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Monarch Community Bancorp 10-Q 2008

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32
  5. Ex-32
FORM 10-Q
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
     
þ   Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2008
or
     
o   Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from                      to                     
Commission file number: 000-49814
MONARCH COMMUNITY BANCORP, INC.
(Exact name of registrant as specified in its charter)
     
Maryland   04-3627031
(State or other jurisdiction   (I.R.S. employer
of incorporation or organization)   identification no.)
375 North Willowbrook Road, Coldwater, MI 49036
(Address of principal executive offices)
517-278-4566
(Registrant’s telephone number)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: þ No: o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer o    Accelerated filer o    Non-accelerated filer   o
(Do not check if a smaller reporting company)
  Smaller reporting company þ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: o No: þ
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practical date: At October 31, 2008, there were 2,046,102 shares of the issuer’s Common Stock outstanding.
 
 

 


 

Monarch Community Bancorp, Inc.
Index
         
       
 
       
       
 
       
    1  
 
       
Condensed Consolidated Statements of Income – Three and Nine Months Ended September 30, 2008 and 2007
    2  
 
       
Condensed Consolidated Statements of Changes in Stockholder’s Equity – Nine Months Ended September 30, 2008 and 2007
    3  
 
       
    4  
 
       
    5-7  
 
       
    7-14  
 
       
    14  
 
       
    15  
 
       
       
 
       
    15  
 
       
    15  
 
       
    15  
 
       
    16  
 
       
    16  
 
       
    16  
 
       
    16  
 
       
    17  
 
       
CERTIFICATIONS
    18-21  
 EX-31.1
 EX-31.2
 EX-32

 


Table of Contents

PART I—FINANCIAL INFORMATION
Item 1. CONDENSED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
                 
    (Unaudited)        
    September     December 31,  
    2008     2007  
    (Dollars in thousands,  
    except per share data)  
Assets
               
Cash and due from banks
    7,468     $ 7,691  
Federal Home Loan Bank overnight time and other interest bearing deposits
    1,309       6,151  
 
           
Total cash and cash equivalents
    8,777       13,842  
Securities — Available for sale
    8,932       11,084  
Securities — Held to maturity
    37       238  
Other securities
    4,237       4,237  
Loans held for sale
    770       422  
Loans, net
    241,578       224,797  
Foreclosed assets, net
    1,731       1,515  
Premises and equipment
    4,531       4,675  
Goodwill
    9,606       9,606  
Core deposit intangible
    723       862  
Other assets
    7,051       7,930  
 
           
 
Total assets
  $ 287,973     $ 279,208  
 
           
 
               
Liabilities and Stockholders’ Equity
               
Liabilities
               
Deposits:
               
Non-interest bearing
  $ 14,463     $ 13,609  
Interest bearing
    176,730       164,327  
 
           
Total deposits
    191,193       177,936  
Federal Home Loan Bank advances
    57,330       59,330  
Accrued expenses and other liabilities
    2,687       2,856  
 
           
Total liabilities
    251,210       240,122  
 
               
Stockholders’ Equity
               
Common stock — $0.01 par value, 20,000,000 shares authorized, 2,063,948 shares issued and outstanding at September 30, 2008 and 2,321,585 shares issued and outstanding at December 31, 2007
    20       23  
Additional paid-in capital
    21,240       23,828  
Retained earnings
    16,391       16,341  
Accumulated other comprehensive income
    50       52  
Unearned compensation
    (938 )     (1,158 )
 
           
Total stockholders’ equity
    36,763       39,086  
 
           
Total liabilities and stockholders’ equity
  $ 287,973     $ 279,208  
 
           
See accompanying notes to condensed consolidated financial statements.

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Net Interest Income After Provision for Loan Losses
    1,453       1,854       4,929       5,546  
 
                               
Non-interest Income
                               
Fees and service charges
    598       653       1,741       1,881  
Loan servicing fees
    110       108       330       329  
Net gain on sale of loans
    101       139       563       470  
Net gain (loss) on sale of securities
                2       (19 )
Net gain (loss) on sale of fixed assets
          71             71  
Other income
    89       69       204       277  
 
                       
Total non-interest income
    898       1,040       2,840       3,009  
 
                               
Non-interest Expense
            2,260                  
Salaries and employee benefits
    1,063       1,065       3,330       3,205  
Occupancy and equipment
    262       250       779       763  
Data processing
    185       180       575       546  
Amortization of mortgage servicing rights
    91       92       321       265  
Professional services
    108       180       301       430  
Amortization of core deposit intangible
    43       54       139       176  
NOW account processing
    40       42       129       133  
ATM/Debit card processing
    52       51       149       144  
Foreclosed property expense
    84       86       169       125  
Other general and administrative
    330       266       1,008       862  
 
                       
 
Total non-interest expense
    2,258       2,266       6,900       6,649  
 
                       
 
Income — Before income taxes
    93       628       869       1,906  
Income Taxes
    36       157       232       477  
 
                       
 
Net Income
  $ 57     $ 471     $ 637     $ 1,429  
 
                       
 
                               
Earnings Per Share
                               
Basic
  $ 0.03     $ 0.14     $ 0.30     $ 0.59  
 
                       
 
Diluted
  $ 0.03     $ 0.14     $ 0.30     $ 0.59  
 
                       
See accompanying notes to condensed consolidated financial statements.

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    Common Stock                     Accumulated              
                                    Other              
    Number of             Additional Paid     Retained     Comprehensive     Unearned        
    Shares     Amount     in Capital     Earnings     Income     Compensation     Total  
Balance - January 1, 2007
    2,534     $ 25     $ 26,191     $ 15,319     $ (63 )   $ (1,486 )   $ 39,986  
Vesting of restricted shares
                                            217       217  
3,204 shares repurchased at $11.95/share
    (3 )             (38 )                             (38 )
Stock option expenses
                    65                               65  
Comprehensive Income:
                                                       
Net Income
                            1,429                       1,429  
Change in unrealized loss on securities available-for-sale, net of tax
                                    56               56  
 
                                                     
Total comprehensive income
                                                    1,485  
Dividends paid ($0.14/share)
                      (531 )                 (531 )
 
                                         
Balance - September 30, 2007
    2,531     $ 25       26,218       16,217       (7 )     (1,269 )     41,184  
 
                                         
 
                                                       
Balance - January 1, 2008
    2,322     $ 23     $ 23,828     $ 16,341     $ 52     $ (1,158 )   $ 39,086  
Vesting of restricted shares
                                            220       220  
259,733 shares repurchased at an average price $9.91/share
    (260 )     (3 )     (2,596 )                             (2,599 )
Stock option expenses
                    8                               8  
Net Income
                            637                       637  
Change in unrealized loss on securities available-for-sale, net of tax
                                    (2 )             (2 )
 
                                                     
Total comprehensive income
                                                    635  
Dividends paid ($0.27/share)
                      (587 )                 (587 )
 
                                         
Balance - September 30, 2008
    2,062       20       21,240       16,391       50       (938 )     36,763  
 
                                         

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Condensed Consolidated Statements of Cash Flows (Unaudited)
                 
    Nine Months Ended  
    September, 30  
    2008     2007  
    (Dollars in thousands)  
Cash Flows From Operating Activities
               
Net Income
  $ 637     $ 1,429  
Adjustments to reconcile net income to net cash from operating activities
               
Depreciation and amortization
    834       826  
Provision for loan losses
    1,488       689  
Stock option expense
    8       65  
Gain on sale of foreclosed assets
    (9 )     (131 )
Mortgage loans originated for sale
    (25,617 )     (20,548 )
Proceeds from sale of mortgage loans
    25,832       20,671  
Gain on sale of mortgage loans
    (563 )     (470 )
(Gain) Loss on sale of available for sale securities
    (2 )     19  
Earned stock compensation
    220       217  
Gain on disposal of equipment
          (71 )
Net change in:
               
Deferred loan fees
    (34 )     10  
Accrued interest receivable
    76       18  
Other assets
    483       195  
Accrued expenses and other liabilities
    (194 )     (421 )
 
           
Net cash provided by operating activities
    3,159       2,498  
Cash Flows From Investing Activities
               
Activity in available-for-sale securities:
               
Purchases
    (2,268 )     (3,819 )
Proceeds from sales of securities
          2,928  
Proceeds from maturities of securities
    4,401       2,091  
Activity in held-to-maturity securities:
               
Purchases
    (7 )      
Proceeds from maturities of securities
    208       15  
Loan originations and principal collections, net
    (20,036 )     393  
Proceeds from sale of foreclosed assets
    1,619       846  
Proceeds from sale of premises and equipment
          283  
Purchase of premises and equipment
    (212 )     (112 )
 
           
Net cash provided by (used in) investing activities
    (16,295 )     2,625  
Cash Flows From Financing Activities
               
Net increase in deposits
    13,257       (11,080 )
Repurchase of common stock
    (2,599 )     (37 )
Dividends paid
    (587 )     (531 )
Proceeds from FHLB advances
    38,500       33,500  
Repayment of FHLB advances
    (40,500 )     (27,500 )
 
           
Net cash provided by financing activities
    8,071       (5,648 )
 
           
Net Increase in Cash and Cash Equivalents
    (5,065 )     (525 )
Cash and Cash Equivalents — Beginning
    13,842       15,297  
 
           
Cash and Cash Equivalents — End
  $ 8,777     $ 14,772  
 
           
 
               
Supplemental Cash Flow Information:
               
Cash paid for:
               
Interest
    6,492       6,961  
Income taxes
    385       600  
Noncash investing activities:
               
Loans transferred to foreclosed assets
    1,801       1,513  
See accompanying notes to condensed consolidated financial statements.

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MONARCH COMMUNITY BANCORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Monarch Community Bancorp, Inc. (the “Corporation”) was incorporated in 2002 under Maryland law to hold all of the common stock of Monarch Community Bank (the “Bank”), formerly known as Branch County Federal Savings and Loan Association. The Bank converted to a stock savings institution effective August 29, 2002. In connection with the conversion, the Corporation sold 2,314,375 shares of its common stock in a subscription offering.
Monarch Community Bank provides a broad range of banking services to its primary market area of Branch, Calhoun and Hillsdale counties in Michigan. The Bank operates six full service offices. The Bank owns 100% of First Insurance Agency. First Insurance Agency is a licensed insurance agency established to allow for the receipt of fees on insurance services provided to the Bank’s customers. The Bank also owns a 24.98% interest in a limited partnership formed to construct and operate multi-family housing units.
BASIS OF PRESENTATION
The condensed consolidated financial statements of the Corporation include the accounts of Monarch Community Bank and First Insurance Agency. All significant intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated financial statements for interim periods are unaudited; however, in the opinion of the Corporation’s management, all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the Corporation’s financial position and results of operations have been included.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates and assumptions.
The accompanying financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes required by generally accepted accounting principles in annual consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the Corporation’s Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission.
The results of operations for the nine month period ended September 30, 2008 are not necessarily indicative of the results to be expected for the full year period.
ALLOWANCE FOR LOAN LOSSES
The appropriateness of the allowance for loan losses is reviewed by management based upon our evaluation of then-existing economic and business conditions affecting our key lending areas and other conditions, such as credit quality trends (including trends in delinquencies, nonperforming loans and foreclosed assets expected to result from existing conditions), collateral values, loan volumes and concentrations, specific industry conditions within portfolio segments and recent loss experience in particular segments of the portfolio that existed as of the balance sheet date and the impact that these conditions were believed to have had on the collectibility of the loan. Senior management reviews these conditions at least quarterly.
To the extent that any of these conditions is evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s estimate of the effect of this condition may be reflected as a specific allowance applicable to this credit or portfolio segment.
The allowance for loan losses is based on estimates of losses inherent in the loan portfolio. Actual losses can vary significantly from the estimated amounts. Our methodology as described permits adjustments to any loss factor used in the computation of the formula allowance in the event that, in management’s judgment, significant factors which affect the collectibility of the portfolio as of the evaluation date are not reflected in the loss factors. By assessing the estimated losses inherent in the loan portfolio on a quarterly basis, we are able to adjust specific and inherent loss estimates based upon any more recent information that has become available.

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RECLASSIFICATIONS
Certain 2007 amounts have been reclassified to conform to the 2008 presentation.
EARNINGS PER SHARE
A reconciliation of the numerators and denominators used in the computation of the basic earnings per share and diluted earnings per share is presented below (000s omitted except per share data):
                                 
    Three Months     Three Months     Nine Months     Nine Months  
    Ended     Ended     Ended     Ended  
    September 30, 2008     September 30, 2007     September 30, 2008     September 30, 2007  
Basic earnings per share
                               
Numerator:
                               
Net income
  $ 57     $ 471     $ 637     $ 1,429  
 
                       
 
                               
Denominator:
                               
Weighted average common shares outstanding
    2,097       2,531       2,196       2,532  
Less: Average unallocated ESOP shares
    (83 )     (93 )     (83 )     (93 )
Less: Average non-vested RRP shares
    (11 )     (28 )     (35 )     (35 )
 
                       
Weighted average common shares outstanding for basic earnings per share
    2,003       2,410       2,078       2,404  
 
                       
Basic earnings per share
  $ 0.03     $ 0.19     $ 0.30     $ 0.59  
 
                       
 
                               
Diluted earnings per share
                               
Numerator:
                               
Net income
  $ 57     $ 471     $ 637     $ 1,429  
 
                       
 
                               
Denominator:
                               
Weighted average common shares outstanding for basic earnings per share
    2,003       2,410       2,078       2,404  
Add: Dilutive effects of restricted stock and stock options
                       
 
                       
Weighted average common shares and dilutive potential common shares outstanding
    2,003       2,410       2,078       2,404  
 
                       
Diluted earnings per share
  $ 0.03     $ 0.19     $ 0.30     $ 0.59  
 
                       
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption was permitted subject to specific requirements outlined in the new Statement. Therefore, calendar-year companies were able to adopt SFAS No. 159 for their first quarter 2007 financial statements.  The Company did not adopt the standard early, therefore SFAS No. 159 became applicable for years beginning January 1, 2008 and had no impact on the financial statements.
The new Statement allows entities to choose, at specified election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item’s fair value in subsequent reporting periods must be recognized in current earnings. SFAS 159 also establishes presentation and disclosure requirements designed to draw comparison between entities that elect different measurement attributes for similar assets and liabilities.
FAIR VALUE MEASUREMENTS
In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability.

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In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.
The following table present information about the Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2008, and the valuation techniques used by the Company to determine those fair values.
                                 
            Significant        
            Other   Significant    
    Quoted Prices in Active   Observable   Unobservable    
    Markets for Identical   Inputs (Level   Inputs (Level   Balance at
    Assets (Level 1)   2)   3)   September 30, 2008
Assets
                               
Investment securities- available — for — sale
  $ 5,736     $ 3,196             $ 8,932  
The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets include held to maturity investments and loans. The Company had no impairment charges for changes in fair value for assets measured on a recurring basis.
Other assets, including bank-owned life insurance, goodwill, intangible assets and other assets acquired in business combinations, are also subject to periodic impairment assessments under other accounting principles generally accepted in the United States of America. These assets are not considered financial instruments. Effective February 12, 2008, the FASB issued a staff position, FSP FAS 157-2, which delayed the applicability of FAS 157 to non-financial instruments. Accordingly, these assets have been omitted from the above disclosures.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements of the Corporation and the accompanying notes.
The Corporation is not aware of any market or institutional trends, events, or circumstances that will have or are likely to have a material effect on liquidity, capital resources, or results of operations except as discussed herein. Also, the Corporation is not aware of any current recommendations by regulatory authorities that will have such effect if implemented.
FORWARD-LOOKING STATEMENTS
In addition to historical information, the following discussion contains “forward-looking statements” that involve risks and uncertainties. All statements regarding the expected financial position, business and strategies are forward-looking statements and the Corporation intends for them to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The words “anticipates,” “believes,” “estimates,” “seeks,” “expects,” “plans,” “intends,” and similar expressions, as they relate to the Corporation or management, are intended to identify forward-looking statements. The Corporation believes that the expectations reflected in these forward-looking statements are reasonable based on our current beliefs and assumptions; however, these expectations may prove to be incorrect.
Factors which could have a material adverse effect on our operations include, but are not limited to, changes in interest rates, changes in the relative difference between short and long-term interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, including levels of non-performing assets, demand for loan products, deposit flows, competition, demand for financial services in our market area, our operating costs and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and you should not rely too much on these statements.

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CRITICAL ACCOUNTING POLICIES
The nature of the financial services industry is such that, other than described below, the use of estimates and management judgment is not likely to present a material risk to the financial statements. In cases where estimates or management judgment are required, internal controls and processes are established to provide assurance that such estimates and management judgments are materially correct to the best of management’s knowledge.
Allowance for Loan Losses. Accounting for loan classifications, accrual status, and determination of the allowance for loan losses is based on regulatory guidance. This guidance includes, but is not limited to, generally accepted accounting principles, the uniform retail credit classification and account management policy issued by the Federal Financial Institutions Examination Council, the joint policy statement on the allowance for loan losses methodologies issued by the Federal Financial Institutions Examination Council and guidance issued by the Securities and Exchange Commission. Accordingly, the allowance for loan losses includes a reserve calculation based on an evaluation of loans determined to be impaired, risk ratings, historical losses, loans past due, collateral values and cost of disposal and other subjective factors.
Foreclosed Assets. Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value at the date of the foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less estimated selling expenses, which consist primarily of commissions that will be paid to an independent real estate agent upon sale of the property. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets.
Goodwill and Other Intangible Assets. Goodwill represents the excess of the cost of an acquisition over the fair value of net identifiable tangible and intangible assets acquired. Under the provisions of SFAS 142, goodwill is no longer amortized into the income statement over an estimated life, but rather is tested at least annually for impairment. Impairment of goodwill is evaluated by reporting unit and is based on a comparison of the recorded balance of goodwill to the applicable market value or discounted cash flows. To the extent that impairment may exist, the current carrying amount is reduced by the estimated shortfall. Intangible assets which have finite lives are amortized over their estimated useful lives and are subject to impairment testing.
FINANCIAL CONDITION
Assets
Total assets increased $8.8 million, or 3.1%, to $288.0 million at September 30, 2008 compared to $279.2 million at December 31, 2007. Management attributes this growth to a strategy for 2008 that emphasizes growth in the commercial business and real estate loan portfolio.
Securities
Securities decreased to $8.9 million at September 30, 2008 compared to $11.1 million at December 31, 2007. The decrease was attributable to $2.3 million in securities being called due to decreasing market interest rates and $2.1 million in securities maturing. This decrease was offset by the purchase of $2.2 million in securities as a result of efforts to increase yield on investments.

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Loans
The Bank’s net loan portfolio increased by $16.8 million, or 7.5%, from $224.8 million at December 31, 2007 to $241.6 million at September 30, 2008. The following table presents information concerning the composition of our loan portfolio in dollar amounts and in percentages as of the dates indicated:
                                 
    September 30, 2008     December 31, 2007  
    Amount     Percent     Amount     Percent  
            (Dollars in thousands)          
Real Estate Loans:
                               
One-to-four family
  $ 123,936       50.7     $ 126,780       55.8 %
Multi-family
    5,759       2.4       5,594       2.5  
Commercial
    74,547       30.5       56,714       25.0  
Construction or development
    5,598       2.2       6,409       2.8  
 
                       
Total real estate loans
    209,840       85.8       195,497       86.0  
Other loans:
                               
Consumer loans:
                               
Home equity
    20,666       8.5       20,430       9.0  
Other
    5,817       2.4       7,014       3.1  
 
                       
Total consumer loans
    26,483       10.8       27,444       12.1  
Commercial Business Loans
    8,134       3.3       4,228       1.9  
 
                       
Total other loans
    34,617       14.2       31,672       14.0  
 
                       
Total Loans
    244,457       100.0 %     227,169       100.0 %
 
                           
 
Allowance for loan losses
    2,296               1,824          
Less: Net deferred loan fees
    583               548          
Loans in process
                           
 
                           
Total Loans, net
  $ 241,578             $ 224,797          
 
                           
One-to-four family loans decreased as a result of a $7.5 million decrease in adjustable rate mortgages and a $1.3 million decrease in all other mortgages (including fixed rate mortgages), this decrease was offset by an increase in balloon loans of $4.9 million. Continuing with the strategy adopted in 2007, the Bank sold a large percentage of new one to four family loan originations. Commercial real estate loans increased $17.8 million and commercial business loans increased $3.9 million due to the continued focus on growth in commercial lending. The Bank has made inroads in the local market but also continues to originate large commercial real estate loans outside the market area. For the last several years the Bank has originated loans in areas outside the market area where the economy is perceived to be better than the local economy. The Bank also relies on good underwriting standards and maintaining current financial information to mitigate the risk associated with lending outside the market area. The Bank expects future loan growth to come primarily from commercial lending with a focus on in-market lending.
The allowance for loan losses was $2,296,000 at September 30, 2008 compared to $1,824,000 at December 31, 2007, an increase of $472,000. This increase was primarily due a provision for loan losses of $1,488,000, which was offset by net charge offs of $1,017,000 for the nine months ended September 2008, (see “Provision for Loan Losses” below). Charge-offs for the nine months ended September 30, 2008 included $500,000 of one-to-four family mortgage loans, $79,000 of home equity lines of credit, $119,000 of commercial loans collateralized by real estate, $67,000 commercial loans not secured by real estate and $406,000 of consumer loans (including overdrafts). Recoveries consisted of $152,000 in consumer loans (including overdrafts) and $2,000 in commercial loans collateralized by real estate. See “Provision for Loan Losses” below for further explanation regarding charge-offs.
Deposits
Total deposits increased $13.3 million, or 7.5%, from $177.9 million at December 31, 2007 to $191.2 million at September 30, 2008. The increase can be attributed to a $13.5 million increase in money market accounts, $1.5 million increase in certificates of deposits, offset by a decrease of $1.7 million in interest bearing demand, NOW and savings accounts. The increase in money market accounts is largely due to management’s efforts to remain competitive with interest rates in this category of deposits. The increase in money markets accounts has provided funding so it has not been necessary for management to borrow additional FHLB advances or increase brokered deposits. Brokered deposits have been managed to provide additional liquidity or reduce excess liquidity depending on current conditions. Management expects future deposit growth to come from increased sales and marketing efforts to attract lower cost savings and checking accounts as well as product enhancement.

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Federal Home Loan Bank Advances
Total Federal Home Loan Bank (FHLB) advances decreased to $57.3 million as of September 30, 2008 from $59.3 at December 31, 2007. Total proceeds from and repayments of FHLB advances for the nine months ended September 30, 2008 total were $38.5 million and $40.5 million respectively. Management is attempting to reduce its reliance on borrowed funds through the growth of deposits, including brokered deposits. Should this strategy not succeed, management anticipates the need for future borrowings to fund loan growth. See “Net Interest Income” below, and also see “Liquidity” later in this report regarding available borrowings.
Equity
Total equity was $36.8 million at September 30, 2008 compared to $39.1 million at December 31, 2007. This represents 12.8% and 14.0% of total assets at September 30, 2008 and December 31, 2007, respectively. Increases in equity primarily resulted from $637,000 in year-to-date net income. Decreases in equity for the nine months ended September 30, 2008 included $2,599,000 in stock repurchases and $587,000 in dividend payments. Management considers its equity position to be strong.
As of September 30, 2008, the previously disclosed stock repurchase program had resulted in 212,290 shares repurchased with 15,710 remaining shares to be repurchased. On October 24, 2008 the Company completed the repurchase of 228,000 shares in connection with the repurchase plan announced February 25, 2008. With the completion of this plan 259,733 shares have been repurchased in 2008.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income before any provision for loan losses increased $11,000 for the quarter ended September 30, 2008 compared to the same period in 2007. The Bank’s net interest margin increased to 3.31% for the quarter ended September 30, 2008 from 3.26% for the quarter ended September 30, 2007 as a result of some success in increasing deposits and renewing borrowings at lower interest rates. The Bank continues to be challenged in its efforts to increase lower costing core deposits. Management continues to put its efforts towards meeting this challenge.
Net interest income before any provision for loan losses increased $182,000 for the nine months ended September 30, 2008 compared to the same period in 2007. The Bank’s net interest margin increased to 3.29% for the nine months ended September 30, 2008 from 3.26% for the nine months ended September 30, 2007.
Our net interest margin increased primarily due to the decrease in costs associated with our borrowings and increases in lower costing deposit balances as compared to the same period a year ago. Interest income from loans represented 96.3% of total interest income for the nine months ended September 30, 2008 compared to 93.7% for the same period in 2007. The Bank’s ability to maintain its net interest margin is heavily dependent on future loan demand and its ability to attract core deposits to offset the effect of higher cost certificates of deposits and borrowings.
The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. No tax equivalent adjustments were made.

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    Nine Months Ended September 30,     Nine Months Ended September 30,  
    2008     2007  
    Average     Interest             Average     Interest        
    Outstanding     Earned/     Yield/     Outstanding     Earned/     Yield/  
    Balance     Paid     Rate     Balance     Paid     Rate  
    (dollars in thousands)  
Fed Funds and overnight deposits
  $ 8,905     $ 100       1.50 %   $ 9,387     $ 344       4.90 %
Investment securities
    10,373       334       4.29       13,465       464       4.61  
Other securities
    4,174       150       4.79       4,174       141       4.52  
Loans receivable
    236,314       12,283       6.92       228,099       12,251       7.18  
 
                                       
Total earning assets
  $ 259,766     $ 12,867       6.60     $ 255,125     $ 13,200       6.92  
 
                                       
 
                                               
Demand and NOW Accounts
  $ 32,270     $ 72       0.30     $ 33,205     $ 53       0.21  
Money market accounts
    34,175       774       3.02       24,897       666       3.58  
Savings accounts
    19,267       61       0.42       21,621       69       0.43  
Certificates of deposit
    104,036       3,551       4.55       104,394       3,843       4.92  
Fed Funds Purchased
    58             0.00                   0.00  
Federal Home Loan Bank Advances
    54,246       1,992       4.89       56,775       2,334       5.50  
 
                                       
Total interest bearing liabilities
  $ 244,052       6,450       3.52     $ 240,892       6,965       3.87  
 
                                       
Net interest income
          $ 6,417                     $ 6,235          
 
                                           
Net interest spread
                    3.08 %                     3.05 %
 
                                           
Net interest margin
                    3.29 %                     3.26 %
 
                                           
Provision for Loan Losses
The Bank recorded a provision for loan losses of $731,000 for the quarter ended September 30, 2008 compared to $219,000 for the quarter ended September 30, 2007. Net charge-offs for the quarter ended September 30, 2008 totaled $442,000 compared to $537,000 for the same period a year ago. While charge off activity continues to consist mostly of 1-4 family residential mortgage loans, there has been an increase in consumer and commercial real estate loans as well for the quarter ended September 2008.
The Bank recorded a $1,488,000 provision for loan losses for the nine months ended September 30, 2008 compared to $689,000 for the same period in 2007, an increase of $799,000. Management believes the increase in provision was necessary to maintain adequate reserves. The level of non-performing assets, net charge-offs, loan impairment, and loan growth were primary considerations in determining the need for the increased provision. Nonperforming assets including the amount of real estate in judgment and foreclosed and repossessed properties, increased from $2.8 million at the end of the last quarter to $3.6 million as of September 30, 2008. Management continues to be aggressive in valuing repossessed properties in efforts to sell quickly. This continues to be a challenge due to the current housing market and the weakened economy. Net charge-offs for the nine months ended September 30, 2008 totaled $1,017,000 compared to $849,000 for the nine months ended September 30, 2007. The net charge-offs consisted primarily of one to four family loans, consumer loans and commercial real estate loans. The Bank’s loan growth is primarily attributable growth in the commercial loan portfolio which represents 39% of the loan portfolio as of September 30, 2008 compared to 32% as of December 31, 2007.
The following table presents non-performing assets and certain asset quality ratios at September 30, 2008 and December 31, 2007.
                 
    September 30, 2008     December 31,2007  
    (In thousands)  
Non-performing loans
  $ 1,853     $ 865  
Real estate in judgement
    932       630  
Foreclosed and repossessed assets
    799       885  
 
           
Total non-performing assets
  $ 3,584     $ 2,380  
 
           
 
               
Non-performing loans to total loans
    0.76 %     0.38 %
Non-performing assets to total assets
    1.24 %     0.85 %
Allowance for loan losses to non-performing loans
    120.60 %     210.80 %
Allowance for loan losses to net loans receiveable
    0.91 %     0.81 %
The Bank had 23 non-performing loan relationships as of September 30, 2008 compared to 13 non-performing loan relationships as of December 31, 2007.

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Non-interest Income
Non-interest income for the quarter ended September 30, 2008 decreased $142,000, or 13.7%, from $1,040,000 to $898,000 compared to the same period a year ago. This decrease is attributable to decreases in fees and service charges, net gain on sale of loans, and net gain on sale of fixed assets. These decreases are offset by an increase in other income.
Fees and Service charges decreased $55,000 for the quarter ended September 30, 2008 from $653,000 to $598,000 compared to the same period a year ago. This decrease was a result of a decrease in brokered loan income of $33,000 and a decrease in overdraft fees of $31,000. These decreases were offset by increases in other loan fees including construction and consumer loan fees of $7,000. While there has been a slight improvement in brokered loan income in the third quarter, management does not expect the same level of income for 2008 or 2009 as achieved in 2007.
Net gain on sale of loans decreased $38,000 for the quarter ended September 30, 2008 from $139,000 to $101,000 compared to the same period a year. While there was an upsurge of mortgage loans originated for sale in the secondary market in the first two quarters of the year, the Bank has seen a decline in sales in the secondary market during the third quarter and expects the same level sales in the last quarter of 2008. The decrease in net gain on sale of fixed assets for the quarter ending September 30, 2008 of $71,000 compared to the same period a year ago is attributable to the sale of former branch building located at 30 West Chicago, Coldwater in the third quarter of 2007. Other income increased $20,000 for the quarter ended September 30, 2008 from $69,000 to $89,000 as a result of an increases in net gain on sale of foreclosed assets of $36,000. Decreases in all other income of $16,000 offset the increase in net gain of foreclosed assets.
Non-interest income for the nine months ended September 30, 2008 decreased $169,000, or 5.6%, from $3.0 million to $2.8 million for the same period in 2007. Fees and Service charges decreased $140,000 for the nine months ended September 30, 2008 from $1.9 million to $1.7 million compared to the same period a year ago. This decrease was a result of a decrease in brokered loan income of $129,000, decrease of overdraft fees of $45,000 and a decrease in other fees of $16,000, offsetting these decreases was a decrease in costs associated with our overdraft protection program of $51,000, and an increase in atm/debit card income of $23,000. Net gain on sale of fixed assets decreased by $71,000 was due to the sale of a building in 2007 as mentioned previously.
Other income decreased $73,000 for the nine months ended September 30, 2008 from $277,000 to $204,000 as a result of decreases in net gain on sale of foreclosed assets of $45,000, a decrease in rental income of $28,000 and a decrease in all other income of $2,000.
The decreases in fees and service charges and other income are offset by an increase in gain on sale of loans for the nine months ended September 30, 2008 of $93,000 from $470,000 to $563,000. A gain of $2,000 on the sale of securities for the nine months ended September 30, 2008 compared to a net loss of $19,000 for the same period in 2007 also offset the decreases in fees and service charges and other income.
Non-interest Expense
Noninterest expense remained relatively unchanged decreasing $8,000, or less than 1%, for the for the three months ended September 30, 2008 compared to the same period ending September 30, 2007. Occupancy and equipment expense increased by $12,000 for the three months ended September 30, 2008 compared to the same period a year ago due to the Bank completing a repaving project for several locations. Other general and administrative expenses increased $65,000 (from $266,000 to $331,000 for the quarter ended September 30, 2008 compared to the same period a year ago. These increases include an increase in advertising of $25,000, an increase in loan related fees of $17,000, and an increase in costs associated with FDIC insurance of $33,000. The increase in advertising reflects the Bank’s efforts to utilize sources of media as a means of promoting products and services and participation in community activities. These increases were offset by decreases in professional services of $73,000 (from $180,000 to $108,000). This area of expense was higher in 2007 due to the Company’s attempt to execute a going private transaction. Amortization of Core Deposit Intangible decreased $11,000 (from $54,000 to $43,000).
Noninterest expense increased $251,000, or 3.8%, to $6.9 million for the nine months ended September 30, 2008 compared to $6.6 million for the same period in 2007. This increase is mainly due to increases in compensation and benefits, repossessed property expenses, amortization of mortgage servicing rights and other general and administrative expenses. Salaries and employee benefits expense increased $125,000 due to normal increases in salaries and wages, and an increase in staffing and utilization of contracted personnel. The Bank has 84 full-time equivalent employees as of September 30, 2008 compared to 77 full-time equivalent employees as of September 30, 2007.

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Other general and administrative expenses increased $146,000, from $862,000 to $1,008,000 for the nine months ended September 30, 2008 compared to the same period a year ago. These increases include an increase in advertising of $73,000, an increase in FDIC insurance of $62,000 and an increase in all other general and administrative expenses of $11,000.
Foreclosed property expense increased $44,000, from $125,000 to $169,000, resulting from write downs on properties held in real estate owned and additional expenses associated with preparing and maintaining properties for sale. Amortization of mortgage servicing rights increased $56,000 (from $265,000 to $321,000) as a result of an increase in mortgage loan payoffs due to refinancing associated with the decrease of interest rates in the first quarter. Data processing increased $29,000, from $546,000 to $575,000 due to implementation of network upgrades and costs associated with the installation of a new telephone system.
Professional services and amortization of core deposit intangible decreased offsetting the other noninterest expense items. Professional services decreased $129,000, from $430,000 to $301,000; this area of expense was higher in 2007 due reason mentioned in the preceding paragraph. Amortization of Core deposit intangible decreased $37,000, from $176,000 to $139,000, as amortization of this asset continues to slow from year to year.
Federal Income Tax Expense
The Company’s provision for federal income taxes decreased $121,000 for the quarter ended September 30, 2008 compared to the same period in 2007 as our net income before taxes decreased $535,000. The effective tax rate for the quarter ended September 30, 2008 was 38.7 % compared to 25% for the same period in 2007. The increase was a result of an over estimation of federal tax and will be reversed in the 4th quarter of 2008. The difference between the effective tax rates and the federal corporate income tax rate of 34% is attributable to the low income housing credits available to the Bank from the investment in the limited partnership as well as fluctuation of permanent book and tax differences such as non-taxable income and non-deductible expenses.
LIQUIDITY
The Bank’s liquidity, represented by cash, overnight funds and investments, is a product of our operating, investing, and financing activities. The Bank’s primary sources of funds are deposits, amortization, prepayments and maturities of outstanding loans, and funds provided from operations. While scheduled payments from the amortization of loans are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. The Bank also generates cash through borrowings. The Bank utilizes Federal Home Loan Bank advances to leverage its capital base and provide funds for its lending and investment activities, and to enhance its interest rate risk management.
Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments such as overnight deposits. On a longer-term basis, the Bank maintains a strategy of investing in various investments and lending products. The Bank uses its sources of funds primarily to meet its ongoing commitments, to pay maturing certificates of deposit and savings withdrawals and to fund loan commitments. Certificates of deposit scheduled to mature in one year or less at September 30, 2008 totaled $59.6 million. Management believes that a significant portion of these certificates of deposit will remain with the Bank provided the Bank pays a rate of interest that is competitive both in the local and national markets.
If necessary, additional funding sources include additional deposits and Federal Home Loan Bank advances. Deposits can be obtained in the local market area and from out of market sources; however, this may require the Bank to offer interest rates higher than those of the competition. At September 30, 2008 and based on current collateral levels, the Bank could borrow an additional $19.6 million from the Federal Home Loan Bank at prevailing interest rates. This borrowing capacity can be increased in the future if the Bank pledges additional collateral to the Federal Home Loan Bank. The Company anticipates that it will continue to have sufficient funds, through deposits and borrowings, to meet its current commitments.
The Bank’s total cash and cash equivalents decreased by $5.0 million during the nine months ended September 30, 2008 compared to a $500,000 decrease for the same period in 2007. The primary sources of cash for the nine months ended September 30, 2008 were $13.3 million increase in deposits, $25.6 million in proceeds from the sale of mortgage loans, $38.5 million in proceeds from FHLB advances and $4.4 million in maturities of available-for-sale investment securities compared to increases of $20.5 million in proceeds from the sale of mortgage loans, $5.0 million in proceeds from sales and maturities of available-for-sale investment securities and $33.5 million in proceeds from FHLB advances for the nine months ended September 30, 2007. The primary uses of cash for the nine months ended September 30, 2008 were $25.8 million of mortgage loans originated for sale, $40.5 million in repayments of FHLB advances, $20 million loan originations in excess of principal collections and $2.3 million in purchases of available-for-sale investment securities compared to $27.5 million in repayments of FHLB advances, $20.7 million in loans originated for sale, and $3.8 million in purchases of available-for-sale investment securities.

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CONTRACTUAL OBLIGATIONS AND OFF BALANCE SHEET ARRANGEMENTS
The Corporation has certain obligations and commitments to make future payments under contracts. At September 30, 2008, the aggregate contractual obligations and commitments are:
Contractual Obligations
                                         
    Payments Due by Period  
            Less than     1-3     3-5     After  
    Total     1 year     years     years     5 years  
    (Dollars in Thousands)  
Certificates of deposit
  $ 102,479     $ 59,584     $ 33,069     $ 9,826     $  
FHLB advances
    57,330       14,662       27,327       15,291       50  
 
                             
 
Total
  $ 159,809     $ 74,246     $ 60,396     $ 25,117     $ 50  
 
                             
Other Commitments
                                         
    Amount of commitment expiration per period  
            Less than     1-3     3-5     After  
    Total     1 year     years     years     5 years  
    (Dollars in Thousands)  
Commitments to grant loans
  $ 3,840     $ 3,840     $     $     $  
Unfunded commitments under HELOCs
    15,029       1,495       3,770       3,376       6,388  
Unfunded commitments under Commercial LOCs
    3,979       2,038       1,496       385       60  
Letters of credit
    10       10                    
 
                             
 
Total
  $ 22,858     $ 7,383     $ 5,266     $ 3,761     $ 6,448  
 
                             
Commitments to grant loans are governed by the Bank’s credit underwriting standards, as established by the Bank’s Loan Policy. The Bank’s policy is to grant Home Equity Lines of Credits (HELOCs) for periods of up to 15 years.
CAPITAL RESOURCES
The Bank is subject to various regulatory capital requirements. As of September 30, 2008, the Bank met the regulatory standards to be classified as “well capitalized.” The Bank’s regulatory capital ratios as of September 30, 2008 were as follows: Tier 1 leverage ratio 9.36%, Tier 1 risk-based capital ratio 11.49%; and total risk-based capital, 12.51%. The regulatory capital requirements to be considered well capitalized are 5.0%, 6.0%, and 10.0%, respectively. Management considers the Bank’s capital to be adequate to support anticipated growth and does not anticipate needing to seek additional capital in the foreseeable future.
ITEM 3. QUANTITATIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK
The Corporation’s primary market risk exposure is interest rate risk (“IRR”). Interest rate risk refers to the risk that changes in market interest rates might adversely affect the Corporation’s net interest income or the economic value of its portfolio of assets, liabilities, and off-balance sheet contracts. Interest rate risk is primarily the result of an imbalance between the price sensitivity of the Corporation’s assets and its liabilities (including off-balance sheet contracts). Such imbalances can be caused by differences in the maturity, repricing and coupon characteristics of assets and liabilities, and options, such as loan prepayment options, interest rate caps and floors, and deposit withdrawal options. These imbalances, in combination with movement in interest rates, will alter the pattern of the Corporation’s cash inflows and outflows, affecting the earnings and economic value of the Corporation.
The Corporation’s primary tool for assessing IRR is a model that uses scenario analysis to evaluate the IRR exposure of the Bank by estimating the sensitivity of the Bank’s portfolios of assets, liabilities, and off-balance sheet contracts to changes in market interest rates. To measure the sensitivity of the Bank’s Net Portfolio Value (NPV) to changes in interest rates, the (NPV) model estimates what would happen to the economic value of each type of asset, liability, and off-balance sheet contract under six different interest rate scenarios. The model estimates the NPV that would result following instantaneous, parallel shifts in the Treasury yield curve of -300, -200, -100, +100, +200, +300 basis points. Management then compares the resulting NPV and the magnitude of change in NPA to regulatory and industry guidelines to determine if the company’s IRR is acceptable. Management believes, based on data from the model, as of September 30, 2008, and indicates that the Bank’s IRR level remains minimal.

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ITEM 4T. CONTROLS AND PROCEDURES
An evaluation of the Corporation’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) as of September 30, 2008 was carried out under the supervision and with the participation of the Corporation’s Chief Executive Officer, Chief Financial Officer and several other members of the Corporation’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures as currently in effect are effective in ensuring that the information required to be disclosed by the Corporation in the reports it files or submits under the Exchange Act is (i) accumulated and communicated to the Corporation’s management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within time periods specified in the SEC’s rules and forms. There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The Corporation intends to continually review and evaluate the design and effectiveness of its disclosure controls and procedures and to improve its controls and procedures over time and to correct any deficiencies that it may discover in the future. The goal is to ensure that senior management has timely access to all material financial and non-financial information concerning the Corporation’s business. While the Corporation believes the present design of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Corporation to modify its disclosure controls and procedures.
PART II — OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Corporation and the Bank are from time-to-time involved in legal proceedings arising out of, and incidental to, their business. Management, based on its review with counsel of all actions and proceedings affecting the Corporation and the Bank, has concluded that the aggregate loss, if any, resulting from the disposition of these proceedings should not be material to the Corporation’s financial condition or results of operations.
Item 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Corporation. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c)
ISSUER PURCHASES OF EQUITY SECURITIES
                                         
      (a)       (b)       (c)       (d)  
                          Total Number of Shares       Maximum Number (or  
                          (or Unit) Purchased as       Approximate Dollar Value) of  
      Total Number of                 Part of Publicly       Shares (or Units) that may yet  
      Shares (or Units)       Average Price paid       Anounced Plans or       Be Purchased Under the  
Period     Purchased       per Share (or Unit)       Programs       Plans or Program  
7/01/08-7/31/08
      41,100       $ 9.22         41,100         54,205  
 
8/01/08-8/31/08
      21,575       $ 9.43         21,575         32,690  
9/01/08-9/30/08
      16,920       $ 8.98         16,920         15,710  
 
                               
 
Total
      79,595       $ 9.23         79,595         15,710  
 
                               
The table above details repurchases by Monarch Community Bancorp during the three months ended September 30, 2008. Stock repurchased during the first two months of 2008 completed the Program initiated in 2007. Our board of directors approved the repurchase by us of up to an aggregate of 228,000 shares of our common stock pursuant to the Program in 2008. As of October 17, 2008 the Company had completed the repurchase program.

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Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
Not applicable
Item 6. EXHIBITS
See the index to exhibits.

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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
  MONARCH COMMUNITY BANCORP, INC.
 
 
Date: November 14, 2008  By:   /s/ Donald L. Denney    
    Donald L. Denney   
    President and Chief Executive Officer   
 
     
Date: November 14, 2008  And:   /s/ Rebecca S. Crabill    
    Rebecca S. Crabill   
    Senior Vice President, Chief Financial Officer   

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INDEX TO EXHIBITS
     
Exhibit No.   Description of Exhibit
31.1
  Rule 13a-14(a) Certification of the Corporation’s President and Chief Executive Officer.
 
   
31.2
  Rule 13a-14(a) Certification of the Corporation’s Chief Financial Officer.
 
   
32
  Section 1350 Certification.

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