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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-QSB

|                                             |  |                                                                                  
|-------------------------------------------- |  | ---------------------------------------------------------------------------------
|x                                            |  | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
|For the quarterly period ended June 30, 2003
|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 small business issuer as specified in its charter)

|                                                                       |  |                                               
|---------------------------------------------------------------------- |  | ----------------------------------------------
|Maryland(State or other jurisdiction
of incorporation or organization) |  | 04-3627031(I.R.S. employer
identification no.)

375 North Willowbrook Road; Coldwater, MI 49036(Address of principal executive offices)

517-278-4566(Issuers telephone number)

State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practical date: At August 1, 2003, there were
2,403,250 shares of the issuers Common Stock outstanding.

Transitional Small Business Disclosure Format (check one): Yes: o No: x





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TABLE OF CONTENTS



|                                                 |                                                                                                |                                                                                                                |  |  |  |  |  | 
|------------------------------------------------ | ---------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                  
|                                                 | Item 1  Condensed Financial Statements                                                       
|                                                 |                                                                                                | Condensed Consolidated Balance Sheets  June 30, 2003 and December 31, 2002                                   
|                                                 |                                                                                                | Condensed Consolidated Statements of Income  Three and Six Months Ended June 30, 2003 and 2002               
|                                                 |                                                                                                | Condensed Consolidated Statements of Changes in Stockholders Equity  Six Months Ended June 30, 2003 and 2002
|                                                 |                                                                                                | Condensed Consolidated Statements of Cash Flow  Six Months Ended June 30, 2003 and 2002                      
|                                                 |                                                                                                | Notes to Condensed Consolidated Financial Statements                                                          
|                                                 | Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                 | Item 3  Controls and Procedures                                                              
|PART II  OTHER INFORMATION                     
|                                                 | Item 1  Legal Proceedings                                                                    
|                                                 | Item 2  Changes in Securities                                                                
|                                                 | Item 3  Defaults Upon Senior Securities                                                      
|                                                 | Item 4  Submission of Matters to a Vote of Security Holders                                  
|                                                 | Item 5  Other Information                                                                    
|                                                 | Item 6  Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                      
|EX-31.1 Certification of Chief Executive Officer
|EX-31.2 Certification of Chief Financial Officer
|EX-32 906 Certification of CEO and CFO          



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##### Table of Contents



Monarch Community Bancorp, Inc.
Index

|              |  |                                                                                                                |  |     
|------------- |  | -------------------------------------------------------------------------------------------------------------- |  | ----
|PART I       |  | FINANCIAL INFORMATION                                                                                          |  |     
|              |  |                                                                                                                |  |     
|Item 1       |  | Condensed Financial Statements:                                                                                |  |     
|              |  |                                                                                                                |  |     
|              |  | Condensed Consolidated Balance Sheets  June 30, 2003 and
December 31, 2002                                    |  | 1   
|              |  |                                                                                                                |  |     
|              |  | Condensed Consolidated Statements of Income  Three and Six Months
Ended June 30, 2003 and 2002                |  | 2   
|              |  |                                                                                                                |  |     
|              |  | Condensed Consolidated Statements of Changes in Stockholders Equity 
Six Months Ended June 30, 2003 and 2002 |  | 3   
|              |  |                                                                                                                |  |     
|              |  | Condensed Consolidated Statements of Cash Flow  Six Months Ended
June 30, 2003 and 2002                       |  | 4   
|              |  |                                                                                                                |  |     
|              |  | Notes to Condensed Consolidated Financial Statements                                                           |  | 5   
|              |  |                                                                                                                |  |     
|Item 2       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                          |  | 6-11
|              |  |                                                                                                                |  |     
|Item 3       |  | Controls and Procedures                                                                                        |  | 11  
|              |  |                                                                                                                |  |     
|PART II      |  | OTHER INFORMATION                                                                                              |  |     
|              |  |                                                                                                                |  |     
|Item 1       |  | Legal Proceedings                                                                                              |  | 11  
|              |  |                                                                                                                |  |     
|Item 2       |  | Changes in Securities                                                                                          |  | 11  
|              |  |                                                                                                                |  |     
|Item 3       |  | Defaults Upon Senior Securities                                                                                |  | 11  
|              |  |                                                                                                                |  |     
|Item 4       |  | Submission of Matters to a Vote of Security Holders                                                            |  | 11  
|              |  |                                                                                                                |  |     
|Item 5       |  | Other Information                                                                                              |  | 11  
|              |  |                                                                                                                |  |     
|Item 6       |  | Exhibits and Reports on Form 8-K                                                                               |  | 11  
|              |  |                                                                                                                |  |     
|SIGNATURES    |  | 12                                                                                                            
|              |  |                                                                                                                |  |     
|CERTIFICATION |  | 13-16                                                                                                         





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##### Table of Contents






PART IFINANCIAL INFORMATION




Item 1. CONDENSED FINANCIAL STATEMENTS




Condensed Consolidated Balance Sheets

|                                                        |                                                                                                                                                            |                     |                                            |                                 |         |                        |         |        |              |         |         | 
|------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ------------------------------------------ | ------------------------------- | ------- | ---------------------- | ------- | ------ | ------------ | ------- | ------- | 
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         | (unaudited)            |         |        |              |         |        
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         | June 30,               |         |        | December 31, |        
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         | 2003                   |         |        | 2002         |        
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         |                        |         |        |              |        
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         | (Dollars in thousands, |        
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         | except per share data) |        
|ASSETS                                                  |                                                                                                                                                            |                     |                                            |                                 |         |                        |         |       
|Cash and due from banks                                 |                                                                                                                                                            | $                   | 9,889                                      |                                 |         | $                      | 4,144   |       
|Federal Funds sold and overnight deposits               |                                                                                                                                                            |                     | 25,323                                     |                                 |         |                        | 16,063  |       
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         |                       
|                                                        |                                                                                                                                                            |                     |                                            | Total cash and cash equivalents |         |                        | 35,212  |        |              |         | 20,207  | 
|SecuritiesAvailable for sale                           |                                                                                                                                                            |                     | 19,217                                     |                                 |         |                        | 17,160  |       
|SecuritiesHeld to maturity                             |                                                                                                                                                            |                     | 233                                        |                                 |         |                        | 274     |       
|Other securities                                        |                                                                                                                                                            |                     | 2,947                                      |                                 |         |                        | 2,807   |       
|Real Estate Investment  Limited partnership, at equity |                                                                                                                                                            |                     | 1,484                                      |                                 |         |                        | 1,554   |       
|Loans held for sale                                     |                                                                                                                                                            |                     | 4,412                                      |                                 |         |                        | 1,527   |       
|Loans, net of allowance for loan losses                 |                                                                                                                                                            |                     | 143,414                                    |                                 |         |                        | 145,162 |       
|Accrued interest receivable                             |                                                                                                                                                            |                     | 1,178                                      |                                 |         |                        | 1,275   |       
|Foreclosed assets, net                                  |                                                                                                                                                            |                     | 2,404                                      |                                 |         |                        | 2,022   |       
|Premises and equipment                                  |                                                                                                                                                            |                     | 4,365                                      |                                 |         |                        | 4,569   |       
|Deferred income taxes                                   |                                                                                                                                                            |                     | 874                                        |                                 |         |                        | 556     |       
|Other assets                                            |                                                                                                                                                            |                     | 826                                        |                                 |         |                        | 872     |       
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         |                       
|                                                        |                                                                                                                                                            |                     | Total assets                               |                                 | $       | 216,566                |         |        | $            | 197,985 |        
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         |                       
|LIABILITIES AND STOCKHOLDERS EQUITY                    |                                                                                                                                                            |                     |                                            |                                 |         |                        |         |       
|Deposits:                                               |                                                                                                                                                            |                     |                                            |                                 |         |                        |         |       
|                                                        |                                                                                                                                                            | Noninterest-bearing |                                            |                                 | 6,254   |                        |         |        | 3,046        |        
|                                                        |                                                                                                                                                            | Interest-bearing    |                                            |                                 | 111,491 |                        |         |        | 103,698      |        
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         |                       
|                                                        |                                                                                                                                                            |                     |                                            | Total deposits                  |         |                        | 117,745 |        |              |         | 106,744 | 
|Federal Home Loan Bank advances                         |                                                                                                                                                            |                     | 57,500                                     |                                 |         |                        | 52,500  |       
|Accrued expenses and other liabilities                  |                                                                                                                                                            |                     | 4,132                                      |                                 |         |                        | 1,792   |       
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         |                       
|                                                        |                                                                                                                                                            |                     |                                            | Total liabilities               |         |                        | 179,377 |        |              |         | 161,036 | 
|Commitments and contingent liabilities                  |                                                                                                                                                            |                     |                                           |                                 |         |                        |        |       
|Stockholders equity                                    |                                                                                                                                                            |                     |                                            |                                 |         |                        |         |       
|                                                        | Common stock-$0.01 par valueauthorized-20,000,000 sharesissued and outstanding-2,403,250 shares at June 30, 2003 and
2,314,375 shares at December 31, 2002 |                     | 24                                         |                                 |         |                        | 23      |       
|                                                        | Additional paid in capital                                                                                                                                 |                     |                                            | 23,303                          |         |                        |         | 22,149 |             
|                                                        | Retained earnings                                                                                                                                          |                     |                                            | 16,498                          |         |                        |         | 16,379 |             
|                                                        | Accumulated other comprehensive income                                                                                                                     |                     |                                            | 185                             |         |                        |         | 64     |             
|                                                        | Unearned Compensation                                                                                                                                      |                     |                                            | (2,821                          | )       |                        |         | (1,666 | )           
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         |                       
|                                                        |                                                                                                                                                            |                     | Total stockholders equity                 |                                 |         | 37,189                 |         |        |              | 36,949  |        
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         |                       
|                                                        |                                                                                                                                                            |                     | Total liabilities and stockholders equity |                                 | $       | 216,566                |         |        | $            | 197,985 |        
|                                                        |                                                                                                                                                            |                     |                                            |                                 |         |                       

See accompanying notes to condensed consolidated financial statements

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Condensed Consolidated Statements of Income

|                                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |               |  |       |               |       |   |     |       | 
|--------------------------------------------------- | ---------------------------------------------- | - | ------------------------ | ------------------------- |  | ------------- | ----- | --- | ------------- | ---------------------- | ----- | ------------- |  | ----- | ------------- | ----- | - | --- | ----- | 
|                                                    |                                                |   |                          |                           |  | Three Months  |       |     | Three Months  |                        |       | Six Months    |  |       | Six Months    |      
|                                                    |                                                |   |                          |                           |  | Ended         |       |     | Ended         |                        |       | Ended         |  |       | Ended         |      
|                                                    |                                                |   |                          |                           |  | June 30, 2003 |       |     | June 30, 2002 |                        |       | June 30, 2003 |  |       | June 30, 2002 |      
|                                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |               |  |       |               |      
|                                                    |                                                |   |                          |                           |  |               |       |     |               | (Dollars in thousands) |       |               |  |       |              
|Interest Income                                     |                                                |   |                          |                           |  |               |       |     |               |                        |       |               |  |       |               |      
|                                                    | Loans, including fees                          | $ | 2,882                    |                           |  | $             | 3,133 |     |               | $                      | 5,843 |               |  | $     | 6,270         |      
|                                                    | Investment securities                          |   |                          | 153                       |  |               |       | 45  |               |                        |       | 299           |  |       |               | 92    |  
|                                                    | Federal funds sold and overnight deposits      |   |                          | 70                        |  |               |       | 58  |               |                        |       | 132           |  |       |               | 106   |  
|                                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |              
|                                                    |                                                |   |                          | Total interest income     |  |               | 3,105 |     |               |                        | 3,236 |               |  |       | 6,274         |       |   |     | 6,468 | 
|                                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |              
|Interest Expense                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |               |  |       |               |      
|                                                    | Deposits                                       | $ | 725                      |                           |  |               | 856   |     |               |                        | 1,496 |               |  |       | 1,741         |      
|                                                    | Federal Home Loan bank advances                |   |                          | 800                       |  |               |       | 790 |               |                        |       | 1,579         |  |       |               | 1,548 |  
|                                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |              
|                                                    |                                                |   |                          | Total interest expense    |  |               | 1,525 |     |               |                        | 1,646 |               |  |       | 3,075         |       |   |     | 3,289 | 
|                                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |              
|Net Interest Income                                 |                                                |   | 1,580                    |                           |  |               | 1,590 |     |               |                        | 3,199 |               |  |       | 3,179         |      
|Provision for Loan Losses                           |                                                |   | 797                      |                           |  |               | 53    |     |               |                        | 1,022 |               |  |       | 177           |      
|                                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |              
|Net Interest Income after Provision
for Loan Losses |                                                |   | 783                      |                           |  |               | 1,537 |     |               |                        | 2,177 |               |  |       | 3,002         |      
|                                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |              
|Noninterest Income                                  |                                                |   |                          |                           |  |               |       |     |               |                        |       |               |  |       |               |      
|                                                    | Fees and service charges                       |   |                          | 245                       |  |               |       | 224 |               |                        |       | 478           |  |       |               | 434   |  
|                                                    | Loan servicing fees                            |   |                          | 50                        |  |               |       | 49  |               |                        |       | 99            |  |       |               | 98    |  
|                                                    | Net gain on sale of loans                      |   |                          | 659                       |  |               |       | 108 |               |                        |       | 1,038         |  |       |               | 166   |  
|                                                    | Net (loss) on trading activities               |   |                          |                          |  |               |       | (2  | )             |                        |       |              |  |       |               | (2    | )
|                                                    | Net gain on disposal of
premises and equipment |   |                          |                          |  |               |       | 1   |               |                        |       |              |  |       |               | 7     |  
|                                                    | Other income                                   |   |                          | 58                        |  |               |       | 46  |               |                        |       | 81            |  |       |               | 79    |  
|                                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |              
|                                                    |                                                |   | Total noninterest income |                           |  | 1,012         |       |     |               | 426                    |       |               |  | 1,696 |               |       |   | 782 |      
|Noninterest Expenses                                |                                                |   |                          |                           |  |               |       |     |               |                        |       |               |  |       |               |      
|                                                    | Salaries and employees benefits                |   |                          | 852                       |  |               |       | 811 |               |                        |       | 1,727         |  |       |               | 1,705 |  
|                                                    | Occupancy and equipment                        |   |                          | 186                       |  |               |       | 196 |               |                        |       | 378           |  |       |               | 396   |  
|                                                    | Data processing                                |   |                          | 89                        |  |               |       | 94  |               |                        |       | 182           |  |       |               | 199   |  
|                                                    | Mortgage banking                               |   |                          | 127                       |  |               |       | 39  |               |                        |       | 233           |  |       |               | 91    |  
|                                                    | NOW account expense                            |   |                          | 37                        |  |               |       | 44  |               |                        |       | 73            |  |       |               | 85    |  
|                                                    | Professional fees                              |   |                          | 151                       |  |               |       | 40  |               |                        |       | 240           |  |       |               | 102   |  
|                                                    | Office supplies and forms                      |   |                          | 48                        |  |               |       | 22  |               |                        |       | 75            |  |       |               | 67    |  
|                                                    | Advertising and promotion                      |   |                          | 20                        |  |               |       | 24  |               |                        |       | 34            |  |       |               | 42    |  
|                                                    | Other general and administrative               |   |                          | 255                       |  |               |       | 239 |               |                        |       | 434           |  |       |               | 489   |  
|                                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |              
|                                                    |                                                |   |                          | Total noninterest expense |  |               | 1,765 |     |               |                        | 1,509 |               |  |       | 3,376         |       |   |     | 3,176 | 
|                                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |              
|Income  Before Income Taxes                        |                                                |   | 30                       |                           |  |               | 454   |     |               |                        | 497   |               |  |       | 608           |      
|Income Taxes                                        |                                                |   | (6                       | )                         |  |               | 160   |     |               |                        | 142   |               |  |       | 213           |      
|                                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |              
|Net Income                                          |                                                | $ | 36                       |                           |  | $             | 294   |     |               | $                      | 355   |               |  | $     | 395           |      
|                                                    |                                                |   |                          |                           |  |               |       |     |               |                        |       |              

See accompanying notes to condensed consolidated financial statements

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Condensed Consolidated Statements of Changes in Stockholders Equity

|                                  |                                                                                                         |                                                                               |    |        |  |   |         |            |  |          |        |                        |               |   |       |              |     |   |        |        |   |   |        |   |     | 
|--------------------------------- | ------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | -- | ------ |  | - | ------- | ---------- |  | -------- | ------ | ---------------------- | ------------- | - | ----- | ------------ | --- | - | ------ | ------ | - | - | ------ | - | --- | 
|                                  |                                                                                                         |                                                                               |    |        |  |   |         |            |  |          |        |                        |               |   |       | Accumulated  |     |   |        |        |   |   |        |   |    
|                                  |                                                                                                         |                                                                               |    |        |  |   |         | Additional |  |          |        |                        |               |   | Other |              |     |   |        |        |   |   |        |  
|                                  |                                                                                                         |                                                                               |    | Common |  |   | Paid in |            |  | Retained |        |                        | Comprehensive |   |       | Unearned     |     |   |        |        |  
|                                  |                                                                                                         |                                                                               |    | Stock  |  |   | Capital |            |  | Earnings |        |                        | Income        |   |       | Compensation |     |   | Total  |       
|                                  |                                                                                                         |                                                                               |    |        |  |   |         |            |  |          |        |                        |               |   |       |              |     |   |        |       
|                                  |                                                                                                         |                                                                               |    |        |  |   |         |            |  |          |        | (Dollars in thousands, |               |   |       |              |     |   |        |        |  
|                                  |                                                                                                         |                                                                               |    |        |  |   |         |            |  |          |        | except per share data) |               |   |       |              |     |   |        |        |  
|Balance, January 1, 2002          |                                                                                                         | $                                                                             | 0  |        |  | $ | 0       |            |  | $        | 15,365 |                        |               | $ | 0     |              |     | $ | 0      |        |   | $ | 15,365 |  
|Comprehensive Income
 Net Income |                                                                                                         |                                                                               |   |        |  |   |        |            |  |          | 395    |                        |               |   |      |              |     |   |       |        |   |   | 395    |  
|                                  |                                                                                                         |                                                                               |    |        |  |   |         |            |  |          |        |                        |               |   |       |              |     |  
|Balance, June 30, 2002            |                                                                                                         | $                                                                             |   |        |  | $ |        |            |  | $        | 15,760 |                        |               | $ |      |              |     | $ |       |        |   | $ | 15,760 |  
|                                  |                                                                                                         |                                                                               |    |        |  |   |         |            |  |          |        |                        |               |   |       |              |     |  
|                                 
|Balance, January 1, 2003          |                                                                                                         | $                                                                             | 23 |        |  | $ | 22,149  |            |  | $        | 16,379 |                        |               | $ | 64    |              |     | $ | (1,666 | )      |   | $ | 36,949 |  
|                                  | Issuance of 88,875 shares of
common stock at $13/share
awarded in connection with
Restricted Stock Plan |                                                                               |    | 1      |  |   |         | 1,154      |  |          |        |                        |               |   |       |              |     |   |        | (1,155 | ) |   |        |  |    
|Comprehensive Income:             |                                                                                                         |                                                                               |    |        |  |   |         |            |  |          |        |                        |               |   |       |              |     |   |        |        |   |   |        |  
|                                  |                                                                                                         | Net Income                                                                    |    |        |  |   |         |            |  |          |        |                        | 355           |   |       |              |     |   |        |        |   |   |        |   | 355 | 
|                                  |                                                                                                         | Change in unrealized
gain on securities available
for sale, net of tax of $60 |    |        |  |   |         |            |  |          |        |                        |               |   |       |              | 121 |   |        |        |   |   |        |   | 121 | 
|Total Comprehensive Income        |                                                                                                         |                                                                               |    |        |  |   |         |            |  |          |        |                        |               |   |       |              |     |   |        |        |   |   |        |  
|Dividends paid ($0.10/share)      |                                                                                                         |                                                                               |    |        |  |   |         |            |  |          | 236    |                        |               |   |       |              |     |   |        |        |   |   | 236    |  
|                                  |                                                                                                         |                                                                               |    |        |  |   |         |            |  |          |        |                        |               |   |       |              |     |  
|Balance, June 30, 2003            |                                                                                                         | $                                                                             | 24 |        |  | $ | 23,303  |            |  | $        | 16,498 |                        |               | $ | 185   |              |     | $ | (2,821 | )      |   | $ | 37,189 |  
|                                  |                                                                                                         |                                                                               |    |        |  |   |         |            |  |          |        |                        |               |   |       |              |     |  

See accompanying notes to condensed consolidated financial statements

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Condensed Consolidated Statements of Cash Flows

|                                          |                                                                  |                                                                            |                                                   |                                                     |   |                        |        |        |               |        |        |  
|----------------------------------------- | ---------------------------------------------------------------- | -------------------------------------------------------------------------- | ------------------------------------------------- | --------------------------------------------------- | - | ---------------------- | ------ | ------ | ------------- | ------ | ------ | -
|                                          |                                                                  |                                                                            |                                                   |                                                     |   | Six Months             |        |        | Six Months    |       
|                                          |                                                                  |                                                                            |                                                   |                                                     |   | Ended                  |        |        | Ended         |       
|                                          |                                                                  |                                                                            |                                                   |                                                     |   | June 30, 2003          |        |        | June 30, 2002 |       
|                                          |                                                                  |                                                                            |                                                   |                                                     |   |                        |        |        |               |       
|                                          |                                                                  |                                                                            |                                                   |                                                     |   | (Dollars in thousands) |       
|Cash Flows from Operating Activities      |                                                                  |                                                                            |                                                   |                                                     |   |                        |        |       
|                                          | Net Income                                                       | $                                                                          | 355                                               |                                                     |   | $                      | 395    |       
|                                          |                                                                  | Adjustments to reconcile net income to net cash from operating activities: |                                                   |                                                     |   |                        |        |        |               |       
|                                          |                                                                  |                                                                            | Depreciation                                      |                                                     |   | 225                    |        |        |               | 234    |       
|                                          |                                                                  |                                                                            | Provision for Loan Losses                         |                                                     |   | 1,022                  |        |        |               | 177    |       
|                                          |                                                                  |                                                                            | Amortization                                      |                                                     |   | 418                    |        |        |               | 91     |       
|                                          |                                                                  |                                                                            | (Gain) Loss on sale of foreclosed assets          |                                                     |   | 30                     |        |        |               | (32    | )     
|                                          |                                                                  |                                                                            | Deferred income taxes                             |                                                     |   | (378                   | )      |        |               | (81    | )     
|                                          |                                                                  |                                                                            | Mortgage loans originated for sale                |                                                     |   | (38,763                | )      |        |               | (6,522 | )     
|                                          |                                                                  |                                                                            | Proceeds from sale of mortgage loans              |                                                     |   | 36,926                 |        |        |               | 5,688  |       
|                                          |                                                                  |                                                                            | Gain on sale of mortgage loans                    |                                                     |   | (1,048                 | )      |        |               | (173   | )     
|                                          |                                                                  |                                                                            | (Gain) Loss on disposal of premises and equipment |                                                     |   |                        |        |        |               | (7     | )     
|                                          |                                                                  |                                                                            | Net change in:                                    |                                                     |   |                        |        |        |               |        |       
|                                          |                                                                  |                                                                            |                                                   | Trading assets                                      |   |                        |       |        |               |        | 258    |  
|                                          |                                                                  |                                                                            |                                                   | Deferred loan fees                                  |   |                        | (29    | )      |               |        | (94    | )
|                                          |                                                                  |                                                                            |                                                   | Accrued interest receivable                         |   |                        | 97     |        |               |        | (42    | )
|                                          |                                                                  |                                                                            |                                                   | Other assets                                        |   |                        | (117   | )      |               |        | (253   | )
|                                          |                                                                  |                                                                            |                                                   | Accrued expenses and other liabilities              |   |                        | 2,340  |        |               |        | 959    |  
|                                          |                                                                  |                                                                            |                                                   |                                                     |   |                       
|                                          |                                                                  |                                                                            |                                                   | Net cash provided by (used in) operating activities |   |                        | 1,078  |        |               |        | 598    |  
|                                          |                                                                  |                                                                            |                                                   |                                                     |   |                       
|Cash Flows from Investing Activities      |                                                                  |                                                                            |                                                   |                                                     |   |                        |        |       
|                                          | Proceeds from maturities of securities                           |                                                                            | 50                                                |                                                     |   |                        | 52     |       
|                                          | Proceeds of other securities                                     |                                                                            |                                                   | 1,570                                               |   |                        |        |       |              
|                                          | Purchases of other securities                                    |                                                                            |                                                   | (140                                                | ) |                        |        | (50    | )            
|                                          | Purchases of available for sale securities                       |                                                                            |                                                   | (3,641                                              | ) |                        |        |       |              
|                                          | Loan originations and principal collections, net                 |                                                                            |                                                   | (920                                                | ) |                        |        | (5,572 | )            
|                                          | Proceeds from sale of foreclosed assets                          |                                                                            |                                                   | 1,264                                               |   |                        |        | 607    |              
|                                          | Proceeds from sale of premises and equipment                     |                                                                            |                                                   | (21                                                 | ) |                        |        | 7      |              
|                                          | Purchases of premises and equipment                              |                                                                            |                                                   |                                                    |   |                        |        | (97    | )            
|                                          |                                                                  |                                                                            |                                                   |                                                     |   |                       
|                                          |                                                                  |                                                                            |                                                   | Net cash provided by (used in) investing activities |   |                        | (1,838 | )      |               |        | (5,053 | )
|                                          |                                                                  |                                                                            |                                                   |                                                     |   |                       
|Cash Flows from Financing Activities      |                                                                  |                                                                            |                                                   |                                                     |   |                        |        |       
|                                          | Net increase in deposits                                         |                                                                            | 11,001                                            |                                                     |   |                        | 1,204  |       
|                                          | Proceeds from FHLB advances                                      |                                                                            |                                                   | 5,000                                               |   |                        |        | 6,000  |              
|                                          | Issuance of dividend                                             |                                                                            |                                                   | (236                                                | ) |                        |        |       |              
|                                          |                                                                  |                                                                            |                                                   |                                                     |   |                       
|                                          |                                                                  |                                                                            |                                                   | Net cash provided by (used in) financing activities |   |                        | 15,765 |        |               |        | 7,204  |  
|                                          |                                                                  |                                                                            |                                                   |                                                     |   |                       
|Net increase in cash and cash equivalents |                                                                  |                                                                            | 15,005                                            |                                                     |   |                        | 2,749  |       
|Cash
and cash equivalents  January 1     |                                                                  |                                                                            | 20,207                                            |                                                     |   |                        | 16,312 |       
|                                          |                                                                  |                                                                            |                                                   |                                                     |   |                       
|Cash and cash equivalents  June 30       |                                                                  | $                                                                          | 35,212                                            |                                                     |   | $                      | 19,061 |       
|                                          |                                                                  |                                                                            |                                                   |                                                     |   |                       
|Supplemental Cash Flow Information:       |                                                                  |                                                                            |                                                   |                                                     |   |                        |        |       
|                                          | Cash paid for interest                                           |                                                                            |                                                   | 3,095                                               |   |                        |        | 3,308  |              
|                                          | Cash paid for income taxes                                       |                                                                            |                                                   | 260                                                 |   |                        |        | 145    |              
|                                          | Noncash investing activity  loans transferred foreclosed assets |                                                                            |                                                   | 1,676                                               |   |                        |        | 767    |              

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. Prior to August 29, 2002, the Bank was a federally chartered and
insured mutual savings institution, which converted to a stock savings
institution effective August 29, 2002. In connection with the conversion, on
August 29, 2002, the Corporation sold 2,314,375 shares of its common stock in a
subscription offering. Fifty percent of the net proceeds from this offering
were used to purchase all of the common stock of the Bank.

Monarch Community Bank provides a broad range of banking services to its
primary market area of Branch and Hillsdale counties in Michigan. The Bank
operates five full service offices and one drive-through only office. The Bank
owns 100% of Community Services Group, Inc., which invests in other entities,
including 100% ownership of First Insurance Agency, a minority ownership in a
limited liability company that reinsures credit life and disability insurance,
a minority ownership in a limited liability company that operates a title
insurance agency, and a minority ownership in a limited liability company that
reinsures private mortgage insurance. 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.

BASIS OF PRESENTATION

The condensed consolidated financial statements of the Corporation include the
accounts of Monarch Community Bank, Community Services Group, 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-QSB 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-KSB for
the year ended December 31, 2002 filed with the Securities and Exchange
Commission.

The results of operations for the three and six month periods ended June 30,
2003 are not necessarily indicative of the results to be expected for the full
year period.

EARNINGS PER SHARE

Earnings per share are based on the weighted average number of shares outstanding during each period. Diluted earnings per share show the
dilutive effect of stock-based compensation.

|                                                         |         |  |                    |      |  |                  |           |      | 
|-------------------------------------------------------- | ------- |  | ------------------ | ---- |  | ---------------- | --------- | ---- | 
|                                                         |         |  | Three Months Ended |      |  | Six Months Ended |          
|                                                         |         |  | June 30, 2003      |      |  | June 30, 2003    |          
|                                                         |         |  |                    |      |  |                  |          
|The weighted average share reconciliation is as follows: |         |  |                    |      |  |                  |           |     
|Weighted average shares outstanding                      |         |  | 2,380,787          |      |  |                  | 2,347,765 |     
|Less: Average nonvested RRP shares                       |         |  | (66,412            | )    |  |                  | (33,390   | )   
|                                                         |         |  |                    |      |  |                 
|Weighted average for basic EPS                           |         |  | 2,314,375          |      |  |                  | 2,314,375 |     
|Dilutive effect of restricted stock and stock options    |         |  | 8,075              |      |  |                  |          |     
|                                                         |         |  |                    |      |  |                 
|Weighted average for dilutive EPS                        |         |  | 2,322,450          |      |  |                  | 2,314,375 |     
|                                                         |         |  |                    |      |  |                 
|Earnings per share are as follows:                       |         |  |                    |      |  |                  |           |     
|                                                         | Basic   |  | $                  | 0.02 |  |                  | $         | 0.15 | 
|                                                         | Diluted |  | $                  | 0.02 |  |                  | $         | 0.15 | 

Earnings per share data does not apply to the periods prior to the conversion since the Bank was a mutual savings and loan association
with no stock outstanding.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion and analysis does not include any comments related to
Monarch Community Bancorp since Monarch Community Bancorp has no significant
operations. The discussion 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.

CRITICAL ACCOUNTING POLICIES

The nature of the financial services industry is such that, other than
described below, the use of estimates and management judgment are 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
joint policy statement on the allowance for loan losses methodologies issued by
the Federal Financial Institutions Examination Council. 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, and other subjective factors.

FINANCIAL CONDITION

Securities

Securities totaled $22.3 million at June 30, 2003 as compared to $20.2 million
at December 31, 2002. During the six months ended June 30, 2003 Monarch
purchased $3.3 million in government agency bonds and $327,000 of tax-exempt
bonds, which are classified as available for sale. Securities are purchased to
increase yields while maintaining sufficient liquidity. Management will
continue to monitor the asset liability mix and liquidity position of the Bank
and may invest in additional securities in the future.

Loans

The Banks net loan portfolio decreased by $1.7 million, or 1.2%, from $145.1
million at December 31, 2002 to $143.4 million at June 30, 2003. Increases in
the portfolio came from real estate loans, which increased $1.4 million, or
1.1%. Increases in construction or
development loans of $2.3 million offset decreases in one to four family loans
and commercial real estate of $740,000 and $500,000, respectively. Consumer
loans decreased by $2.2 million, or 6.2%, from $19.8 million at December 31,
2002 to $17.6 million at June 30, 2003. The largest decrease in consumer loans
was in home equity loans of $1.2 million. Commercial business loans decreased
by $203,000. These changes did not significantly affect the mix of the loan
portfolio.

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Deposits

Total deposits increased $11.0 million, or 10.3%, from $106.7 million at
December 31, 2002 to $117.7 million at June 30, 2003. Within the deposit
totals, noninterest-bearing deposits increased by $3.2 million and
interest-bearing deposits increased $7.8 million from December 31, 2002 to June
30, 2003. The noninterest-bearing deposit increase is largely due to increases
in municipal accounts at the Bank. The increase in interest-bearing deposits
is primarily due to the Bank attracting certificates of deposit early in the
year as management believed market interest rates had bottomed out.

Federal Home Loan Bank Advances

Federal Home Loan Bank (FHLB) advances increased by $5.0 million, or 9.5%, from
$52.5 million at December 31, 2002 to $57.5 million at June 30, 2003. In an
effort to manage our interest rate risk, the Bank has utilized longer term (in
excess of five year maturities) fixed rate FHLB advances to extend the overall
maturity of our liabilities. While the interest rates paid on these advances
are currently greater than those paid on certain shorter term deposits, the
longer-term advances allow the Bank to better match the term of these advances
against anticipated maturities of loans in an attempt to reduce the
Banks exposure to rising interest rates.

Equity

Total equity was $37.2 million at June 30,2003 and $36.9 million at December
31, 2002. This represents 17.2% and 18.7% of total assets at June 30, 2003 and
December 31, 2002, respectively. The increase in equity over the period was
due to continued profitable operations. During the period ended June 30, 2003
the Corporation paid two dividends totaling $.10 per share of common stock.
These dividend payments reduced equity by $236,000.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income before the provision for loan losses for the quarter ended
June 30, 2003 totaled $1.6 million and represented a decrease of $10,000
compared to the same period one year ago. The Corporations net interest
margin decreased from 3.97% for the quarter ended June 30, 2002 to 3.27% for
the quarter ended June 30, 2003. The net interest margin has been impacted by
the current low market interest rates. The current
interest rates continue to encourage loan refinancing to lower rates and limit
the investment opportunities the Bank is willing to consider without incurring
an inordinate amount of interest rate risk. The decline in the net interest
margin was offset by the increase of $36 million of average interest earning
assets. Interest income from loans represented 93% of total interest income
for the first quarter of 2003 compared to 97% for the same period in 2002.

Net interest income before the provision for loan losses for the six months
ended June 30, 2003 totaled $3.2 million and represented an increase of $20,000
compared to the same period a year ago. The Corporations net interest margin
declined to 3.30% for the six months ended June 30, 2003 from 4.04% for the six
months ended June 30, 2002 for the same reasons mentioned in the preceding
paragraph.

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. All average balances are average daily balances.

|                                         |                                    |   |                           |         |  |          |       |       |        |  |                        |             |         |   |         |          |  |        |       |       |  |  |      |      | 
|---------------------------------------- | ---------------------------------- | - | ------------------------- | ------- |  | -------- | ----- | ----- | ------ |  | ---------------------- | ----------- | ------- | - | ------- | -------- |  | ------ | ----- | ----- |  |  | ---- | ---- | 
|                                         |                                    |   | Six Months Ended June 30, |        
|                                         |                                    |   |                           |        
|                                         |                                    |   | 2003                      |         |  | 2002     |      
|                                         |                                    |   |                           |         |  |          |      
|                                         |                                    |   | Average                   |         |  | Interest |       |       |        |  |                        |             | Average |   |         | Interest |  |        |       |       | 
|                                         |                                    |   | Outstanding               |         |  | Earned/  |       |       | Yield/ |  |                        | Outstanding |         |   | Earned/ |          |  | Yield/ |      
|                                         |                                    |   | Balance                   |         |  | Paid     |       |       | Rate   |  |                        | Balance     |         |   | Paid    |          |  | Rate   |      
|                                         |                                    |   |                           |         |  |          |       |       |        |  |                        |             |         |   |         |          |  |        |      
|                                         |                                    |   |                           |         |  |          |       |       |        |  | (Dollars in Thousands) |             |         |   |         |          |  |        |       |      
|Federal Funds sold and
Overnight deposit |                                    | $ | 22,165                    |         |  | $        | 131   |       |        |  | 1.19                   | %           |         | $ | 12,217  |          |  | $      | 106   |       |  |  | 1.75 | %   
|Trading assets                           |                                    |   | 0                         |         |  |          | 0     |       |        |  | 0                      |             |         |   | 130     |          |  |        | 3     |       |  |  | 4.65 |     
|Investment securities                    |                                    |   | 18,018                    |         |  |          | 225   |       |        |  | 2.52                   |             |         |   | 342     |          |  |        | 11    |       |  |  | 6.49 |     
|Other securities                         |                                    |   | 2,873                     |         |  |          | 75    |       |        |  | 5.26                   |             |         |   | 2,566   |          |  |        | 78    |       |  |  | 6.13 |     
|Loans                                    |                                    |   | 152,252                   |         |  |          | 5,843 |       |        |  | 7.74                   |             |         |   | 143,582 |          |  |        | 6,270 |       |  |  | 8.81 |     
|                                         |                                    |   |                           |         |  |          |       |       |        |  |                        |             |         |   |         |          |  |       
|                                         | Total earning assets               |   | $                         | 195,308 |  |          |       | 6,274 |        |  |                        | 6.48        |         |   | $       | 158,837  |  |        |       | 6,468 |  |  |      | 8.21 | 
|                                         |                                    |   |                           |         |  |          |       |       |        |  |                        |             |         |   |         |          |  |       
|Demand and NOW accounts                  |                                    | $ | 9,980                     |         |  |          | 41    |       |        |  | .83                    |             |         | $ | 13,051  |          |  |        | 79    |       |  |  | 1.24 |     
|Money market accounts                    |                                    |   | 9,896                     |         |  |          | 65    |       |        |  | 1.32                   |             |         |   | 10,197  |          |  |        | 102   |       |  |  | 2.02 |     
|Savings deposit                          |                                    |   | 15,862                    |         |  |          | 81    |       |        |  | 1.03                   |             |         |   | 15,214  |          |  |        | 104   |       |  |  | 1.37 |     
|Certificates of deposit                  |                                    |   | 78,102                    |         |  |          | 1,309 |       |        |  | 3.38                   |             |         |   | 66,177  |          |  |        | 1,454 |       |  |  | 4.55 |     
|FHLB advances                            |                                    |   | 56,727                    |         |  |          | 1,579 |       |        |  | 5.61                   |             |         |   | 50,650  |          |  |        | 1,548 |       |  |  | 6.17 |     
|                                         |                                    |   |                           |         |  |          |       |       |        |  |                        |             |         |   |         |          |  |       
|                                         | Total interest-bearing liabilities |   | $                         | 170,567 |  |          |       | 3,075 |        |  |                        | 3.64        |         |   | $       | 155,289  |  |        |       | 3,289 |  |  |      | 4.27 | 
|                                         |                                    |   |                           |         |  |          |       |       |        |  |                        |             |         |   |         |          |  |       
|Net interest income                      |                                    |   |                           |         |  | $        | 3,199 |       |        |  |                        |             |         |   |         |          |  | $      | 3,179 |       |  |  |      |     
|                                         |                                    |   |                           |         |  |          |       |       |        |  |                        |             |         |   |         |          |  |        |       |       |  | 
|Net interest spread                      |                                    |   |                           |         |  |          |       |       |        |  | 2.84                   | %           |         |   |         |          |  |        |       |       |  |  | 3.94 | %   
|Net interest margin                      |                                    |   |                           |         |  |          |       |       |        |  | 3.30                   | %           |         |   |         |          |  |        |       |       |  |  | 4.04 | %   

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Provision for Loan Losses

The provision for loan losses was $797,000 for the quarter ended June 30, 2003
compared to $53,000 for the quarter ended June 30, 2002. The allowance for
loan losses as a percent of gross loans was 1.7% and 1.2% at June 30,
2003 and December 31, 2002, respectively. Net charge-offs for the quarter ended
June 30, 2003 totaled $104,000 compared to $47,000 for the quarter ended June
30, 2002. The increased charge-offs in 2003 were the result of more aggressive
collection efforts and foreclosure activity to reduce the level of serious
delinquencies.

The provision for loan losses for the six months ended June 30, 2003 was $1.0
million compared to $177,000 for the same period in 2002. The increased
provision was the result of increased charge offs in 2003 and the increase in
non-performing loans, which is further discussed below.

The following table presents non-performing assets and certain asset quality
ratios at June 30, 2003 and December 31, 2002.

|                                                   |                             |   |                        |       |  |                   |       |       | 
|-------------------------------------------------- | --------------------------- | - | ---------------------- | ----- |  | ----------------- | ----- | ----- | 
|                                                   |                             |   | June 30, 2003          |       |  | December 31, 2002 |      
|                                                   |                             |   |                        |       |  |                   |      
|                                                   |                             |   | (Dollars in thousands) |      
|Non-performing loans                               |                             | $ | 3,035                  |       |  | $                 | 2,955 |      
|Real estate in judgment                            |                             |   | 1,703                  |       |  |                   | 1,136 |      
|Foreclosed and repossessed assets                  |                             |   | 732                    |       |  |                   | 923   |      
|                                                   |                             |   |                        |       |  |                  
|                                                   | Total non-performing assets |   | $                      | 5,470 |  |                   | $     | 5,014 | 
|                                                   |                             |   |                        |       |  |                  
|Non-performing loans to total loans                |                             |   | 3.64                   | %     |  |                   | 2.04  | %    
|Non-performing assets to total assets              |                             |   | 2.52                   | %     |  |                   | 2.53  | %    
|Allowance for loan losses to non-performing loans  |                             |   | 81.29                  | %     |  |                   | 58.71 | %    
|Allowance for loan losses to loans receivable, net |                             |   | 1.72                   | %     |  |                   | 1.18  | %    

The increase in
non-performing loans includes a $1.6 million loan relationship which was put
on non-accrual status as of June 30, 2003. Two loans were made to fund the
construction of a commercial building in southwest Michigan that has been
completed. At June 30, 2003, $919,000 is owing on a 20 year fixed rate loan and
$645,000 is owing on a one-year note. The $919,000 loan was 60 days delinquent
as of June 30, 2003 and the $645,000 loan matured May 1, 2003 and was not paid
or renewed at June 30, 2003. The Bank has a commitment thru January 2004
from the Small Business Administration (SBA) to purchase the $645,000 loan. Due
to current financial difficulties of the borrower, the SBA has not purchased
the loan and has indicated it will not until the Borrowers financial status
improves. The entire loan relationship has been classified by management as
substandard at of June 30, 2003.

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

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the loan. Senior management reviews these conditions 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.

Noninterest Income

Noninterest income increased by $616,000 to $1.0 million for the quarter ended
June 30, 2003 as compared to $396,000 for the quarter ended June 30, 2002. Gain
on sale of loans increased to $653,000 compared to $113,000 for the same period
a year ago as mortgage banking activities have increased significantly in this interest rate
environment. Other
income increased by $12,000 as compared to the same period a year ago.
Dividends from MIMLIC increased by $38,000 for the quarter ended June 30, 2003
as compared to the same period in 2002. This increase was offset by net losses
on sale of real estate owned of $19,000 for the three months ended June 30,
2003 compared to net gains on sale of $11,000 for the same period in 2002, as
we continued to aggressively dispose of these properties.

Noninterest income increased by $914,000 to $1.7 million for the six months
ended June 30, 2003 as compared to $782,000 for the six months ended June 30,
2002. The increase was primarily from increased gain on sale of loans of $1.0
million for the six months ended June 30,2003 compared to $166,000 for the same
period in 2002, for the reasons discussed above.

Noninterest Expense

Noninterest expense increased by $288,000 to $1.8 million for the quarter ended
June 30, 2003 compared to the quarter ended June 30, 2002. Salaries and
benefits increased $41,000. Expense related to the Employee Stock Ownership
Plan and the Recognition and Retention Plan were partially offset by decreases
in wage expense and 401(k) employer contribution. Mortgage banking costs increased by
$88,000 for the three months ended June 30, 2003. This increase was due to the
accelerated amortization of mortgage servicing rights associated with loans
serviced for others that prepay.
Professional services, which includes legal, accounting/auditing and
stock-related expenses, increased $111,000 primarily due to additional services
required as the result of being a public company and the adoption and shareholder approval of our
Stock Option and Incentive Plan and Recognition and Retention Plan.

Noninterest expense increased by $232,000 to $3.4 million for the six months
ended June 30, 2003 compared to the six months ended June 30, 2002. Salaries
and benefits increased $22,000 as expenses related to the Employee Stock
Ownership Plan of $120,000 and the Recognition and Retention Plan of $39,000
offset decreases in wage expense and 401(k) employer contribution. Mortgage
banking costs increased by $142,000 and professional services increased $138,000 for
the six months ended June 30, 2003 for the same reasons noted above. Other
general and administrative expenses decreased $55,000 for the six months ended
June 30, 2003 compared to the same period in 2002. This decrease was primarily
due to a decrease in real estate owned expense to $32,000 for the six months
ended June 30, 2003 compared to $121,000 for the six months ended June 30,
2002. This was offset by additional operating expense for the six months ended
June 30, 2003, primarily a one-time $28,000 fee paid to the State of
Michigan due to the Company being a Maryland corporation.

Federal Income Tax Expense

The provision for federal income tax was 29% of pretax income for the six
months ended June 30, 2003 as compared to 35% for the six months ended June 30,
2002. The difference between the effective tax rates and the federal corporate
income tax rate of 34% is attributable to the fluctuation of permanent book and
tax differences such as non-deductible expenses as well as tax benefits
recorded on the limited partnership investment in 2003.

STOCK-BASED COMPENSATION

The Corporation accounts for stock-based compensation plans under the recognition
and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No
stock-based compensation cost is reflected in net income, as all options granted
under those plans had an exercise price equal to the market value of the underlying
common stock on the date of grant.

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LIQUIDITY

The Banks liquidity, represented by cash and cash equivalents, 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, Monarch maintains a
strategy of investing in various investments and lending products. Monarch
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. At June 30, 2003, the total approved loan origination commitments
outstanding, including the unadvanced portion of construction loans, amounted to
$9.4 million. Unused commercial and consumer lines of credit were $5.7
million as of June 30, 2003; there were no outstanding letters of credit as of
that date. Certificates of deposit scheduled to mature in one year or less at
June 30, 2003 totaled $27 million. Based on historical experience, management
believes that a significant portion of these certificates of deposit will
remain with Monarch.

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 Monarch to offer
interest rates higher than those of the competition. At June 30, 2003 and
based on current collateral levels, Monarch could borrow an
additional $6.6 million from the Federal Home loan Bank at prevailing interest rates. This
borrowing capacity can be increased in the future if Monarch pledges additional
collateral to the Federal Home Loan Bank. Monarch 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 increased by $15.0 million during
the six month period ended June 30, 2003 compared to a $2.7 million increase
for the same period in 2002. Net cash provided by operating activities totaled
$1.0 million for the six months ended June 30, 2003 as compared to net cash
provided by operating activities of $598,000 for the six months ended June 30,
2002. Net cash used in investing activities totaled $1.8 million for the six
months ended June 30, 2003 as compared to net cash used in investing activities
of $5.1 million for the six months ended June 30, 2002. The primary reason for
this fluctuation was $4.7 million less cash used for loans during the
six months ended June 30, 2003 as compared to the same period in 2002. This
reduction was partially offset by the $2.1 million that was used to purchase securities
during the six months ended June 30, 2003. Net cash provided by
financing activities totaled $15.7 million for the six months ended June 30,
2003, due to increases in deposits and the

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proceeds from additional borrowings. Net cash provided by financing activities
totaled $7.2 million for the six months ended June 30, 2002 due primarily to
increased borrowings.

CAPITAL RESOURCES

The Bank is subject to various regulatory capital requirements. As of June 30,
2003, the Bank met the regulatory standards to be classified as well
capitalized. The Banks regulatory capital ratios as of June 30, 2003 were as
follows: tangible capital, 13.2%; leverage capital, 13.2%; and total
risk-based capital, 23.7%. The regulatory capital requirements to be
considered well capitalized are 3.0%, 5.0%, and 10.0%, respectively.




ITEM 3. CONTROLS AND PROCEDURES

An
evaluation of the Companys disclosure
controls and procedures (as defined in Rule 13a-15(e) of the Securities
Exchange Act of 1934 (the Exchange Act)) as of June 30, 2003, was
carried out under the supervision and with the participation of the
Companys Chief Executive Officer, Chief Financial Officer and several
other members of the Companys senior management. The
Companys Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures
as currently in effect are effective in ensuring that the information
required to be disclosed by the Company in the reports it files or submits
under the Exchange Act is (i) accumulated and communicated to the
Companys management (including the Chief Executive Officer and
Chief Financial Officer) in a timely manner, and (ii) recorded,
processed, summarized and reported within the 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 June 30, 2003, that have materially
affected, or are reasonably likely to materially affect, our internal control over
financial reporting.

The Company 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 companys business. While the Company believes the
present design of its disclosure controls and procedures is effective to
achieve its goal, future events affecting its business may cause the Company
to modify its disclosure controls and procedures.




OTHER INFORMATION




Item 1. LEGAL PROCEEDINGS

None




Item 2. CHANGES IN SECURITIES

None




Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable




Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



|1. |  | Election of Directors with terms ending in 2006
|-- |  | -----------------------------------------------

|                |  |           |  |  |          |  |  | 
|--------------- |  | --------- |  |  | -------- |  |  | 
|                |  | For       |  |  | Withhold | 
|                |  |           |  |  |          | 
|Frank M. Tripp  |  | 2,134,624 |  |  | 65,753   | 
|Stephen M. Ross |  | 2,132,597 |  |  | 67,780   | 
|Gordon L. Welch |  | 2,134,624 |  |  | 65,753   | 

The following are the names of the directors (and remaining terms) whose terms continued after the meeting:

|                  |  |         |  | 
|----------------- |  | ------- |  | 
|                  |  | Term    | 
|                  |  | Expires | 
|                  |  |         | 
|John R. Schroll   |  | 2004    | 
|Craig W. Dally    |  | 2004    | 
|Harold A. Adamson |  | 2005    | 
|Lauren L. Bracy   |  | 2005    | 
|James R. Vozar    |  | 2005    | 



|2. |  | Adoption of the Monarch Community Bancorp, Inc. 2003 Stock Option and Incentive Plan:
|-- |  | -------------------------------------------------------------------------------------

|               |  |                  |  |                |  |                          
|-------------- |  | ---------------- |  | -------------- |  | -------------------------
|For: 1,334,762 |  | Against: 186,181 |  | Abstain: 6,202 |  | Broker non-votes: 673,232



|3. |  | Adoption of the Monarch Community Bancorp, Inc. 2003 Recognition and Retention Plan:
|-- |  | ------------------------------------------------------------------------------------

|               |  |                  |  |                 |  |                          
|-------------- |  | ---------------- |  | --------------- |  | -------------------------
|For: 1,196,113 |  | Against: 334,147 |  | Abstain: 14,885 |  | Broker non-votes: 655,232



|4. |  | Ratification of the appointment of Plante & Moran, PLLC as independent auditors for the
fiscal year ending December 31, 2003:
|-- |  | -----------------------------------------------------------------------------------------------------------------------------

|               |  |                 |  |                |  | 
|-------------- |  | --------------- |  | -------------- |  | 
|For: 2,127,991 |  | Against: 62,892 |  | Abstain: 9,494 | 




Item 5. OTHER INFORMATION

Not applicable




Item 6. EXHIBITS AND REPORTS ON FORM 8-K



|(a) |  | Exhibits                                                                                 
|--- |  | -----------------------------------------------------------------------------------------
|   
|    |  | See the index to exhibits.                                                               
|   
|(b) |  | Reports on Form 8-K                                                                      
|   
|    |  | No reports on Form 8-K have been filed during the quarter for which this
report is filed.

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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: August 14, 2003 |  | By:                             |  | /s/ John R. Schroll                  
|                      |  |                                 |  |                                      
|                      |  |                                 |  | John R. Schroll                      
|                      |  |                                 |  | President and Chief Executive Officer
|                      |  |                                 |  |                                      
|Date: August 14, 2003 |  | And:                            |  | /s/ William C. Kurtz                 
|                      |  |                                 |  |                                      
|                      |  |                                 |  | William C. Kurtz                     
|                      |  |                                 |  | Senior Vice President and Treasurer  

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INDEX TO EXHIBITS

|            |  |                                                                                      |  |  |  | 
|----------- |  | ------------------------------------------------------------------------------------ |  |  |  | 
|Exhibit No. |  | Description of Exhibit                                                               |  |  |  | 
|            |  |                                                                                      |  |  |  | 
|           
|31.1        |  | Rule 13a-14(a) Certification of the Companys President and Chief Executive Officer.
|           
|31.2        |  | Rule 13a-14(a) Certification of the Companys Chief Financial Officer.              
|           
|32          |  | Section 1350 Certification.                                                         

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