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, 2001

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


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

                        Commission file number: 000-32641

                           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:  Common Stock,
$1.00 par value

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    X    No
    ------     -------

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, 2001 were
approximately $ 8,102,000

The aggregate market value of the outstanding Common Stock held by nonaffiliates
as of January 30, 2002 was approximately $14,093,526.

As of January 31, 2002, the number of outstanding shares of the Common Stock,
$1.00 par value, of James Monroe Bancorp, Inc. was 960,467.

                      DOCUMENTS INCORPORATED BY REFERENCE

                                      None
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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

GENERAL

         James Monroe Bancorp ("Bancorp") was incorporated under the laws of the
Commonwealth 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 small to medium sized businesses,
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 minimal
delinquencies or problem loans.

         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.

         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, 2001, the Bank's statutory lending limit to any single
borrower was $1.5 million, subject to certain exceptions provided under
applicable law. As of December 31, 2001, the Bank's credit exposure to its
largest borrower was $1,524,000.


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<PAGE>

         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.

         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, adjust within 3



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<PAGE>

to 5 years, 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, 2001, 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.



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<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; or
securities of states and political subdivisions.

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.

         Bills have been introduced in each of the last three Congresses 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 legislation effectively permitting the payment of interest on
business demand deposits is enacted, 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.

         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.



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         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, 2001, the Bank had 24 full-time and 4 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.

         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.



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<PAGE>

         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.

         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.



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<PAGE>

         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 and certain U.S. government and agency
securities, 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 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




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<PAGE>



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.

         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



                                       9


<PAGE>

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.

         Deposit Insurance Premiums. The FDIA establishes a risk based deposit
insurance assessment system. Under applicable regulations, deposit premium
assessments are determined based upon a matrix formed utilizing capital
categories - well capitalized, adequately capitalized and undercapitalized -
defined in the same manner as those categories are defined for purposes of
Section 38 of the FDIA. Each of these groups is then divided into three
subgroups which reflect varying levels of supervisory concern, from those which
are considered healthy to those which are considered to be of substantial
supervisory concern. The matrix so created results in nine assessment risk
classifications, with rates ranging from 0.04% of insured deposits for well
capitalized institutions having the lowest level of supervisory concern, to
0.31% of insured deposits for undercapitalized institutions having the highest
level of supervisory concern. In general, while the Bank Insurance Fund of the
FDIC ("BIF") maintains a reserve ratio of 1.25% or greater, no deposit insurance
premiums are required. When the BIF reserve ratio falls below that level, all
insured banks would be required to pay premiums at a uniform rate of 0.23% of
insured deposits. Certain studies by the FDIC and other agencies project that
the BIF will fall below the required reserve ratio in 2002, which would likely
result in the imposition of deposit premiums at the uniform rate in 2003,
although there can be no assurance of this.

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 7,170 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 two branch offices, located at 7023 Little River Turnpike,
Annandale, Virginia and 606 S. King St., Leesburg, Virginia. The Annandale
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



                                       10


<PAGE>

approximately 3% annually. There are options to renew the lease for two
additional five-year terms. The Leesburg branch is consists of 1,774 square feet
in an office complex. 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. In October 2001, the Company entered into a new
lease of 3,420 square feet at 10509 Judicial Drive, Fairfax, Virginia. The
current monthly rental is $7,695 subject to annual increases of approximately
3%. The lease expires on November 14, 2011. There is one five-year renewal
option. The Company intends to open a branch at this site on or about February
15, 2002.

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

ITEM 3.  LEGAL PROCEEDINGS.

         Bancorp may be involved in routine legal proceedings in the ordinary
course of its business. At December 31, 2001, there were 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, 2001.

                                     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, 2001, there were 960,467 shares
of common stock outstanding, held by approximately 496 shareholders of record.

         Set forth below is certain financial information relating to Bancorp's
share price history for the each quarter since January 1, 2000. For 2001 and
2002, information provided represents high and low bid prices, which reflect
inter-dealer prices without retail mark-up, mark-down or commission, and may not
represent actual trades. Information for 2000 reflects high and low sales prices
for trades known to Bancorp, and do not necessarily reflect all trades which
occurred.


<TABLE>
<CAPTION>


                         2002                     2001                      2000
                 ---------------------    ----------------------    ----------------------
Period Ended       High        Low          High         Low          High         Low
                 ---------   ---------    ---------   ----------    ----------  ----------
<S>               <C>         <C>          <C>         <C>           <C>         <C>
March 31          $19.00      $17.00       $15.50      $14.50        $ 12.25     $ 10.00
June 30                                    $17.00      $12.00        $ 12.25     $ 11.44
September 30                               $17.00      $13.75        $ 14.50     $ 14.50
December 31                                $19.00      $14.00         None        None

</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 and capital, 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.



                                       11
<PAGE>

         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, 2001,
$1,347,000 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.

         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:

            o       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.
            o       On each of February 10, 2000 and February 12, 2001, Director
                    Dr. Alvin Nashman exercised options to purchase 1,700 shares
                    of common  stock at an  exercise  price of $10.00 per share.
                    Bancorp relied on the exemption  provided by Section 4(2) of
                    the Securities Act of 1933.
            o       On February 10, 1999, prior to the  establishment of Bancorp
                    as the  holding  company  for the Bank,  the Bank sold 5,000
                    shares 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.

         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.



                                       12
<PAGE>

         As of January 31, 2002, $2 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.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS.

FORWARD-LOOKING STATEMENTS

         This document contains forward looking statements within the meaning of
the Securities Act of 1933 and the Securities Exchange Act of 1934, 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 forward looking statements are generally identified
by phrases such as "Bancorp expects," "Bancorp believes," "Bancorp anticipates,"
"may," "should" or words of similar import. 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
notes thereto for the year ended December 31, 2001.

BALANCE SHEET

         DECEMBER 2001 VS. DECEMBER 2000. Total assets increased by $37.4
million from December 31, 2000 to December 31, 2001, ending the period at $126.7
million. During this period Bancorp opened its third office, in Leesburg,
Virginia. The increase in assets occurred as a result of a $36.2 million
increase in deposits, with noninterest-bearing deposits increasing $12.3 million
and interest-bearing deposits increasing $23.9 million. Stockholders' equity
increased $1.3 million as a result of the $1.1 million of earnings for the year
2001 and $105 thousand increase in the unrealized gains on securities available
for sale. With this growth in deposits and capital, Bancorp was able to fund a
$36.1 million increase in loans, and added $2.1 million to the securities
portfolio, and increased Bancorp's liquidity position (Federal funds sold and
interest bearing deposits).

         DECEMBER 2000 VS. DECEMBER 1999. 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. The Company opened its first
branch on December 23, 1999.




                                       13
<PAGE>

RESULTS OF OPERATIONS



<TABLE>
<CAPTION>


                                                         YEAR ENDED DECEMBER 31,
                                               ------------------------------------------------
($ IN THOUSANDS EXCEPT SHARE DATA)                  2001             2000            1999
                                               ---------------  --------------- ---------------
<S>                                             <C>              <C>             <C>
BALANCE SHEET HIGHLIGHTS:
Total assets                                    $   126,658      $   89,230      $   49,618
Total loans                                          86,139          50,040          31,039
Total liabilities                                   114,691          78,497          43,018
Total stockholders' equity                           11,967          10,733           6,600
-----------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS:
Total interest income                           $     7,548      $    5,413      $    2,845
Total interest expense                                2,918           2,177             921
Net interest income                                   4,630           3,236           1,924
Provision for loan losses                               450             237             231
Other income                                            554             302             159
Noninterest expense                                   3,033           2,348           1,727
Income before taxes                                   1,701             953             125
Net income                                            1,112             810             125
-----------------------------------------------------------------------------------------------
PER SHARE DATA:
Earnings per share, basic                       $      1.16      $     1.04      $     0.17
Earnings per share, diluted                     $      1.12      $     1.01      $     0.17
Weighted average shares
     outstanding--basic                             960,099         779,256         742,028

Weighted average shares
     outstanding--diluted                           995,420         804,394         750,952
Book value (at period-end)                      $     12.46      $    11.19      $     8.87

Shares outstanding                                  960,467         958,767         744,290
-----------------------------------------------------------------------------------------------
PERFORMANCE RATIOS:
Return on average assets                               1.02%           1.19%           0.32%
Return on average equity                               9.65%          10.75%           1.89%
Net interest margin                                    4.56%           5.09%           5.25%
Efficiency Ratio                                       58.5%           66.4%           82.9%
-----------------------------------------------------------------------------------------------
OTHER RATIOS:
Allowance for loan losses to total loans               1.20%           1.20%           1.17%
Equity to assets                                       9.45%          12.03%          13.30%
Nonperforming loans to total loans                     0.31%           0.08%           0.00%
Net charge-offs to average loans                       0.03%           0.00%           0.00%
Risk-Adjusted Capital Ratios:
     Tier 1                                            11.9%           18.5%           20.3%
     Total                                             13.0%           19.6%           21.4%
     Leverage Ratio                                     9.5%           12.6%           14.0%


</TABLE>



COMPARISON OF 2001 OPERATING RESULTS TO 2000 OPERATING RESULTS

         For the year ended December 31, 2001, Bancorp earned $1.1 million , or
$1.16 per basic share and $1.12 per diluted share, compared with $810 thousand,
or $1.04 per basic share and $1.01 per diluted share, for the year ended
December 31, 2000. Return on average assets of 1.02% and return on average
equity of 9.65% for the year ended December 31, 2001 compared to a 1.19% return
on average assets and a 10.75% return on average equity for the year ended
December 31, 2000.



                                       14
<PAGE>

         Bancorp's per share earnings and the returns on assets and equity for
the for the year ended December 31, 2001 are negatively impacted by the fact
that it was in a taxable position in 2001, whereas it was not required to make a
tax provision during the first eight months of 2000. In addition, per share
earnings and the ratios for 2001 are further negatively impacted as a result of
the sale and issuance of an additional 214,477 shares of common stock in
November 2000. As a result of these factors, the Company does not believe that
direct comparisons of results of operations for the comparable periods in 2001
and 2000 are meaningful.

         During 2001, Bancorp continued to focus on managing its net interest
margin, especially in light of the rapidly changing interest rate environment,
and the level of operating expenses. In 2001, the Federal Reserve reduced
interest rates 11 times, for a total reduction of 475 basis points, an
unprecedented reduction both in terms of the number of, and amount of, rate
changes in a 12-month period. These rate reductions had a direct impact on the
rates earned on the Bank's outstanding floating or adjustable rate loans, as
well as new loans, and on the rates earned on other investments. These dramatic
reductions in a relatively short period resulted in a reduction in the net
interest margin, which declined from 5.09% during the 2000 to 4.56% during 2001.
Despite these reductions, the Company's practice of managing its interest rate
risk process has mitigated the negative effect of such a severe declining rate
environment. Although Bancorp continued to grow in asset size since its
inception in 1998, and added its second branch, its third office, in 2001, it
was able to continue to improve on its operating efficiency. Bancorp's
Efficiency Ratio dropped from 66.4% in 2000 down to 58.5% in 2001.

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 revenue and earnings. Unlike the
larger regional or mega-banks who have significant sources of fee income,
community banks, such as the Bank, rely primarily on net interest income from
traditional banking activities as the primary revenue source. Table 1 presents
average balance sheets and a net interest income analysis for the years ended
December 31, 2001 and December 31, 2000. Bancorp did not have any tax-exempt
income during any of the periods presented in table 1.

         For the year ended December 31, 2001, net interest income increased
$1.4 million, or 43.1%, to $4.6 million from the $3.2 million for the year ended
December 31, 2000, primarily as a result of the increase in the volume of
interest earning assets, partially offset by the effect of declining interest
rates. Total average earning assets increased by $37.8 million, or 59.4%, from
2000 to 2001. The yield on earning assets decreased by 107 basis points from
2000, reflecting the dramatic reductions in interest rates in 2001. Yields on
federal funds and the securities portfolio decreased by 281 and 22 basis points,
respectively. Average loans outstanding grew by $24.4 million, or 58.8%, during
2001 compared to 2000, and the yield on such loans decreased by 102 basis
points. The federal funds rate, which is the short-term liquidity yield,
reflected the most sensitivity to declining rates, while loan yields and the
securities yields declined, but not as significantly. This is due to the
composition of the loan portfolio being comprised of variable, fixed, and
adjustable rates, which are not all subject to immediate rate reductions. In the
case of the securities portfolio, many agency bonds were called in 2001, but
Bancorp was able to reinvest the proceeds of the called securities into new
securities at similar yields, which partially mitigated the call of higher
yielding securities.

         Interest expense for 2001 was $2.9 million compared with $2.2 million
in interest expense for 2000. This increase is predominately a result of the
$24.7 million, or 58.2% growth in the volume of interest-bearing liabilities,
partially offset by the 78 basis point decrease in the average cost of
interest-bearing liabilities. Although deposit rates in our market peaked during
the middle of 2000, the Company's interest expense for deposits lagged in
repricing and/or resetting downward to reflect declines in market interest
rates. This lag is primarily the result of the Company's interest-bearing time
deposits, most of which have maturities of one year or less and which will not
immediately reprice at lower rates in a falling rate environment, but which
become eligible for repricing at lower rates during the 12 months following a
declining rate environment. Repricing of these liabilities accelerated in the
fourth quarter of quarter of 2001 and is expected to continue in early 2002.




                                       15
<PAGE>

COMPARISON OF AVERAGE BALANCES, INTEREST AND YIELDS

         The following table provides certain information relating to the
Company's average consolidated statements of financial condition and reflects
the interest income on interest-earning assets and interest expense of
interest-bearing liabilities for the periods indicated and the average yields
earned and rates paid for 2001 and 2000. These yields and costs are derived by
dividing income or expense by the average daily balance of the related assets or
liabilities for the periods presented. Yields on loans and securities have not
been calculated on a tax equivalent basis. Non-accrual loans have been included
in the average balances of loans receivable.


TABLE 1
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES
2001 COMPARED TO 2000
($ IN THOUSANDS)

TABLE 1
Consolidated Average Balances, Yields and Rates
2001 compared to 2000
($ in thousands)
<TABLE>
<CAPTION>

                                                           YEAR ENDED                              YEAR ENDED
                                                       DECEMBER 31, 2001                        DECEMBER 31, 2000
-------------------------------------------------------------------------------------------------------------------------
                                               AVERAGE                    YIELD/        AVERAGE                    YIELD/
                                               BALANCE       INTEREST      RATE         BALANCE       INTEREST      RATE
-------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>           <C>           <C>          <C>           <C>          <C>
ASSETS
Loans:
     Commercial                                $ 25,521      $ 2,110       8.27%        $ 19,224      $ 1,749       9.10%
     Commercial real estate                      30,401        2,689       8.84           16,729        1,670       9.98
     Consumer                                    10,009          844       8.43            5,567          558      10.02
                                               --------      -------      -----         --------      -------      -----
          Total Loans                            65,931        5,643       8.56           41,520        3,977       9.58
Taxable securities (1)                           23,218        1,464       6.31           16,338        1,067       6.53
Federal funds sold and cash equivalents          12,282          441       3.60            5,759          369       6.41
                                               --------      -------      -----         --------      -------      -----
                      TOTAL EARNING ASSETS      101,431        7,548       7.44%          63,617        5,413       8.51%
Less allowance for loan losses                    (756)                                     (481)
Cash and due from banks                           6,167                                    3,678
Premises and equipment, net                         871                                      712
Other assets                                        822                                      680
                                               --------                                 --------
                              TOTAL ASSETS     $108,535                                  $68,206
                                               ========                                 ========

LIABILITIES AND
     STOCKHOLDERS' EQUITY
Interest-bearing demand deposits               $  4,851      $    78       1.61%        $  3,667      $    77       2.10%
Money market deposit accounts                    33,516        1,203       3.59           20,826          986       4.73
Savings accounts                                    687           17       2.47              337           10       2.97
Time deposits                                    28,646        1,620       5.66           17,908        1,101       6.15
Borrowed funds                                       --           --         --               45            3       6.67
                                               --------      -------      -----         --------      -------      -----
     TOTAL INTEREST-BEARING
          LIABILITIES                            67,700        2,918       4.31%          42,783        2,177       5.09%
                                               --------      -------      -----         --------      -------      -----

Net Interest Income and Net Yield on
Interest-Earning Assets                                      $ 4,630       4.56%                      $ 3,236       5.09%
                                                             =======      =====                       =======      =====

Noninterest-bearing demand deposits              28,786                                   17,570
Other liabilities                                   527                                      319
Stockholders' equity                             11,522                                    7,534
                                               --------                                 --------
          TOTAL LIABILITIES AND
          STOCKHOLDERS' EQUITY                 $108,535                                 $ 68,206
                                               ========                                 ========
</TABLE>


(1) Yields on securities available for sale have been calculated on the basis of
historical cost, and do not give effect to changes in fair value of those
securities, which are reflected as a component of stockholder's equity.

                                       16
<PAGE>

         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 earning assets and
interest-bearing liabilities, and the changes in net interest income due to
changes in interest rates between 2001 and 2000. As the table shows, the
increase in net interest income in 2001 as compared to 2000 is entirely due to
the growth in the volume of earning assets and interest-bearing liabilities.
While the decrease in interest rates has, to date, affected total interest
income, and to a lesser extent, total interest expense, management has managed
its exposure to changes in interest rates such that the negative effect of the
declining rate environment resulted in a $226 thousand reduction of net interest
income, whereas the growth in earning assets and deposits resulted in an
increase of $1.6 million to net interest income.

TABLE 2
              EFFECT OF VOLUME RATE CHANGES ON NET INTEREST INCOME


<TABLE>
<CAPTION>

                                                               DECEMBER 31
                                                             2001 VS. 2000
                                               --------------------------------------------
                                                                        DUE TO CHANGE
                                                  INCREASE               IN AVERAGE:
                                                    OR           --------------------------
                                                 (DECREASE)          VOLUME        RATE
                                               --------------------------------------------
              <S>                                   <C>           <C>           <C>
              EARNING ASSETS:
              Loans                                 $   1,666     $    2,034    $    (368)
              Taxable securities                          397            432          (35)
              Federal funds sold                           72            117          (45)
                                               --------------------------------------------
                   Total interest income                2,135          2,583         (448)

              INTEREST-BEARING LIABILITIES:
              Interest-bearing demand
                   deposits                                 1             (0)           1
              Money market deposit
                   accounts                               217            359         (142)
              Savings deposits                              7              8           (1)
              Time deposits                               519            599          (80)
              Borrowed funds                               (3)            (1)          (2)
                                               --------------------------------------------
                   Total interest expense                 741            965         (224)
                                               --------------------------------------------

                        Net Interest Income         $   1,394     $    1,618    $    (224)
                                               ============================================
</TABLE>



COMPARISON OF 2000 OPERATING RESULTS TO 1999 OPERATING RESULTS

         For the year ended December 31, 2000, Bancorp earned $810 thousand, or
$1.04 per basic share and $1.01 per diluted share, compared with $125 thousand,
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.

         During 2000, Bancorp continued 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 experienced.


NET INTEREST INCOME

         Table 3 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 in Table 3.



                                       17
<PAGE>

         For the year ended December 31, 2000, net interest income increased
$1.3 million, or 68.1%, to $3.2 million as compared to 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
$26.9 million, or 73.6%, from 1999 to 2000, and the yield on earning assets
increased by 75 basis points as a result of four 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 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 54 basis points. Also
contributing to the increase in earning assets on a period- to-period basis was
the increase in taxable securities, which increased $6.2 million and federal
funds sold and cash equivalent increased $1.5 million. The yield on these
earning assets also increased 42 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.

         The following table provides certain information relating to the
Company's average consolidated statements of financial condition and reflects
the interest income on interest-earning assets and interest expense of
interest-bearing liabilities for the periods indicated and the average yields
earned and rates paid for 2000 and 1999. These yields and costs are derived by
dividing income or expense by the average daily balance of the related assets or
liabilities for the periods presented. Yields on loans and securities have not
been calculated on a tax equivalent basis. Non-accrual loans have been included
in the average balances of loans receivable.












                                       18
<PAGE>


TABLE 3
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES
2000 COMPARED TO 1999
($ 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 (1)                              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-bearing 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>

(1) Yields on securities available for sale have been calculated on the basis of
historical cost, and do not give effect to changes in fair value of those
securities, which are reflected as a component of stockholder's equity.

         Table 4 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 assets and
interest-bearing liabilities for the comparative periods despite the fact that
interest rates changed six times for an aggregate increase of 175 basis points



                                       19
<PAGE>

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 maintained a relatively consistent and
strong net interest margin in excess of 5% during 2000 and 1999.

TABLE 4
           EFFECT OF VOLUME RATE CHANGES ON NET INTEREST INCOME

<TABLE>
<CAPTION>

                                                   YEAR ENDED DECEMBER 31,
                                                      2000 VS. 1999
                                           -------------------------------------
                                                             DUE TO CHANGE
                                             INCREASE        IN AVERAGE:
                                               OR       ------------------------
($ IN THOUSANDS)                            (DECREASE)     VOLUME       RATE
                                           -------------------------------------
<S>                                           <C>          <C>         <C>
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
                                           =====================================

</TABLE>


PROVISION AND ALLOWANCE FOR LOAN LOSSES

         The provision for loan losses is based upon management's judgment of
the adequacy of the allowance for loan losses to absorb probable inherent losses
in the current loan portfolio. During 2001, Bancorp experienced its first loan
losses since the Bank opened in 1998, as four small loans totaling approximately
$20 thousand were charged-off. At December 31, 2001, the Company had no impaired
loans or loans on nonaccrual status, and one nonperforming loan in the amount of
$266 thousand that is fully-secured and in the process of collection and which
is current as to interest on the loan. The Company has one other loan, in the
amount of $250 thousand, secured by business assets with no readily determinable
market value, that is current as to its terms but which the Company has serious
concerns as to the ability of the borrower to be able to comply with the current
loan repayment terms in the future. At December 31, 2000 and 1999, the Company
had no impaired loans and $39,000 and $0, respectively, of loans on nonaccrual
status. There were no restructured loans, other real estate owned or foreclosed
real estate at December 31, 2001, 2000 or 1999.

         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.




                                       20
<PAGE>

         While the methodology we use for establishing the allowance for loan
losses is reevaluated on at least a quarterly basis, Bancorp's current policy is
to maintain the allowance at approximately 1.20% of total loans. Bancorp
continues to experience excellent loan growth, despite national and regional
economic trends affecting larger institutions. While, the local economy has
shown signs of a cut back in certain sectors, Bancorp has not lent on
speculative real estate development but rather owner-occupied development
financing. Pending the development of a negative trend with respect to past due
loans or charge off trends, Bancorp continues to maintain a reserve it believes
is adequate but not excessive.

         As reflected in Table 6 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. For additional information on the allowance
for loan losses, nonperforming assets and Bancorp's policies for placing shares
on nonaccrual status, please refer to the Notes to the consolidated financial
statements for the year ended December 31, 2001.

TABLE 5

         THE FOLLOWING  TABLE  PRESENTS THE ACTIVITY IN THE ALLOWANCE FOR LOAN
LOSSES FOR THE YEARS ENDED  DECEMBER 31, 2001,  2000 AND 1999.

<TABLE>
<CAPTION>

                                                          DECEMBER 31,
                                     -------------------------------------------------------
($ in thousands)                            2001               2000              1999
                                     -------------------  ----------------  ----------------
<S>                                          <C>                <C>               <C>
Balance, January 1                           $      600         $     363         $     132
Provision for loan losses                           450               237               231
Loan charge-offs:
     Commercial                                      (5)               --                --
     Consumer                                       (15)               --                --
                                     -------------------  ----------------  ----------------
       Total charge-offs                            (20)
                                     -------------------  ----------------  ----------------
Loan recoveries                                      --                --                --
                                     -------------------  ----------------  ----------------
     Net charge-offs                                (20)               --                --
                                     -------------------  ----------------  ----------------
Balance, December 31                        $     1,030         $     600         $     363
                                     ===================  ================  ================
</TABLE>



TABLE 6

         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,
                                            ------------------------------------------------------------------------
                                                    2001                     2000                      1999
                                            ------------------------------------------------------------------------
($ in thousands)                             AMOUNT    PERCENT(1)     AMOUNT    PERCENT(1)      AMOUNT    PERCENT(1)
                                            ---------------------    ---------------------      --------------------
<S>                                         <C>         <C>          <C>         <C>            <C>          <C>
Commercial loans                            $   360      34.9%       $ 25,500      42.5%        $  200       50.9%
Comercial real estate loans                     530      51.3             250      41.5            120       31.8
Real estate 1-4 family residental loans          40       3.9              50       8.4             10        3.2
Home equity loans                                20       1.8              --       1.1             --        0.5
Consumer loans                                   80       8.1              45       6.5             33       13.6
                                            ---------------------    ---------------------      --------------------
Balance End of Period                       $ 1,030     100.0%       $ 25,845     100.0%        $  363      100.0%
                                            =====================    =====================      ====================

</TABLE>

     (1) Represents percentage of loans in category to gross loans.

LOANS

         The loan portfolio is the largest component of earning assets and
accounts for the greatest portion of total interest income. At December 31,
2001, total loans were $86.1 million, a 72% increase from the $50.0 million in
loans outstanding at December 31, 2000. Total loans at December 31, 2000
represented a 61.2% increase from the $31.0 million of loans 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.
Lending activity is confined to our market of Northern Virginia. We do not
engage in highly leveraged transactions or foreign lending activities.


                                       21

<PAGE>

         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 or adjustable 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.

         Virtually all of Bancorp's loans are commercial real estate mortgage or
development loans, relating to property in the Northern Virginia market. As
such, they are subject to risks relating to the general economic conditions in
that market, and the market for real estate in particular. While the region has
experienced some decline in economic activity during 2001, the local real estate
market remains generally strong, and Bancorp attempts to mitigate risk though
careful underwriting, including primary reliance on the borrower's financial
capacity and ability to repay without resort to the property, and lends
primarily with respect owner occupied or managed properties

         Bancorp's 1-4 family residential real estate loans are generally not
the typical purchase money first mortgage loan or refinancing, but are loans
made for other purposes and the collateral obtained is a first deed of trust on
the residential property of 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 reflected in Table 7, approximately one-third of Bancorp
loans are fixed rate loans. Ninety-six percent of Bancorp's loans have a
maturity or reprice in five-years or less.

         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, which
includes consumer loans, home equity loans, and 1-4 family residential loans,
represents 13.9% of the loan portfolio at December 31, 2001, as compared to 16%
at December 31, 2000 and 17.3% at December 31, 1999.

TABLE 7

         Table 7 shows the maturities of the loan portfolio and the sensitivity
of loans to interest rate fluctuations at December 31, 2001. Maturities are
based on the earlier of contractual maturity or repricing date. Demand loans,
loans with no contractual maturity and overdrafts are represented in one year or
less.

<TABLE>
<CAPTION>

                                                          DECEMBER 31, 2001
                                       ----------------------------------------------------------
                                                           AFTER ONE
                                             WITHIN      YEAR THROUGH    AFTER FIVE
($ in thousands)                            ONE YEAR      FIVE YEARS       YEARS         TOTAL
                                       ----------------------------------------------------------
<S>                                        <C>            <C>            <C>          <C>
Commercial loans                           $  22,083      $    4,573     $  3,140     $   29,796
Commercial real estate loans                  27,398          16,241          706         44,345
Real estate 1-4 family residential             1,602           1,761           --          3,363
Home equity loans                              1,554              --           --          1,554
Consumer loans                                 5,930           1,151           --          7,081
                                       ----------------------------------------------------------
                                           $  58,567      $   23,726     $  3,846     $   86,139
                                       ==========================================================

</TABLE>

<TABLE>
<CAPTION>

                                                        AFTER ONE YEAR
                                             ONE YEAR    THROUGH FIVE     AFTER FIVE
                                             OR LESS         YEARS          YEARS        TOTAL
                                       ----------------------------------------------------------
<S>                                        <C>           <C>              <C>         <C>
Fixed Rate                                 $  16,620     $    11,087      $   706     $   28,413
Variable/Adjustable Rate                      41,947          12,639        3,140         57,726
                                       ----------------------------------------------------------

                    Total                  $  58,567     $    23,726      $ 3,846     $   86,139
                                       ==========================================================
</TABLE>



                                       22
<PAGE>

         At December 31, 2001, the aggregate amount of loans due after one year
which have fixed rates was approximately $11.8 million, and the amount with
variable or adjustable rates was approximately $15.8 million.

TABLE 8

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


<TABLE>
<CAPTION>

                                             DECEMBER 31,          DECEMBER 31,         DECEMBER 31,
($ in thousands)                                 2001                  2000                 1999
                                           ------------------    -----------------    ------------------
<S>                                              <C>                  <C>                   <C>
Commercial loans                                 $    30,023          $    21,271           $    15,812
Real estate-Commercial                                44,192               20,783                 9,849
Real estate-1-4 family residential                     3,363                4,165                 1,003
Home equity loans                                      1,554                  546                   158
Consumer loans                                         7,007                3,275                 4,217
                                           ------------------    -----------------    ------------------
                                                      86,139               50,040                31,039
Less allowance for loan losses                        (1,030)                (600)                 (363)
                                           ------------------    -----------------    ------------------
Net Loans                                        $    85,109          $    49,440           $    30,676
                                           ==================    =================    ==================

</TABLE>

INVESTMENT SECURITIES

         The carrying value (fair value) of Bancorp's securities portfolio
increased $2.1 million to $22.1 million at December 31, 2001 from $20.0 million
at December 31, 2000. From December 31, 2000 to December 31, 2001, the
adjustment to record the securities at approximate fair market value improved by
$159 thousand from a mark-to-market appreciation of $59 thousand at the end of
2000 to a mark-to-market appreciation of $218 thousand at the end of 2001. The
carrying value (fair value) of Bancorp's securities portfolio increased $6.5
million to $20.0 million at December 31, 2000 from $13.5 million 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 thousand from a
mark-to-market loss of $372 thousand at the end of 1999 to a mark-to-market
appreciation of $59 thousand at the end of 2000.

         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
mortgage-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.

         The following table presents the amount and maturities of the
investment securities in our portfolio at December 31, 2001.



                                       23
<PAGE>


TABLE 9

MATURITY OF SECURITIES AT DECEMBER 31, 2001
<TABLE>
<CAPTION>
                                                                        YEARS TO MATURITY
-------------------------------------------------------------------------------------------------------------------------------
                                      WITHIN           OVER 1 YEAR            OVER 5            OVER
(in thousands)                        1 YEAR         THROUGH 5 YEARS     THROUGH 10 YEARS       10 YEARS              TOTAL
-------------------------------------------------------------------------------------------------------------------------------
                                   AMOUNT   YIELD    AMOUNT     YIELD    AMOUNT     YIELD   AMOUNT    YIELD    AMOUNT     YIELD
-------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>       <C>     <C>        <C>      <C>        <C>     <C>        <C>     <C>         <C>
INVESTMENTS AVAILABLE-FOR-SALE:
U.S. Agency                        $   --      --    $ 3,115    6.28%    $ 1,000    6.01%   $   --       --    $ 4,115     6.21%
Mortgage-backed securities             --      --      2,667    6.68%         --      --     3,029     6.29%     5,696     6.47%
Adjustable Rate Mortgage-backed
securities                             --      --         --      --          --      --     1,699     6.06%     1,699     6.06%
Corporate bonds                       500    6.99%     2,906    5.99%      3,799    6.42%    2,752     7.55%     9,957     6.63%
Other securities                                                                               434     5.37%       434     5.37%
                                 --------            -------             -------            ------             -------
           Total Debt Securities
              Available-for-Sale   $  500    6.99%   $ 8,688    6.31%    $ 4,799    6.33%   $7,914     6.63%   $21,901     6.44%
                                 =========           =======             =======            ======             =======
</TABLE>

Amounts shown are at amortized cost.





         For additional information regarding the investment portfolio, see Note
2 to the consolidated financial statements for the year ended December 31, 2001.

         At December 31, 2001, 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, 2001, our
Basic Surplus ratios (net access to cash and secured borrowings as a percentage
of total assets was approximately 5% compared to the present internal minimum
guideline range of 5% 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 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.



                                       24
<PAGE>

         At December 31, 2001 we were modestly liability sensitive in the short
term and then become asset sensitive out beyond one year. 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
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. These products may not reprice
consistent with assets such as variable rate commercial loans or other loans
that immediately reprice as the prime rate changes. 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.

         Thus, Bancorp manages its exposure to possible changes in interest
rates by 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 which include the
following scenarios: Static Rates, Most Likely Rate Projection, Rising Rate
Environment, Declining Rate Environment, Ramp Up 100bp and 200bp over 12-months,
and Ramp Down 100bp and 200bp over 12-months scenarios. In addition, 8 rate
shock scenarios are modeled at 50 bp up and 50 bp down increments. At December
31, 2001, the following 12-month impact on net interest income is estimated to
range from a positive impact of 2% if rates rise to a negative impact of 5% if
rates continue to decline 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 4% to a negative impact of 5%. 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.

         The following are the projected potential percentage impact on
Bancorp's net interest income over the next 12 months for the most likely to
occur scenarios, but measured against a static interest rate environment as of
December 31, 2001. Clearly Bancorp is positioned to substantially improve
earnings if and when rates rise. With respect to further reductions in rates,
Most Likely scenario and the Ramp Down scenarios, Bancorp would experience
further negative implications on margins and earnings; however, Bancorp does not
believe that a 200 basis point decline is realistic given the already extremely
low interest rates. The Most Likely Scenario predicts that rates would decline
another 50 basis points before beginning to increase around the middle of 2002.
Thus management believes the exposure to further changes in interest rates would
not have a material negative effect on the results of operations.

                Static rates                                    -0-%
                Most Likely rates                             (1.7)%
                Ramp Up 100bp-12 Months                        1.8 %
                Ramp Up 200bp-12 Months                        3.6 %
                Ramp Down 100 bp-12 Months                    (2.0)%
                Ramp Down 200bp-12 Months                     (4.0)%
                Rising rate scenario                          (0.7)%
                Declining rate scenario                       (5.0)%



                                       25

<PAGE>

TABLE 10

<TABLE>
<CAPTION>

                                                      Match Funding Matrix
                                                        James Monroe Bank
                                                          Dec. 31, 2001

-----------------------------------------------------------------------------------------------------------------------------------
                            60+      37-60      25-36      13-24      10-12       7-9       4-6       1-3
                 Assets    Months    Months     Months     Months     Months     Months    Months    Months     O/N       Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>           <C>        <C>       <C>         <C>       <C>         <C>        <C>       <C>      <C>       <C>      <C>
Liabilities
 & Equity                  22,427    9,254       10,384    12,087      7,348      6,704     7,318     15,386   33,717    124,625
-----------------------------------------------------------------------------------------------------------------------------------

  60+
 Months         45,386     22,427    9,254       10,384     3,321                                                         45,386

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

 37-60
 Months          1,468                                      1,468                        ASSET SENSITIVE                   1,468

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

 25-36
 Months            312                                        312                                                            312

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

 13-24
 Months          1,574                                      1,574                                                          1,574

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

 10-12
 Months          5,852                                      5,412        440                                               5,852

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

  7-9
 Months          6,309                                                 6,309                                               6,309

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

  4-6
 Months          6,056               LIABILITY SENSITIVE                 599      5,457                                    6,056

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

  1-3
 Months          8,001                                                            1,247     6,754                          8,001

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

  O/N           49,667                                                                        564     15,386   33,717     49,667

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

 Total         124,625     22,427    9,254       10,384     12,087     7,348      6,704     7,318     15,386   33,717    124,625

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





NONINTEREST INCOME AND EXPENSE

         Noninterest income consists 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 and equipment
expense. To date, Bancorp has not been required to pay any premiums for deposit
insurance. To the extent that deposit premiums may become required, Bancorp's
results of operations will be adversely affected.

                                       26

<PAGE>


         Table 11 provides information regarding Bancorp's noninterest income
for the periods indicated.

TABLE 11


<TABLE>
<CAPTION>


                                                                    DECEMBER 31,
                                                   -------------------------------------------------
($ in thousands)                                        2001             2000             1999
                                                   ---------------  ---------------  ---------------
<S>                                                      <C>              <C>             <C>
Service charges on deposit accounts                      $    263         $    190        $     111
Cash management fee income                                    113               48               19
Gain on sale of securities                                    107               17               --
Other fee income                                               71               47               29
                                                   ---------------  ---------------  ---------------
                          Total Noninterest Income       $    554         $    302        $     159
                                                   ===============  ===============  ===============
</TABLE>



         The increases in noninterest income for the each period shown is the
result of the continued growth of the Company and the expansion of products
resulting in fee income, such as the increase in cash management fee income and
service charges on deposit accounts. These increases are primarily due to the
progressively increasing growth in the number and balances of deposit accounts.
In addition, in 2001, Bancorp earned cash management fees relating to
off-balance sheet customer sweep accounts which had average balances of between
$20 and $25 million during 2001. Bancorp did not offer this product in prior
years.

TABLE 12

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


<TABLE>
<CAPTION>

                                                                    DECEMBER 31,
                                              --------------------------------------------------------
($ in thousands)                                    2001                2000               1999
                                              -----------------   ------------------  ----------------
<S>                                                  <C>                  <C>                <C>
Salaries and benefits                                $   1,513            $   1,203          $    841
Occupancy cost, net                                        367                  266               234
Equipment expense                                          184                  149               104
Data processing costs                                      269                  251               164
Advertising and public relations                            77                   56                48
Professional fees                                          153                   76                60
Courier and express services                                73                   52                31
Meals & entertainment                                       38                   40                26
Supplies                                                    54                   35                25
Postage                                                     35                   27                25
Holding company organization costs                          --                   --                46
State franchise tax                                        107                   94                66
Other                                                      163                   99                57
                                              -----------------   ------------------  ----------------
                    Total Noninterest Expense        $   3,033            $   2,348         $   1,727
                                              =================   ==================  ================
</TABLE>

         Noninterest expense increased $685,000 or 29% from $2.3 million for the
year ended December 31, 2000, to $3.0 million for 2001. Approximately one-half
of this increase is in salary and benefit costs. In April 2001, Bancorp opened
its third office, with three personnel, and added personnel at the main office
in order to support the growth in customers and transactions being processed. In
addition, three employees were hired in late 2001 that will be located at the
Company's fourth office, located in Fairfax City, Virginia, which will open in
February 2002. The increase in occupancy cost is due to the cost of one new
branch in 2001 plus the Company acquired an additional 1,770 square feet at its
main office to support the growth of the Bank. The increase in professional fees
is primarily due to higher legal expenses and the transfer of the stock transfer
function to a third party. The increase in the Other category is due to the
Company paying director fees to its directors beginning in 2001.



                                       27
<PAGE>

TABLE 13

         The following table indicates the amount of certificates of deposit of
$100,000 or more and less than $100,000, and their remaining maturities. For
additional information regarding our deposit base, see Tables 1 and 3 at pages
16 and 19, and Note 5 to the consolidated financial statements for the year
ended December 31, 2001.


<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               $ 3,399     $ 2,845      $ 4,347     $   672    $ 11,263
Certificates of deposit of $100MM or                     4,602       3,210        7,813       1,622      17,247
                                                   -------------------------------------------------------------
                                                       $ 8,001     $ 6,055      $ 12,160    $ 2,294    $ 28,510
                                                   =============================================================

</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, 2001, stockholders' equity increased
$1.2 million from the $10.7 million of equity at December 31, 2000, primarily as
a result of the $1.1 million in earnings for the year 2001.

         Bancorp has reported a steady improvement in earnings since the Bank
opened on June 8, 1998. Positive earnings were reported in the ninth month of
operations and culminated with $125 thousand of earnings in 1999, $810 thousand
of earnings for 2000, and $1.1 million of earnings for 2001. One of Bancorp's
initial strategies was to restore the initial lost capital from the initial
organization costs of $254 thousand and the accumulated earnings loss of $452
thousand for 1998. As of December 31, 2000, the earnings for 1999 and 2000 had
recouped the losses and at December 31, 2001 Bancorp had retained earnings in
excess of $1.3 million. 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.

         Bancorp intends to make a private offering under Regulation D of the
Securities Act of 1933 of up to approximately 280,000 newly issued shares of
common stock which will not be registered under the Securities Act of 1933, for
aggregate gross proceeds of up to $5 million. The shares may not be offered or
sold in the United States absent registration or an exemption from the
registration requirements. The offering, which will commence in the first
quarter of 2002, is expected to be competed late in the first quarter or early
in the second quarter of 2002, will be made primarily through the efforts of
certain directors and officers of Bancorp, without an underwriter.


                                       28
<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, 2001 and 2000, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the years ended December 31, 2001, 2000 and 1999. 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.


         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, 2001 and 2000, and the results
of their operations and their cash flows for the years ended December 31, 2001,
2000 and 1999, in conformity with accounting principles generally accepted in
the United States of America.


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

Winchester, Virginia
January 16, 2002


                                       29
<PAGE>


                           JAMES MONROE BANCORP, INC.
                                 AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2001 and 2000
                    (Dollars in thousands, except share data)

<TABLE>
<CAPTION>

                                                                                                      DECEMBER 31,
                                                                                           -------------------------------------
ASSETS                                                                                           2001                2000
                                                                                           ------------------   ----------------
<S>                                                                                           <C>                <C>
Cash and due from banks                                                                       $        5,982     $        6,362
Interest-bearing deposits in banks                                                                     2,035              2,010
Federal funds sold                                                                                     9,469              9,933
Securities available for sale, at fair value                                                          22,119             20,039
Loans, net of allowance for loan losses of $1,030 in 2001
  and $600 in 2000                                                                                    85,109             49,440
Bank premises and equipment, net                                                                       1,007                692
Accrued interest receivable                                                                              631                567
Other assets                                                                                             306                187
                                                                                           ------------------   ----------------

TOTAL ASSETS                                                                                  $      126,658     $       89,230
                                                                                           ==================   ================

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
  Noninterest-bearing deposits                                                                $       35,034     $       22,711
  Interest-bearing deposits                                                                           79,225             55,331
                                                                                           ------------------   ----------------
           Total deposits                                                                            114,259             78,042

Accrued interest payable and other liabilities                                                           432                455
                                                                                           ------------------   ----------------
           Total liabilities                                                                         114,691             78,497
                                                                                           ------------------   ----------------

COMMITMENTS AND CONTINGENCIES                                                                             --                 --

STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized 2,000,000 shares; issued
 and outstanding 960,467 shares in 2001, 958,767 shares in 2000                                          960                959
Capital surplus                                                                                        9,522              9,506
Retained earnings                                                                                      1,341                229
Accumulated other comprehensive income                                                                   144                 39
                                                                                           ------------------   ----------------
           Total stockholders' equity                                                                 11,967             10,733
                                                                                           ------------------   ----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                    $      126,658     $       89,230
                                                                                           ==================   ================

</TABLE>

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



                                       30
<PAGE>

                           JAMES MONROE BANCORP, INC.
                                 AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME
              For the Years Ended December 31, 2001, 2000 and 1999
                  (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                             YEARS ENDED DECEMBER 31,
                                                             -----------------------------------------------------------
                                                                 2001                2000                  1999
                                                             ----------------  ------------------  ---------------------

<S>                                                           <C>               <C>                 <C>
INTEREST AND DIVIDEND INCOME:
  Loans, including fees                                       $        5,643    $          3,977    $             2,008
  Securities, taxable                                                  1,464               1,067                    622
  Federal funds sold                                                     379                 343                    215
  Other interest income                                                   62                  26                     --
                                                             ----------------  ------------------  ---------------------
     Total interest and dividend income                                7,548               5,413                  2,845
INTEREST EXPENSE:
  Deposits                                                             2,918               2,174                    921
  Federal funds purchased                                                 --                   3                     --
                                                             ----------------  ------------------  ---------------------
     Total interest expense                                            2,918               2,177                    921
                                                             ----------------  ------------------  ---------------------
     Net interest income                                               4,630               3,236                  1,924
PROVISION FOR LOAN LOSSES                                                450                 237                    231
                                                             ----------------  ------------------  ---------------------
     Net interest income after provision for loan losses               4,180               2,999                  1,693
                                                             ----------------  ------------------  ---------------------
NONINTEREST INCOME:
  Service charges and fees                                               263                 190                    111
  Gain on sales of available for sale securities                         107                  17                     --
  Other                                                                  184                  95                     48
                                                             ----------------  ------------------  ---------------------
     Total noninterest income                                            554                 302                    159
                                                             ----------------  ------------------  ---------------------
NONINTEREST EXPENSES:
  Salaries and wages                                                   1,307               1,061                    744
  Employee benefits                                                      206                 142                     97
  Occupancy expenses                                                     367                 266                    234
  Equipment expenses                                                     184                 149                    104
  Other operating expenses                                               969                 730                    548
                                                             ----------------  ------------------  ---------------------
     Total noninterest expenses                                        3,033               2,348                  1,727
                                                             ----------------  ------------------  ---------------------
     Income before income taxes                                        1,701                 953                    125
PROVISION FOR INCOME TAXES                                               589                 143                     --
                                                             ----------------  ------------------  ---------------------
     Net income                                               $        1,112    $            810    $               125
                                                             ================  ==================  =====================

EARNINGS PER SHARE, basic                                     $         1.16    $           1.04    $              0.17
EARNINGS PER SHARE, diluted                                   $         1.12    $           1.01    $              0.17

</TABLE>

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



                                       31
<PAGE>

                           JAMES MONROE BANCORP, INC.
                                 AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                 For the Years Ended December 31, 2001, 2000 and
                                      1999
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                 ACCUMULATED
                                                                                   OTHER
                                                                    RETAINED       COMPRE-          COMPRE-            TOTAL
                                            COMMON      CAPITAL     EARNINGS       HENSIVE          HENSIVE        STOCKHOLDERS'
                                             STOCK      SURPLUS    (DEFICIT)     INCOME(LOSS)     INCOME(LOSS)        EQUITY
                                           --------     -------    ----------    -------------    ------------    -------------
<S>                                        <C>          <C>        <C>               <C>           <C>            <C>
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
    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
  Comprehensive income:
   Net income                                                         1,112                             1,112            1,112
   Other comprehensive income:
    Net change in unrealized gains
     on available for sale
     securities:
     Unrealized holding gains on
      available for sale securities
      net of deferred taxes of $91                                                                        176
     Less:  reclassification adjustment,
      net of income taxes of $36                                                                          (71)
                                                                                                  -----------
     Other comprehensive income,
      net of tax                                                                       105                105              105
                                                                                                  -----------
  Total comprehensive income                                                                            1,217
                                                                                                  ===========
  Issuance of common stock                       1           16                                                             17
                                           --------     -------    ----------    -------------                    -------------
BALANCE, DECEMBER 31, 2001                 $   960      $ 9,522    $  1,341      $     144                        $     11,967
                                           ========     =======    ==========    =============                    =============
</TABLE>

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



                                       32
<PAGE>


                           JAMES MONROE BANCORP, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Years Ended December 31, 2001, 2000 and 1999
                             (Dollars in thousands)


<TABLE>
<CAPTION>

                                                                                          YEARS ENDED DECEMBER 31,
                                                                                -------------------------------------------
                                                                                  2001               2000            1999
                                                                                --------           --------        --------
<S>                                                                             <C>                <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                                    $  1,112           $    810        $    125
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation and amortization                                                    177                112              81
    Provision for loan losses                                                        450                237             231
    (Increase) in accrued interest receivable                                        (64)              (221)           (258)
    Amortization of bond premium                                                      46                  5               3
    Accretion of bond discount                                                       (49)               (22)             (6)
    Realized (gain) on sales of securities available for sale                       (107)               (17)             --
    Deferred income tax (benefit)                                                   (125)              (159)             --
    (Increase) decrease in other assets                                              (48)                12             (36)
    Increase(decrease) in accrued interest payable and other liabilities             (23)               256             130
                                                                                --------           --------        --------
       Net cash provided by operating activities                                   1,369              1,013             270
                                                                                --------           --------        --------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of securities available for sale                                     (21,655)            (8,904)        (11,112)
  Proceeds from calls and maturities of securities available for sale             13,889                332           1,230
  Proceeds from sales of securities available for sale                             5,955              2,515              --
  Purchases of premises and equipment                                               (492)               (90)           (301)
  (Increase) in interest-bearing cash balances                                       (25)            (2,010)             --
  (Increase) decrease in Federal funds sold                                          464             (8,396)          3,430
  Net (increase) in loans                                                        (36,119)           (19,001)        (18,270)
                                                                                --------           --------        --------
       Net cash (used in) investing activities                                   (37,983)           (35,554)        (25,023)
                                                                                --------           --------        --------
CASH FLOWS FROM FINANCING ACTIVITIES
  Net increase in demand deposits, savings deposits
   and money market accounts                                                      33,178             17,812          19,946
  Net increase in time deposits                                                    3,039             17,411           6,092
  Proceeds from issuance of common stock                                              17              3,039              50
                                                                                --------           --------        --------
       Net cash provided by financing activities                                  36,234             38,262          26,088
                                                                                --------           --------        --------

       Increase (decrease) in cash and due from banks                               (380)             3,721           1,335
CASH AND DUE FROM BANKS
  Beginning                                                                        6,362              2,641           1,306
                                                                                --------           --------        --------
  Ending                                                                        $  5,982           $  6,362        $  2,641
                                                                                ========           ========        ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Interest paid on deposits and borrowed funds                                  $  2,945           $  2,036        $    826
                                                                                ========           ========        ========
  Income taxes paid                                                             $    732           $    235        $     --
                                                                                ========           ========        ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES,
   unrealized gain (loss) on securities available for sale                      $    160           $    430        $   (355)
                                                                                ========           ========        ========


</TABLE>

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



                                       33
<PAGE>


NOTES TO FINANCIAL STATEMENTS

                           JAMES MONROE BANCORP, INC.
                                 AND SUBSIDIARY

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 accounting principles generally accepted
              in the United States of America. 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
              accounting principles generally accepted in the United States of
              America 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.


                                       34
<PAGE>
NOTES TO FINANCIAL STATEMENTS

              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
              cost-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.



                                       35
<PAGE>
NOTES TO FINANCIAL STATEMENTS

              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.

              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

              Statement of Financial Accounting Standards (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

              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.



                                       36
<PAGE>
NOTES TO FINANCIAL STATEMENTS

              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.

              Earnings per common share have been computed based on the
              following:
                                                 YEARS ENDED DECEMBER 31,
                                          --------------------------------------
                                           2001           2000           1999
                                           ----           ----           ----
                                                    (In Thousands)

Net income                                $1,112          $810           $125
                                          ======          ====           ====

Weighted average common
  shares outstanding                         960           779            742
Effect of dilutive options                    36            25              9
                                          ------          ----           ----
Weighted average common
  shares outstanding used to
  calculate diluted earnings per share       996           804            751
                                          ======          ====           ====

              RECENT ACCOUNTING PRONOUNCEMENTS

              In July 2001, the Financial Accounting Standards Board issued two
              statements - SFAS No. 141, Business Combinations, and SFAS No.
              142, Goodwill and Other Intangible Assets, which will potentially
              impact the accounting for goodwill and other intangible assets.
              Statement 141 eliminates the pooling method of accounting for
              business combinations and requires that intangible assets that
              meet certain criteria be reported separately from goodwill. The
              Statement also requires negative goodwill arising from a business
              combination to be recorded as an extraordinary gain. Statement 142
              eliminates the amortization of goodwill and other intangibles that
              are determined to have an indefinite life. The Statement requires,
              at a minimum, annual impairment tests for goodwill and other
              intangible assets that are determined to have an indefinite life.

              Upon adoption of these Statements, an organization is required to
              re-evaluate goodwill and other intangible assets that arose from
              business combinations entered into before July 1, 2001. If the
              recorded other intangible assets do not meet the criteria for
              recognition, they should be classified as goodwill. Similarly, if
              there are other intangible assets that meet the criteria for
              recognition, but were not separately recorded from goodwill, they
              should be reclassified from goodwill. An organization also must
              reassess the useful lives of intangible assets and adjust the
              remaining amortization periods accordingly. Any negative goodwill
              must be written off.

              The standards generally are required to be implemented by the
              Corporation in its 2002 financial statements. The adoption of
              these standards will not have a material impact on the financial
              statements.

              In June 2001, the Financial Accounting Standards Board issued SFAS
              No. 143, Accounting for Asset Retirement Obligations. This
              Statement addresses financial accounting and reporting for
              obligations associated with the retirement of tangible long-lived
              assets and associated retirement coasts. It requires that the fair
              value of a liability for an asset retirement obligation be
              recognized in the period in which it is incurred and the
              associated asset retirement costs be capitalized as part of the
              carrying amount of the long-lived asset. This Statement is
              effective for financial statements issued for fiscal years
              beginning after June 15, 2002. The Statement is not expected to
              have a material effect on the Corporation's financial statements.

                                       37
<PAGE>
NOTES TO FINANCIAL STATEMENTS

              In August 2001, the Financial Accounting Standards Board issued
              SFAS No. 144, Accounting for the Impairment or Disposal of
              Long-Lived Assets. This Statement addresses financial accounting
              and reporting for the impairment or disposal of long-lived assets.
              It also establishes a single accounting model for long-lived
              assets to be disposed of by sale, which includes long-lived assets
              that are part of a discontinued operation. This Statement is
              effective for financial statements issued for fiscal years and
              interim periods beginning after December 15, 2001. The Statement
              is not expected to have a material effect on the Corporation's
              financial statements.

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
                           ---------    ----------    ----------    -----
                                                  2001
                           -----------------------------------------------------
                                           (Dollars in Thousands)

U.S. Government and
  federal agency           $  3,501     $     94      $     (2)     $  3,593
Mortgage-backed               8,008          144            (2)        8,150
Corporate notes               9,958          128          (144)        9,942
Other securities                434           --            --           434
                           --------     --------      --------      --------
                           $ 21,901     $    366      $   (148)     $ 22,119
                           ========     ========      ========      ========

                                          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
                           ========     ========      ========      ========


              The amortized cost and fair value of securities by contractual
maturity at December 31, 2001 follows:

                                       38
<PAGE>
NOTES TO FINANCIAL STATEMENTS

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

Due within one year                       $   500        $   501
Due after one year but
  within five years                         8,688          8,895
Due after five years but
  within ten years                          4,799          4,900
Due after ten years                         7,480          7,389
                                          -------        -------
                                           21,467         21,685
Equity securities                             434            434
                                          -------        -------
  Total available for sale securities     $21,901        $22,119
                                          =======        =======

              Securities carried at $2,500,000 and $2,800,000 at December 31,
              2001 and 2000, respectively, were pledged to secure public
              deposits and for other purposes required or permitted by law.

              For the years ended December 31, 2001 and 2000, proceeds from
              sales of securities available for sale amounted to $5,955,000 and
              $2,515,000, respectively. Gross realized gains amounted to
              $107,000 and $17,000, respectively. The tax provision applicable
              to these realized gains amounted to $36,000 and $6,000,
              respectively. There were no sales of securities available for sale
              during 1999.

NOTE 3.       LOANS AND ALLOWANCE FOR LOAN LOSSES

              Major classifications of loans are as follows:

                                                     DECEMBER 31,
                                               -------------------------
                                                 2001             2000
                                               --------         --------
                                                 (Dollars in Thousands)

Commercial loans                               $ 30,023         $ 21,271
Real estate - commercial                         44,192           20,783
Real estate - 1 to 4 family residential           3,363            4,165
Home equity loans                                 1,554              546
Consumer loans                                    7,007            3,275
                                               --------         --------
                                                 86,139           50,040
Less allowance for loan losses                   (1,030)            (600)
                                               --------         --------
  Net loans                                    $ 85,109         $ 49,440
                                               ========         ========



                                       39
<PAGE>
NOTES TO FINANCIAL STATEMENTS

              Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31,
                                                    2001            2000          1999
                                                  -------         -------        -------
                                                          (Dollars in Thousands)
<S>                                               <C>             <C>            <C>
Beginning balance                                 $   600         $   363        $   132
Loans charged-off                                     (20)             --             --
Recoveries of loans previously charged-off             --              --             --
                                                  -------         -------        -------
     Net charge-offs                                  (20)             --             --
                                                  -------         -------        -------
Provision for loan losses                             450             237            231
                                                  -------         -------        -------
Ending balance                                    $ 1,030         $   600        $   363
                                                  =======         =======        =======
</TABLE>


              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, 2001 or 1999


NOTE 4.       BANK PREMISES AND EQUIPMENT

              Bank premises and equipment consist of the following:

                                             DECEMBER 31,
                                         -------------------
                                          2001          2000
                                         ------        ------
                                        (Dollars in Thousands)

Leasehold improvements                   $  470        $  337
Furniture and equipment                     419           283
Computers                                   207           153
Software                                    179           132
Premises and equipment in process           134            18
                                         ------        ------
                                          1,409           923
Less accumulated depreciation               402           231
                                         ------        ------
                                         $1,007        $  692
                                         ======        ======


              Depreciation and amortization charged to operations totaled
              $177,000, $112,000 and $81,000 for the years ended December 31,
              2001, 2000 and 1999, respectively.

                                       40
<PAGE>
NOTES TO FINANCIAL STATEMENTS


NOTE 5.       DEPOSITS

               consist of the following:

                                                      DECEMBER 31,
                                                 ----------------------
                                                  2001           2000
                                                 -------        -------
                                                 (Dollars in Thousands)

NOW accounts                                     $ 4,993        $ 4,698
Savings accounts                                   1,056            417
Money market accounts                             43,589         23,667
Certificates of deposit under $100,000            11,263         11,667
Certificates of deposit $100,000 and over         17,247         14,028
Individual retirement accounts                     1,077            854
                                                 -------        -------
                                                 $79,225        $55,331
                                                 =======        =======


              At December 31, 2001, the scheduled maturities of time deposits
(in thousands) are as follows:

                    2002                            $26,233
                    2003                              1,574
                    2004                                312
                    2005                              1,468
                                                    -------
                                                    $29,587
                                                    =======

NOTE 6.       INCOME TAXES

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

                                                               DECEMBER 31,
                                                           ---------------------
                                                           2001          2000
                                                           -----         -----
                                                          (Dollars in Thousands)

Deferred tax assets:
   Provision for loan losses                               $ 273         $ 128
   Amortization of organization and
      start-up costs                                          31            51
                                                           -----         -----
                                                             304           179
                                                           -----         -----
Deferred tax liabilities:
   Depreciation                                              (20)          (20)
   Unrealized gain on securities available for sale          (74)          (20)
                                                           -----         -----
                                                             (94)          (40)
                                                           -----         -----

Deferred tax asset, net                                    $ 210         $ 139
                                                           =====         =====



                                       41
<PAGE>
NOTES TO FINANCIAL STATEMENTS

              Allocation of federal income taxes between current and deferred
              portions for the years ended December 31, 2001 and 2000 is as
              follows:

                              2001          2000
                              -----         -----
                            (Dollars in Thousands)

Current tax provision         $ 714         $ 302
Deferred tax (benefit)         (125)         (159)
                              -----         -----
                              $ 589         $ 143
                              =====         =====


              The Corporation recognized no income tax provision for the year
ended December 31, 1999.

              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, 2001, 2000 and 1999, due
              to the following:

                                           2001         2000          1999
                                           -----        -----         -----
                                                (Dollars in Thousands)

Computed "expected" tax expense            $ 578        $ 324         $  43
Increase (decrease) in income taxes
  resulting from:
    Other nondeductible expenses              11           11             1
    Change in valuation allowance             --         (192)          (44)
                                           -----        -----         -----
                                           $ 589        $ 143         $  --
                                           =====        =====         =====


NOTE 7.       LEASE COMMITMENTS AND TOTAL RENTAL EXPENSE

              The Corporation leases its facilities under operating leases
              expiring at various dates through 2011. 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, 2001, 2000 and
              1999 was $270,000, $198,000 and $168,000, respectively.

              The minimum lease commitments (in thousands) for the next five
years and thereafter are:

                        2002                    $   356
                        2003                        371
                        2004                        370
                        2005                        362
                        2006                        375
                        Thereafter                1,089
                                                -------
                                                $ 2,923
                                                =======

                                       42
<PAGE>
NOTES TO FINANCIAL STATEMENTS

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>
                                                  2001                      2000                    1999
                                          ----------------------    ----------------------    -------------------
                                                        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          54,630        $ 10.00     49,880        $ 10.00     46,880     $ 10.00
Granted                                    6,250        $ 14.50      4,750        $ 10.00      3,000     $ 10.00
                                          ------                    ------                    ------
Outstanding at end of year                60,880        $ 10.46     54,630        $ 10.00     49,880     $ 10.00
                                          ======                    ======                    ======

Options exerciseable at year end          55,126        $ 10.17     34,832        $ 10.00     16,624     $ 10.00
                                          ======                    ======                    ======
Weighted average fair value of
   options granted during the year       $  5.59                   $  4.68                   $  4.37
</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.


              A summary of the status of the Corporation's director stock option
plan is presented below:
<TABLE>
<CAPTION>
                                                   2001                      2000                    1999
                                          ----------------------    ----------------------    -------------------
                                                        WEIGHTED                  WEIGHTED               WEIGHTED
                                                         AVERAGE                  AVERAGE                AVERAGE
                                                        EXERCISE                  EXERCISE               EXERCISE
                                          SHARES          PRICE     SHARES          PRICE     SHARES      PRICE
                                          ------        --------    ------        --------    ------     --------
<S>                                       <C>           <C>         <C>           <C>         <C>        <C>
Fixed Options:
   Outstanding at beginning of year       55,500        $ 10.00     57,200        $ 10.00         --          --
   Granted                                    --             --         --             --     57,200     $ 10.00
   Exercised                              (1,700)         10.00     (1,700)         10.00         --          --
                                          ------                    ------                   -------
   Outstanding at end of year             53,800          10.00     55,500          10.00     57,200       10.00
                                          ======                    ======                   =======

   Options exerciseable at year end       53,800          10.00     36,433          10.00     19,067       10.00
                                          ======                    ======                    ======
</TABLE>

                                       43
<PAGE>
NOTES TO FINANCIAL STATEMENTS

              Information pertaining to options outstanding at December 31, 2001
              is as follows:

    WEIGHTED
     AVERAGE
    REMAINING
   CONTRACTUAL         EXERCISE           NUMBER            NUMBER
      LIFE              PRICES         OUTSTANDING       EXERCISABLE
   -----------         --------        -----------       -----------

    6.5 Years          $10.00            46,880            46,880
    7.5 Years           10.00             3,000             3,000
   7.75 Years           10.00            53,800            53,800
      8 Years           10.00             4,750             3,165
      9 Years           14.50             6,250             2,081


              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
              SFAS 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:


                                              2001           2000          1999
                                             ------          -----         -----
                                                    (Dollars in Thousands)

Net income                  As reported      $1,112          $ 810         $ 125
                            Pro forma         1,026            710            31

Earnings per share-         As reported        1.16           1.04          0.17
     basic                  Pro forma          1.07           0.91          0.04

Earnings per share-         As reported        1.12           1.01          0.17
     assuming dilution      Pro forma          1.03           0.88          0.04


              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:

                                           2001           2000            1999
                                         --------       --------       --------

              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       4.93%          6.41%          5.83%


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 year ended
              December 31, 2001, expense attributable to the plan amounted to
              $19,000. For the years ended December 31, 2000 and 1999, no
              discretionary contributions were made by the Corporation.

                                       44

<PAGE>
NOTES TO FINANCIAL STATEMENTS

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, 2001
              and 2000, that the Corporation and the Bank exceeded all capital
              adequacy requirements to which they are subject.

              As of December 31, 2001, 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,
              2001 and 2000 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
                                 -------        -----        -------         -----      -------       ------
                                                             (Dollars in Thousands)
<S>                              <C>            <C>          <C>              <C>       <C>           <C>
As of December 31, 2001:
  Total Capital (to Risk
    Weighted Assets):
      Consolidated               $12,853        13.0%        $ 7,919          8.0%          N/A          N/A
      Bank                       $10,803        11.0%        $ 7,885          8.0%      $ 9,856        10.0%
  Tier 1 Capital (to Risk
    Weighted Assets):
      Consolidated               $11,823        11.9%        $ 3,959          4.0%          N/A          N/A
      Bank                       $ 9,773         9.9%        $ 3,943          4.0%      $ 5,914         6.0%
  Tier 1 Capital (to
    Average Assets):
      Consolidated               $11,823         9.5%        $ 3,724          3.0%          N/A          N/A
      Bank                       $ 9,773         8.0%        $ 3,662          3.0%      $ 3,662         3.0%

As of December 31, 2000:
  Total Capital (to Risk
    Weighted Assets):
      Consolidated               $11,294        19.6%        $ 4,620          8.0%          N/A          N/A
      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
      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
      Bank                       $ 8,668        10.4%        $ 2,498          3.0%      $ 2,498         3.0%
</TABLE>

                                       45

<PAGE>
NOTES TO FINANCIAL STATEMENTS


              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, 2001, the Bank could pay $1,347,000 in dividends
              without prior regulatory approval. The Bank did not pay any
              dividends during the years ended December 31, 2001, 2000 or 1999.

NOTE 11.      OFF-BALANCE SHEET ACTIVITIES

              Credit-Related Financial Instruments. The Corporation is a party
              to credit related financial instruments with off-balance sheet
              risk in the normal course of business to meet the financing needs
              of its customers. These financial instruments include commitments
              to extend credit, standby letters of credit and commercial letters
              of credit. Such commitments involve, to varying degrees, elements
              of credit and interest rate risk in excess of the amount
              recognized in consolidated balance sheets.

              The Corporation's exposure to credit loss is represented by the
              contractual amount of these commitments. The Corporation follows
              the same credit policies in making commitments as it does for
              on-balance sheet instruments. At December 31, 2001 and 2000, the
              following financial instruments were outstanding whose contract
              amounts represent credit risk:

                                          2001         2000
                                        --------     --------
(DOLLARS IN THOUSANDS)

Commitments to extend credit            $ 18,241     $ 17,493
Stand-by letters-of-credit              $    440     $    463

              Commitments to extend credit are agreements to lend to a customer
              as long as there is no violation of any condition established in
              the contract. Commitments generally have fixed expiration dates or
              other termination clauses and may require payment of a fee. The
              commitments for equity lines of credit may expire without being
              drawn upon. Therefore, the total commitments amounts do not
              necessarily represent future cash requirements. The amount of
              collateral obtained, if it is deemed necessary by the Corporation,
              is based on management's credit evaluation of the customer.

              Unfunded commitments under commercial lines-of-credit, revolving
              credit lines and overdraft protection agreements are commitments
              for possible future extensions of credit to existing customers.
              These lines-of-credit are uncollateralized and usually do not
              contain a specified maturity date and may not be drawn upon to the
              total extent to which the Corporation is committed.

              Commercial and standby letters-of-credit are conditional
              commitments issued by the Corporation to guarantee the performance
              of a customer to a third party. Those letters-of-credit are
              primarily issued to support public and private borrowing
              arrangements. Essentially all letters-of-credit issued have
              expiration dates within one year. The credit risk involved in
              issuing letters-of-credit is essentially the same as that involved
              in extending loan facilities to customers. The Corporation
              generally holds collateral supporting those commitments if deemed
              necessary.

              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 $2,179,000 at
              December 31, 2001.
                                       46

<PAGE>
NOTES TO FINANCIAL STATEMENTS

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 $1,481,000
              and $536,000 at December 31, 2001 and 2000, respectively. During
              the year ended December 31, 2001, total principal additions were
              $1,373,000 and total principal payments were $428,000.

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.

              OFF BALANCE SHEET INSTRUMENTS - Fair values for off-balance sheet
              credit-related instruments are based on fees currently charged to
              enter similar arrangements, taking into account the remaining
              terms of the agreements and the present creditworthiness of the
              counterparties. For fixed rate loan commitments, fair value also
              considers the difference between current levels of interest rates
              and the committed rates. The fair value of standby letters of
              credit is based on fees currently charged for similar agreements
              or on the estimated cost to terminate them or otherwise settle the
              obligations with the counterparties at the reporting date. At
              December 31, 2001 and 2000, the carrying amounts of loan
              commitments and standby letters of credit approximated fair
              values.

                                       47

<PAGE>
NOTES TO FINANCIAL STATEMENTS

              The estimated fair values of the Corporation's financial
              instruments at December 31, 2001 and 2000 are as follows:
<TABLE>
<CAPTION>
                                             DECEMBER 31, 2001               DECEMBER 31, 2000
                                          ------------------------        ------------------------
                                          CARRYING          FAIR          CARRYING          FAIR
                                           AMOUNT           VALUE          AMOUNT          VALUE
                                          --------        --------        --------        --------
<S>                                       <C>             <C>             <C>             <C>
FINANCIAL ASSETS:
Cash and due from banks                   $  5,982        $  5,982        $  6,362        $  6,362
Interest-bearing deposits in banks           2,035           2,035           2,010           2,010
Federal funds sold                           9,469           9,469           9,933           9,933
Investment securities                       22,119          22,119          20,039          20,039
Loans                                       85,109          85,349          49,440          50,065
Accrued interest                               631             631             567             567

FINANCIAL LIABILITIES:
Deposits                                  $114,259        $114,646        $ 78,042        $ 78,187
Accrued interest                               237             237             264             264
</TABLE>


              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 Bank has unsecured lines of credit with correspondent banks
              totaling $13,600,000 available for overnight borrowing. There were
              no amounts drawn on these lines at December 31, 2001 or 2000.

              As a member of the Federal Reserve System, the Bank is required to
              maintain certain average reserve balances. For the final reporting
              period in the year ended December 31, 2001, the aggregate amount
              of daily average balances was approximately $924,000.

NOTE 15.      OTHER NONINTEREST INCOME AND EXPENSES

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

                                                  2001     2000       1999
                                                  -----    ----       ----
                                                   (Dollars in Thousands)

              Cash management fee income          $ 113    $ 48       $ 19
              Other fee income                       71      47         29
                                                  -----    ----       ----
                                                  $ 184    $ 95       $ 48
                                                  =====    ====       ====

                                       48

<PAGE>
NOTES TO FINANCIAL STATEMENTS


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

                                                  2001     2000        1999
                                                  -----    -----       -----
                                                    (Dollars in Thousands)

              Data processing costs               $ 269    $ 251       $ 164
              Advertising and public relations       84       56          48
              Professional fees                     181       76          60
              Courier and express services           73       52          31
              Meals and entertainment                38       40          26
              Supplies                               54       35          25
              Postage                                35       27          25
              Holding company organization costs     --       --          46
              State franchise tax                   107       94          66
              Other                                 128       99          57
                                                  -----    -----       -----
                                                  $ 969    $ 730       $ 548
                                                  =====    =====       =====

                                       49

<PAGE>
NOTES TO FINANCIAL STATEMENTS

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, 2001 and 2000


                                             2001           2000
                                            -------        -------
                                            (Dollars in Thousands)
ASSETS

Interest-bearing deposits in banks          $ 2,035        $ 2,010
Investment in subsidiary bank                 9,916          8,707
Other assets                                     16             20
                                            -------        -------
                                            $11,967        $10,737
                                            =======        =======

LIABILITIES AND STOCKHOLDERS' EQUITY

Other liabilities                           $    --        $     4
Stockholders' equity                         11,967         10,733
                                            -------        -------
                                            $11,967        $10,737
                                            =======        =======


                           CONDENSED INCOME STATEMENTS
              For the Years Ended December 31, 2001, 2000 and 1999
<TABLE>
<CAPTION>
                                                              2001          2000           1999
                                                             ------        ------         ------
                                                                    (Dollars in Thousands)
<S>                                                          <C>           <C>            <C>
Interest income                                              $   62        $   26         $   --
                                                                                          ------

Operating expense                                                49            --             46
                                                             ------        ------         ------
Income (loss) before income tax expense (benefit) and
  equity in undistributed income of subsidiary bank              13            26            (46)
Income tax expense (benefit)                                      6            (7)            --
Equity in undistributed income of subsidiary bank             1,105           777            171
                                                             ------        ------         ------
          Net income                                         $1,112        $  810         $  125
                                                             ======        ======         ======
</TABLE>

                                       50

<PAGE>
NOTES TO FINANCIAL STATEMENTS

                       CONDENSED STATEMENTS OF CASH FLOWS
              For the Years Ended December 31, 2001, 2000 and 1999
<TABLE>
<CAPTION>
                                                                       2001            2000            1999
                                                                     -------         -------         -------
                                                                              (Dollars in Thousands)
<S>                                                                  <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                         $ 1,112         $   810         $   125
  Adjustments to reconcile net income to
    net cash provided by(used in) operating activities:
    Equity in undistributed income of subsidiary bank                 (1,105)           (777)           (171)
      (Increase)decrease in other assets                                   5             (20)             --
      Increase (decrease) in other liabilities                            (4)            (42)             46
                                                                     -------         -------         -------
           Net cash provided by(used in) operating activities              8             (29)             --
                                                                     -------         -------         -------

CASH FLOWS FROM INVESTING ACTIVITIES
  Investment in subsidiary bank                                           --          (1,000)             --
  (Increase) in interest-bearing deposits in banks                       (25)         (2,010)             --
                                                                     -------         -------         -------
           Net cash (used in) investing activities                       (25)         (3,010)             --
                                                                     -------         -------         -------

CASH FLOWS FROM FINANCING ACTIVITIES,
  proceeds from issuance of common stock                                  17           3,039              --
                                                                     -------         -------         -------

           Increase in cash and cash equivalents                          --              --              --

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                              --              --              --
                                                                     -------         -------         -------

CASH AND CASH EQUIVALENTS, END OF YEAR                               $    --         $    --         $    --
                                                                     =======         =======         =======
</TABLE>

                                       51

<PAGE>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

         None.

                                    PART III

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

         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 has served since the organization of the Company 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 the Company 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 1997 from 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 1991 from his position of
Head of the Systems Group of Computer Sciences Corporation which he held for
over 27 years. Mr. Nashman is a 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.

                                       52
<PAGE>

         David W. Pijor. Mr. Pijor has been Chairman of the Bank since February
1997 and Chairman of Bancorp since its formation Mr. Pijor has been an attorney
in private practice for the past 24 years and is currently 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 of 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Common Stock, to file reports of ownership and changes in ownership on Forms
3, 4 and 5 with the Securities and Exchange Commission, and to provide the
Company with copies of all Forms 3, 4, and 5 they file. The Company's directors
and officers have been subject to the reporting requirements of Section 16(a)
since April 30, 2001.

         Based solely upon the Company's review of the copies of the forms which
it has received and written representations from the Company's directors,
executive officers and ten percent shareholder, the Company is not aware of any
failure of any such person to comply with the requirements of Section 16(a).

ITEM 10  EXECUTIVE COMPENSATION

         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, 2001.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                               Long-term
                                      Annual Compensation                 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      2001       $145,833         $38,000                -0-             Less than $10,000
and Chief Executive Officer     2000       $133,750         $30,000                -0-             Less than $10,000
                                1999       $118,750         $10,000                -0-             Less than $10,000

Richard I. Linhart,             2001       $115,000         $27,000               1,800            Less than $10,000
Executive Vice President,       2000       $102,000         $25,000               1,800            Less than $10,000
Chief Operating Officer         1999       $ 90,000         $ 8,000                -0-             Less than $10,000


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


                        OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
                                                   Percent of Total Options
                         Number of Securities      Granted to Employees in      Exercise Price
      Name            Underlying Options Granted          Fiscal Year             Per Share        Expiration Date
------------------    ------------------------     ------------------------     --------------     ----------------
<S>                               <C>                        <C>                   <C>             <C>
John R. Maxwell                    -0-                        N/A                    N/A                    N/A
Richard I. Linhart                1,800                      28.8%                 $14.50          January 10, 2011
</TABLE>
------------------

                                       53
<PAGE>

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
                                                                 Number of Securities            Value of Unexercised
                                                                Underlying Unexercised         In-The-Money Options at
                       Shares Acquired on                    Options at December 31, 2001         December 31, 2001
      Name                  Exercise        Value Realized     Exercisable/Unexercisable     Exercisable/Unexercisable(1)
------------------     ------------------   --------------   ----------------------------    ----------------------------
<S>                           <C>                <C>                  <C>                          <C>
John R. Maxwell               -0-                -0-                   36,880/-0-                    $304,260/$0
Richard I. Linhart            -0-                -0-                   13,000/600                  $101,850/$2,250
------------------
</TABLE>
(1)      Based on $18.25 per share, the last sale price of for the common stock
         as of January 31, 2002.

EMPLOYMENT AGREEMENTS

         John R. Maxwell. The Bank and Bancorp have entered into an agreement
with Mr. Maxwell, which they have agreed to amend, 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 as proposed to be amended expires on December 31, 2004,
and is subject to automatic one-year extensions on each January 1 thereafter,
provided that neither the Company 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 $170,000 during the period January 1, 2002 to December
31, 2002. Mr. Maxwell's base salary for subsequent periods is subject to annual
review by the Board of Directors. Under the agreement, as proposed to be
amended, Mr. Maxwell is entitled to 28% of the award from the bonus pool
established for employees. The amount of the pool is established by the Board of
Directors, with the actual award based upon the achievement of income and asset
size goals determined by the Board of Directors. Mr. Maxwell is also entitled to
$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. Mr. Maxwell is entitled to reimbursement of income taxes payable upon
the exercise of 36,880 options previously granted under the agreement, 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 entitled to receive supplemental payments upon disability,
in excess of those provided under Bancorp's generally applicable plan, to bring
total payments to 60% of his base salary. 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 two years,
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.

                                       54
<PAGE>


         Richard I. Linhart. The employment agreement between the Bank and
Bancorp and Mr. Linhart pursuant to which Mr. Linhart serves as Executive Vice
President and Chief Operating Officer of the Bank expired on December 31, 2001.
Although it is anticipated that a new employment agreement will be executed, no
new agreement has been executed as of the date hereof. It is expected that any
new agreement will provides for the payment of cash and other benefits to Mr.
Linhart, including a base salary of $125,000 during the period January 1, 2002
to December 31, 2002, subject to annual review, provided that the salary may not
be less than his base salary for the prior period, and a car allowance of $500
per month. Mr. Linhart is entitled to reimbursement of income taxes payable upon
the exercise of the 10,000 options previously granted to him, 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 entitled to receive supplemental payments upon disability, in
excess of those provided under Bancorp's generally applicable plan, to bring
total payments to 60% of his base salary. 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.

         It is anticipated that Mr. Linhart's agreement will provide that 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
would be entitled to receive continued salary and benefits for two years. 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.

         401(k) Plan. Bancorp maintains a 401(k) defined contribution plan for
all eligible employees. Employees who are at least 21 years of age, have
completed at least ninety days of continuous service with the Bank and have
completed at least 1,000 hours of work during any plan year are eligible to
participate. Under the plan, a participant may contribute up to 15% of his or
her compensation for the year, subject to certain limitations. The Bank may also
make, but is not required to make, a discretionary contribution for each
participant. The amount of such contribution is determined annually by the Board
of Directors, and is currently 50% of employee contributions up to 6% of salary.
Contributions by the Company totaled $19,000 for the fiscal year ended December
31, 2001.

         Stock Option Plan. Bancorp also maintains the 1998 Stock Option Plan
for key employees, pursuant to which options to purchase up to 91,880 shares of
common stock may be issued as either incentive stock options or nonincentive
stock options. As of December 31, 2001, options to purchase 60,880 share of
common stock had been issued.

DIRECTORS' COMPENSATION

         Directors receive $200 for attendance at meetings of the Board of
Directors of the Company or the Bank, and $50 for each committee meeting.
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 were 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, 2001 9,680 options remained available for issuance.

ITEM 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information as of January 31,
2002 concerning the number and percentage of shares of the common stock
beneficially owned by our directors and executive officers, and by all of our
directors and 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, we are not aware of any other person
or persons who beneficially own in excess of five percent of the common stock.
Further, we are not aware of any arrangement which at a subsequent date may
result in a change of control of Bancorp.

                                       55
<PAGE>
<TABLE>
<CAPTION>
       Name                           Age                Position                  Shares Beneficially Owned(1)   Percentage
-----------------------               ---    ----------------------------------    ----------------------------   ----------
<S>                                    <C>   <C>                                       <C>                          <C>

DIRECTORS
Fred A. Burroughs, III                 66                Director                        10,000                      1.04%
Dr. Terry L. Collins                   56                Director                        51,300(2)                   5.31%
12701 Fair Lakes Circle
Fairfax, VA  22033

Norman P. Horn                         70                Director                        11,400                      1.18%
Dr. David C. Karlgaard                 55                Director                        54,200                      5.59%
12750 Fair Lakes Circle
Fairfax, VA  22033

Richard Linhart                        58    Director, Executive Vice President          14,350                      1.47%
                                                and Chief Operating Officer

Richard C. Litman                      44                Director                        13,100                      1.35%
John R. Maxwell                        41        Director, President & CEO               43,680                      4.38%
Dr. Alvin E. Nashman                   75                Director                        25,600(3)                   2.66%
Helen L. Newman                        58                Director                        26,200(4)                   2.72%
Thomas L. Patterson                    49                Director                        12,869(5)                   1.33%
David W. Pijor                         49        Chairman of the Board and               18,600(6)                   1.91%
                                                         Director
Russell E. Sherman                     65                Director                        11,200                      1.16%

Executive Officers and Directors
as a Group  (12 individuals)                                                            292,399(1)                  27.47%

Principal Shareholders
Nino Vaghi                                                                               79,650                      8.29%
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 January 31, 2002.
         Beneficial ownership may be disclaimed as to certain of the shares.

         Directors and executive officers beneficially own the following stock
         options which are exercisable within 60-days following January 31,
         2002: Collins-- 6,300 shares; Horn-- 4,400 shares; Karlgaard-- 8,300
         shares; Linhart--13,600 shares; Litman--8,100 shares; Maxwell--36,880
         shares; Nashman-- 1,700; Newman--3,700 shares; Patterson--3,800shares;
         Pijor--12,300 shares; Sherman--5,200 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.

(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 4,550 shares held individually by Mr. Pijor, 1,550 shares held
         jointly, and 200 shares held by his minor children which Mr. Pijor
         claims beneficial ownership.

                                       56
<PAGE>


ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Company 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 the Company during 2001 amounted to $1,535,000 representing
approximately 12.8% of the Company's total shareholders' equity at December 31,
2001. 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 the Company to
unaffiliated parties. On December 31, 2001, $1,481,000 of loans were outstanding
to individuals who, during 2001, were officers, directors or affiliates of the
Company. 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 the Company and the
Bank in the ordinary course of their businesses, and the Company expects that he
will continue to perform services for the Company and the Bank. In 2000 and
2001, the aggregate fees paid to Mr. Pijor by the Company and the Bank were
$33,690 and $32,437, respectively. Fred A. Burroughs, III has a management
consulting agreement with the Bank under which he receives $60,000 annually for
business development services and activities.

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)
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.

23              Consent of Yount, Hyde & Barbour, P.C., independent accountants
----------------------
(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

         No reports on Form 8-K were filed during the fourth quarter of 2001.

                                       57
<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.


February 13, 2002                                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                                      February 13, 2002
-----------------------------
Fred A. Burroughs, III


/s/ Dr. Terry L. Collins             Director                                      February 13, 2002
-----------------------------
Dr. Terry L. Collins


/s/ Norman P. Horn                   Director                                      February 13, 2002
-----------------------------
Norman P. Horn


/s/ Dr. David C. Karlgaard           Director                                      February 13, 2002
-----------------------------
Dr. David C. Karlgaard


/s/ Richard I. Linhart               Director, Chief Operating Officer, Secretary  February 13, 2002
-----------------------------        (Principal Accounting and Financial Officer)
Richard I. Linhart


/s/ Richard C. Litman                Director                                      February 13, 2002
-----------------------------
Richard C. Litman


/s/ John R. Maxwell                  President, Chief Executive Officer            February 13, 2002
-----------------------------        and Director (Principal Executive Officer)
John R. Maxwell


/s/ Dr. Alvin E. Nashman             Director                                      February 13, 2002
-----------------------------
Dr. Alvin E. Nashman


/s/ Helen L. Newman                  Director                                      February 13, 2002
-----------------------------
Helen L. Newman
</TABLE>

                                       58
<PAGE>
<TABLE>
<CAPTION>
<S>                                  <C>                                           <C>
/s/ Thomas L. Patterson              Director                                      February 13, 2002
-----------------------------
Thomas L. Patterson


/s/ David W. Pijor                   Chairman of the Board of Directors            February 13, 2002
-----------------------------
David W. Pijor


/s/ Russell E. Sherman               Director                                      February 13, 2002
-----------------------------
Russell E. Sherman
</TABLE>

                                       59