U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

           X  Annual report under Section 13 or 15(d) of the Securities Exchange
          --- Act of 1934

          For the fiscal year ended December 31, 2000

              Transition  report  under  Section  13  or 15(d) of the Securities
          --- Exchange Act of 1934

          For the transition period from                 to
                                         ---------------    --------------

Commission file number: 333-38098

                           James Monroe Bancorp, Inc.
                 (Name of Small Business Issuer in its Charter)




              Virginia                             54-1941875
  (State or other jurisdiction         (I.R.S. Employer Identification No.)
of incorporation or organization)

                3033 Wilson Boulevard, Arlington, Virginia 22201
               (Address of Principal Executive Offices)  (Zip Code)

Issuer's Telephone Number:  703.524.8100

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:  None

Check whether the Issuer;  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports);  and (2) has been
subject to such filing requirements for the past 90 days.

Yes        No  x
    ---       ---

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. X
                              ---

The  issuer's  revenues  for the  fiscal  year  ended  December  31,  2000  were
approximately $ 5,715,000

The aggregate market value of the outstanding Common Stock held by nonaffiliates
as of March 16, 2001 was approximately $11,225,000.

As of March 16,  2000,  the number of  outstanding  shares of the Common  Stock,
$1.00 par value, of James Monroe Bancorp, Inc. was 958,767.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None


<PAGE>
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

GENERAL

         James Monroe Bancorp ("Bancorp") was incorporated under the laws of the
State of Virginia on April 9, 1999 to be the  holding  company for James  Monroe
Bank (the  "Bank").  Bancorp  acquired  all of the shares of the Bank on July 1,
1999 in a mandatory share exchange under which each outstanding  share of common
stock of the Bank was exchanged for one share of Bancorp common stock. The Bank,
a Virginia  chartered  commercial bank, which is a member of the Federal Reserve
System, is Bancorp's sole subsidiary.  The Bank commenced banking  operations on
June 8,  1998,  and  currently  operates  out of its main  office and one branch
office.  The Bank  seeks to  provide  a high  level of  personal  service  and a
sophisticated  menu of  products  to  individuals  and  small  to  medium  sized
businesses.  While the Bank  offers a full range of  services to a wide array of
depositors  and  borrowers,  it has chosen the small to medium  sized  business,
professionals  and the individual  retail customer as its primary target market.
The Bank  believes  that as financial  institutions  grow and are merged with or
acquired by larger  institutions  with  headquarters  that are far away from the
local customer  base, the local business and individual is further  removed from
the point of decision  making.  The Bank attempts to place the customer  contact
and the ultimate decision on products and credits as close together as possible.

LENDING ACTIVITIES

         The Bank  offers a wide array of  lending  services  to its  customers,
including  commercial  loans,  lines of credit,  personal loans,  auto loans and
financing  arrangements  for personal  equipment  and business  equipment.  Loan
terms,  including  interest rates,  loan to value ratios,  and  maturities,  are
tailored as much as possible to meet the needs of the borrower. A special effort
is made to keep loan products as flexible as possible  within the  guidelines of
prudent banking practices in terms of interest rate risk and credit risk.

         When  considering  loan  requests,   the  primary  factors  taken  into
consideration  are the cash flow and financial  condition of the  borrower,  the
value  of the  underlying  collateral,  if  applicable,  and the  character  and
integrity  of the  borrower.  These  factors are  evaluated  in a number of ways
including an analysis of financial  statements,  credit reviews,  trade reviews,
and  visits  to  the  borrower's  place  of  business.  We  have  implemented  a
comprehensive  loan policy and  procedures  manual to provide our loan  officers
with term, collateral,  loan-to-value and pricing guidelines.  The policy manual
and sound credit analysis,  together with thorough review by the Asset-Liability
Committee,  have resulted in a profitable  loan  portfolio,  with only one minor
non-performing assets since the Company's formation.

         Our aim is to build and maintain a commercial loan portfolio consisting
of term loans,  lines of credit and  commercial  real estate  loans  provided to
primarily locally-based borrowers. These types of loans are generally considered
to have a higher  degree of risk of default  or loss than other  types of loans,
such as  residential  real estate  loans,  because  repayment may be affected by
general  economic  conditions,  interest rates, the quality of management of the
business, and other factors which may cause a borrower to be unable to repay its
obligations.  Traditional installment loans and personal lines of credit will be
available on a selective basis.  General economic conditions can directly affect
the quality of a small and  mid-sized  business  loan  portfolio.  We attempt to
manage the loan  portfolio  to avoid  high  concentrations  of similar  industry
and/or  collateral pools,  although this cannot be assured.  We currently expect
that  approximately  50% of the loan  portfolio  will be comprised of commercial
mortgage  loans,  approximately  15% will  consist  of  commercial  term  loans,
approximately  20% in  commercial  lines  of  credit  and 15% in  consumer  loan
products (car loans, residential real estate loans, personal lines of credit and
other similar forms of credit products).  There can be no assurance that we will
be able achieve or maintain  this  distribution  of loans.  We may change at any
time or from  time to time  the  distribution  of  loans  which  we  attempt  to
maintain,  based on a number of factors,  which include,  but are not limited to
relative  pricing for and  profitability  of  different  types of loans,  market
demand  for  loans,  competitive  issues  and  the  level  of risk  relating  to
individual loans.

                                       2

<PAGE>
         Loan   business  is   generated   primarily   through   referrals   and
direct-calling  efforts.   Referrals  of  loan  business  come  from  directors,
shareholders,  current customers and professionals such as lawyers,  accountants
and financial intermediaries.

         At December 31, 2000, the Bank's statutory  lending limit to any single
borrower  was  $1.3  million,  subject  to  certain  exceptions  provided  under
applicable  law. As of December  31,  2000,  the Bank's  credit  exposure to its
largest borrower was $1,028,000.

         Commercial  Loans.  Commercial  loans  are  written  for  any  business
purpose,  including  the  financing  of plant and  equipment,  the  carrying  of
accounts   receivable,   contract   administration,   and  the  acquisition  and
construction  of  real  estate  projects.  Special  attention  is  paid  to  the
commercial  real estate  market  which is  particularly  active in the  Northern
Virginia market area. The Bank's  commercial  loan portfolio  reflects a diverse
group of borrowers with no concentration in any borrower, or group of borrowers.

         The  lending  activities  in which we  engage  carry  the risk that the
borrowers will be unable to perform on their obligations. As such, interest rate
policies  of  the  Federal  Reserve  Board  and  general  economic   conditions,
nationally and in our primary market area will have a significant  impact on our
results of  operations.  To the extent  that  economic  conditions  deteriorate,
business and individual  borrowers may be less able to meet their obligations to
the Bank in full, in a timely manner,  resulting in decreased earnings or losses
to the Bank.  To the extent  that  loans are  secured  by real  estate,  adverse
conditions  in the real  estate  market may reduce  ability of the  borrower  to
generate  the  necessary  cash flow for  repayment  of the loan,  and reduce our
ability to  collect  the full  amount of the loan upon a default.  To the extent
that the Bank makes fixed rate loans,  general  increases in interest rates will
tend to  reduce  our  spread  as the  interest  rates we must  pay for  deposits
increase while interest income is flat.  Economic  conditions and interest rates
may also adversely affect the value of property pledged as security for loans.

         We  constantly  strive to  mitigate  risks in the  event of  unforeseen
threats  to the loan  portfolio  as a result of an  economic  downturn  or other
negative influences. Plans for mitigating inherent risks in managing loan assets
include  carefully  enforcing  loan  policies and  procedures,  evaluating  each
borrower's   industry  and  business  plan  during  the  underwriting   process,
identifying  and monitoring  primary and  alternative  sources for repayment and
obtaining  collateral  that  is  margined  to  minimize  loss  in the  event  of
liquidation.

         Commercial  real  estate  loans will  generally  be owner  occupied  or
managed  transactions  with a principal  reliance on the  borrower's  ability to
repay,  as well as prudent  guidelines for assessing  real estate values.  Risks
inherent in managing a commercial real estate  portfolio relate to either sudden
or gradual drops in property  values as a result of a general or local  economic
downturn.  A decline in real  estate  values can cause loan to value  margins to
increase  and  diminish  the bank's  equity  cushion on both an  individual  and
portfolio  basis.  The Bank attempts to mitigate  commercial real estate lending
risks by carefully  underwriting each loan of this type to address the perceived
risks in the  individual  transaction.  Generally,  the Bank  requires a loan to
value ratio of 75% of the lower of an appraisal or cost. A borrower's ability to
repay is  carefully  analyzed  and policy calls for an ongoing cash flow to debt
service  requirement  of 1.1:1.0.  An approved  list of  commercial  real estate
appraisers  selected on the basis of rigorous  standards  has been  established.
Each appraisal is scrutinized in an effort to insure current  comparable  market
values.

         As noted above,  commercial  real estates loans are  generally  made on
owner  occupied  or managed  properties  where  there is both a reliance  on the
borrower's  financial health and the ability of the borrower and the business to
repay. Whenever appropriate and available, the Bank seeks Federal and State loan
guarantees,  such as the Small  Business  Administration's  "7A" and "504"  loan
programs,  to reduce risks. The Bank generally  requires personal  guarantees on
all loans as a matter  of  policy;  exceptions  to policy  are  documented.  All
borrowers will be required to forward annual corporate, partnership and personal
financial  statements  to comply with bank policy and enforced  through the loan
covenants  documentation for each  transaction.  Interest rate risks to the Bank
are mitigated by using either  floating  interest rates or by fixing rates for a
short period of time,  generally less than five years.  While loan amortizations
may be approved  for up to 360 months,  loans  generally  have a call  provision
(maturity  date) of 5-10 years or less.  Non-specific  provisions  for loan loss
reserves  are  generally  set at  approximately  1.20% of the  portfolio  value,
subject to adjustment  depending on national and local  economic  circumstances.
Specific  reserves  are used to increase  overall  reserves  based on  increased
credit and/or collateral risks on an individual loan basis. A risk rating system
is used to proactively  determine loss exposure and provide a measurement system
for setting general and specific reserve allocations.

                                       3
<PAGE>

         Commercial  term  loans are used to  provide  funds for  equipment  and
general corporate needs. This loan category is designed to support borrowers who
have a proven  ability to service  debt over a term  generally  not to exceed 60
months.  The Bank generally requires a first lien position on all collateral and
guarantees from owners having at least a 20% interest in the involved  business.
Interest  rates on  commercial  term loans is generally  floating or fixed for a
term not to exceed  five  years.  Management  carefully  monitors  industry  and
collateral  concentrations  to avoid loan  exposures to a large group of similar
industries  and/or  similar  collateral.  Commercial  loans  are  evaluated  for
historical  and projected  cash flow  attributes,  balance sheet  strength,  and
primary and alternate  resources of personal  guarantors.  Commercial  term loan
documents require borrowers to forward regular financial information on both the
business  and on personal  guarantors.  Loan  covenants  require at least annual
submission  of  complete  financial   information  and  in  certain  cases  this
information  is  required  more  frequently,  depending  on the  degree to which
lenders  desire  information  resources  for  monitoring a borrower's  financial
condition and  compliance  with loan  covenants.  Examples of properly  margined
collateral for loans, as required by bank policy,  would be a 75% advance on the
lesser of appraisal or recent sales price on  commercial  property,  80% or less
advance on eligible  receivables,  50% or less advance on eligible inventory and
an  80%  advance  on  appraised  residential   property.   Collateral  borrowing
certificates  may be  required to monitor  certain  collateral  categories  on a
monthly or quarterly basis. Key person life insurance is required as appropriate
and as necessary to mitigate the risk loss of a primary owner or manager.

         The Bank  attempts  to further  mitigate  commercial  term loan loss by
using  Federal and State loan  guarantee  programs such as offered by the United
States Small  Business  Administration.  The loan loss reserve of  approximately
1.20% of the entire portfolio in this group has been established.  Specific loan
reserves will be used to increase  overall  reserves  based on increased  credit
and/or  collateral  risks on an individual  loan basis. At December 31, 2000, no
specific  reserves have been assigned or made for any specific  credits.  A risk
rating  system is used to  proactively  determine  loss  exposure  and provide a
measurement system for setting general and specific reserve allocations.

         Commercial  lines of credit are used to  finance a business  borrower's
short-term  credit needs and/or to finance a percentage of eligible  receivables
and inventory.  In addition to the risks inherent in term loan facilities,  line
of credit  borrowers  typically  require  additional  monitoring  to protect the
lender  against  increasing  loan  volumes and  diminishing  collateral  values.
Commercial  lines of credit are generally  revolving in nature and require close
scrutiny. The Bank generally requires at least an annual out of debt period (for
seasonal  borrowers)  or regular  financial  information  (monthly or  quarterly
financial statements, borrowing base certificates, etc.) for borrowers with more
growth and greater permanent  working capital financing needs.  Advances against
collateral are generally in the same percentages as in term loan lending.  Lines
of credit and term loans to the same borrowers are generally cross-defaulted and
cross-collateralized.   Industry  and  collateral  concentration,   general  and
specific  reserve  allocation and risk rating  disciplines are the same as those
used in managing the commercial  term loan  portfolio.  Interest rate charges on
this group of loans  generally  float at a factor at or above the prime  lending
rate. Generally, personal guarantees are required on these loans.

         As part of its  internal  loan review  process  management  reviews all
loans 30-days delinquent,  loans on the Watch List, loans rated special mention,
substandard,  or doubtful,  and other loans of concern at least quarterly.  Loan
reviews are reported to the board of directors with any adversely  rated changes
specifically  mentioned.  All other loans with their respective risk ratings are
reported  monthly  to the Bank's  Board of  Directors.  The Audit and  Examining
Committee  coordinates  periodic  documentation  and internal control reviews by
outside vendors to complement loan reviews.

         Other  Loans.  Loans are  considered  for any  worthwhile  personal  or
business  purpose on a case-by-case  basis,  such as the financing of equipment,
receivables, contract administration expenses, land acquisition and development,
and automobile  financing.  Consumer credit facilities are underwritten to focus
on the  borrower's  credit  record,  length of employment  and cash flow to debt
service.  Car, residential real estate and similar loans require advances of the
lesser of 80% loan to  collateral  value or cost.  Loan loss  reserves  for this
group of loans are generally set at  approximately  1.20% subject to adjustments
as required by national or local economic conditions.

                                       4

<PAGE>
INVESTMENT ACTIVITIES

         The  investment  policy of the Bank is an integral  part of its overall
asset/liability  management  program.  The  investment  policy is to establish a
portfolio which will provide liquidity  necessary to facilitate funding of loans
and  to  cover  deposit   fluctuations  while  at  the  same  time  achieving  a
satisfactory  return on the funds invested.  The Bank seeks to maximize earnings
from its investment  portfolio consistent with the safety and liquidity of those
investment assets.

         The  securities  in which the Bank may invest are subject to regulation
and are limited to securities which are considered  investment grade securities.
In addition,  the Bank's internal investment policy restricts investments to the
following categories:  U.S. Treasury securities;  obligations of U.S. government
agencies;   investment   grade   obligations  of  U.S.   private   corporations;
mortgage-backed  securities,  including  securities  issued by Federal  National
Mortgage Association and the Federal Home Loan Mortgage Corporation;  securities
of states and political subdivisions and high quality corporate bonds.

SOURCES OF FUNDS

         Deposits.  Deposits  obtained  through bank offices have  traditionally
been the  principal  source of the Bank's funds for use in lending and for other
general business purposes.  In order to better serve the needs of its customers,
the Bank  offers  several  types of deposit  accounts  in  addition  to standard
savings,  checking,  and NOW  accounts.  Special  deposit  accounts  include the
Clarendon and Fairfax Money Market Accounts which pays a higher rate of interest
but requires a larger minimum deposit. Personal checking requires a $300 minimum
balance and may have no monthly fee, per check charge, or activity limit.  Small
Business  Checking allows a small business to pay no monthly service charge with
a minimum  balance of $1,000 but  limits the number of checks and  deposits  per
month.  If the  minimums  are  exceeded  in this  account,  the  small  business
automatically  moves to  another  account  with a minimum  balance of $2,500 and
would be  entitled to a higher  minimum  number of checks and  deposits  without
incurring a monthly fee. If the small business grows and exceeds these minimums,
the regular commercial  analysis account is available where adequate balance can
offset the cost of activity.  Therefore,  the bank offers a range of accounts to
meet the needs of the customer without the customer incurring charges or fees.

         A bill was introduced in the 106th Congress which would permit banks to
pay interest on checking and demand deposit accounts  established by businesses,
a  practice  which  is  currently  prohibited  by  regulation.  If the  proposed
legislation  is enacted in its current form, of which there can be no assurance,
it is likely  that we may be required  to pay  interest  on some  portion of our
noninterest  bearing  deposits in order to compete  against  other  banks.  As a
significant  portion of our deposits are  non-interest  bearing demand  deposits
established  by  businesses,  payment of interest on these deposits could have a
significant  negative impact on our net income,  net interest  income,  interest
margin, return on assets and equity, and other indices of financial performance.
We expect that other banks would be faced with similar negative impacts. We also
expect that the primary focus of competition would continue to be based on other
factors, such as quality of service.

         Borrowing.  While  Bancorp  has  not  placed  significant  reliance  on
borrowings  as a source of  liquidity,  we have  established  various  borrowing
arrangements in order to provide management with additional sources of liquidity
and funding,  thereby increasing  flexibility.  Management believes that Bancorp
currently  has  adequate  liquidity  available  to respond to current  liquidity
demands.

COMMUNITY REINVESTMENT ACT

         The Bank is  committed  to  serving  the  banking  needs of the  entire
community,  including low and moderate  income areas,  and is a supporter of the
Community  Reinvestment  Act  ("CRA").  There are several ways in which the Bank
attempts to fulfill this commitment, including working with economic development
agencies,  undertaking special projects, and becoming involved with neighborhood
outreach programs.

                                        5

<PAGE>
         The Bank has contacts  with state and city  agencies that assist in the
financing  of  affordable  housing  developments  as well as with  groups  which
promote the economic  development of low and moderate  income  individuals.  The
Bank has computer software to geographically code all types of accounts to track
business  development  and  performance  by census  tract  and to assess  market
penetration in low and moderate income  neighborhoods within the primary service
area. The Bank is a registered Small Business Administration lender.

         Bancorp  encourages  its  directors  and  officers  to  participate  in
community,  civic and  charitable  organizations.  Management and members of the
Board of Directors  periodically  review the various CRA activities of the Bank,
including the advertising  program and geo-coding of real estate loans by census
tract data which specifically  focuses on low income  neighborhoods,  its credit
granting  process with respect to business  prospects  generated in these areas,
and its involvement with community leaders on a personal level.

COMPETITION

         In attracting deposits and making loans, we encounter  competition from
other institutions,  including larger commercial banking organizations,  savings
banks,  credit  unions,  other  financial  institutions  and non-bank  financial
service  companies   serving  our  market  area.   Financial  and  non-financial
institutions  not  located  in the  market  are also able to reach  persons  and
entities   based  in  the  market   through  mass   marketing,   the   internet,
telemarketing, and other means. The principal methods of competition include the
level of loan interest rates, interest rates paid on deposits, efforts to obtain
deposits,  range of services  provided  and the quality of these  services.  Our
competitors  include a number of major financial  companies whose  substantially
greater  resources may afford them a  marketplace  advantage by enabling them to
maintain  numerous  banking  locations  and  mount  extensive   promotional  and
advertising  campaigns.  In light of the  deregulation of the financial  service
industry and the absence of interest  rate  controls on deposits,  we anticipate
continuing   competition   from  all  of  these   institutions  in  the  future.
Additionally,   as  a  result  of  legislation  which  reduced  restrictions  on
interstate banking and widened the array of companies that may own banks, we may
face additional competition from institutions outside our market and outside the
traditional  range of bank holding  companies  which may take  advantage of such
legislation to acquire or establish  banks or branches in our market.  There can
be no  assurance  that we will be able to  successfully  meet these  competitive
challenges.

         In addition to offering  competitive rates for its banking products and
services,  our  strategy  for meeting  competition  has been to  concentrate  on
specific  segments  of the market for  financial  services,  particularly  small
business and individuals, by offering such customers customized and personalized
banking services.

         We believe that active  participation in civic and community affairs is
an  important  factor  in  building  our  reputation  and,  thereby,  attracting
customers.

EMPLOYEES

         As of  December  31,  2000,  Bank  had  16  full-time  and 2  part-time
employees.  Bancorp has no employees who are not also employees of the Bank. Our
employees are not represented by any collective  bargaining unit, and we believe
our employee  relations  are good.  The Bank  maintains a benefit  program which
includes health and dental insurance,  life, short-term and long-term disability
insurance, and a 401(k) plan for substantially all employees.

SUPERVISION AND REGULATION

JAMES MONROE BANCORP

         Bancorp is a bank  holding  company  registered  under the Bank Holding
Company Act of 1956, as amended,  (the "Act") and is subject to  supervision  by
the Federal  Reserve Board.  As a bank holding  company,  Bancorp is required to
file with the Federal  Reserve Board an annual report and such other  additional
information  as the Federal  Reserve Board may require  pursuant to the Act. The
Federal  Reserve  Board may also make  examinations  of Bancorp  and each of its
subsidiaries.

                                       6
<PAGE>
         The Act requires approval of the Federal Reserve Board for, among other
things,  the  acquisition by a proposed bank holding  company of control of more
than five percent (5%) of the voting shares, or substantially all the assets, of
any bank or the merger or  consolidation  by a bank holding company with another
bank holding company.  The Act also generally  permits the acquisition by a bank
holding company of control, or substantially all the assets, of any bank located
in a state other than the home state of the bank holding  company,  except where
the bank has not been in existence  for the minimum  period of time  required by
state law,  but if the bank is at least 5 years old, the Federal  Reserve  Board
may approve the acquisition.

         Under  current law,  with certain  limited  exceptions,  a bank holding
company is prohibited from acquiring control of any voting shares of any company
which is not a bank or bank  holding  company  and  from  engaging  directly  or
indirectly in any activity other than banking or managing or  controlling  banks
or furnishing services to or performing service for its authorized subsidiaries.
A bank  holding  company  may,  however,  engage in or acquire an interest in, a
company  that  engages  in  activities  which  the  Federal  Reserve  Board  has
determined  by order or  regulation  to be so  closely  related  to  banking  or
managing or controlling banks as to be properly incident thereto. In making such
a  determination,  the Federal Reserve Board is required to consider whether the
performance of such activities can reasonably be expected to produce benefits to
the public, such as convenience,  increased  competition or gains in efficiency,
which  outweigh  possible  adverse  effects,  such  as  undue  concentration  of
resources,  decreased  or unfair  competition,  conflicts of interest or unsound
banking practices.  The Federal Reserve Board is also empowered to differentiate
between   activities   commenced  de  novo  and  activities   commenced  by  the
acquisition,  in whole or in part, of a going  concern.  Some of the  activities
that the  Federal  Reserve  Board has  determined  by  regulation  to be closely
related to banking include making or servicing  loans,  performing  certain data
processing  services,  acting as a fiduciary or investment or financial advisor,
and making investments in corporations or projects designed primarily to promote
community welfare.

         Effective on March 11, 2000, the Gramm Leach Bliley Act (the "GLB Act")
allows a bank holding  company or other company to certify status as a financial
holding company,  which will allow such company to engage in activities that are
financial  in  nature,   that  are  incidental  to  such   activities,   or  are
complementary to such activities. The GLB Act enumerates certain activities that
are deemed financial in nature,  such as underwriting  insurance or acting as an
insurance principal, agent or broker, underwriting, dealing in or making markets
in securities,  and engaging in merchant banking under certain restrictions.  It
also  authorizes the Federal Reserve Board to determine by regulation what other
activities are financial in nature, or incidental or complementary thereto.

         Subsidiary  banks of a bank  holding  company  are  subject  to certain
restrictions  imposed by the Federal  Reserve Act on any extensions of credit to
the bank  company or any of its  subsidiaries,  or  investments  in the stock or
other  securities  thereof,  and on the  taking of such stock or  securities  as
collateral  for  loans to any  borrower.  Further,  a  holding  company  and any
subsidiary bank are prohibited  from engaging in certain tie-in  arrangements in
connection  with the  extension  of  credit.  A  subsidiary  bank may not extend
credit,  lease or sell  property,  or furnish any  services,  or fix or vary the
consideration for any of the foregoing,  on the condition that: (i) the customer
obtain or provide some additional  credit,  property or services from or to such
bank other than a loan,  discount,  deposit or trust service;  (ii) the customer
obtain or provide some additional credit, property or service from or to Bancorp
or any other subsidiary of Bancorp;  or (iii) the customer not obtain some other
credit, property or service from competitors, except for reasonable requirements
to assure the soundness of credit extended.

         The  Federal  Reserve  has also  adopted  capital  guidelines  for bank
holding  companies  that are  substantially  the same as those applying to state
member  banks,  although  these  requirements  are not  currently  applicable to
Bancorp.

JAMES MONROE BANK

         The Bank is a Virginia  chartered  commercial bank which is a member of
the  Federal  Reserve  System.  Its  deposit  accounts  are  insured by the Bank
Insurance  Fund of the FDIC up to the maximum legal limits of the FDIC and it is
subject to  regulation,  supervision  and regular  examination  by the  Virginia
Bureau of Financial  Institutions  and the Federal  Reserve.  The regulations of
these  various  agencies  govern most aspects of James Monroe  Bank's  business,
including required reserves against deposits,  loans,  investments,  mergers and
acquisitions,  borrowings,  dividends and location and number of branch offices.
The laws and regulations  governing the Bank generally have been  promulgated to
protect  depositors and the deposit  insurance funds, and not for the purpose of
protecting stockholders.

                                       7
<PAGE>

         Banking is a business which depends on interest rate differentials.  In
general, the differences between the interest paid by a bank on its deposits and
its other  borrowings  and the interest  received by a bank on loans extended to
its customers and  securities  held in its investment  portfolio  constitute the
major portion of the Bank's earnings.  Thus, the earnings and growth of the Bank
will be subject to the influence of economic conditions generally, both domestic
and foreign,  and also to the monetary and fiscal  policies of the United States
and its agencies,  particularly  the Federal Reserve Board,  which regulates the
supply of money through  various means  including open market dealings in United
States government securities.  The nature and timing of changes in such policies
and their impact on the Bank cannot be predicted.

         Branching and  Interstate  Banking.  The federal  banking  agencies are
authorized to approve  interstate  bank merger  transactions  without  regard to
whether such transaction is prohibited by the law of any state,  unless the home
state of one of the banks has opted out of the interstate bank merger provisions
of the Riegle-Neal  Interstate Banking and Branching Efficiency Act of 1994 (the
"Riegle-Neal  Act")  by  adopting  a law  after  the  date of  enactment  of the
Riegle-Neal  Act and  prior  to June  1,  1997,  which  applies  equally  to all
out-of-state  banks  and  expressly  prohibits  merger  transactions   involving
out-of-state  banks.  Interstate  acquisitions of branches are permitted only if
the law of the state in which the branch is located  permits such  acquisitions.
Such  interstate  bank mergers and branch  acquisitions  are also subject to the
nationwide and statewide insured deposit concentration  limitations described in
the Riegle-Neal Act.

         The Riegle-Neal Act authorizes the federal banking  agencies to approve
interstate  branching  de novo by  national  and  state  banks in  states  which
specifically  allow for such  branching.  Virginia has enacted laws which permit
interstate acquisitions of banks and bank branches and permit out-of-state banks
to establish de novo branches.

         Capital  Adequacy  Guidelines.  The Federal  Reserve  Board has adopted
risk-based  capital  adequacy  guidelines  pursuant  to which  they  assess  the
adequacy  of  capital  in  examining  and  supervising  banks  and bank  holding
companies and in analyzing  bank  regulatory  applications.  Risk-based  capital
requirements  determine  the adequacy of capital  based on the risk  inherent in
various classes of assets and off-balance sheet items.

         State  member  banks  are  expected  to meet a  minimum  ratio of total
qualifying  capital (the sum of core capital (Tier 1) and supplementary  capital
(Tier  2)) to risk  weighted  assets of 8%. At least  half of this  amount  (4%)
should be in the form of core capital.

         Tier 1 Capital  generally  consists of the sum of common  stockholders'
equity  and  perpetual  preferred  stock  (subject  in the case of the latter to
limitations on the kind and amount of such stock which may be included as Tier 1
Capital),  less goodwill,  without adjustment for changes in the market value of
securities classified as "available for sale" in accordance with FAS 115. Tier 2
Capital  consists  of  the  following:  hybrid  capital  instruments;  perpetual
preferred  stock  which  is not  otherwise  eligible  to be  included  as Tier 1
Capital;  term  subordinated  debt and  intermediate-term  preferred stock; and,
subject to limitations,  general allowances for loan losses. Assets are adjusted
under  the   risk-based   guidelines  to  take  into  account   different   risk
characteristics,  with the  categories  ranging from 0% (requiring no risk-based
capital)  for  assets  such as cash,  to 100% for the bulk of  assets  which are
typically  held  by a  bank  holding  company,  including  certain  multi-family
residential  and  commercial  real estate loans,  commercial  business loans and
consumer  loans.  Residential  first  mortgage  loans  on  one  to  four  family
residential  real  estate and certain  seasoned  multi-family  residential  real
estate loans, which are not 90 days or more past-due or non-performing and which
have been made in accordance with prudent underwriting  standards are assigned a
50%  level  in  the  risk-weighing  system,  as  are  certain   privately-issued
mortgage-backed  securities  representing  indirect  ownership  of  such  loans.
Off-balance  sheet items also are  adjusted to take into  account  certain  risk
characteristics.

         In addition to the risk-based capital requirements, the Federal Reserve
Board has  established a minimum 3.0% Leverage  Capital Ratio (Tier 1 Capital to
total adjusted  assets)  requirement for the most  highly-rated  banks,  with an
additional  cushion  of at least 100 to 200 basis  points  for all other  banks,
which  effectively  increases the minimum  Leverage Capital Ratio for such other
banks to 4.0% - 5.0% or more.  The  highest-rated  banks are those  that are not
anticipating or experiencing  significant growth and have well diversified risk,
including no undue interest rate risk

                                       8

<PAGE>
exposure,  excellent  asset  quality,  high  liquidity,  good  earnings  and, in
general, those which are considered a strong banking organization. A bank having
less than the minimum Leverage Capital Ratio requirement  shall,  within 60 days
of the  date as of which it fails to  comply  with  such  requirement,  submit a
reasonable  plan  describing  the means and timing by which a bank shall achieve
its minimum Leverage Capital Ratio requirement.  A bank which fails to file such
plan is deemed  to be  operating  in an unsafe  and  unsound  manner,  and could
subject  that  bank  to  a   cease-and-desist   order.  Any  insured  depository
institution with a Leverage Capital Ratio that is less than 2.0% is deemed to be
operating  in an unsafe or unsound  condition  pursuant  to Section  8(a) of the
Federal  Deposit  Insurance  Act  (the  "FDIA")  and  is  subject  to  potential
termination  of deposit  insurance.  However,  such an  institution  will not be
subject to an enforcement proceeding solely on account of its capital ratios, if
it has entered into and is in  compliance  with a written  agreement to increase
its Leverage Capital Ratio and to take such other action as may be necessary for
the  institution  to be  operated  in a  safe  and  sound  manner.  The  capital
regulations  also  provide,  among other  things,  for the issuance of a capital
directive,  which is a final  order  issued  to a bank  that  fails to  maintain
minimum  capital or to restore its capital to the  minimum  capital  requirement
within a specified time period. Such directive is enforceable in the same manner
as a final cease-and-desist order.

         Prompt  Corrective  Action.  Under Section 38 of the FDIA, each federal
banking agency is required to implement a system of prompt corrective action for
institutions  which it regulates.  The federal banking agencies have promulgated
substantially  similar  regulations to implement the system of prompt corrective
action  established  by Section 38 of the FDIA.  Under the  regulations,  a bank
shall be  deemed to be:  (i) "well  capitalized"  if it has a Total  Risk  Based
Capital  Ratio of 10.0% or more,  a Tier 1 Risk Based  Capital  Ratio of 6.0% or
more, a Leverage Capital Ratio of 5.0% or more and is not subject to any written
capital order or directive; (ii) "adequately capitalized" if it has a Total Risk
Based  Capital  Ratio of 8.0% or more, a Tier 1 Risk Based Capital Ratio of 4.0%
or more and a Tier 1 Leverage  Capital Ratio of 4.0% or more (3.0% under certain
circumstances)  and does not meet the  definition of "well  capitalized;"  (iii)
"undercapitalized"  if it has a Total Risk Based Capital Ratio that is less than
8.0%,  a Tier 1 Risk  based  Capital  Ratio that is less than 4.0% or a Leverage
Capital  Ratio that is less than 4.0% (3.0% under certain  circumstances);  (iv)
"significantly undercapitalized" if it has a Total Risk Based Capital Ratio that
is less than 6.0%, a Tier 1 Risk Based Capital Ratio that is less than 3.0% or a
Leverage   Capital   Ratio  that  is  less  than  3.0%;   and  (v)   "critically
undercapitalized"  if it has a ratio of tangible  equity to total assets that is
equal to or less than 2.0%.

         An institution  generally must file a written capital  restoration plan
which meets specified  requirements  with an appropriate  federal banking agency
within 45 days of the date the institution  receives notice or is deemed to have
notice that it is undercapitalized, significantly undercapitalized or critically
undercapitalized.  A federal  banking agency must provide the  institution  with
written  notice of  approval  or  disapproval  within 60 days after  receiving a
capital restoration plan, subject to extensions by the applicable agency.

         An institution  which is required to submit a capital  restoration plan
must  concurrently  submit a performance  guaranty by each company that controls
the  institution.  Such guaranty shall be limited to the lesser of (i) an amount
equal to 5.0% of the institution's  total assets at the time the institution was
notified  or  deemed to have  notice  that it was  undercapitalized  or (ii) the
amount  necessary at such time to restore the relevant  capital  measures of the
institution  to the levels  required for the  institution  to be  classified  as
adequately  capitalized.  Such a guaranty shall expire after the federal banking
agency notifies the institution that it has remained adequately  capitalized for
each of four consecutive calendar quarters. An institution which fails to submit
a written capital  restoration plan within the requisite  period,  including any
required performance  guaranty,  or fails in any material respect to implement a
capital  restoration plan, shall be subject to the restrictions in Section 38 of
the FDIA which are applicable to significantly undercapitalized institutions.

         A  "critically  undercapitalized   institution"  is  to  be  placed  in
conservatorship  or  receivership  within  90  days  unless  the  FDIC  formally
determines  that  forbearance  from such action would better protect the deposit
insurance fund. Unless the FDIC or other appropriate  federal banking regulatory
agency makes specific  further  findings and certifies  that the  institution is
viable and is not  expected to fail,  an  institution  that  remains  critically
undercapitalized on average during the fourth calendar quarter after the date it
becomes critically undercapitalized must be placed in receivership.  The general
rule is that the FDIC will be appointed as receiver  within 90 days after a bank
becomes critically  undercapitalized unless extremely good cause is shown and an
extension  is agreed to by the federal  regulators.  In  general,  good cause is
defined  as  capital  which has been  raised  and is  imminently  available  for
infusion into a bank except for certain technical  requirements  which may delay
the infusion for a period of time beyond the 90 day time period.

                                       9

<PAGE>
         Immediately upon becoming undercapitalized, an institution shall become
subject to the provisions of Section 38 of the FDIA,  which (i) restrict payment
of capital  distributions and management fees; (ii) require that the appropriate
federal  banking agency monitor the condition of the institution and its efforts
to restore its capital;  (iii) require submission of a capital restoration plan;
(iv)  restrict the growth of the  institution's  assets;  and (v) require  prior
approval of certain expansion proposals.  The appropriate federal banking agency
for an  undercapitalized  institution  also may take any number of discretionary
supervisory  actions  if the  agency  determines  that any of these  actions  is
necessary  to resolve the  problems  of the  institution  at the least  possible
long-term  cost to the  deposit  insurance  fund,  subject in  certain  cases to
specified procedures. These discretionary supervisory actions include: requiring
the  institution to raise  additional  capital;  restricting  transactions  with
affiliates;  requiring  divestiture  of  the  institution  or  the  sale  of the
institution to a willing  purchaser;  and any other supervisory  action that the
agency  deems  appropriate.   These  and  additional  mandatory  and  permissive
supervisory actions may be taken with respect to significantly  undercapitalized
and critically undercapitalized institutions.

         Additionally,  under  Section  11(c)(5) of the FDIA, a  conservator  or
receiver  may  be  appointed  for an  institution  where:  (i) an  institution's
obligations  exceed its assets;  (ii) there is  substantial  dissipation  of the
institution's  assets or  earnings  as a result of any  violation  of law or any
unsafe or unsound  practice;  (iii) the  institution  is in an unsafe or unsound
condition;  (iv) there is a willful violation of a  cease-and-desist  order; (v)
the  institution  is unable to pay its  obligations  in the  ordinary  course of
business;  (vi) losses or threatened  losses deplete all or substantially all of
an  institution's  capital,  and there is no  reasonable  prospect  of  becoming
"adequately capitalized" without assistance; (vii) there is any violation of law
or unsafe or unsound practice or condition that is likely to cause insolvency or
substantial  dissipation  of  assets  or  earnings,   weaken  the  institution's
condition,  or otherwise  seriously prejudice the interests of depositors or the
insurance fund; (viii) an institution ceases to be insured; (ix) the institution
is  undercapitalized  and  has  no  reasonable  prospect  that  it  will  become
adequately capitalized,  fails to become adequately capitalized when required to
do so, or fails to submit or materially implement a capital restoration plan; or
(x)  the   institution   is   critically   undercapitalized   or  otherwise  has
substantially insufficient capital.

         Regulatory   Enforcement   Authority.   Federal   banking   law  grants
substantial  enforcement powers to federal banking regulators.  This enforcement
authority  includes,  among  other  things,  the  ability to assess  civil money
penalties,   to  issue  cease-and-desist  or  removal  orders  and  to  initiate
injunctive  actions against  banking  organizations  and  institution-affiliated
parties.  In general,  these enforcement actions may be initiated for violations
of laws and  regulations  and  unsafe or  unsound  practices.  Other  actions or
inactions may provide the basis for enforcement action,  including misleading or
untimely reports filed with regulatory authorities.

ITEM 2.  DESCRIPTION OF PROPERTY.

         The executive  offices of Bancorp and the Bank,  and the main office of
the Bank are located at 3033 Wilson Boulevard,  Arlington, Virginia. Our offices
occupy 5,400  square feet on the ground floor of a seven story office  building,
including  approximately  1,800 square feet used for the banking lobby. We lease
the  property  in which the main  office is located  under a lease  expiring  on
December 31, 2007 at a current monthly rent of $16,150,  subject to fixed annual
increases  of  approximately  3%  annually,  plus an  allocated  portion  of the
building annual operating expenses. There are two five year options to renew the
lease.  The  Bank  has one  branch,  located  at  7023  Little  River  Turnpike,
Annandale,  Virginia. The branch consists of 1,445 square feet in a professional
office  building.  The  property  is  occupied  under a  lease,  terminating  on
September  30, 2004,  at a current  monthly  rental of $2,450,  subject to fixed
annual increases of  approximately  3% annually.  There are options to renew the
lease for two  additional  five year  terms.  On January 2,  2001,  the  Company
entered  into a new lease of 1774  square  feet at 606 S.  King  St.,  Leesburg,
Virginia.  The current  monthly rental is $3,250 subject to annual  increases of
approximately  3%. The lease  expires on December 31,  2010.  There are two five
year  renewal  options.  The  Company  intends  to open a  branch  at this  site
utilizing approximately 875 square feet and sub-lease the remaining space.

         Management  believes  the existing  facilities  are adequate to conduct
Bancorp's business.

                                       10

<PAGE>
ITEM 3.  LEGAL PROCEEDINGS.

         Bancorp may be involved in routine  legal  proceedings  in the ordinary
course of its business. At December 31, 2000, there are no pending or threatened
legal proceedings.

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

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of the year ended December 31, 2000.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         Market for Common Stock and  Dividends.  Bancorp's  common stock is not
traded on any organized  exchange or on the Nasdaq National Market or the Nasdaq
SmallCap Market. Since January 19, 2001, the common stock has been traded in the
over the counter  "bulletin board" market (the "OTCBB") under the symbol "JMBI".
Two market makers currently offer to make a market in the common stock.  Trading
in the common stock has been  sporadic,  and prior to January 19, 2001 consisted
of private trades conducted without brokers.  There may be other trades of which
we are either not aware, or with respect to which we are not aware of the price.
These trades and transactions do not necessarily reflect the intrinsic or market
values of the common stock.  As of December 31, 2000,  there were 958,767 shares
of common stock outstanding, held by approximately 544 shareholders of record.

         Set forth below is certain financial  information relating to Bancorp's
share price history for the each quarter since January 1, 1999.  Information for
the period  prior to July 1, 1999  represents  trades in the common stock of the
Bank.  High and low sales prices  reflect  trades  known to Bancorp,  and do not
necessarily reflect all trades which occurred.

<TABLE>
<CAPTION>

                         2001                     2000                      1999
                 ---------------------    ----------------------    ----------------------
Period Ended       High        Low          High         Low          High         Low
                 ---------   ---------    ---------   ----------    ----------  ----------
<S>              <C>         <C>          <C>         <C>           <C>         <C>
March 31         $15.50      $14.50       $ 12.25     $ 10.00       $ 11.00     $ 11.00
June 30                                   $ 12.25     $ 11.44       $ 11.00     $ 11.00
September 30                              $ 14.50     $ 14.50       $ 12.00     $ 11.25
December 31                               None        None          $ 12.00     $ 12.00

</TABLE>

         Dividends.  Holders  of  the  common  stock  are  entitled  to  receive
dividends as and when declared by the Board of  Directors.  Bancorp has not paid
cash  dividends  since it became the holding  company for the Bank, and prior to
that  time the Bank did not pay any cash  dividends,  each  electing  to  retain
earnings  to support  growth.  We  currently  intend to  continue  the policy of
retaining dividends to support growth for the immediate future. Future dividends
will depend primarily upon the Bank's earnings,  financial  condition,  and need
for funds, as well as applicable  governmental  policies and regulations.  There
can be no assurance that we will have earnings at a level  sufficient to support
the payment of dividends,  or that we will in the future elect to pay dividends.
As the Bank is the primary  source of funds for payment of dividends by Bancorp,
the inability of the Bank to pay dividends could adversely affect the ability of
Bancorp to pay dividends.

         Regulations  of the Federal  Reserve and  Virginia law place a limit on
the  amount  of  dividends  the  Bank  may pay  without  prior  approval.  Prior
regulatory  approval is required to pay  dividends  which  exceed the Bank's net
profits for the current year plus its retained net profits for the preceding two
calendar  years,  less  required  transfers to surplus.  At December 31, 2000, $
242,000 in dividends may be approved  without prior approval.  State and federal
regulatory  authorities  also have  authority  to  prohibit  a bank from  paying
dividends if they deem payment to be an unsafe or unsound practice.

                                       11

<PAGE>
         The Federal  Reserve has  established  guidelines  with  respect to the
maintenance  of  appropriate  levels  of  capital  by  registered  bank  holding
companies.  Compliance with such standards,  as presently in effect,  or as they
may be amended from time to time,  could  possibly limit the amount of dividends
that Bancorp may pay in the future. In 1985, the Federal Reserve issued a policy
statement on the payment of cash  dividends by bank  holding  companies.  In the
statement,  the  Federal  Reserve  expressed  its view  that a  holding  company
experiencing earnings weaknesses should not pay cash dividends exceeding its net
income,  or which  could  only be  funded  in ways  that  weakened  the  holding
company's financial health, such as by borrowing.

         As a depository  institution,  the deposits of which are insured by the
FDIC,  the Bank may not pay  dividends or distribute  any of its capital  assets
while it  remains in default  on any  assessment  due the FDIC.  The Bank is not
currently in default under any of its obligations to the FDIC.

         Recent  Sales of  Unregistered  Shares.  During the past  three  years,
Bancorp has not sold any securities  without  registration  under the Securities
Act of 1933,  except for the initial issuance of shares of its common stock, par
value $1.00 per share, as of July 1, 1999, in connection with the  establishment
of Bancorp as the one bank holding company for the Bank. Bancorp relied upon the
exemption  provided  by  Section  3(a)(12)  of the  Securities  Act of 1933.  In
connection  with that  reorganization  transaction,  each  share of  outstanding
common stock of the Bank was converted  into one share of Bancorp  common stock,
and each shareholder  retained the same percentage ownership interest in Bancorp
as such shareholder had in the Bank. Each outstanding  option to purchase shares
of the Bank common  stock was  converted  into an  identical  option to purchase
shares of Bancorp.  No shares of Bancorp common stock or other  authorized class
of  securities  were sold for cash,  and no  underwriter,  broker or dealer  was
involved in connection with the reorganization and conversion of shares.

         Prior to  establishment of Bancorp as the holding company for the Bank,
on June 8, 1998, the Bank  consummated  the sale of 737,590 shares of its common
stock,  par value $5.00 per share  through an offering to members of the general
public.  All shares were sold at a price of $10.00 per share,  resulting  in net
proceeds to the Bank of  approximately  $7.4  million.  The Bank relied upon the
exemption for bank securities  provided by Section 3(a)(2) of the Securities Act
of 1933. No underwriter, broker or dealer was involved in the offerings.

         On February  10,  1999,  the Bank sold 5,000 of its common  stock to an
individual in  connection  with his joining the Board of Directors at a price of
$10.00 per share. The Bank relied on the exemption for bank securities  provided
by Section 3(a)(2) of the Securities Act of 1933. On February 10, 2000, Director
Dr. Alvin Nashman  exercised his 1,700 vested option shares at a price of $10.00
per share.

         Use of  Proceeds:  On August 11,  2000,  Bancorp's  first  registration
statement  under the  Securities  Act of 1933,  on Form  SB-2  (No.  333-38098),
relating to its initial  registered  offering of common stock,  $1.00 par value,
was  declared  effective by the  Securities  and  Exchange  Commission,  and the
offering commenced. The offering related to an aggregate of up to 344,828 shares
of common  stock,  at an offering  price of $14.50 per share,  for an  aggregate
offering  price  of  $5,000,006.  We also  reserved  the  right to sell up to an
additional  137,  930 shares of common  stock in the event that the offering was
oversubscribed, for an additional aggregate offering price of $1,999,985.

         On  November  15,  2000,  the  offering  was  completed.   We  accepted
subscriptions for and sold an aggregate of 214,477 shares of common stock at the
offering  price of $14.50  per  share,  for  gross  proceeds  of  $3,109,916.50.
Aggregate  expenses of the offering were  $88,000,  resulting in net proceeds of
the offering of $3,022,000.  No person or entity underwrote the offering,  which
was made through the efforts of the directors and  executive  officers.  None of
such directors or officers received any special  compensation in connection with
the offering.

         As of December  31,  2000,  $1 million of the  proceeds of the offering
have been  contributed  to the  capital  of the Bank for use in  support  of its
lending and investment  activities.  The remaining proceeds of the offering have
been  retained by Bancorp and held in  temporary  interest-bearing  money market
investments pending contribution to the Bank or used for other general corporate
purposes.

                                       12

<PAGE>
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS.

FORWARD-LOOKING STATEMENTS

         This document contains forward looking statements within the meaning of
the Securities Exchange Act of 1934, as amended,  including statements of goals,
intentions,  and expectations as to future trends,  plans,  events or results of
Company operations and policies and regarding general economic conditions. These
statements  are  based  upon  current  and  anticipated   economic   conditions,
nationally and in Bancorp's  market,  interest rates and interest rate policies,
competitive  factors,  statements by suppliers of data processing  equipment and
services, government agencies and other third parties, which by their nature are
not   susceptible  to  accurate   forecast,   and  are  subject  to  significant
uncertainty.  Because of these  uncertainties  and the assumptions on which this
discussion  and  the   forward-looking   statements  are  based,  actual  future
operations and results in the future may differ  materially from those indicated
herein.  Readers  are  cautioned  against  placing  undue  reliance  on any such
forward-looking   statement.   Bancorp   does  not   undertake   to  update  any
forward-looking  statement to reflect  occurrences  or events which may not have
been anticipated as of the date of such statements.

FINANCIAL OVERVIEW

         The  following  discussion  provides  information  about the results of
operations and financial condition,  liquidity, and capital resources of Bancorp
and should be read in conjunction with our consolidated financial statements and
footnotes thereto for the year ended December 31, 2000.

BALANCE SHEET

         Total  assets  increased  by $39.6  million  from  December 31, 1999 to
December 31, 2000,  ending the period at $89.2  million.  The increase in assets
occurred  as  a  result  of  a  $35   million   increase   in   deposits,   with
noninterest-bearing   deposits  increasing  $9.5  million  and  interest-bearing
deposits increasing $25.7 million. In addition,  stockholders'  equity increased
$4.1 million,  primarily a result of the $3.1 million of new capital  raised and
the $810  thousand of earnings  for the year 2000.  With this growth in deposits
and capital,  Bancorp was able to fund $19 million increase in loans, added $6.5
million  to  the  securities  portfolio,   and  increased  Bancorp's  short-term
liquidity  position  by $8.4  million.  Of the  approximately  $3 million in new
capital  (net of  issuance  costs)  that was  raised  in 2000,  $1  million  was
contributed to the Bank's capital and the remaining $2 million has been invested
in interest-bearing money market instruments.



                                       13

<PAGE>
RESULTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                           SEVEN MONTHS ENDED
                                             YEAR ENDED DECEMBER 31,           DECEMBER 31,
                                           ---------------------------     ------------------
($ in thousands except share data)             2000            1999                 1998
                                           -----------      ----------     ------------------
<S>                                         <C>            <C>                 <C>
BALANCE SHEET HIGHLIGHTS:
Total assets                                 $ 89,230        $ 49,618           $ 23,509
Total loans                                    50,040          31,039             12,769
Total liabilities                              78,497          43,018             16,850
Total shareholders' equity                     10,733           6,600              6,659
---------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS:
Total interest income                        $  5,413        $  2,845           $    630
Total interest expense                          2,177             921                147
Net interest income                             3,236           1,924                483
Provision for loan and lease losses               237             231                132
Other income                                      302             159                 14
Noninterest expense                             2,348           1,727                817
Income before taxes                               953             125               (452)
Net income                                        810             125               (452)
---------------------------------------------------------------------------------------------
PER SHARE DATA:
Earnings per share, basic                    $   1.04        $   0.17           $  (0.61)
Earnings per share, diluted                  $   1.01        $   0.17           $  (0.61)
Weighted average shares
     outstanding--basic                       779,256         742,028            737,590
Weighted average shares
     outstanding--diluted                     804,394         750,952            737,590
Book value (at period-end)                   $  11.19        $   8.87           $   9.03
Shares outstanding                            958,767         744,290            737,590
---------------------------------------------------------------------------------------------
PERFORMANCE RATIOS:
Return on average assets                         1.19%          0.32%              (0.72%)
Return on average equity                        10.75%          1.89%              (6.59%)
Net interest margin                              5.09%          5.25%               5.27%
Efficiency Ratio                                 66.4%          82.9%              164.4%
---------------------------------------------------------------------------------------------
OTHER RATIOS:
Allowance for loan losses to total
     loans                                       1.20%          1.17%               1.03%
Equity to average assets                        12.03%         13.30%              28.33%
Nonperforming assets to total
     assets                                       0.0%           0.0%                0.0%
Net charge-offs to total loans                    0.0%           0.0%                0.0%
Risk-Adjusted Capital Ratios:
     Tier 1                                      18.5%          20.3%               43.8%
     Total                                       19.6%          21.4%               44.7%
     Leverage Ratio                              12.6%          13.9%               30.6%

</TABLE>


                                       14

<PAGE>
COMPARISON OF 1999 OPERATING RESULTS TO 1998 OPERATING RESULTS

         James Monroe Bank,  the wholly owned  subsidiary of Bancorp,  commenced
operations on June 8, 1998, and therefore had only seven months of operations in
1998 compared to twelve months of operations in 1999. During this period Bancorp
has experienced rapid growth, growing from $7 million in assets at commencement,
to $23.5 million at December 31, 1998 to $49.6 million at December 31, 1999, and
ended December 31, 2000 at $89.2 million in assets.

         For the seven month  period  ended  December  31,  1998,  Bancorp  lost
$452,000  compared to a profit of $125,000 for the first full year of operations
ending December 31, 1999. An in depth analysis  comparing  individual  income or
expense items for 1999 with 1998 is not meaningful in that the  explanation  for
each line item is that the increase in income or expense  comparing 1999 to 1998
is attributable to 1) the growth Bancorp has experienced  during this period and
2) the  increase is due the fact that 1999 is a twelve month period and 1998 was
a seven month period. The following discussion compares the results of 2000 with
1999.

COMPARISON OF 2000 OPERATING RESULTS TO 1999 OPERATING RESULTS

         For the year ended December 31, 2000, Bancorp earned $810,000, or $1.04
per basic share and $1.01 per  diluted  share ,  compared  with  $125,000 of net
income, or $0.17 per basic share and $0.17 per diluted share, for the year ended
December 31, 1999. With respect to performance ratios, 2000 earnings resulted in
a return on  average  assets of 1.19% and a return on  average  equity of 10.75%
compared  to a 0.32%  return on  average  assets  and a 1.89%  return on average
equity for 1999.  In comparing  1999 and 2000  earnings,  the reader should note
that Bancorp made no provision for federal income taxes in 1999 because earnings
were offset by net operating loss  carryforwards from 1998, whereas in 2000, net
operating  loss  carryforwards  were fully  utilized  by August 2000 and Bancorp
became fully taxable thereafter.

         Bancorp  continues  to focus on managing a strong net  interest  margin
(5.09% for 2000 versus  5.25%  1999),  maintaining  strong  asset  quality,  and
balancing  cost control with the need to incur costs to support the rapid growth
Bancorp has experienced.

NET INTEREST INCOME

         Net interest income is the difference  between interest and fees earned
on assets and the interest paid on deposits and borrowings.  Net interest income
is one of the major determining factors in a financial institution's performance
as it is the  principal  source of earnings.  Table 1 presents  average  balance
sheets and a net interest  income analysis for the year ended December 31, 2000,
compared  with  the year  ended  December  31,  1999.  Bancorp  did not have any
tax-exempt income during any of the periods presented herein.

         For the year ended  December 31, 2000,  net interest  income  increased
$1.3 million, or 68.1%, to $3.2 million from the $1.9 million for the year ended
December  31,  1999,  primarily  as a result of the  increase  in the  volume of
interest  earning  assets.  Total  average  earning  assets  increased  by $26.6
million,  or 71.7%, from 1999 to 2000, and the yield on earning assets increased
by 83 basis  points as a result of 4 increases  in the prime rate.  Between June
1999 and December 2000, the Federal  Reserve raised rates on six occasions,  for
an aggregate  increase of 175 basis points.  During this period of rising rates,
Bancorp  has managed  the rates  earned on earning  assets and the rates paid on
interest-bearing  deposits to maintain a balance  between being able to generate
loans and deposits and to also maintain a relatively steady net interest margin.
From 1999 to 2000, average loans outstanding grew by $19.3 million, or 87.0% and
the yield on such loans increased by 53 basis points.  Also  contributing to the
increase  in earning  assets on a period-  to-period  basis was the  increase in
taxable  securities which increased $5.7 million and federal funds sold and cash
equivalent  increased  $1.5  million.  The yield on these  earning  assets  also
increased 66 basis points and 137 basis points, respectively.  The growth in the
liquidity from 1999 to 2000, represented by the growth in taxable securities and
Federal funds sold and cash  equivalents,  is  attributable to the $27.7 million
growth in average  deposits,  net of the $19.8  million  growth in average loans
outstanding.

                                       15

<PAGE>
TABLE 1
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)

<TABLE>
<CAPTION>

                                                          Year Ended                               Year Ended
                                                       December 31, 2000                        December 31, 1999
-----------------------------------------------------------------------------------------------------------------------------
                                                  Average                   Yield/         Average                    Yield/
                                                  Balance       Interest     Rate          Balance       Interest      Rate
-----------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>        <C>            <C>             <C>         <C>
ASSETS
Loans:
     Commercial                                   $ 19,224      $ 1,749     9.10%          $ 10,012        $ 865       8.64%
     Commercial real estate                         16,729        1,670      9.98             8,672          850       9.80
     Consumer                                        5,567          558     10.02             3,517          293       8.33
                                            --------------------------------------   ----------------------------------------
          Total Loans                               41,520        3,977      9.58            22,201        2,008       9.04
Taxable securities                                  16,338        1,067      6.53            10,176          622       6.11
Federal funds and cash equivalents                   5,759          369      6.41             4,268          215       5.04
                                            --------------------------------------   ----------------------------------------
                  TOTAL EARNING ASSETS              63,617        5,413     8.51%            36,645        2,845       7.76%
Less allowance for loan losses                        (481)                                    (242)
Cash and due from banks                              3,678                                    2,261
Premises and equipment, net                            712                                      508
Other assets                                           680                                      353
                                            ---------------                          ---------------
                          TOTAL ASSETS            $ 68,206                                 $ 39,525
                                            ===============                          ===============
LIABILITIES AND
     STOCKHOLDERS' EQUITY

Interest-bearning demand deposits                  $ 3,667         $ 77     2.10%           $ 2,739         $ 41       1.50%
Money market deposit accounts                       20,826          986      4.73            13,615          556       4.08
Savings accounts                                       337           10      2.97               255            7       2.75
Time deposits                                       17,908        1,101      6.15             6,329          317       5.01


Borrowed funds                                          45            3      6.67                 -            -          -
                                            --------------------------------------   ----------------------------------------
                TOTAL INTEREST-BEARING
                   LIABILITIES                      42,783        2,177     5.09%            22,938          921       4.02%
                                            --------------------------------------   ----------------------------------------

Net Interest Income and Net Yield on
Interest-Earning Assets                                         $ 3,236     5.09%                        $ 1,924       5.25%
                                                           =======================                  =========================




Noninterest-bearing demand
     deposits                                       17,570                                    9,760


Other liabilities                                      319                                      160


Stockholders' equity                                 7,534                                    6,660
                                            ---------------                          ---------------
          TOTAL LIABILITIES AND
          STOCKHOLDERS' EQUITY                    $ 68,206                                 $ 39,518
                                            ===============                          ===============

</TABLE>

           Table 2 shows  the  composition  of the net  change  in net  interest
income  for the  periods  indicated,  as  allocated  between  the  change in net
interest   income  due  to   changes  in  the  volume  of  average   assets  and
interest-bearing  liabilities,  and the  changes in net  interest  income due to
changes  in  interest  rates  between  2000 and 1999.  As the table  shows,  the
increase  in net  interest  income is almost  entirely  due to the growth in the
volume of earning

                                       16

<PAGE>
assets and interest-bearing  liabilities for the comparative periods despite the
fact that interest rates changed 6 times for an aggregate  increase of 175 basis
points from June 1999 to December  31, 2000.  Despite  these  increases  and the
increasing  competition  from other  financial  institutions  for both loans and
deposits within the market served by Bancorp,  Bancorp has been able to maintain
a relatively consistent and strong net interest margin in excess of 5%.

TABLE 2


EFFECT OF VOLUME RATE CHANGES ON NET INTEREST INCOME

                                                 YEAR ENDED DECEMBER 31,
                                                      2000 VS. 1999
                                           -------------------------------------
                                             INCREASE        DUE TO CHANGE
                                                OR            IN AVERAGE:
($ in thousands)                            (DECREASE)     VOLUME       RATE
                                           -------------------------------------
Earning Assets:
Loans                                           $ 1,969      $ 1,844      $ 125
Taxable securities                                  445          368         77
Federal funds sold                                  154           87         67
                                           -------------------------------------
     Total interest income                        2,568        2,299        269

INTEREST-BEARING LIABILITIES:
Interest-bearing demand
     deposits                                        36           16         20
Money market deposit
     accounts                                       430          331         99
Savings deposits                                      3            2          1
Time deposits                                       784          697         87
Borrowed funds                                        3            3          -
                                           -------------------------------------
     Total interest expense                       1,256        1,049        207
                                           -------------------------------------
          Net Interest Income                   $ 1,312      $ 1,250       $ 62
                                           =====================================

PROVISION AND ALLOWANCE FOR LOAN LOSSES

         The provision for loan losses is based upon  management's best estimate
of probable  losses  which have been  incurred.  Since James Monroe Bank is a de
novo bank with a limited operating history, it has no history of loan losses. To
date, the Company has not charged off any loans.  Except for one nonaccrual loan
of less than $40,000 the Company has not had any  nonaccrual  loans,  loans past
due 90-days or more,  restructured  loans, other real estate owned or foreclosed
properties.  At December 31, 2000, there were no loans which were performing but
as to which  information known to us caused management to have serious doubts as
to the ability of the borrower to comply with the current loan repayment  terms.
In  determining  the  adequacy of the  allowance,  the value and adequacy of the
collateral is considered as well as the growth and composition of the portfolio,
as well as the loss  experience of other banks in our peer group.  Consideration
is given to the results of examinations and evaluations of the overall portfolio
by senior management,  external auditors,  and regulatory  examiners.  While the
methodology we use for establishing the allowance for loan losses is reevaluated
on a regular basis, the Company's current policy is to maintain the allowance at
approximately 1.20% of total loans. As reflected in table 4 below, the allowance
is allocated  among the various  categories of loans in rough  proportion to the
level  of  loans  outstanding  in  such  categories.  Management  considers  the
allowance to be adequate for the periods presented.

                                       17

<PAGE>
TABLE 3

         The following table presents the activity in the allowance for loan and
lease losses for the years ended December 31, 2000 and 1999 and the seven-months
ended December 31, 1998.

                                                               SEVEN MONTHS
                                                                   ENDED
($ in thousands)            DECEMBER 31,      DECEMBER 31,      DECEMBER 31,
                               2000              1999              1998
                            ------------      ------------      ------------
Balance, January 1             $ 363             $ 132             $   -
Provision for loan losses        237               231               132
Loan charge-offs                   -                 -                 -
Loan recoveries                    -                 -                 -
                            ------------      ------------      ------------
     Net charge-offs               -                 -                 -
                            ------------      ------------      ------------
Balance, December 31           $ 600             $ 363             $ 132
                            ============      ============      ============

TABLE 4

         The  following  table shows the  allocation  of the  allowance for loan
losses at the dates  indicated.  The  allocation of portions of the allowance to
specific  categories of loans is not intended to be indicative of future losses,
and does not restrict the use of the  allowance to absorb losses in any category
of loans.

<TABLE>
<CAPTION>

                                                                     December 31,
                                                ----------------------------------------------
                                                         2000                     1999
                                                ----------------------------------------------
($ in thousands)                                  Amount     Percent       Amount    Percent
                                                ----------------------  ----------------------
<S>                                              <C>         <C>           <C>        <C>
Commercial loans                                 $ 255        42.5%        $ 200      50.9%
Comercial real estate loans                        250        41.5           120      31.8
Real estate 1-4 family residental loans             50         8.4            10       3.2
Home equity loans                                    -         1.1             -       0.5
Consumer loans                                      45         6.5            33      13.6
                                                ----------------------  ----------------------
Balance End of Period                            $ 600       100.0%        $ 363     100.0%
                                                ======================  ======================

</TABLE>



                                       18

<PAGE>
TABLE 5

Table 5 shows the maturities of the loan portfolio and the  sensitivity of loans
to interest rate fluctuations at December 31, 2000.  Maturities are based on the
earlier of contractual maturity or repricing date.

<TABLE>
<CAPTION>


                                                            DECEMBER 31, 2000
                                       ----------------------------------------------------------
                                                          AFTER ONE
                                            WITHIN       YEAR THROUGH    AFTER FIVE
($ in thousands)                           ONE YEAR       FIVE YEARS       YEARS          TOTAL
                                       ----------------------------------------------------------
<S>                                        <C>               <C>          <C>           <C>
Commercial loans                            $ 16,908         $ 3,293      $ 1,070       $ 21,271
Commercial real estate loans                   8,211          12,346          226         20,783
Real estate 1-4 family residential             2,008           2,130           27          4,165
Home equity loans                                546               -            -            546
Consumer loans                                 2,771             474           30          3,275
                                       ----------------------------------------------------------
                                            $ 30,444        $ 18,243      $ 1,353       $ 50,040
                                       ==========================================================

($ in thousands)
Fixed Rate*                                  $ 6,160         $ 9,671        $ 358       $ 16,189
Variable Rate*                                24,284           8,572          995         33,851
                                       ----------------------------------------------------------

                    Total                   $ 30,444        $ 18,243      $ 1,353       $ 50,040
                                       ==========================================================

</TABLE>


* The  table  reflects  the  earliest  period of  either  maturity  date or next
repricing date.


LOANS

         The loan  portfolio  is the  largest  component  of earning  assets and
accounts  for the greatest  portion of total  interest  income.  At December 31,
2000, total loans were $50.0 million, a 61.2% increase from the $31.0 million in
loans  outstanding  at  December  31,  1999.  In general,  loans are  internally
generated  with the  exception  of a small  percentage  of  participation  loans
purchased  from other  local  community  banks,  and lending  activity  which is
confined  to our  market  of  Northern  Virginia.  We do not  engage  in  highly
leveraged transactions or foreign lending activities.

         Loans in the  commercial  category,  as well as commercial  real estate
mortgages,  consist  primarily of short-term  (five year or less final maturity)
and/or floating rate commercial  loans made to small to medium-sized  companies.
We do not have any agricultural loans in the portfolio. There are no substantial
loan  concentrations to any one industry or to any one borrower.  The 1-4 family
residential  real estate loans are generally not the typical first mortgage loan
but are loans made for other  purposes  and the  collateral  obtained is a first
deed of trust on the residential  property or the borrower.  The underlying loan
would have a final maturity much shorter than the typical first mortgage and may
be a variable or fixed rate loans.  As can be seen in Table 5,  Bancorp has very
few loans  that have a fixed  rate and a  maturity  of five  years or greater or
reprice in more than five years.

         Consumer  loans  consist  primarily of secured  installment  credits to
individuals,  residential  construction  loans secured by a first deed of trust,
home equity loans, or home improvement loans. The consumer portfolio  represents
7.6% of the loan portfolio at December 31, 2000.


                                       19

<PAGE>
TABLE 6

         The following  table presents the  composition of the loan portfolio by
type of loan at the dates indicated.

                                       DECEMBER 31,          DECEMBER 31,
($ in thousands)                           2000                  1999
                                       ------------          ------------

Commercial loans                         $ 21,271             $ 15,812
Real estate-Commercial                     20,783                9,849
Real estate-1-4 family residential          4,165                1,003
Home equity loans                             546                  158
Consumer loans                              3,275                4,217
                                       ------------          ------------
                                           50,040               31,039
Less allowance for loan losses               (600)                (363)
                                       ------------          ------------
Net Loans                                $ 49,440             $ 30,676

INVESTMENT SECURITIES

         The  carrying  value of James  Monroe  Bancorp's  securities  portfolio
increased  $6.1  million to $20.0  million at  December  31,  2000 from $13.9 at
December 31, 1999.  From December 31, 1999 to December 31, 2000,  the adjustment
to record the securities at  approximate  fair market value improved by $431,000
from a  mark-to-market  loss of $372,000 at the end of 1999 to a  mark-to-market
appreciation of $59,000 at the end of 2000. James Monroe Bancorp currently,  and
for  all  periods  shown,   classifies  its  entire   securities   portfolio  as
Available-for-Sale.  Increases in the portfolio have occurred  whenever  deposit
growth has  outpaced  loan demand and the  forecast for loan growth is such that
the  investment  of excess  liquidity in  investment  securities  (as opposed to
short-term  investments  such as federal  funds) is warranted.  In general,  our
investment philosophy is to acquire high quality government agency securities or
high-grade corporate bonds, with a maturity of five years or less in the case of
fixed rate securities. In the case of mortgaged-backed securities, the policy is
to invest only in those  securities  whose average expected life is projected to
be approximately  five years or less except for adjustable rate securities which
may have an average life greater than 5 years.  To the extent  possible  Bancorp
attempts to "ladder" the maturities of such securities.

TABLE 7

         The  following   table  presents  the  amount  and  maturities  of  the
investment securities in our portfolio at December 31, 2000.

<TABLE>
<CAPTION>


MATURITY OF SECURITIES

                                           Years to Maturity
-------------------------------------------------------------------------------------------------------------------
                                      Within              Over 1              Over 5               Over
         ($ in thousands)             1 Year             through 5 Years     through 10 Years    10 Years
-------------------------------------------------------------------------------------------------------------------
                                      Amount     Yield    Amount     Yield    Amount     Yield    Amount     Yield
-------------------------------------------------------------------------------------------------------------------
<S>                                   <C>         <C>    <C>         <C>     <C>         <C>     <C>         <C>
INVESTMENTS AVAILABLE-FOR-SALE:
U. S. Agency                          $ 250       5.75%  $ 10,905    6.16%   $ 1,000     6.78%   $  -         0.00%
Mortgage-backed securities            $  -          -       2,443    6.79      1,875     6.37      891        6.87
Corporate bonds                       $  -          -       1,241    7.28         -                 -
                                     -------             ---------           --------            ------
             Total Debt Securities
                Available-for-Sale    $ 250       5.75%  $ 13,148    6.43%   $ 2,875     6.51%   $ 891        6.87%
                                     =======             =========           ========            ======

</TABLE>


                                       20

<PAGE>
         For additional information regarding the investment portfolio, see Note
2 to the consolidated financial statements for the year ended December 31, 2000.

         At December 31, 2000, there were no issuers, other than issuers who are
US government agencies,  whose securities owned by Bancorp had an aggregate book
value of more than 10% of total stockholder's equity of Bancorp.

LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT

         The primary objectives of asset and liability management are to provide
for the safety of depositor and investor funds, assure adequate  liquidity,  and
maintain an appropriate  balance between interest  sensitive  earning assets and
interest bearing liabilities.  Liquidity management involves the ability to meet
the cash  flow  requirements  of  customers  who may be  depositors  wanting  to
withdraw  funds or borrowers  needing  assurance that  sufficient  funds will be
available to meet their credit needs.

         We define  liquidity  for these  purposes  as the ability to raise cash
quickly at a  reasonable  cost without  principal  loss.  The primary  liquidity
measurement we utilize is called the Basic Surplus,  which captures the adequacy
of our access to  reliable  sources of cash  relative  to the  stability  of our
funding mix of deposits.  Accordingly,  we have established borrowing facilities
with other banks  (Federal  funds) and the Federal  Home Loan Bank as sources of
liquidity in addition to the deposits.

         The Basic Surplus  approach  enables us to adequately  manage liquidity
from both a tactical and  contingency  perspectives.  At December 31, 2000,  our
Basic Surplus ratios (net access to cash and secured  borrowings as a percentage
of total assets was  approximately  24% compared to the present internal minimum
guideline range of 7% to 10%.

         Financial institutions utilize a number of methods to evaluate interest
rate risk.  Methods range from the original  static gap analysis (the difference
between interest sensitive assets and interest sensitive  liabilities  repricing
during  the same  period,  measured  at a  specific  point in time),  to running
multiple  simulations  of  potential  interest  rate  scenarios,  to rate  shock
analysis, to highly complicated duration analysis.

         One tool that we  utilize in  managing  our  interest  rate risk is the
matched funding matrix  depicted in the  accompanying  table.  The matrix arrays
repricing  opportunities along a time line for both assets and liabilities.  The
longest  term,  most fixed rate  sources  are  presented  in the upper left hand
corner while the shorter term, most variable rate items,  are at the lower left.
Similarly,  uses of funds,  assets, are arranged across the top moving from left
to right.

         The body of the matrix is derived by allocating  the longest fixed rate
funding  sources to the  longest  fixed rate assets and  shorter  term  variable
sources to shorter term variable  uses.  The result is a graphical  depiction of
the time  periods  over  which we expect  to  experience  exposure  to rising or
falling rates. Since the scales of the liability and assets sides are identical,
all  numbers in the  matrix  would fall  within  the  diagonal  lines if we were
perfectly matched across all repricing time frames. Numbers outside the diagonal
lines  represent two general types of  mismatches:  liability  sensitive in time
frames when  numbers are to the left of the  diagonal  line and asset  sensitive
when numbers are to the right of the diagonal line.

As  can be seen in the accompanying Table 9 that follows, we are asset sensitive
in the  short  term  and  then  become  slightly  liability  sensitive.  This is
primarily  caused by the  assumptions  used in  allocating  a repricing  term to
nonmaturity  deposits--demand  deposits,  savings  accounts,  and  money  market
deposit  accounts.  While the  traditional  gap analysis and the matched funding
matrix  show a general  picture  of our  potential  sensitivity  to  changes  in
interest  rates,  it cannot quantify the actual impact of interest rate changes.
The actual  impact due to changes in interest  rates is difficult to quantify in
that the administrative  ability to change rates on these products is influenced
by competitive market conditions in changing rate  environments,  prepayments of
loans, customer demands, and many other factors.

                                       21

<PAGE>
         Thus,  Bancorp utilizes  simulation  modeling or "what if" scenarios to
quantify the potential  financial  implications of changes in interest rates. In
practice,  each quarter  approximately  14  different  "what if"  scenarios  are
evaluated.  At December 31, 2000, the following  12-month impact on net interest
income is estimated to range from a positive  impact of 7% to a negative  impact
of 6% for the  multiple  scenarios.  In the next  12-month  period  the range of
impact on net interest income is estimated to be from a positive impact of 5% to
a negative impact of 7%. Bancorp believes these ranges of exposure to changes in
interest  rates to be well  within  acceptable  range  given a wide  variety  of
potential  rate change  scenarios.  This  process is  performed  each quarter to
ensure Bancorp is not materially at risk to possible changes in interest rates.

TABLE 8

                              MATCH FUNDING MATRIX
                               JAMES MONROE BANK
                                DECEMBER 31, 2000
<TABLE>
<CAPTION>

                  ASSETS       60+    36-59    24-35   12-23    10-11    7-9     4-6     2-3    1 MONTH    O/N     TOTAL
                             MONTHS   MONTHS   MONTHS  MONTHS   MONTHS  MONTHS  MONTHS  MONTHS
-------------------------------------------------------------------------------------------------------------------------
<S>              <C>         <C>      <C>       <C>     <C>      <C>    <C>      <C>      <C>      <C>    <C>      <C>
Liabilities &
Equity                       12,168   16,633    11,915  6,602    2,151  2,275    1,435    2,581    1,946  29,512   87,218

60+ Months        17,563     12,168    5,395                                                                       17,563

36-59
Months             6,973               6,973                                        ASSET SENSITIVE                 6,973

24-35
Months             3,577               3,577                                                                        3,577

12-23
Months             6,807                 688     6,119                                                              6,807

10-11
Months             5,170                         5,170                                                              5,170

7-9
Months             7,200                           626   6,574                                                      7,200

4-6
Months           11,213                                     28   2,151  2,275    1,435    2,581  1,946      797    11,213

2-3
Months           23,210                                                                                  23,210    23,210

1 Month           5,505                 LIABILITY SENSITIVE                                               5,505     5,505

O/N                   0                                                                                                 0
-------------------------------------------------------------------------------------------------------------------------
Total            87,218     12,168    16,633   11,915   6,602    2,151  2,275    1,435    2,581  1,946   29,512    87,218
=========================================================================================================================
</TABLE>



NONINTEREST INCOME AND EXPENSE

         Noninterest  income  consist  primarily of services  charges on deposit
accounts and fees and other charges for banking  services.  Noninterest  expense
consists  primarily  of salary and  benefit  costs and  occupancy  expense.  The
following tables shows the detail for the years ended December 31, 2000 and 1999
and for seven-month period ended December 31, 1998.

                                       22

<PAGE>
TABLE 9

         The increase in noninterest  income for the comparative  periods is the
result  of the  continued  growth  of  Bancorp  and the  expansion  of  products
resulting in fee income.

<TABLE>
<CAPTION>


                                                                             FOR THE SEVEN
                                               DECEMBER 31,                   MONTHS ENDED
($ in thousands)                                   2000          1999       DECEMBER 31, 1998
                                               ------------   ---------     -----------------
<S>                                               <C>           <C>              <C>
Service charges on deposit accounts               $ 190         $ 111            $  5
Cash management fee income                           48            19               5
Gain on sale of securities                           17             -               -
Other fee income                                     47            29               4
                                               ------------   ---------     -----------------
             Total Noninterest Income             $ 302         $ 159            $ 14
                                               ============   =========     =================

</TABLE>

TABLE 10

         Major expense  categories that exceed 1% of operating  revenues for the
comparative years ended December 31 are as follows:

<TABLE>
<CAPTION>



                                            DECEMBER 31,       FOR THE SEVEN MONTH
                                        --------------------        PERIOD ENDED
($ in thousands)                          2000        1999       DECEMBER 31, 1998
                                        --------    --------   -------------------
<S>                                      <C>         <C>               <C>
Salaries and benefits                    $ 1,203     $  841            $ 355
Occupancy cost, net                          266        234              119
Equipment expense                            149        104               38
Data processing costs                        251        164               56
Advertising and public relations              56         48               38
Professional fees                             76         60               46
Courier and express services                  52         31               14
Meals & entertianment                         40         26               14
Supplies                                      35         25               15
Postage                                       27         25                5
Holding company organization costs             -         46                -
State franchise tax                           94         66               40
Other                                         99         57               77
                                        ---------   --------          -------
             Total Noninterest Expense   $ 2,348     $1,727            $ 817
                                        =========   ========          =======

</TABLE>



         Noninterest  expense  increased  $621,000  or 36% from $1.7  million at
December  31,1999 to $2.3  million  for 2000.  Approximately  one-third  of this
increase is due to the operating cost of Bancorp's first branch which was opened
at the end of the year in 1999. The branch is staffed with 3.5 FTE employees. At
December 31, 2000, the branch had $13 million in deposits and had generated $3.3
million in loans.  On a basis of fully  allocating  expenses,  the branch  began
making a positive  contribution  of earnings by mid-year  2000.  The increase in
personnel  expense  of $  362,000  is a result  of the  staff  costs for the new
branch,  merit  increases  to all  employees  on January 1 of each  year,  and a
$70,000 increase in the bonus pool for employees.

         Occupancy and equipment  costs  increased  $77,000 to $415, 000 in 2000
from $338,000 for 1999. The increase is predominately due to the rent, leasehold
amortization,  and equipment depreciation costs of the new branch for 2000 which
were not incurred  for 1999.  With  respect to the  increases in other  expenses
categories such as data processing costs, postage,  supplies,  and other general
operating  costs,  increases  are due to the  significant  growth  the  bank has
experienced since its opening.

                                       23

<PAGE>
TABLE 12

         The following  table indicates the amount of certificates of deposit of
$100,000 or more and less than $100,000, and their remaining maturities.

<TABLE>
<CAPTION>


                                               3 MONTHS     4 TO 6      7 TO 12     OVER 12
                                               OR LESS      MONTHS      MONTHS      MONTHS       TOTAL
                                             --------------------------------------------------------------
<S>                                            <C>          <C>         <C>         <C>         <C>
Certificates of deposit less than $100MM       $ 5,317      $ 1,682     $ 4,004     $ 2,502     $ 13,505
Certificates of deposit of $100MM or more        4,369        2,253       5,565         857       13,044
                                             --------------------------------------------------------------
                                               $ 9,686      $ 3,935     $ 9,569     $ 3,359     $ 26,549
                                             ==============================================================
</TABLE>

CAPITAL MANAGEMENT

                  Management monitors  historical and projected earnings,  asset
growth,  as well as its  liquidity  and various  balance sheet risks in order to
determine appropriate capital levels. At December 31, 2000, stockholders' equity
increased  $4.17  million  from the  $6,600,000  of equity at December 31, 1999,
primarily  as a result of the  issuance  of  216,177  shares of common  stock at
$14.50 per share,  which resulted in net proceeds of  approximately  $3 million,
and also  reflecting  earnings of $810,000,  an $284,000  increase in the in the
fair value of  securities  available  for sale,  and $17,000  proceeds  from the
exercise of a director stock option relating to 1,700 shares of common stock.

         James  Monroe  Bancorp has  reported a steady  improvement  in earnings
since James Monroe Bank opened on June 8, 1998.  Positive earnings were reported
in the ninth month of  operations  and  culminated  with $125,000 of earnings in
1999 and $810,000 of earning for 2000. One of Bancorp's  initial  strategies was
to restore the initial  lost  capital  from the  initial  organization  costs of
$254,000 and the accumulated  earnings loss of $452,000 for 1998. As of December
31, 2000,  the earnings for 1999 and 2000 have recouped the losses and ended the
year with a positive  retained  earnings of $229,000.  In addition,  Bancorp has
fully utilized its net operating losses for tax purposes  beginning in September
2000 and has been at a 34% effective tax rate since that date.

                                       24

<PAGE>
ITEM 7. Financial Statements.


                          INDEPENDENT AUDITOR'S REPORT

To the Stockholders and Directors
James Monroe Bancorp, Inc. and Subsidiary
Arlington, Virginia

         We have audited the accompanying  consolidated  balance sheets of James
Monroe  Bancorp,  Inc. and  Subsidiary as of December 31, 2000 and 1999, and the
related consolidated  statements of income,  changes in stockholders' equity and
cash  flows  for the  years  then  ended.  These  financial  statements  are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these  financial  statements  based on our audits.  The  financial
statements  of James  Monroe Bank for the period June 8, 1998  (commencement  of
banking  operations)  through  December 31, 1998 were audited by other  auditors
whose report, dated February 17, 1999, expressed an unqualified opinion on those
statements.

              We conducted  our audits in  accordance  with  generally  accepted
auditing  standards.  Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

              In our opinion, the consolidated  financial statements referred to
above present fairly, in all material respects,  the financial position of James
Monroe  Bancorp,  Inc. and  Subsidiary as of December 31, 2000 and 1999, and the
results  of its  operations  and its cash  flows for the years  then  ended,  in
conformity with generally accepted accounting principles.

/s/ Yount, Hyde & Barbour, P.C.


Winchester, Virginia
January 5, 2001

                                       25

<PAGE>
                           JAMES MONROE BANCORP, INC.

                                 AND SUBSIDIARY

<TABLE>
<CAPTION>

                                    JAMES MONROE BANCORP, INC.
                                          AND SUBSIDIARY

                                   CONSOLIDATED BALANCE SHEETS
                                    December 31, 2000 and 1999

                            (Dollars in thousands, except share data)

                                                                                  DECEMBER 31,
                                                                       -----------------------------
Assets                                                                    2000              1999
                                                                       ----------        -----------
<S>                                                                     <C>               <C>

Cash and due from banks                                                 $  6,362          $  2,641
Interest-bearing deposits in banks                                         2,010                -
Federal funds sold                                                         9,933             1,537
Securities available for sale, at fair value                              20,039            13,518
Loans, net of allowance for loan losses of $600 in 2000
  and $363 in 1999                                                        49,440            30,676
Bank premises and equipment, net                                             692               714
Accrued interest receivable                                                  567               346
Other assets                                                                 187               186
                                                                       ----------        -----------

                                                                        $ 89,230          $ 49,618
                                                                       ==========        ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Deposits:

Noninterest-bearing deposits                                            $ 22,711          $  13,217
Interest-bearing deposits                                                 55,331             29,602
                                                                       ----------        -----------
Total deposits                                                            78,042             42,819

Accrued interest payable and other liabilities                               455                199
                                                                       ----------        -----------
Total liabilities                                                         78,497             43,018
                                                                       ----------        -----------

COMMITMENTS AND CONTINGENCIES                                                 -                  -
                                                                       ----------        -----------

STOCKHOLDERS' EQUITY

Common stock, $1 par value; authorized 2,000,000 shares; issued
and outstanding 958,767 shares in 2000, 742,590 shares in 1999               959                743
Capital surplus                                                            9,506              6,683
Retained earnings (deficit)                                                  229               (581)
Accumulated other comprehensive income (loss)                                 39               (245)
                                                                       ----------        -----------
Total stockholders' equity                                                10,733              6,600
                                                                       ----------        -----------

                                                                        $ 89,230          $  49,618
                                                                       ==========        ===========

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       26

<PAGE>

                         JAMES MONROE BANCORP, INC.

                               AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF INCOME
         For the Years Ended December 31, 2000 and 1999 and for the
          Period from June 8, 1998 (Commencement of Banking Operations)
                         through December 31, 1998
              (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                                                                     FOR THE PERIOD
                                                                                  FOR THE             FOR THE         FROM JUNE 8,
                                                                                YEAR ENDED          YEAR ENDED       1998 THROUGH
                                                                               DECEMBER 31,        DECEMBER 31,       DECEMBER 31,
                                                                                   2000                1999               1998
                                                                               ------------        ------------     --------------
<S>                                                                               <C>                 <C>               <C>

INTEREST AND DIVIDEND INCOME:
Loans, including fees                                                             $3,977              $2,008            $  340
Securities, taxable                                                                1,067                 622                39
Federal funds sold                                                                   343                 215               251
Other interest income                                                                 26                  --                --
                                                                                  ------              ------            ------
Total interest and dividend income                                                 5,413               2,845               630
                                                                                  ------              ------            ------
INTEREST EXPENSE:
  Deposits                                                                         2,174                 921               148
  Federal funds purchased                                                              3                  --                --
                                                                                  ------              ------            ------
Total interest expense                                                             2,177                 921               148
                                                                                  ------              ------            ------
Net interest income                                                                3,236               1,924               482
PROVISION FOR LOAN LOSSES                                                            237                 231               132
                                                                                  ------              ------            ------
Net interest income after provision for loan losses                                2,999               1,693               350
                                                                                  ------              ------            ------
NONINTEREST INCOME:
Service charges and fees                                                             190                 111                 5
Gain on sales of available for sale securities                                        17                  --                --
Other                                                                                 95                  48                 9
                                                                                  ------              ------            ------
Total noninterest income                                                             302                 159                14
                                                                                  ------              ------            ------
NONINTEREST EXPENSES:
Salaries and wages                                                                 1,061                 744               306
Employee benefits                                                                    142                  97                49
Occupancy expenses                                                                   266                 234               119
Equipment expenses                                                                   149                 104                38
Other operating expenses                                                             730                 548               304
                                                                                  ------              ------            ------
Total noninterest expenses                                                         2,348               1,727               816
                                                                                  ------              ------            ------
Income (loss) before income taxes                                                    953                 125              (452)
PROVISION FOR INCOME TAXES                                                           143                  --                --
                                                                                  ------              ------            ------
Net income (loss)                                                                 $  810              $  125            $ (452)
                                                                                  ======              ======            ======

EARNINGS (LOSS) PER SHARE, basic                                                  $ 1.04              $ 0.17            $(0.61)
                                                                                  ======              ======            ======
EARNINGS (LOSS) PER SHARE, diluted                                                $ 1.01              $ 0.17            $(0.61)
                                                                                  ======              ======            ======

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       27

<PAGE>



                           JAMES MONROE BANCORP, INC.

                                 AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
           For the Years Ended December 31, 2000 and 1999 and for the
          Period From June 8, 1998 (Commencement of Banking Operations)
                            through December 31, 1998
                             (Dollars in thousands)

<TABLE>
<CAPTION>


                                                                                           ACCUMULATED
                                                                                              OTHER
                                                                                             COMPRE-     COMPRE-
                                                                                RETAINED     HENSIVE     HENSIVE      TOTAL
                                                          COMMON     CAPITAL    EARNINGS     INCOME      INCOME    STOCKHOLDERS'
                                                          STOCK      SURPLUS   (DEFICIT)     (LOSS)      (LOSS)      EQUITY
                                                         --------    --------   --------    --------    --------    --------
<S>                                                      <C>         <C>        <C>         <C>         <C>         <C>


BALANCE, JUNE 8, 1998                                    $    738    $  6,638   $   (254)   $     --                $  7,122
Comprehensive (loss):
Net (loss)                                                     --          --       (452)         --    $   (452)       (452)
Other comprehensive income:
Net change in unrealized (losses)
on available for sale securities,
net of deferred taxes of $6                                    --          --         --         (11)        (11)        (11)
                                                         --------    --------   --------    --------    --------    --------
Total comprehensive (loss)                                                                              $   (463)
                                                                                                        ========
BALANCE, DECEMBER 31, 1998                                    738       6,638       (706)        (11)                  6,659
Comprehensive (loss):
Net income                                                     --          --        125          --    $    125         125
Other comprehensive income:
Net change in unrealized (losses)
on available for sale securities,
net of deferred taxes of $121                                  --          --         --        (234)       (234)       (234)
                                                                                                        --------
   Total comprehensive (loss)                                                                           $   (109)
                                                                                                        ========
   Issuance of common stock                                     5          45         --          --                      50
                                                         --------   --------    --------    --------                --------
BALANCE, DECEMBER 31, 1999                                    743       6,683       (581)       (245)                  6,600
Comprehensive income:
Net income                                                     --          --        810          --    $    810         810
Other comprehensive income:
Net change in unrealized gains (losses)
  on available for sale securities:
Unrealized holding gains on
available for sale securities
net of deferred taxes of $152                                  --          --         --          --         295          --
Less:  reclassification adjustment,
net of income taxes of $6                                      --          --         --          --         (11)         --
                                                                                                        --------
Other comprehensive income,
net of tax                                                     --          --         --         284         284         284
                                                                                                        --------
   Total comprehensive income                                                                           $  1,094
                                                                                                        ========
   Issuance of common stock                                   216       2,823         --          --                   3,039
                                                         --------   --------    --------    --------                --------
BALANCE, DECEMBER 31, 2000                               $    959    $  9,506   $    229    $     39                $ 10,733
                                                         ========   ========    ========    ========                ========

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       28


<PAGE>





                           JAMES MONROE BANCORP, INC.
                                 AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
           For the Years Ended December 31, 2000 and 1999 and for the
         Period From June 8, 1998 (Commencement of Banking Operations)
                           through December 31, 1998
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                                                       FOR THE PERIOD
                                                                                                      FROM JUNE 8, 1998
                                                                        YEAR ENDED       YEAR ENDED        THROUGH
                                                                       DECEMBER 31,      DECEMBER 31,    DECEMBER 31,
                                                                          2000               1999           1998
                                                                       -----------       -----------     ------------
<S>                                                                     <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)                                                       $    810         $    125         $   (452)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization                                                112               81               38
Provision for loan losses                                                    237              231              132
(Increase) in accrued interest receivable                                   (221)            (258)             (88)
Amortization of bond premium                                                   5                3                2
Accretion of bond discount                                                   (22)              (6)              --
Realized (gain) on sales of securities available for sale                    (17)              --               --
Deferred income tax (benefit)                                               (159)              --               --
(Increase) decrease in other assets                                           12              (36)              (7)
Increase in accrued interest and other liabilities                           256              130               69
                                                                        --------         --------         --------
Net cash provided by (used in) operating activities                        1,013              270             (306)
                                                                        --------         --------         --------

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of securities available for sale                                (8,904)         (11,112)          (4,007)
Proceeds from calls and maturities of securities available for sale          332            1,230               --
Proceeds from sales of securities available for sale                       2,515               --               --
Purchases of premises and equipment                                          (90)            (301)            (364)
(Increase) in interest-bearing cash balances                              (2,010)              --               --
(Increase) decrease in Federal funds sold                                 (8,396)           3,430           (4,967)
Net (increase) in loans                                                  (19,001)         (18,270)         (12,769)
                                                                        --------         --------         --------
Net cash (used in) investing activities                                  (35,554)         (25,023)         (22,107)
                                                                        --------         --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, savings deposits
and money market accounts                                                 17,812           19,946           13,463
Net increase in time deposits                                             17,411            6,092            3,318
Proceeds from issuance of common stock                                     3,039               50               --
                                                                        --------         --------         --------
Net cash provided by financing activities                                 38,262           26,088           16,781
                                                                        --------         --------         --------

Increase (decrease) in cash and due from banks                             3,721            1,335           (5,632)

CASH AND DUE FROM BANKS

Beginning                                                                  2,641            1,306            6,938
                                                                        --------         --------         --------


Ending                                                                  $  6,362         $  2,641         $  1,306
                                                                        ========         ========         ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Interest paid on deposits and borrowed funds                            $  2,036         $    826         $    121
                                                                        ========         ========         ========
Income taxes paid                                                       $    235         $     --         $     --
                                                                        ========         ========         ========

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES,
   unrealized gain (loss) on securities available for sale              $    430         $   (355)        $    (16)
                                                                        ========         ========         ========

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       29

<PAGE>

                           JAMES MONROE BANCORP, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  NATURE OF BANKING ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND CONSOLIDATION

The  consolidated  financial  statements  include the  accounts of James  Monroe
Bancorp, Inc. (the "Corporation") and its wholly owned subsidiary,  James Monroe
Bank (the  "Bank").  In  consolidation,  significant  intercompany  accounts and
transactions have been eliminated.

BUSINESS

The  Corporation  offers  various  loan,  deposit  and other  financial  service
products to its customers,  principally  located  throughout  Northern Virginia.
Additionally,  the Corporation maintains correspondent banking relationships and
transacts daily federal funds  transactions on an unsecured basis, with regional
correspondent banks.

The accounting and reporting  policies and practices of the Corporation  conform
with generally accepted accounting principles. The following is a summary of the
most significant of such policies and procedures.

USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those  estimates.  Material  estimates that are
particularly  susceptible to  significant  change in the near term relate to the
determination of the allowance for loan losses and the valuation of deferred tax
assets.

CASH AND CASH EQUIVALENTS

For purposes of reporting  cash flows,  cash and due from banks  include cash on
hand and amounts due from banks, including cash items in process of clearing.

INTEREST-BEARING DEPOSITS IN BANKS

Interest-bearing  deposits  in banks  mature  within one year and are carried at
cost.

SECURITIES AVAILABLE FOR SALE

Securities  classified as available for sale are equity  securities with readily
determinable fair values and those debt securities that the Corporation  intends
to hold for an indefinite  period of time but not  necessarily to maturity.  Any
decision to sell a security  classified  as available for sale would be based on
various factors,  including  significant movements in interest rates, changes in
the maturity mix of the Corporation's  assets and liabilities,  liquidity needs,
regulatory capital  considerations,  and other similar factors. These securities
are carried at fair value,  with any  unrealized  gains or losses  reported as a
separate component of other comprehensive income net of the related deferred tax
effect.  Declines in the fair value below their cost that are deemed to be other
than temporary are reflected in earnings as realized  losses.  Interest  income,
including  amortization of premiums and accretion of discounts,  computed by the
interest method,  is included in interest income in the consolidated  statements
of income.  Gains and losses on the sale of securities are recorded on the trade
date and are determined using the specific identification method.

                                       30

<PAGE>


LOANS

The Corporation grants mortgage,  commercial and consumer loans to customers.  A
substantial  portion of the loan  portfolio is  represented  by commercial  real
estate loans  throughout  Northern  Virginia.  The ability of the  Corporation's
debtors to honor their  contracts is dependent  upon the real estate and general
economic conditions in this area.

Loans that  management  has the intent and  ability to hold for the  foreseeable
future or until maturity or pay-off  generally are reported at their outstanding
unpaid  principal  balances  adjusted for  charge-offs,  the  allowance for loan
losses,  and any deferred fees or costs on originated loans.  Interest income is
accrued on the unpaid principal  balance.  Loan origination fees, net of certain
direct  origination  costs,  are deferred and recognized as an adjustment of the
related loan yield using the interest method.

The accrual of interest on mortgage and commercial  loans is discontinued at the
time the loan is 90 days  delinquent  unless the credit is  well-secured  and in
process of collection.  Other personal loans are typically  charged off no later
than 180 days  past  due.  In all  cases,  loans are  placed  on  nonaccrual  or
charged-off  at an earlier  date if  collection  of  principal  or  interest  is
considered doubtful.

All interest  accrued but not  collected for loans that are placed on nonaccrual
or charged off is reversed against interest income.  The interest on these loans
is accounted for on the cash-basis or  costs-recovery  method,  until qualifying
for  return to  accrual.  Loans are  returned  to  accrual  status  when all the
principal and interest amounts  contractually due are brought current and future
payments are reasonably assured.

ALLOWANCE FOR LOAN LOSSES

The  allowance  for loan losses is  established  as losses are estimated to have
occurred  through a provision for loan losses  charged to earnings.  Loan losses
are charged against the allowance when management believes the  uncollectibility
of a loan balance is confirmed.  Subsequent recoveries,  if any, are credited to
the allowance.

Because the Corporation has no history of loan losses,  the current policy is to
build an allowance for loan losses of approximately  1.20% of total loans.  This
percentage was determined  based on peer group experience and the composition of
the Corporation's loan portfolio.

In the future,  the  allowance  for loan losses will be  evaluated  on a regular
basis by management,  and will be based upon management's periodic review of the
collectibility  of the loans in light of historical  experience,  the nature and
volume of the loan portfolio,  adverse situations that may affect the borrower's
ability to repay,  estimated  value of any underlying  collateral and prevailing
economic conditions.  This evaluation is inherently  subjective,  as it requires
estimates  that are  susceptible  to  significant  revision as more  information
becomes available.

A loan is considered  impaired when, based on current information and events, it
is probable that a creditor will be unable to collect the scheduled  payments of
principal or interest  when due according to the  contractual  terms of the loan
agreement.  Factors  considered by management in determining  impairment include
payment status,  collateral  value and the  probability of collecting  scheduled
principal and interest  payments when due. Loans that  experience  insignificant
payment delays and payment shortfalls  generally are not classified as impaired.
Management  determines the significance of payment delays and payment shortfalls
on a case-by-case  basis,  taking into  consideration  all of the  circumstances
surrounding  the loan and the borrower,  including the length of the delay,  the
reasons for the delay,  the borrower's  prior payment record,  and the amount of
the  shortfall in relation to the  principal  and interest  owed.  Impairment is
measured on a loan by loan basis for commercial and construction loans by either
the  present  value of  expected  future  cash  flows  discounted  at the loan's
effective  interest rate, the loan's  obtainable market price, or the fair value
of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for
impairment. Accordingly, the Corporation does not separately identify individual
consumer and residential loans for impairment disclosures.

                                       31

<PAGE>

BANK PREMISES AND EQUIPMENT

Premises and  equipment  are stated at cost less  accumulated  depreciation  and
amortization that is computed using the straight-line  method over the following
estimated useful lives:

                                                   YEARS

Leasehold improvements                                10
Furniture and equipment                             3-10

Costs incurred for maintenance and repairs are expensed currently.

INCOME TAXES

Deferred income tax assets and  liabilities  are determined  using the liability
(or balance  sheet)  method.  Under this  method,  the net deferred tax asset or
liability is determined  based on the tax effects of the  temporary  differences
between  the  book  and tax  bases  of the  various  balance  sheet  assets  and
liabilities  and gives  current  recognition  to  changes in tax rates and laws.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management,  it is more likely than not that some portion or all of the deferred
tax assets will not be realized.

FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures About Fair Value of Financial Instruments, " requires
disclosure of fair value information about financial instruments, whether or not
recognized in the balance  sheet,  for which it is  practicable to estimate that
value.  In cases where quoted market prices are not  available,  fair values are
based  on  estimates  using  present  value  techniques.  Those  techniques  are
significantly  affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate  settlement of the  instrument.  SFAS No. 107
excludes certain financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts presented
should not be  considered  an  indication  of the fair value of the  Corporation
taken as a whole.

STOCK COMPENSATION PLANS

Statement of Financial  Accounting  Standards  (SFAS) No. 123,  "Accounting  for
Stock-Based  Compensation,"  encourages all entities to adopt a fair value based
method of accounting for employee stock compensation plans, whereby compensation
cost is  measured  at the  grant  date  based on the  value of the  award and is
recognized  over the  service  period,  which is  usually  the  vesting  period.
However,  it also allows an entity to continue to measure  compensation cost for
those plans using the intrinsic  value based method of accounting  prescribed by
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees,"  whereby  compensation  cost is the  excess,  if any,  of the quoted
market price of the stock at the grant date (or other measurement date) over the
amount an employee must pay to acquire the stock. Stock options issued under the
Corporation's  stock option plan have no intrinsic  value at the grant date, and
under  Opinion  No.  25  no  compensation  cost  is  recognized  for  them.  The
Corporation  has elected to continue with the accounting  methodology in Opinion
No. 25 and, as a result,  has provided pro forma  disclosures  of net income and
earnings per share and other  disclosures,  as if the fair value based method of
accounting had been applied.


                                       32

<PAGE>



EARNINGS PER SHARE

Basic  earnings per share  represents  income  available to common  stockholders
divided by the  weighted-average  number of common shares outstanding during the
period.  Diluted earnings per share reflects additional common shares that would
have been outstanding if dilutive  potential  common shares had been issued,  as
well as any  adjustment  to income that would result from the assumed  issuance.
Potential  common shares that may be issued by the Corporation  relate solely to
outstanding stock options, and are determined using the treasury stock method.

<TABLE>
<CAPTION>


                                                                                 FOR THE PERIOD
                                                                                FROM JUNE 8, 1998
                                               YEAR ENDED      YEAR ENDED            THROUGH
                                               DECEMBER 31,   DECEMBER 31,        DECEMBER 31,
                                                  2000            1999                1998
                                               ------------   -------------       -------------
<S>                                            <C>            <C>                 <C>

                                                             (In Thousands)

Net income (loss)                                  $ 810       $ 125                 $(452)
                                                   =====       =====                 =====

Weighted average common shares outstanding           779         742                   738
Effect of dilutive options                            25           9                    --
                                                   -----       -----                 -----
Weighted average common shares outstanding
used to calculate diluted earnings per share         804         751                   738
                                                   =====       =====                 =====

</TABLE>

NOTE 2.       SECURITIES AVAILABLE FOR SALE

              The  amortized   cost  and  estimated  fair  value  of  securities
              available  for  sale,  with  gross  unrealized  gains  and  losses
              follows:

                                               GROSS         GROSS
                               AMORTIZED    UNREALIZED    UNREALIZED      FAIR
                                 COST          GAINS         LOSSES      VALUE
                              ----------    -----------   -----------   --------
                                                     2000
                              --------------------------------------------------
                                             (Dollars in Thousands)

U.S. Government and
federal agency                 $ 12,155     $     29      $    (49)     $ 12,135
Mortgage-backed                   5,209           50            (3)        5,256
Corporate notes                   2,243           32            --         2,275
Other securities                    373           --            --           373
                               --------     --------      --------      --------
                               $ 19,980     $    111      $    (52)     $ 20,039
                               ========     ========      ========      ========

                                       33


<PAGE>

                                           GROSS         GROSS
                         AMORTIZED      UNREALIZED    UNREALIZED       FAIR
                           COST            GAINS        LOSSES         VALUE
                        -----------     -----------   ----------       -----
                                               1999
                        --------------------------------------------------------
                                      (Dollars in Thousands)

U.S. Government and
federal agency          $ 11,655        $     --      $   (349)     $ 11,306
Mortgage-backed            2,035               5           (28)        2,012
Other securities             200              --            --           200
                        --------        --------      --------      --------
                        $ 13,890        $      5      $   (377)     $ 13,518
                        ========        ========      ========      ========


              The amortized  cost and fair value of  securities  by  contractual
maturity at December 31, 2000 follows:

                                                AMORTIZED        FAIR
                                                   COST         VALUE
                                                ---------     --------
                                                (Dollars in Thousands)

Due within one year                             $   250       $   250
Due after one year but within five years         15,590        15,622
Due after five years but within ten years         2,876         2,902
Due after ten years                                 891           892
                                                -------       -------
                                                 19,607        19,666
Equity securities                                   373           373
                                                -------       -------
Total available for sale securities             $19,980       $20,039
                                                =======       =======


Securities  carried at $2,800,000  and $1,750,000 at December 31, 2000 and 1999,
respectively,  were pledged to secure  public  deposits  and for other  purposes
required or permitted by law.

For the year  ended  December  31,  2000,  proceeds  from  sales  of  securities
available for sale amounted to  $2,515,000.  Gross  realized  gains  amounted to
$17,000.  The tax  provision  applicable  to these  realized  gains  amounted to
$6,000.  There were no sales of  securities  available  for sale  during 1999 or
1998.




                                       34


<PAGE>


NOTE 3.       LOANS AND ALLOWANCE FOR LOAN LOSSES

              Major classifications of loans are as follows:

                                                               DECEMBER 31,
                                                        ------------------------
                                                          2000           1999
                                                        --------       ---------
                                                         (Dollars in Thousands)

Commercial loans                                        $ 21,271       $ 15,812
Real estate - commercial                                  20,783          9,849
Real estate - 1 to 4 family residential                    4,165          1,003
Home equity loans                                            546            158
Consumer loans                                             3,275          4,217
                                                        --------       --------
                                                          50,040         31,039
Less allowance for loan losses                              (600)          (363)
                                                        --------       --------
Net loans                                               $ 49,440       $ 30,676
                                                        ========       ========

Changes in the allowance for loan losses are as follows:

                                                                  FOR THE PERIOD
                                        FOR THE       FOR THE      FROM JUNE 8,
                                      YEAR ENDED     YEAR ENDED    1998 THROUGH
                                     DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                         2000          1999           1998
                                     ------------   ------------   ------------
                                               (Dollars in Thousands)

Beginning balance                       $363           $132            $ --
Provision charged to operations          237            231             132
                                        ----           ----            ----
Ending balance                          $600           $363            $132
                                        ====           ====            ====



The  Corporation  has had no loans charged off since its  inception.  Nonaccrual
loans  excluded  from impaired  loan  disclosure  under SFAS No. 114 amounted to
$39,000 at December 31, 2000.  If interest on this loan had been  accrued,  such
income  would have  approximated  $3,000 at  December  31,  2000.  There were no
nonaccrual loans at December 31, 1999 or 1998.


                                       35

<PAGE>


NOTE 4.       BANK PREMISES AND EQUIPMENT

              Bank premises and equipment consist of the following:

                                               DECEMBER 31,
                                          ----------------------
                                            2000          1999
                                          --------      --------
                                          (Dollars in Thousands)

Leasehold improvements                      $337          $213
Furniture and equipment                      283           199
Computers                                    153           118
Software                                     132            54
Premises and equipment in process             18           248
                                            ----          ----
                                             923           832
Less accumulated depreciation                231           118
                                            ----          ----
                                            $692          $714
                                            ====          ====


              Depreciation  and  amortization   charged  to  operations  totaled
              $112,000  and $81,000 for the years  ended  December  31, 2000 and
              1999,  respectively,  and $38,000 for the period from June 8, 1998
              through December 31, 1998.

NOTE 5.       DEPOSITS

              Interest-bearing deposits consist of the following:

                                                          DECEMBER 31,
                                                --------------------------------
                                                    2000            1999
                                                -----------     -----------
                                                   (Dollars in Thousands)

NOW accounts                                    $   4,698            $   3,009
Savings accounts                                      417                  319
Money market accounts                              23,667               16,863
Certificates of deposit under $100,000             11,667                4,348
Certificates of deposit $100,000 and over          14,028                4,791
Individual retirement accounts                        854                  272
                                                ---------            ---------
                                                $  55,331            $  29,602
                                                =========            =========


                                       36

<PAGE>


              At December 31, 2000,  the  scheduled  maturities of time deposits
are as follows:

                   YEARS ENDING
                   DECEMBER 31,
              (Dollars in Thousands)

                      2001                     $    23,219
                      2002                           1,204
                      2003                             756
                      2004                             236
                      2005                           1,134
                                               -----------
                                               $    26,549
                                               ===========

NOTE 6.       INCOME TAXES

              Significant  components  of the  Corporation's  net  deferred  tax
assets consist of the following:

                                                  DECEMBER 31,
                                            -----------------------
                                               2000          1999
                                            ----------    ---------
                                              (Dollars in Thousands)

Deferred tax assets:
   Provision for loan losses                   $ 128          $  43
   Unrealized loss on securities                  --            127
   Amortization of organization and
      start-up costs                              51             56
   Other                                          --              2
   Net operating loss carryforward                --            105
                                               -----          -----
                                                 179            333
                                               -----          -----
Deferred tax liabilities:
   Depreciation                                  (20)           (14)
   Unrealized gain on securities                 (20)            --
                                               -----          -----
                                                 (40)           (14)
                                               -----          -----

                                                 139            319

Less valuation allowance                          --            192
                                               -----          -----
Deferred tax asset, net                        $ 139          $ 127
                                               =====          =====


                                       37

<PAGE>


              Allocation of federal  income taxes  between  current and deferred
              portions for the year ended December 31, 2000 is as follows:

                                                          2000
                                                  -------------------
                                                 (Dollars in Thousands)

             Current tax provision                        $ 302
             Deferred tax (benefit)                        (159)
                                                          -----
                                                          $ 143


              The  Corporation  recognized no income tax provision for the years
              ended  December  31, 1999 and the period from June 8, 1998 through
              December 31, 1998.

              The income  tax  provision  differs  from the amount of income tax
              determined by applying the U.S.  federal income tax rate to pretax
              income for the years ended  December  31,  2000 and 1999,  and the
              period  from June 8, 1998  through  December  31,  1998 due to the
              following:

                                               2000       1999       1998
                                              ------     ------     ------
                                                (Dollars in Thousands)

Computed "expected" tax expense (benefit)     $ 324      $  43      $(154)
Increase (decrease) in income taxes
  resulting from:
    Other nondeductible expenses                 11          1          3
    Change in valuation allowance              (192)       (44)       151
                                              -----      -----      -----
                                              $ 143      $  --      $  --
                                              =====      =====      =====


NOTE 7.  LEASE COMMITMENTS AND TOTAL RENTAL EXPENSE

              The  Corporation  leases its  facilities  under  operating  leases
              expiring at various dates through  2007.  The leases  provide that
              the Corporation pay as additional rent, its proportionate share of
              real estate taxes,  insurance,  and other operating expenses.  The
              leases  contain a  provision  for annual  increases  of 3%.  Total
              rental  expense for the years ended December 31, 2000 and 1999 was
              $198,000 and  $168,326,  respectively,  and $93,000 for the period
              from June 8, 1998 through December 31, 1998.

              The  minimum  lease  commitments  for  the  next  five  years  and
              thereafter are:

                  (Dollars in Thousands)
                         2001                               $        263
                         2002                                        271
                         2003                                        279
                         2004                                        289
                         2005                                        264
                         Thereafter                                  731



                                       38

<PAGE>


NOTE 8.       STOCK OPTION PLANS

              EMPLOYEE STOCK OPTION PLAN

              The  Corporation has a stock option plan (Plan) for key employees,
              which is accounted for in accordance  with  Accounting  Principles
              Board  (APB)   Opinion  25,   "Accounting   for  Stock  Issued  to
              Employees,"  and related  interpretations.  The Plan provides that
              91,880 shares of the  Corporation's  common stock will be reserved
              for both incentive stock options and  non-qualified  stock options
              to purchase  common stock of the  Corporation.  The exercise price
              per share for  incentive  stock  options and  non-qualified  stock
              options shall not be less than the fair market value of a share of
              common  stock  on the  date  of  grant,  and may be  exercised  in
              increments  commencing  after the date of grant.  One-third of the
              options granted become vested and exercisable in each of the three
              years following the grant date.  Each incentive and  non-qualified
              stock  option  granted  under this plan shall expire not more than
              ten years from the date the option is granted.

              A summary of the status of the Corporation's employee stock option
              plan is presented below:

<TABLE>
<CAPTION>


                                                 2000                         1999                         1998
                                       ---------------------------  ---------------------------  ---------------------------
                                                       WEIGHTED                     WEIGHTED                     WEIGHTED
                                                        AVERAGE                      AVERAGE                      AVERAGE
                                                       EXERCISE                     EXERCISE                     EXERCISE
                                          SHARES         PRICE         SHARES         PRICE         SHARES         PRICE
                                       -------------- ------------  -------------- ------------  -------------- ------------
<S>                                        <C>          <C>           <C>           <C>             <C>           <C>

Outstanding at beginning of year           49,880       $ 10.00       46,880        $ 10.00             --        $    --
Granted                                     4,750       $ 10.00        3,000        $ 10.00         46,880        $ 10.00
                                           ------                     ------                        ------
Outstanding at end of year                 54,630       $ 10.00       49,880        $ 10.00         46,880        $ 10.00
                                           ======                     ======                        ======

Options exerciseable at year end           34,832       $ 10.00       16,624        $ 10.00             --        $ 10.00
                                           ======                     ======                        ======
Weighted average fair value of
   options granted during the year         $ 4.68                     $ 4.37                        $ 3.59

</TABLE>

              DIRECTOR STOCK OPTION PLAN

              In 1999,  the  Corporation  adopted a stock  option  plan in which
              options  for  66,880  shares of common  stock  were  reserved  for
              issuance to directors  of the bank.  The  Corporation  applies APB
              Opinion 25 and related interpretations in accounting for the stock
              option plan. Accordingly,  no compensation has been recognized for
              grants  under this  plan.  The stock  option  plan  required  that
              options be granted at an exercise  price equal to at least 100% of
              the fair  market  value of the common  stock on the date of grant.
              One-third of the options  granted become vested and exercisable in
              each of the three years  following the grant date and shall expire
              not more than ten years from the date the option is granted.



                                       39

<PAGE>


              A summary of the status of the Corporation's director stock option
plan is presented below:

<TABLE>
<CAPTION>


                                                           2000                           1999
                                                   ----------------------      ------------------------
                                                                 WEIGHTED                      WEIGHTED
                                                                 AVERAGE                       AVERAGE
                                                                 EXERCISE                      EXERCISE
                                                   SHARES         PRICE         SHARES          PRICE
                                                   ------        -------        ------         ---------
<S>                                                <C>           <C>            <C>            <C>
Fixed Options:
   Outstanding at beginning of year                57,200        $ 10.00            --         $    --
   Granted                                            --         $    --        57,200         $ 10.00
   Exercised                                       (1,700)       $ 10.00            --         $    --
                                                   ------                       ------
   Outstanding at end of year                      55,500        $ 10.00        57,200         $ 10.00
                                                   ======                       ======

   Options exerciseable at year end                36,433        $ 10.00        19,067         $ 10.00
                                                   ======                       ======

</TABLE>


              Information pertaining to options outstanding at December 31, 2000
is as follows:

<TABLE>
<CAPTION>

                                       OPTIONS OUTSTANDING               OPTIONS EXERCISABLE
                                  ----------------------------        --------------------------
    Weighted
     Average                                          Weighted                           Weighted
    Remaining     Range of                            Average                             Average
   Contractual    Exercise           Number           Exercise           Number          Exercise
      Life         Prices         Outstanding          Price          Exercisable          Price
   -----------    --------        -----------         --------        -----------        ---------
<S>                <C>              <C>               <C>                <C>             <C>
    7.5 years      $ 10.00          46,880            $ 10.00            31,252          $ 10.00
    8.5 years      $ 10.00           3,000            $ 10.00             1,998          $ 10.00
   8.75 years      $ 10.00          55,500            $ 10.00            36,433          $ 10.00
    9.0 years      $ 10.00           4,750            $ 10.00             1,582          $ 10.00

</TABLE>

Had compensation cost for the  Corporation's  stock option plans been determined
based on the fair value at the grant dates for awards under the plans consistent
with the method  prescribed  by FASB  Statement No. 123, the  Corporation's  net
income and earnings per share would have been  adjusted to the pro forma amounts
indicated in the following table:

<TABLE>
<CAPTION>


                                                  2000          1999           1998
                                                --------      --------       --------
<S>                           <C>               <C>          <C>          <C>
                                                       (Dollars in Thousands)

Net income (loss)             As reported       $  810       $  125       $  (452)
                              Pro forma         $  710       $   31       $  (486)

Earnings (loss) per share     As reported       $ 1.04       $ 0.17       $ (0.61)
                              Pro forma         $ 0.91       $ 0.04       $ (0.66)

Earnings (loss) per share-    As reported       $ 1.01       $ 0.17       $ (0.61)
     assuming dilution        Pro forma         $ 0.88       $ 0.04       $ (0.66)

</TABLE>

                                       40

<PAGE>


              The fair value of each option  grant is  estimated  on the date of
              grant  using  the  Black-Scholes  option-pricing  model  with  the
              following weighted-average assumptions:

                                             2000           1999        1998
                                          -----------    ----------  -----------

              Dividend yield                    0.00%        0.00%       0.00%
              Expected life                  10 years     10 years    10 years
              Expected volatility               0.50%        0.50%       0.50%
              Risk-free interest rate           6.41%        5.83%       4.50%


NOTE 9.       401(K) PLAN

              Effective  January  1,  1999,  the  Corporation  adopted a Section
              401(k)  plan  covering   employees  meeting  certain   eligibility
              requirements as to minimum age and years of service. Employees may
              make voluntary  contributions  to the 401(k) plan through  payroll
              deductions  on  a  pre-tax  basis.   The   Corporation   may  make
              discretionary  contributions  to  the  401(k)  plan  based  on its
              earnings.  The employer's  contributions  are subject to a vesting
              schedule  requiring the completion of five years of service before
              these benefits become vested. A participant's 401(k) plan account,
              together  with  investment   earnings  thereon,  is  distributable
              following  retirement,  death,  disability or other termination of
              employment  under various  payout  options.  For the periods ended
              December 31, 2000, 1999 and 1998, no  discretionary  contributions
              were made by the Corporation.

NOTE 10. MINIMUM REGULATORY CAPITAL REQUIREMENTS

              The Corporation (on a consolidated basis) and the Bank are subject
              to various  regulatory  capital  requirements  administered by the
              federal  banking   agencies.   Failure  to  meet  minimum  capital
              requirements   can  initiate   certain   mandatory   and  possibly
              additional   discretionary   actions  by   regulators   that,   if
              undertaken,   could   have  a  direct   material   effect  on  the
              Corporation's  and  Bank's  financial  statements.  Under  capital
              adequacy  guidelines  and  the  regulatory  framework  for  prompt
              corrective action, the Corporation and the Bank must meet specific
              capital  guidelines  that involve  quantitative  measures of their
              assets,   liabilities  and  certain   off-balance-sheet  items  as
              calculated  under  regulatory  accounting  practices.  The capital
              amounts  and   classification  are  also  subject  to  qualitative
              judgments by the regulators about components, risk weightings, and
              other  factors.   Prompt  corrective  action  provisions  are  not
              applicable to bank holding companies.

              Quantitative  measures established by regulation to ensure capital
              adequacy  require the Corporation and the Bank to maintain minimum
              amounts and ratios (set forth in the following table) of total and
              Tier 1 capital (as defined in the  regulations)  to  risk-weighted
              assets (as  defined) and of Tier 1 capital (as defined) to average
              assets (as defined).  Management believes, as of December 31, 2000
              and 1999,  that the  Corporation and the Bank exceeded all capital
              adequacy requirements to which they are subject.


                                       41


<PAGE>


              As of December 31,  2000,  the most recent  notification  from the
              Federal Deposit Insurance Corporation categorized the Bank as well
              capitalized  under the regulatory  framework for prompt corrective
              action. To be categorized as well capitalized, an institution must
              maintain  minimum total  risk-based,  Tier 1 risk-based and Tier 1
              leverage ratios as set forth in the following tables. There are no
              conditions  or  events  since  the  notification  that  management
              believes have changed the Bank's category.  The  Corporation's and
              the Bank's  actual  capital  amounts and ratios as of December 31,
              2000 and 1999 are also presented in the table.

<TABLE>
<CAPTION>

                                                                                                     MINIMUM TO BE
                                                                                                    WELL CAPITALIZED
                                                                         MINIMUM CAPITAL           UNDER PROMPT CORRECTIVE
                                           ACTUAL                          REQUIREMENT                 ACTION PROVISIONS
                                      -------------------------     --------------------------    -----------------------
                                        AMOUNT          RATIO         AMOUNT           RATIO        AMOUNT        RATIO
                                      ---------       ---------     ----------       ---------    ----------    ---------
<S>                                   <C>             <C>           <C>              <C>           <C>           <C>
                                                                 (Dollars in Thousands)
As of December 31, 2000:
  Total Capital (to Risk
    Weighted Assets):
      Consolidated                     $11,294           19.6%       $ 4,620           8.0%           N/A         N/A
      James Monroe Bank                $ 9,268           16.2%       $ 4,586           8.0%       $ 5,732        10.0%
  Tier 1 Capital (to Risk
    Weighted Assets):
      Consolidated                     $10,694           18.5%       $ 2,310           4.0%           N/A         N/A
      James Monroe Bank                $ 8,668           15.1%       $ 2,293           4.0%       $ 3,439        6.0%
  Tier 1 Capital (to
    Average Assets):
      Consolidated                     $10,694           12.6%       $ 2,546           3.0%           N/A         N/A
      James Monroe Bank                $ 8,668           10.4%       $ 2,498           3.0%       $ 2,498        3.0%

As of December 31, 1999:
  Total Capital (to Risk
    Weighted Assets):
      Consolidated                     $ 7,208           21.4%       $ 2,700           8.0%           N/A         N/A
      James Monroe Bank                $ 7,254           21.5%       $ 2,700           8.0%       $ 3,375       10.0%
  Tier 1 Capital (to Risk
    Weighted Assets):
      Consolidated                     $ 6,845           20.3%       $ 1,350           4.0%           N/A         N/A
      James Monroe Bank                $ 6,891           20.4%       $ 1,350           4.0%       $ 2,025        6.0%
  Tier 1 Capital (to
    Average Assets):
      Consolidated                     $ 6,845           13.9%       $ 1,474           3.0%           N/A         N/A
      James Monroe Bank                $ 6,891           14.0%       $ 1,474           3.0%       $ 1,474        3.0%


</TABLE>



                                       42

<PAGE>


              RESTRICTION ON DIVIDENDS

              Prior  approval of the Bank's  regulatory  agencies is required to
              pay dividends  which exceed the Bank's net profits for the current
              year plus its retained net profits for the preceding two years. At
              December  31,  2000,  the Bank  could pay  $242,000  in  dividends
              without  prior  regulatory  approval.  The  Bank  did  not pay any
              dividends  during the periods  ended  December 31,  2000,  1999 or
              1998.

NOTE 11.      OFF-BALANCE SHEET ACTIVITIES

              The  Corporation's  financial  statements  do not reflect  various
              commitments which arise in the normal course of business and which
              involve elements of credit risk,  interest rate risk and liquidity
              risk. These commitments are to extend credit,  stand-by letters of
              credit and  revolving  lines of credit.  A summary of the notional
              amount of the  Corporation's  commitments  as of December 31, 2000
              and 1999, respectively is as follows:

                                                            2000      1999
                                                          --------  --------
                                                        (DOLLARS IN THOUSANDS)

                       COMMITMENTS TO EXTEND CREDIT       $ 17,493   $8,590
                       STAND-BY LETTERS OF CREDIT         $    463   $   47

              Commitments  to  extend  credit  and  stand-by  letters  of credit
              include   exposure   to  some   credit   loss  in  the   event  of
              nonperformance of the customer.  The Corporation's credit policies
              and procedures for credit commitments and financial guarantees are
              the same as those for  extensions  of credit that are  recorded on
              the balance sheets.  Because these instruments have fixed maturity
              dates,  and because many of them expire  without being drawn upon,
              they do not generally  present any  significant  liquidity risk to
              the Corporation.

              The  Corporation  maintains  a portion of its cash  balances  with
              several financial  institutions.  Accounts at each institution are
              secured  by  the  Federal  Deposit  Insurance  Corporation  up  to
              $100,000.  Unsecured  balances  were  approximately  $2,031,000 at
              December 31, 2000.

NOTE 12.      TRANSACTIONS WITH DIRECTORS AND OFFICERS

              The  Corporation  has  had,  and  may be  expected  to have in the
              future,  banking  transactions  in the ordinary course of business
              with directors and principal  officers,  their immediate  families
              and affiliated companies in which they are principal  stockholders
              (commonly  referred  to as  related  parties).  In the  opinion of
              management,  such  loans  are  made on the same  terms,  including
              interest rates and collateral, as those prevailing at the time for
              comparable transactions with others. They do not involve more than
              normal credit risk or present other unfavorable features.

              Aggregate loan balances with related parties totaled  $536,000 and
              $736,000 at December 31, 2000 and 1999,  respectively.  During the
              year ended  December  31, 2000,  total  principal  additions  were
              $238,000 and total principal payments were $438,000.

                                       43

<PAGE>


NOTE 13.      FAIR VALUE OF FINANCIAL INSTRUMENTS AND INTEREST RATE RISK

              The following  methods and  assumptions  were used to estimate the
              fair value of each class of financial  instruments for which it is
              practicable to estimate that value:

              CASH AND CASH EQUIVALENTS - For these short-term instruments,  the
              carrying amount is a reasonable estimate of fair value.

              INTEREST-BEARING  DEPOSITS  IN  BANKS - The  carrying  amounts  of
              interest-bearing  deposits maturing within ninety days approximate
              their fair value.

              INVESTMENT  SECURITIES  - Fair  values are based on quoted  market
              prices.  If a quoted market price is not available,  fair value is
              estimated using quoted market prices for similar securities.

              LOANS  RECEIVABLE - Fair value for performing  loans is calculated
              by discounting estimated cash flows using interest rates currently
              being offered for loans with similar terms to borrowers of similar
              credit quality.

              Fair  value  for  non-performing  loans is based on the  lesser of
              estimated   cash  flows   which  are   discounted   using  a  rate
              commensurate  with the risk  associated  with the  estimated  cash
              flows, or values of underlying collateral.

              DEPOSIT  LIABILITIES - The fair value of demand deposits,  savings
              accounts and certain money market  deposits is the amount  payable
              on demand at the reporting date. The fair value of certificates of
              deposit  is based on the  discounted  value  of  contractual  cash
              flows.  The discount rate is estimated  using the rates  currently
              offered for deposits of similar remaining maturities.

              ACCRUED  INTEREST  - The  carrying  amounts  of  accrued  interest
              approximate fair value.

              The  estimated   fair  values  of  the   Corporation's   financial
              instruments at December 31, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>


                                              DECEMBER 31, 2000              DECEMBER 31, 1999
                                         ----------------------------   ---------------------------
                                            CARRYING         FAIR         CARRYING          FAIR
                                             AMOUNT          VALUE         AMOUNT          VALUE
                                         -------------     ----------   -----------      ----------
<S>                                         <C>              <C>           <C>             <C>
FINANCIAL ASSETS:
Cash and due from banks                     $ 6,362       $ 6,362         $ 2,641        $ 2,641
Interest-bearing deposits in banks            2,010         2,010             - -            - -
Federal funds sold                            9,933         9,933           1,537          1,537
Investment secutities                        20,039        20,039          13,518         13,518
Loans                                        49,440        50,065          30,676         31,586
Accrued interest                                567           567             346            346

FINANCIAL LIABILITIES:
Deposits                                   $ 78,042      $ 78,187        $ 42,819       $ 42,807
Accrued interest                                264           264              73             73

</TABLE>




                                       44

<PAGE>


              The Corporation  assumes interest rate risk (the risk that general
              interest  rate  levels  will  change)  as a result  of its  normal
              operations.  As a result,  the fair  values  of the  Corporation's
              financial instruments will change when interest rate levels change
              and that  change may be either  favorable  or  unfavorable  to the
              Corporation. Management attempts to match maturities of assets and
              liabilities to the extent believed  necessary to minimize interest
              rate risk. However, borrowers with fixed rate obligations are less
              likely to prepay in a rising rate  environment  and more likely to
              prepay in a falling rate environment.  Conversely,  depositors who
              are receiving fixed rates are more likely to withdraw funds before
              maturity in a rising rate  environment and less likely to do so in
              a  falling  rate  environment.   Management   monitors  rates  and
              maturities  of assets and  liabilities  and  attempts  to minimize
              interest  rate risk by  adjusting  terms of new loans and deposits
              and by  investing  in  securities  with  terms that  mitigate  the
              Corporation's overall interest rate risk.

NOTE 14.      COMMITMENTS AND CONTINGENT LIABILITIES

              The Corporation  has unsecured lines of credit with  correspondent
              banks totaling $6,300,000 available for overnight borrowing. There
              were no amounts drawn on these lines at December 31, 2000 or 1999.

              As a member of the Federal  Reserve  System,  the  Corporation  is
              required to maintain  certain  average reserve  balances.  For the
              final  reporting  period in the year ended  December 31, 2000, the
              aggregate  amount  of daily  average  balances  was  approximately
              $261,000.

NOTE 15.      OTHER NONINTEREST INCOME AND EXPENSES

              The  principal  components  of  other  noninterest  income  in the
              consolidated statements of income are:

                                               2000          1999         1998
                                             --------    ----------      -------
                                                     (Dollars in Thousands)
              Cash management fee income     $    48     $      19       $     5
              Other fee income                    47            29             4
                                             --------    ----------      -------
                                             $    95     $      48       $     9
                                             ========    ==========      =======

              The  principal  components  of  other  operating  expenses  in the
              consolidated statements of income are:

<TABLE>
<CAPTION>


                                                         2000       1999           1998
                                                       --------   --------       --------
<S>                                                    <C>         <C>            <C>
                                                           (Dollars in Thousands)

              Data processing costs                    $    251    $   164        $    56
              Advertising and public relations               56         48             38
              Professional fees                              76         60             46
              Courier and express services                   52         31             14
              Meals and entertainment                        40         26             14
              Supplies                                       35         25             15
              Postage                                        27         25              5
              Holding company organization costs             --         46             --
              State franchise tax                            94         66             40
              Other                                          99         57             76
                                                       --------   --------       ---------

                                                       $    730   $    548        $   304
                                                       ========   ========       ========

</TABLE>


                                       45

<PAGE>


NOTE 16.      CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY

              Financial  information  pertaining  only to James Monroe  Bancorp,
              Inc. is as follows:

                            CONDENSED BALANCE SHEETS
                           December 31, 2000 and 1999

                                                            2000         1999
                                                          -------       -------
                                                          (Dollars in Thousands)
ASSETS
Interest-bearing deposits in banks                        $ 2,010       $    --
Investment in subsidiary bank                               8,707         6,646
Other assets                                                   20            --
                                                          -------       -------
                                                          $10,737       $ 6,646
                                                          =======       =======

LIABILITIES AND STOCKHOLDERS' EQUITY

Other liabilities                                         $     4       $    46
Stockholders' equity                                       10,733         6,600
                                                          -------       -------
                                                          $10,737       $ 6,646
                                                          =======       =======

                           CONDENSED INCOME STATEMENTS
                 For the Years Ended December 31, 2000 and 1999

                                                            2000          1999
                                                          -------       -------
                                                          (Dollars in Thousands)
Interest income                                           $    26       $    --

Operating expense                                              --            46
                                                          -------       -------
Income (loss) before income tax benefit and equity
   in undistributed income of subsidiary bank                  26           (46)
Income tax benefit                                              7            --
Equity in undistributed income of subsidiary bank             777           171
                                                          -------       -------
   Net income                                             $   810       $   125
                                                          =======       =======


<PAGE>

                       CONDENSED STATEMENTS OF CASH FLOWS
                 For the Years Ended December 31, 2000 and 1999


<TABLE>
<CAPTION>


                                                                        2000      1999
                                                                      --------  --------
                                                                    (Dollars in Thousands)
<S>                                                                   <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net income                                                            $   810     $   125
Adjustments to reconcile net income to
   net cash (used in) operating activities:
Equity in undistributed income of subsidiary bank                        (777)       (171)
      (Increase) in other assets                                          (20)         --
      Increase (decrease) in other liabilities                            (42)         46
                                                                      -------     -------
           Net cash (used in) operating activities                        (29)         --
                                                                      -------     -------

CASH FLOWS FROM INVESTING ACTIVITIES

Investment in subsidiary bank                                          (1,000)         --
(Increase) in interest-bearing deposits in banks                       (2,010)         --
                                                                      -------     -------
Net cash (used in) investing activities                                (3,010)         --
                                                                      -------     -------

CASH FLOWS FROM FINANCING ACTIVITIES,

proceeds from issuance of common stock                                  3,039          --
                                                                      -------     -------

Increase in cash and cash equivalents                                      --          --

CASH AND CASH EQUIVALENTS, beginning of year                               --          --
                                                                      -------     -------

CASH AND CASH EQUIVALENTS, end of year                                $    --     $    --
                                                                      =======     =======

</TABLE>


                                       47

<PAGE>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

         No disclosure required in this report.

                                    PART III

ITEM 9.  DIRECTORS,   EXECUTIVE   OFFICERS,   PROMOTERS  AND  CONTROL   PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         The Board of Directors has fixed the number of persons constituting the
Board of Directors  at twelve  (12),  Each of the  following  persons  currently
serves as a director  of Bancorp  and the Bank.  Directors  serve for a one year
term and until their successors have been elected and qualified.

         Set  forth  below is a  description  of the  principal  occupation  and
business  experience of each of the directors and executive officers of Bancorp.
Except as  expressly  indicated  below,  each  person  has been  engaged  in his
principal  occupation for at least five years.  Each of the members of the Board
of Directors of Bancorp has served  since the  organization  of Bancorp in 1999,
and has served as a director of the Bank since its inception in 1997, except Mr.
Burroughs,  who  joined  the Board of the Bank on  February  10,  1999,  and Mr.
Linhart,  who joined the Board of Bancorp in June 2000 and the Board of the Bank
in May, 2000.

         Fred A. Burroughs, III. Mr. Burroughs retired in 1997 from his position
as  Chairman  of the Board and Chief  Executive  Officer of The Bank of Northern
Virginia.

         Dr. Terry L. Collins.  Dr.  Collins is the  Co-Founder and President of
Argon  Engineering   Associates,   founded  in  1997  (Systems  and  Information
Technology  Firm).  He was also the Vice  President  and General  Manager of the
Falls Church Operation of Raytheon E-Systems from 1989 - 1997.

         Norman P.  Horn.  Mr.  Horn  retired  in  1997from  his  position  as a
Principal in Homes, Lowry, Horn & Johnson, Ltd. (Accounting Firm).

         Dr. David C.  Karlgaard.  Dr.  Karlgaard  is the Founder,  Chairman and
President of PEC Solutions,  Inc  (Information  Technology  Firm) (listed on the
Nasdaq National Market).

         Richard I. Linhart.  Mr.  Linhart has been Executive Vice President and
Chief Operating Officer of the Bank since February 1998 and of Bancorp since its
formation.  Prior to that time, Mr. Linhart was President of ALM Associates from
1995 to 1998,  Executive  Vice  President and CFO of Hubco,  Inc.,  Mahwah,  New
Jersey from 1994 to 1995 and  Executive  Vice  President and COO of NBT Bancorp,
Norwich, New York from 1991 to 1994.

         Richard  C.  Litman.  Mr.  Litman  is  a  Registered  Patent  Attorney;
President of Litman Law Offices, Ltd.

         John R. Maxwell.  Mr.  Maxwell has been  President and Chief  Executive
Officer of the Bank since April 1997 and of Bancorp since its  formation.  Prior
to joining James Monroe Bank, he was Senior Vice President - Lending of the Bank
of Northern  Virginia from 1988 to 1996 and Executive  Vice  President and Chief
Lending Officer of the Bank of Northern Virginia from 1996 to 1997.

         Dr. Alvin E. Nashman.  Dr. Nashman  retired in 1991from his position of
Head of the Systems  Group of Computer  Sciences  Corporation  which he held for
over 27 years He currently  serves as a consultant  for Trawick  Associates  and
Unitech Inc., both of which are technology  consulting services  companies.  Mr.
Nashman is also  Director of Micros to Mainframes  (publicly  traded on Nasdaq):
Director of  Andreulis  Corporation;  Director of  Spaceworks;  and  Director of
Federal Sources, Inc.

         Helen L. Newman.  Ms.  Newman is Senior Vice  President  of  Government
Operations for Gulfstream Aerospace Corporation.

         Thomas L.  Patterson.  Mr.  Patterson  is an attorney  with Linowes and
Blocher,  LLP.  (Law Firm) since May 2000.  From November 1998 until May 2000 he
was an attorney with Venable,  Baetjer,  Howard & Civiletti (or Tucker,  Flyer &
Lewis,  which  became  a part of that  firm in  1999).  Mr.  Patterson  was Vice
President - Real Estate  Counsel of Federal Realty  Investment  Trust from March
1997 until  September  1998,  and prior to that time was an  attorney in private
practice.

                                       48

<PAGE>
         David W. Pijor.  Mr. Pijor has been Chairman of the Bank since February
1997 and Chairman of Bancorp since its formation,  and is Of Counsel to the firm
of Sherman & Fromme, P.C. (Law Firm).

         Russell E. Sherman.  Mr.  Sherman is the President of Sherman & Fromme,
P.C. (Law Firm).

         Compliance  with  Section  16(a) of the  Securities  Exchange  Act. Not
applicable

         ITEM 10.  EXECUTIVE COMPENSATION.

         The  following  table  sets  forth  a  comprehensive  overview  of  the
compensation  for Mr.  Maxwell,  the  President  of the  Bank and  Bancorp,  and
executive  officers  who  received  total salary and bonuses of $100,000 or more
during the fiscal year ended December 31, 2000.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                Long-term
                                     Annual Compensation(1)              Compensation Awards
                                                                               Securities              All Other
 Name and Principal Position     Year       Salary           Bonus         Underlying Options       Compensation($)
----------------------------------------------------------------------------------------------------------------------
<S>                             <C>        <C>             <C>                  <C>                <C>
John R. Maxwell, President      2000       $133,750         $30,000                -0-             Less than $10,000
and Chief Executive Officer     1999       $118,750         $10,000                -0-             Less than $10,000
                                1998       $ 64,167           -0-                36,880            Less than $10,000

Richard I. Linhart,             2000       $102,000         $25,000               1,800            Less than $10,000
Executive Vice President,       1999       $ 90,000         $ 8,000                -0-             Less than $10,000
Chief Operating Officer         1998       $ 49,583           -0-                10,000            Less than $10,000

</TABLE>
-------------------------------
(1)  Compensation  for 1998 is from the date  the Bank  opened  on June 8,  1998
through December 31, 1998

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                       Percent of Total
                          Number of Securities        Options Granted to          Exercise
                           Underlying Options         Employees in Fiscal         Price Per
        Name                     Granted                     Year                   Share             Expiration Date
---------------------    ------------------------    ----------------------     --------------       ------------------
<S>                        <C>                          <C>                         <C>              <C>
John R. Maxwell                    -0-                        0%                     N/A                    N/A

Richard I. Linhart                1,800                      28.3%                 $10.00            January 10, 2011

</TABLE>
---------------------


                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR AND OPTION VALUES

<TABLE>
<CAPTION>
                                                                   Number of Securities          Value of Unexercised
                                                                  Underlying Unexercised        In-The-Money Options at
                         Shares Acquired                       Options at December 31, 2000        December 31, 2000
         Name              on Exercise      Value Realized      Exercisable/Unexercisable     Exercisable/Unexercisable(1)
--------------------------------------------------------------------------------------------------------------------------
<S>                         <C>             <C>                    <C>                         <C>
John R. Maxwell                -0-                -0-                 24,586/12,294                 $110,637/55,323
Richard I. Linhart             -0-                -0-                  8,466/5,134                  $38,097/$17,703
</TABLE>

-----------------------

(1) Based on $14.50 per share,  the price at which the common  stock was offered
    in Bancorp's offering completed in November 2000.


                                       49
<PAGE>


EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

         Set  forth  below is  certain  information  regarding  persons  who are
executive officers of the Bank or Bancorp.  Except as otherwise  indicated,  the
occupation listed has been such person's  principal  occupation for at least the
last five years.

EMPLOYMENT AGREEMENTS

         John R.  Maxwell.  The Bank and Bancorp  have entered into an agreement
with Mr.  Maxwell  pursuant to which Mr.  Maxwell  serves as President and Chief
Executive Officer of each institution.  Without cause or Mr. Maxwell's  consent,
he may not be  removed  from these  positions,  nor may any  executive  position
higher than Mr. Maxwell's be established.  The term of Mr.  Maxwell's  agreement
expires on May 31, 2002, and is subject to automatic one-year extensions on each
June 1  thereafter,  provided  that  neither nor Mr.  Maxwell has given  written
notice of intention not to renew at least 90 days prior to the renewal date. The
agreement  provides for the payment of cash and other  benefits to Mr.  Maxwell,
including a current base salary of  $140,0000  during the period June 1, 2000 to
May 31, 2001. Mr.  Maxwell's  base salary for  subsequent  periods is subject to
annual  review by the Board of  Directors,  provided  that the salary may not be
less than 105% of his base salary for the prior period.  Mr. Maxwell is entitled
to an annual bonus determined by the Board of Directors, $1,000,000 of Bank paid
life insurance  (subject to increase based upon the percentage  increase in base
salary), use of a Bank owned or leased car and an automobile  allowance,  and is
entitled to reimbursement of reasonable business expenses.  Under the agreement,
Mr. Maxwell has been granted  non-qualified options to purchase 36,880 shares of
common stock at an exercise price of $10.00 per share, vesting over a three year
period ending on June 1, 2001, exercisable through May 31, 2008, pursuant to the
1998 Management  Stock Option Plan. Mr. Maxwell is entitled to  reimbursement of
income taxes  payable upon the exercise of the options,  up to the amount of the
tax benefit  realized by Bancorp as a result of the exercise,  and under certain
circumstances,  to  registration  of the shares under the  securities  laws. Mr.
Maxwell is also  entitled to  participate  in any  pension,  retirement,  profit
sharing,  stock purchase,  stock option,  insurance,  deferred  compensation and
other benefit plans provided to other executives or employees.

         The  agreement  terminates  as of the end of the initial or any renewal
terms if either party gives notice of non-renewal.  If Mr. Maxwell elects not to
renew the  agreement,  he is not  entitled to any  additional  payments,  and is
subject to a two year non-competition restriction. If the Bank or Bancorp elects
not to renew the agreement, Mr. Maxwell is entitled to receive continued salary,
bonus  and  benefits  for 18  months,  and  is  subject  to the  non-competition
restriction for that period.  If the agreement is terminated by Mr. Maxwell,  at
his option, within six months of a "change in control" (as defined), Mr. Maxwell
shall be entitled to receive continued salary,  bonus and benefits for one year,
and is  subject  to the  non-competition  restriction  for that  period.  If the
agreement is terminated by the Bank or Bancorp in breach of the  agreement,  Mr.
Maxwell is entitled  to receive  continued  salary,  bonus and  benefits  for 12
months, and is not subject to the non-competition  restriction. If the agreement
is  terminated  by the Bank or Bancorp due to Mr.  Maxwell's  breach,  he is not
entitled  to any  additional  payments  and is  subject  to the  non-competition
restriction for two years. The agreement prohibits  conflicts of interests,  and
requires that Mr. Maxwell maintain the confidentiality of nonpublic  information
regarding the Bank, Bancorp and its customers.

         Richard I. Linhart. The Bank and Bancorp have entered into an agreement
with Mr.  Linhart  pursuant  to which  Mr.  Linhart  serves  as  Executive  Vice
President  and Chief  Operating  Officer of the Bank.  The  current  term of Mr.
Linhart's agreement expires on December 31, 2001. The agreement provides for the
payment of cash and other  benefits to Mr.  Linhart,  including  a current  base
salary of $115,000  during the period  January 1, 2001 to December 31, 2001. Mr.
Linhart's base salary is subject to annual review,  provided that the salary may
not be less than his base salary for the prior period. Under the agreement,  Mr.
Linhart has been  granted  non-qualified  options to purchase  10,000  shares of
common stock at an exercise price of $10.00 per share, vesting over a three year
period ending on June 8, 2001, exercisable through May 31, 2008, pursuant to the
1998 Management  Stock Option Plan. Mr. Linhart is entitled to  reimbursement of
income taxes  payable upon the exercise of the options,  up to the amount of the
tax benefit  realized by Bancorp as a result of the exercise,  and under certain
circumstances,  to  registration  of the shares under the  securities  laws. Mr.
Linhart is also  entitled to  participate  in any  pension,  retirement,  profit
sharing,  stock purchase,  stock option,  insurance,  deferred  compensation and
other benefit plans provided to other executives or employees.


         The  agreement  terminates as of December 31, 2001. If the agreement is
terminated by Mr. Linhart,  at his option,  for "good cause" (as defined) within
six months of a "change in control" (as defined),  Mr. Linhart shall be entitled
to receive  continued  salary and  benefits  for one year.  If the  agreement is
terminated by the Bank or Bancorp in breach of the agreement, or by Mr.. Linhart
as a result of Bank's  breach,  Mr.  Linhart is  entitled  to receive  continued
salary,  bonus and  benefits for the greater of twelve  months or the  remaining
term of the agreement,  and outplacement  assistance from an organization of Mr.
Linhart's  choice,  at a cost paid by the Bank and  Bancorp  of up to 18% of Mr.
Linhart's base salary at the time of termination.

DIRECTORS' COMPENSATION

         Directors do not receive fees for  attendance  at meetings of the Board
of  Directors  of Bancorp or the Bank,  or  committee  meetings.  Directors  are
entitled  to receive  options  under the 1999  Director  Option  Plan.  In 1999,
directors  received  options to  purchase  57,200  shares of Common  Stock at an
exercise price of $10.00 per share.  The Directors'  Option Plan was approved by
stockholders in 1999. Under the Directors'  Option Plan, 66,880 shares of common
stock are available for issuance  under options  granted  between 1999 and 2004.
The purpose of the  Directors'  Option Plan is to enable  Bancorp to continue to
attract and retain  outstanding  outside  directors,  and to further the growth,
development  and financial  success of Bancorp and the Bank.  Only  non-employee
directors of Bancorp and any subsidiary are eligible to participate in the Plan.
As of December 31, 2000 9,680 options remained available for issuance.


                                      50


<PAGE>


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth certain information as of March 16, 2001
concerning  the  number  and  percentage  of shares of  Bancorp's  common  stock
beneficially owned by its directors,  executive  officers,  and by its directors
and all executive  officers as a group,  as well as  information  regarding each
other person known by Bancorp to own in excess of 5% of the  outstanding  common
stock.  Except as otherwise  indicated,  all shares are owned directly,  and the
named person possesses sole voting and sole investment power with respect to all
such  shares.  Except as set forth  below,  Bancorp  knows of no other person or
persons  who  beneficially  own in excess of 5% of the  common  stock.  Further,
Bancorp is not aware of any arrangement which at a subsequent date may result in
a change of control of Bancorp.

<TABLE>
<CAPTION>

               Name,                  Age              Position                Shares Beneficially       Percentage
                                                                                    Owned(1)
------------------------------------ ------- ------------------------------ -------------------------- ---------------
<S>                                    <C>   <C>                                <C>                          <C>
DIRECTORS

Fred A. Burroughs, III                 65              Director                      10,000                     1.04%
Dr. Terry L. Collins                   55              Director                     50,200(2)                   5.21%
12701 Fair Lakes Cirle
Fairfax, VA  22033
Norman P. Horn                         69              Director                       9,933                     1.03%
Dr. David C. Karlgaard                 54              Director                      51,433                     5.33%
12750 Fair Lakes Circle
Fairfax, VA  22033
Richard Linhart                        57      Director, Executive Vice               9,216                     0.95%
Richard C. Litman                      43              Director                      10,400                     1.08%
John R. Maxwell                        40      Director, President & CEO             29,586                     3.01%
Dr. Alvin E. Nashman                   74              Director                     23,900(3)                   2.49%
Helen L. Newman                        57              Director                     24,966(4)                   2.60%
Thomas L. Patterson                    48              Director                     11,602(5)                   1.21%
David W. Pijor                         48      Chairman of the Board of Directors   13,400(6)                   1.39%
Russell E. Sherman                     64              Director                       9,466                     0.98%

Executive Officers and Directors
as a Group  (12 individuals)                                                       252,033(1)                  24.51%

Principal Shareholders

Nino Vaghi                                                                           78,000                     8.14%
c/o National Mailing Systems
1749 Old Meadow Road
McLean, VA  22101

</TABLE>

------------------------------------
(1)      The shares  "beneficially  owned" by an  individual  are  determined in
         accordance with the definitions of "beneficial  ownership" set forth in
         the General Rules and  Regulations of the U.S.  Securities and Exchange
         Commission  and may  include  shares  owned by or for the  individual's
         spouse and minor  children and any other relative of the individual who
         lives in the same home, as well as shares to which the individual  has,
         or  shares,  voting or  investment  power,  or has the right to acquire
         beneficial  ownership  within  sixty  (60) days after  March 16,  2001.
         Beneficial ownership may be disclaimed as to certain of the shares.

         Directors and executive  officers  beneficially own the following stock
         option shares which are exercisable  within 60-days following March 16,
         2001:  Collins-- 4,200 shares;  Horn-- 2,933 shares;  Karlgaard-- 5,533
         shares;  Linhart--8,466 shares;  Litman--5,400 shares;  Maxwell--24,586
         shares; Nashman---1,700; Newman--2,466 shares; Patterson--2,533 shares;
         Pijor--8,200 shares; Sherman--3,466 shares.

(2)      Includes 1,100 shares of Common Stock held individually by Mr. Collins'
         daughter.  Mr. Collins disclaims  beneficial ownership of the shares of
         Common Stock held by his daughter.

                                       51

<PAGE>


(3)      Includes 3,500 shares held individually by his spouse.

(4)      Includes 20,500 shares of Common Stock held individually by Mrs. Newman
         and 2,000 shares of Common Stock held individually by her spouse.

(5)      Includes  2,069 shares held in various  trusts which Mr.  Patterson has
         voting and/or  investment  power. Does not include 3,379 shares held by
         Mr. Patterson's sibling for benefit of Mr. Patterson's son.

(6)      Includes 3,650 shares held individually by Mr. Pijor, 1,350 shares held
         jointly,  and 200 shares  held by his minor  children  which Mr.  Pijor
         claims beneficial ownership.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Bancorp  has  had,   and  expects  to  have  in  the  future,   banking
transactions  in the  ordinary  course of business  with some of its  directors,
officers, and employees and their associates.  In the past, substantially all of
such  transactions  have  been on the  same  terms,  including  interest  rates,
maturities  and  collateral  requirements  as those  prevailing  at the time for
comparable  transactions  with  non-affiliated  persons and did not involve more
than the normal risk of collectibility or present other unfavorable features.

         The  maximum  aggregate  amount  of loans to  officers,  directors  and
affiliates  of  Bancorp   during  2000   amounted  to  $  723,434   representing
approximately 6.7% of Bancorp's total shareholders' equity at December 31, 2000.
In the opinion of the Board of  Directors,  the terms of these loans are no less
favorable  to  Bancorp  than terms of the loans  from  Bancorp  to  unaffiliated
parties.  On  December  31,  2000,  $  535,759  of  loans  were  outstanding  to
individuals who, during 2000, were officers, directors or affiliates of Bancorp.
At the time each loan was made,  management  believed  that the loan involved no
more  than  the  normal  risk  of  collectibility  and  did  not  present  other
unfavorable  features.  None of  such  loans  were  classified  as  Substandard,
Doubtful or Loss.

         David W. Pijor has performed  legal  services for James Monroe  Bancorp
and James Monroe Bank in the ordinary  course of their  businesses,  and Bancorp
expects that he will  continue to perform  services for Bancorp and James Monroe
Bank. In 1999 and 2000,  the aggregate fees paid to Mr. Pijor by Bancorp and the
Bank were $34,009 and $33,690, respectively.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

<TABLE>
<CAPTION>

Exhibit No.       Description of Exhibits
<S>               <C>
3(a)              Articles of Incorporation of James Monroe Bancorp, as amended(1)
3(b)              Bylaws of James Monroe Bancorp (1)
10(a)             Employment contract between James Monroe Bancorp and John R. Maxwell (1)
10(b)             James Monroe Bancorp1998 Management Incentive Stock Option Plan (1)
10(c)             James Monroe Bancorp1999 Director's Stock Option Plan (1)
10(d)             Employment contract between James Monroe Bancorp and Richard I. Linhart, filed herewith
11                Statement of Computation of Per Share Earnings
21                Subsidiaries of the Registrant

</TABLE>

         The sole  subsidiary  of James  Monroe  Bancorp is James  Monroe  Bank,
organized under the laws of Virginia.

--------------------------
(1)      Incorporated  by  reference  to exhibit of same number to James  Monroe
         Bancorp's  registration  statement  on Form SB-2 (No. 333-38098)

(B)  REPORTS ON FORM 8-K

         On  November  17,  2000,  Bancorp  filed a report  on Form  8-K,  dated
November 15, 2000, under Item 5, disclosing the completion of Bancorp's offering
and the proceeds thereof.

                                       52

<PAGE>


                                   SIGNATURES

         In accordance  with Section 13 of the Securities  Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                 JAMES MONROE BANCORP, INC.

March 14, 2001                   By:   /s/ John R. Maxwell
                                      --------------------------
                                      John R. Maxwell, President

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>

       SIGNATURE                                      TITLE                                       DATE
<S>                                                <C>                                           <C>

/s/ Fred A. Burroughs, III                         Director                                      March 14, 2001
---------------------------------------------
Fred A. Burroughs, III


/s/ Dr. Terry L. Collins                           Director                                      March 14, 2001
---------------------------------------------
Dr. Terry L. Collins


/s/ Norman P. Horn                                 Director                                      March 14, 2001
---------------------------------------------
Norman P. Horn


/s/ Dr. David C. Karlgaard                         Director                                      March 14, 2001
---------------------------------------------
Dr. David C. Karlgaard



 /s/ Richard I. Linhart                            Director, Chief Operating Officer, Secretary  March 14, 2001
---------------------------------------------      (Principal Accounting and Financial Officer)
Richard I. Linhart


/s/ Richard C. Litman                              Director                                      March 14, 2001
---------------------------------------------
Richard C. Litman


 /s/ John R. Maxwell                               President, Chief Executive Officer            March 14, 2001
---------------------------------------------      and Director (Principal Executive Officer)
John R. Maxwell


/s/ Dr. Alvin E. Nashman                           Director                                      March 14, 2001
---------------------------------------------
Dr. Alvin E. Nashman


/s/ Helen L. Newman                                Director                                      March 14, 2001
---------------------------------------------
Helen L. Newman


                                       54

<PAGE>


/s/ Thomas L. Patterson                            Director                                      March 14, 2001
---------------------------------------------
Thomas L. Patterson


/s/ David W. Pijor                                 Chairman of the Board of Directors            March 14, 2001
---------------------------------------------
David W. Pijor


/s/ Russell E. Sherman                              Director                                      March 14, 2001
---------------------------------------------
Russell E. Sherman


</TABLE>




                                       54