,486
    
    
    
    6.79
    %
    
    $
    6.763
    
    
    
    4.00
    %
    
    $
    10,145
    
    
    
    6.00
    %Tier 1 Capital
(to Average Assets)
    
    $
    11,486
    
    
    
    4.36
    %
    
    $
    13,167
    
    
    
    5.00
    %
    
    $
    13,167
    
    
    
    5.00
    %As 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
    %
 39




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 14 Restrictions on Dividends, Loans and Advances
    Note 15 Shareholders Equity
     40




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 15 Shareholders Equity (continued)
   Note 16  Retirement Plans
     41




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 17  Related Party Transactions
  Note 18  Fair Value of Financial Instruments
   Cash
and Cash Equivalents
 Securities
 Other
Securities
 Mortgage
Loans Held for Sale
 Loans
Receivable
 42




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 18  Fair Value of Financial Instruments (Continued)
 Deposit
Liabilities
 Federal
Home Loan Bank Advances
 Accrued
Interest
  December 31,2010
    
    
    2009Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueAssets:Cash and cash equivalents
    
    $
    41,974
    
    
    $
    41,974
    
    
    $
    23,354
    
    
    $
    23,354Securities  Held to maturity
    
    
    10
    
    
    
    10
    
    
    
    23
    
    
    
    23Securities  Available for sale
    
    
    11,466
    
    
    
    11,466
    
    
    
    16,063
    
    
    
    16,063Other securities
    
    
    3,865
    
    
    
    3,865
    
    
    
    4,237
    
    
    
    4,237Loans held for sale
    
    
    693
    
    
    
    703
    
    
    
    809
    
    
    
    827Net loans
    
    
    182,768
    
    
    
    185,268
    
    
    
    220,875
    
    
    
    230,866Accrued interest and late charges
receivable
    
    
    264
    
    
    
    264
    
    
    
    1,154
    
    
    
    1,154Liabilities:Deposits
    
    
    206,028
    
    
    
    206,400
    
    
    
    213,368
    
    
    
    214,581Federal Home Loan Bank
advances
    
    
    36,350
    
    
    
    38,532
    
    
    
    44,518
    
    
    
    48,260Accrued interest payable
    
    
    341
    
    
    
    341
    
    
    
    397
    
    
    
    397
 43




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 19  Fair Value Measurements
      Quoted Prices in Active
    
    
    Significant Other
    
    
    Significant
    
    
    Balance atMarkets for Identical
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    December 31,Assets (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    2010Assets:December 31, 2010U.S. government agency
obligations
    
    $
    
    
    
    $
    1,682
    
    
    $
    
    
    
    $
    1,682Mortgage-backed securities
    
    
    
    
    
    
    4,024
    
    
    
    
    
    
    
    4,024Obligations of states and
political subdivisions
    
    
    
    
    
    
    5,760
    
    
    
    
    
    
    
    5,760$
    
    
    
    $
    11,466
    
    
    $
    
    
    
    $
    11,466
 Quoted Prices in Active
    
    
    Significant Other
    
    
    Significant
    
    
    Balance atMarkets for Identical
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    December 31,Assets (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    2009Assets:December 31, 2009U.S. Treasury
    
    $
    1,071
    
    
    $
    
    
    
    $
    
    
    
    $
    1,071U.S. government agency
obligations
    
    
    
    
    
    
    3,196
    
    
    
    
    
    
    
    3,196Mortgage-backed securities
    
    
    
    
    
    
    5,536
    
    
    
    
    
    
    
    5,536Obligations of states and
political subdivisions
    
    
    
    
    
    
    6,260
    
    
    
    
    
    
    
    6,260$
    1,071
    
    
    $
    14,992
    
    
    $
    
    
    
    $
    16,063
 44




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 19  Fair Value Measurements (Continued)
   SignificantQuoted Prices in
    
    Other
    
    SignificantBalance at
    
    Active Markets for
    
    Observable
    
    UnobservableDecember 31,
    
    Identical Assets
    
    Inputs (Level
    
    Inputs (Level2010
    
    (Level 1)
    
    2)
    
    3)Impaired Loans
    
    $
    11,433
    
    
    $
    
    
    
    $
    
    
    
    $
    11,433Foreclosed
Assets
    
    
    2,972
    
    
    
    
    
    
    
    
    
    
    
    2,972
  
 SignificantQuoted Prices in
    
    Other
    
    SignificantBalance at
    
    Active Markets for
    
    Observable
    
    UnobservableDecember 31,
    
    Identical Assets
    
    Inputs (Level
    
    Inputs (Level2009
    
    (Level 1)
    
    2)
    
    3)Impaired Loans
    
    $
    18,653
    
    
    $
    
    
    
    $
    
    
    
    $
    18,653Foreclosed Assets
    
    
    2,839
    
    
    
    
    
    
    
    
    
    
    
    2,839
  45




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##### Table of Contents



Monarch Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 20 Employee Stock Ownership Plan (ESOP)
   Year EndingDecember 31,2011
    
    $
    982012
    
    
    1032013
    
    
    1082014
    
    
    1132015
    
    
    118Thereafter
    
    
    124Total
    
    $
    664
  46




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##### Table of Contents



Monarch
Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note
20  Employee Stock Ownership Plan (ESOP) (Continued)
  2010
    
    
    2009Allocated shares
    
    
    120,348
    
    
    
    111,090Shares released for allocation
    
    
    9,258
    
    
    
    9,258Shares distributed
    
    
    (61,072
    )
    
    
    (38,827
    )Unreleased shares
    
    
    55,544
    
    
    
    64,802Total ESOP shares
    
    
    124,078
    
    
    
    146,323Fair value of unallocated shares
    
    $
    67
    
    
    $
    175
  Note 21  Stock Compensation Plans
    47




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##### Table of Contents



Monarch
Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 21  Stock Compensation Plans (continued)
  2009Dividend yield
    
    
    2.7
    %Expected life
    
    5 yearsExpected volatility
    
    
    37.9
    %Risk-free interest rate
    
    
    2.5
    %
  2010
    
    
    2009Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at beginning
of year
    
    
    194,562
    
    
    
    11.27
    
    
    
    162,262
    
    
    
    13.22Granted
    
    
    
    
    
    
    
    
    
    
    40,000
    
    
    
    3.60Forfeited/expired
    
    
    37,250
    
    
    
    13.55
    
    
    
    7,700
    
    
    
    12.69Outstanding at end of year
    
    
    157,312
    
    
    
    10.72
    
    
    
    194,562
    
    
    
    11.27Exercisable at year-end
    
    
    157,312
    
    
    
    10.72
    
    
    
    194,362
    
    
    
    11.25
 48




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##### Table of Contents



Monarch
Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note 21  Stock Compensation Plans (continued)
  Outstanding
    
    ExercisableExercise Price
    
    Number
    
    Remaining
    
    NumberPer share
    
    Outstanding
    
    Life (in Months)
    
    Exercisable$14.00
    
    
    19,836
    
    
    
    45
    
    
    
    19,836$13.00
    
    
    96,476
    
    
    
    28
    
    
    
    96,476$11.15
    
    
    1,000
    
    
    
    72
    
    
    
    1,000$  3.60
    
    
    40,000
    
    
    
    103
    
    
    
    40,000
 Note 22  Condensed Financial Statements of Parent Company
  Condensed Balance Sheet (000s omitted)
 December 31,
    
    
    December 31,2010
    
    
    2009AssetsCash
    
    $
    568
    
    
    $
    626Investments
    
    
    93
    
    
    
    1,611Investment in Monarch Community Bank
    
    
    12,132
    
    
    
    21,204Other assets
    
    
    27
    
    
    
    99Total assets
    
    $
    12,820
    
    
    $
    23,540Liabilities and Stockholders EquityAccrued expenses
    
    $
    802
    
    
    $
    377Stockholders equity
    
    
    12,018
    
    
    
    23,163Total liabilities and stockholders equity
    
    $
    12,820
    
    
    $
    23,540
 49




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##### Table of Contents



Monarch
Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note
22  Condensed Financial Statements of Parent Company (Continued)
 Condensed Income Statement (000s omitted)
 December 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008Income  Interest on investments
    
    $
    8
    
    
    $
    24
    
    
    
    15Dividends from Monarch Community Bank
    
    
    
    
    
    
    
    
    
    
    2,638Operating expense
    
    
    270
    
    
    
    234
    
    
    
    217Income
(loss)  Before equity in undistributed net income (loss) of subsidiary
    
    
    (262
    )
    
    
    (210
    )
    
    
    2,436Equity in
undistributed net income (loss) of subsidiary
    
    
    (10,620
    )
    
    
    (19,186
    )
    
    
    (2,138
    )Net income
    
    $
    (10,882
    )
    
    $
    (19,396
    )
    
    $
    298
 50




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##### Table of Contents



Monarch
Community Bancorp, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements
 Note
22  Condensed Financial Statements of Parent Company (Continued)
 Condensed Statement of Cash Flows (000s omitted)
 December 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Net income (loss)
    
    $
    (10,882
    )
    
    $
    (19,396
    )
    
    $
    298Adjustments
to reconcile net income (loss) to net cash (used in) provided by operating activities:Amortization and depreciation
    
    
    11
    
    
    
    58
    
    
    
    1Allocation of ESOP and RRP
    
    
    40
    
    
    
    119
    
    
    
    335(Increase) decrease in other assets
    
    
    72
    
    
    
    41
    
    
    
    (112
    )(Increase) decrease in accrued expenses
    
    
    81
    
    
    
    (271
    )
    
    
    326Undistributed net (income) loss of subsidiary
    
    
    10,620
    
    
    
    19,186
    
    
    
    2,138Net cash (used in) provided by operating activities
    
    
    (58
    )
    
    
    (263
    )
    
    
    2,986Cash flows from investing activities:Purchase of securities
    
    
    
    
    
    
    (2,560
    )
    
    
    (7
    )Investment in subisidary
    
    
    (1,500
    )
    
    
    (4,000
    )
    
    
    Proceeds from sales and maturities of securities
    
    
    1,504
    
    
    
    1,014
    
    
    
    208Net cash (used in) provided by investing activities
    
    
    4
    
    
    
    (5,546
    )
    
    
    201Cash flows from financing activities:Issuance of Preferred Stock
    
    
    
    
    
    
    6,785
    
    
    
    Repurchase of Common Stock
    
    
    (4
    )
    
    
    (3
    )
    
    
    (2,704
    )Dividends paid
    
    
    
    
    
    
    (816
    )
    
    
    (772
    )Net cash (used in) provided by financing activities
    
    
    (4
    )
    
    
    5,966
    
    
    
    (3,476
    )Net increase (decrease) in cash
    
    
    (58
    )
    
    
    157
    
    
    
    (289
    )Cash at beginning of year
    
    
    626
    
    
    
    469
    
    
    
    758Cash at end of year
    
    $
    568
    
    
    $
    626
    
    
    $
    469
 51




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##### Table of Contents



QUARTERLY RESULTS OF OPERATIONS
  Year Ended December 31, 20101st Qtr
    
    
    2nd Qtr
    
    
    3rd Qtr
    
    
    4th Qtr(Dollars in thousands, except per share data)Interest income
    
    $
    3,488
    
    
    $
    3,235
    
    
    $
    3,099
    
    
    $
    3,015Interest expense
    
    
    1,458
    
    
    
    1,385
    
    
    
    1,291
    
    
    
    1,238Net interest income
    
    
    2,030
    
    
    
    1,850
    
    
    
    1,808
    
    
    
    1,777Provision for loan losses
    
    
    1,845
    
    
    
    7,040
    
    
    
    2,724
    
    
    
    (107
    )Net interest income after
provision for loan losses
    
    
    185
    
    
    
    (5,190
    )
    
    
    (916
    )
    
    
    1,884Noninterest income
    
    
    1,072
    
    
    
    854
    
    
    
    880
    
    
    
    891Noninterest expense
    
    
    2,493
    
    
    
    2,480
    
    
    
    2,482
    
    
    
    2,782Income before income taxes
    
    
    (1,236
    )
    
    
    (6,816
    )
    
    
    (2,518
    )
    
    
    (107
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205Net Income
    
    $
    (1,236
    )
    
    $
    (6,816
    )
    
    $
    (2,518
    )
    
    $
    (312
    )Dividends and amortization of discount on preferred stock
    
    
    88
    
    
    
    88
    
    
    $
    90
    
    
    
    89Net Income available to common stock
    
    $
    (1,324
    )
    
    $
    (6,904
    )
    
    $
    (2,608
    )
    
    $
    (401
    )Earnings per share:Basic
    
    $
    (0.67
    )
    
    $
    (3.49
    )
    
    $
    (1.32
    )
    
    $
    (.20
    )Diluted
    
    $
    (0.67
    )
    
    $
    (3.49
    )
    
    $
    (1.32
    )
    
    $
    (.20
    )Cash dividends declared per share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 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 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 before income taxes
    
    
    239
    
    
    
    (2,431
    )
    
    
    (473
    )
    
    
    (17,279
    )Income tax expense
    
    
    60
    
    
    
    (608
    )
    
    
    (121
    )
    
    
    121Net Income
    
    $
    179
    
    
    $
    (1,823
    )
    
    $
    (352
    )
    
    $
    (17,400
    )Dividends and amortization of discount on preferred stock
    
    
    51
    
    
    
    87
    
    
    $
    88
    
    
    
    89Net Income available to common stock
    
    $
    128
    
    
    $
    (1,910
    )
    
    $
    (440
    )
    
    $
    (17,489
    )Earnings 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
    
    
    $
    
 
 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  52




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##### Table of Contents



ITEM 9A. Controls and Procedures
      Internal ControlIntegrated Framework
 Dated: March 31, 2011
    /s/ Richard J. DeVriesRichard J. DeVriesPresident and Chief Executive Officer /s/ Rebecca S. CrabillRebecca S. CrabillSenior Vice President and Chief Financial Officer 53




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##### Table of Contents



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 securitiesto be issued upon
    
    Weighted-average
    
    Number of securitiesexercise of
    
    exercise price of
    
    remaining available foroutstanding options
    
    outstanding options
    
    future issuance underPlan Category
    
    warrants and rights
    
    warrants and rights
    
    equity compensation plansEquity compensation plans approved by security holders (1)
    
    
    157,312
    
    
    
    10.72
    
    
    
    74,126Equity 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 54




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##### Table of Contents



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.
 55




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##### Table of Contents



SIGNATURES
  MONARCH COMMUNITY BANCORP, INC.Dated: April 4, 2011
    By:
    /s/ Richard J. DeVriesRichard J. DeVries, Presidentand Chief Executive Officer 56




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##### Table of Contents



Signature
    
    Title
    
    Date/s/ Richard J. DeVries


Richard J. DeVries
    
    President and Chief Executive Officer (Principal
Executive Officer)
    
    April 4, 2011

/s/ Stephen M. Ross

Stephen M. Ross
    
    Chairman of the Board
    
    April 4, 2011/s/ Rebecca S. Crabill


Rebecca S. Crabill
    
    Senior Vice President and Chief Financial Officer (Principal
Financial and Accounting Officer)
    
    April 4, 2011/s/ Harold A. Adamson


Harold A. Adamson
    
    Director
    
    April 4, 2011/s/ Karl F. Loomis


Karl F. Loomis
    
    Director
    
    April 4, 2011/s/ James W. Gordon


James W. Gordon
    
    Director
    
    April 4, 2011/s/ Martin L. Mitchell


Martin L. Mitchell
    
    Director
    
    April 4, 2011/s/ Gordon L. Welch


Gordon L. Welch
    
    Director
    
    April 4, 2011/s/ Craig W. Dally


Craig W. Dally
    
    Director
    
    April 4, 2011/s/ Richard L. Dobbins


Richard L. Dobbins
    
    Director
    
    April 4, 2011
 57




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##### Table of Contents



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
    
    Management Continuity Agreement between Monarch Community Bancorp, Inc. and Andrew J. Van Doren (incorporated by reference from Form 8-K
filed on 12/21/2004)10.2
    
    Registrants Employee Stock Ownership Plan
    
    
    *10.3
    
    Registrants 2003 Stock Option and Incentive Plan
    
    
    **10.4
    
    Registrants Recognition and Retention Plan
    
    
    **10.5
    
    Form of Stock Option Agreement
    
    
    ***10.6
    
    Management Continuity Agreement with Rebecca S. Crabill (Incorporated by reference from Form 8-K filed on 02/27/08)10.7
    
    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)10.8
    
    Form of Waiver of Senior Executive Officers (incorporated by reference from Form 8-K, filed on 2/12/09)10.9
    
    Form of Amendment Agreement (incorporated by reference from Form 8-K filed on 2/12/09)10.10
    
    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)10.11
    
    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)10.12
    
    Consent Order with OFIR and the FDIC (incorporated by reference from Form 8-K filed on 5/2/10).10.13
    
    Employment term sheet with Richard J. DeVries (incorporated by reference from Form 8-K filed on 7/16/10).10.14
    
    Written agreement with the FRB (incorporated by reference from Form 8-K filed on 9/27/10).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.
    
    
    3299.1
    
    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
 58




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*
    
    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 hyRegistrant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 59