SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from              to

Commission File No.  0-31951
                     -------

                                 MONROE BANCORP
                                 --------------
             (Exact name of registrant as specified in its charter)

          Indiana                                           35-1594017
          -------                                           ----------
(State or other jurisdiction of                            (IRS Employer
incorporation or organization)                           Identification No.)


                            210 East Kirkwood Avenue
                              Bloomington, IN 47408
                              ---------------------
                    (Address of principal executive offices)
                                   (Zip Code)
                                 (812) 336-0201
                                 --------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X]           No [ ]


Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ]           No [X]


Outstanding Shares of Common Stock on April 30, 2007:  6,353,342

<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                                    FORM 10-Q

                                      INDEX
                                                                        Page No.
                                                                        --------

Part I. Financial Information:


    Item 1.  Financial Statements:

                Consolidated Condensed Balance Sheets..........................3

                Consolidated Condensed Statements of Income - Three Months.....4

                Consolidated Condensed Statement of Shareholders' Equity.......5

                Consolidated Condensed Statements of Cash Flows................6

                Notes to Consolidated Condensed Financial Statements...........7

    Item 2.  Management's Discussion and Analysis of Financial
                    Condition and Results of Operations........................9

    Item 3.  Quantitative and Qualitative Disclosures about Market Risk.......18

    Item 4.  Controls and Procedures..........................................20

Part II.  Other Information:

    Item 1.  Legal Proceedings................................................20

    Item 1A. Risk Factors.....................................................21

    Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds......21

    Item 3.  Defaults Upon Senior Securities..................................21

    Item 4.  Submission of Matters to a Vote of Security Holders..............21

    Item 5.  Other Information................................................21

    Item 6.  Exhibits.........................................................21

Signatures....................................................................24

Exhibit Index.................................................................25


                                       2
<PAGE>

Part I. Financial Information

Item 1. Financial Statements

                          MONROE BANCORP AND SUBSIDIARY
                      Consolidated Condensed Balance Sheets
                  (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                                    March 31,  December 31,
                                                                                      2007         2006
                                                                                   (Unaudited)
                                                                                   ---------    ---------
<S>                                                                                <C>          <C>
Assets
       Cash and due from banks .................................................   $  23,079    $  24,415
       Federal funds sold ......................................................       4,210        5,803
       Interest-earning deposits ...............................................       3,927        3,328
                                                                                   ---------    ---------
             Total cash and cash equivalents ...................................      31,216       33,546

       Trading securities, at fair value .......................................       3,655        3,557
       Investment securities:
            Available for sale .................................................     117,709      115,040
            Held to maturity ...................................................       1,008        1,653
                                                                                   ---------    ---------
                 Total investment securities ...................................     118,717      116,693

       Loans ...................................................................     560,361      556,918
       Allowance for loan losses ...............................................      (6,216)      (6,144)
                                                                                   ---------    ---------
            Net loans ..........................................................     554,145      550,774
       Loans held for sale .....................................................       2,363        2,545
       Premises and equipment ..................................................      15,138       15,411
       Federal Home Loan Bank of Indianapolis stock, at cost ...................       2,312        2,312
       Other assets ............................................................      24,075       23,355
                                                                                   ---------    ---------
                  Total assets .................................................   $ 751,621    $ 748,193
                                                                                   =========    =========

Liabilities
       Deposits:
            Noninterest-bearing ................................................   $  84,775    $  79,783
            Interest-bearing ...................................................     510,286      509,545
                                                                                   ---------    ---------
                 Total deposits ................................................     595,061      589,328

       Borrowings ..............................................................      95,143       98,079
       Other liabilities .......................................................       9,516        7,281
                                                                                   ---------    ---------
                  Total liabilities ............................................     699,720      694,688

Commitments and Contingent Liabilities

Shareholders' Equity
       Common stock, no-par value
           Authorized, 18,000,000 shares
           Issued and outstanding - 6,353,342 and 6,515,342 shares, respectively         137          137
       Additional paid-in capital ..............................................       6,433        9,284
       Retained earnings .......................................................      46,388       45,136
       Accumulated other comprehensive loss ....................................        (823)        (818)
       Unearned ESOT shares ....................................................        (234)        (234)
                                                                                   ---------    ---------
                  Total shareholders' equity ...................................      51,901       53,505
                                                                                   ---------    ---------
                  Total liabilities and shareholders' equity ...................   $ 751,621    $ 748,193
                                                                                   =========    =========
</TABLE>
       See notes to consolidated condensed financial statements.

                                       3
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                   Consolidated Condensed Statements of Income
                                   (Unaudited)
                  (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                       Three Months Ended
                                                                             March 31,
                                                                       ------------------
                                                                          2007      2006
                                                                        -------   -------
<S>                                                                     <C>       <C>
Interest Income
       Loans, including fees ........................................   $10,411   $ 9,030
       Trading securities ...........................................        27        20
       Investment securities
            Taxable .................................................       971       854
            Tax exempt ..............................................       296       216
       Federal funds sold ...........................................       125        41
       Other interest income ........................................        22        14
                                                                        -------   -------
                  Total interest income .............................    11,852    10,175
                                                                        -------   -------

Interest Expense
       Deposits .....................................................     5,096     3,835
       Short-term borrowings ........................................       730       516
       Other borrowings .............................................       295       393
                                                                        -------   -------
                  Total interest expense ............................     6,121     4,744
                                                                        -------   -------
                  Net interest income ...............................     5,731     5,431
       Provision for loan losses ....................................       285       300
                                                                        -------   -------
                  Net interest income after provision for loan losses     5,446     5,131
                                                                        -------   -------

Noninterest Income
       Fiduciary activities .........................................       485       409
       Service charges on deposit accounts ..........................       867       866
       Commission income ............................................       232       202
       Securities gains .............................................         1        44
       Unrealized gains on trading securities .......................        33        29
       Net gains on loans sales .....................................       177       184
       Debit card interchange fees ..................................       214       184
       Other operating income .......................................       438       331
                                                                        -------   -------
                  Total other income ................................     2,447     2,249
                                                                        -------   -------

Noninterest Expenses
       Salaries and employee benefits ...............................     2,989     2,827
       Net occupancy and equipment expense ..........................       819       777
       Advertising ..................................................       225       219
       Legal fees ...................................................       155        87
       Appreciation in directors' and executives' deferred
            compensation plans ......................................        64        96
       Other operating expense ......................................       841       816
                                                                        -------   -------
                  Total other expenses ..............................     5,093     4,822
                                                                        -------   -------

                  Income before income tax ..........................     2,800     2,558
                  Income tax expense ................................       788       785
                                                                        -------   -------
                             Net income .............................   $ 2,012   $ 1,773
                                                                        =======   =======

       Basic and diluted earnings per share .........................   $  0.31   $  0.27
       Dividends declared and paid per share ........................      0.12      0.12
</TABLE>
       See notes to consolidated condensed financial statements.

                                       4
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
            Consolidated Condensed Statement of Shareholders' Equity
                           For the Three Months Ended
                                 March 31, 2007
                                   (Unaudited)
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                                               Unearned
                                          Common Stock                                          Accumulated    Employee
                                       -------------------  Additional                             Other        Stock
                                         Shares               Paid in  Comprehensive Retained  Comprehensive   Ownership
                                       Outstanding  Amount    Capital      Income    Earnings       Loss     Trust Shares   Total
                                       -------------------------------------------------------------------------------------------
<S>                                     <C>          <C>      <C>         <C>        <C>          <C>           <C>       <C>
Balances January 1, 2007.............   6,515,342    $ 137    $ 9,284                $ 45,136     $ (818)       $ (234)   $ 53,505

Comprehensive Income:
  Net income for the period..........                                     $ 2,012       2,012                                2,012
  Other comprehensive income
      -unrealized loss on securities                                           (5)                    (5)                       (5)
ESOT shares earned...................                              16                                                           16
Stock option compensation
     expense..........................                             15                                                           15
Repurchase of stock, at cost..........   (162,000)             (2,882)                                                      (2,882)
Cash dividend ($0.12 per share)                                                          (760)                                (760)
                                       -------------------------------------------------------------------------------------------
Balances March 31, 2007...............  6,353,342    $ 137    $ 6,433     $ 2,007    $ 46,388     $ (823)       $ (234)   $ 51,901
                                       ===========================================================================================
</TABLE>
See notes to consolidated condensed financial statements.















                                       5
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                 Consolidated Condensed Statements of Cash Flows
                                   (Unaudited)
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                            Three Months Ended
                                                                                                 March 31,
                                                                                            --------------------
                                                                                              2007        2006
                                                                                            --------    --------
<S>                                                                                         <C>         <C>
Operating Activities
      Net income ........................................................................   $  2,012    $  1,773
      Adjustments to reconcile net income to net cash provided
              by operating activities:
         Provision for loan losses ......................................................        285         300
         Depreciation and amortization ..................................................        286         273
         Deferred income tax ............................................................        (51)        (36)
         Investment securities amortization (accretion), net ............................        (12)         28
         Securities gain ................................................................         (1)        (44)
         Origination of loans held for sale .............................................    (12,347)    (13,485)
         Proceeds from sale of loans held for sale ......................................     12,706      13,063
         Gain on sale of loans held for sale ............................................       (177)       (184)
         Gain on sale of land ...........................................................        (78)         --
         ESOT compensation ..............................................................         16          10
         Stock-based compensation expense ...............................................         15          16
         Net change in:
              Trading securities ........................................................        (97)        127
              Interest receivable and other assets ......................................       (667)       (361)
              Interest payable and other liabilities ....................................        988      (1,718)
                                                                                            --------    --------
                        Net cash provided (used) by operating activities.................      2,878        (238)
                                                                                            --------    --------

Investing Activities
      Purchase of securities available for sale .........................................    (15,308)     (8,566)
      Proceeds from sales of securities available for sale ..............................        250          --
      Proceeds from paydowns and maturities of securities available for sale ............     13,641       7,517
      Proceeds from paydowns and maturities of securities held to maturity...............        645         300
      Net change in loans ...............................................................     (3,656)    (14,524)
      Proceeds from sales of premises and equipment .....................................        142          --
      Purchase of premises and equipment ................................................        (77)     (1,237)
                                                                                            --------    --------
                        Net cash used by investing activities ...........................     (4,363)    (16,510)
                                                                                            --------    --------

Financing Activities
      Net change in:
         Noninterest-bearing, interest-bearing demand and savings deposits...............    (19,625)     (8,854)
         Certificates of deposit ........................................................     25,360        (606)
         Borrowings .....................................................................     (8,081)     11,203
      Repayments of Federal Home Loan Bank advances .....................................        (11)     (2,000)
      Proceeds from trust preferred debentures ..........................................      5,155          --
      Cash dividends paid ...............................................................       (760)       (793)
      Repurchase of common stock ........................................................     (2,883)         --
                                                                                            --------    --------
                        Net cash used by financing activities ...........................       (845)     (1,050)
                                                                                            --------    --------
Net Change in Cash and Cash Equivalents .................................................     (2,330)    (17,798)
Cash and Cash Equivalents, Beginning of Period ..........................................     33,546      36,600
                                                                                            --------    --------
Cash and Cash Equivalents, End of Period ................................................   $ 31,216    $ 18,802
                                                                                            ========    ========

Supplemental cash flow disclosures
      Interest paid .....................................................................   $  5,765    $  4,643
      Income tax paid ...................................................................         --          47
</TABLE>
      See notes to consolidated condensed financial statements.

                                       6
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
              Notes to Consolidated Condensed Financial Statements
                                 March 31, 2007
                                   (Unaudited)

Note 1: Basis of Presentation
-----------------------------
The consolidated condensed financial statements include the accounts of Monroe
Bancorp (the "Company") and its wholly owned subsidiary, Monroe Bank, a state
chartered bank (the "Bank") and the Bank's wholly owned subsidiary MB Portfolio
Management, Inc ("MB") and MB's wholly owned subsidiary MB REIT, Inc. A summary
of significant accounting policies is set forth in Note 1 of Notes to Financial
Statements included in the December 31, 2006, Annual Report to Shareholders. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

The interim consolidated condensed financial statements have been prepared in
accordance with instructions to Form 10-Q, and therefore do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.

The interim consolidated condensed financial statements at March 31, 2007, and
for the three months ended March 31, 2007 and 2006, have not been audited by
independent accountants, but reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows for
such periods.

The consolidated condensed balance sheet of the Company as of December 31, 2006
has been derived from the audited consolidated balance sheet of the Company as
of that date. Certain information and note disclosures normally included in the
Company's annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's annual report on Form 10-K filed with the Securities
and Exchange Commission.

The results of operations for the period are not necessarily indicative of the
results to be expected for the year.









                                       7
<PAGE>

Note 2: Earnings Per Share
--------------------------
The number of shares used to compute basic and diluted earnings per share was as
follows:

                                             Three months ended
                                             ------------------

                                       March 31, 2007    March 31, 2006
                                       --------------    --------------

Net income (in thousands) .........      $     2,012       $     1,773
                                         ===========       ===========

Weighted average shares outstanding        6,461,520         6,639,842

Average unearned ESOT shares ......          (21,100)          (30,937)
                                         -----------       -----------
   Shares used to compute basic
       earnings per share .........        6,440,420         6,608,905

Effect of dilutive securities -
    stock options .................           25,706            20,766
                                         -----------       -----------

   Shares used to compute diluted
        earnings per share ........        6,466,126         6,629,671
                                         ===========       ===========

Earnings per share, basic .........      $      0.31       $      0.27
Earnings per share, diluted .......             0.31              0.27

Options to purchase 210,000 shares of common stock at $22 per share were
outstanding at March 31, 2007, but were not included in the computation of
diluted earnings per share because the options' exercise price was greater than
the average market price of the common shares.

Options to purchase 30,000 shares of common stock at $16 per share and 210,000
shares of common stock at $22 per share were outstanding at March 31, 2006, but
were not included in the computation of diluted earnings per share because the
options' exercise price was greater than the average market price of the common
shares.

Note 3:  Change in Accounting Principle
---------------------------------------
The Company adopted the provisions of the Financial Accounting Standards Board
(FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income
Taxes - an interpretation of FASB Statement No. 109, on January 1, 2007. FIN 48
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. As a result of the implementation of FIN 48, the
Company did not identify any uncertain tax positions that it believes should be
recognized in the financial statements.

Note 4:  Reclassifications
--------------------------
Reclassifications of certain amounts in the 2006 consolidated condensed
financial statements have been made to conform to the 2007 presentation.

Note 5:  Contingencies
----------------------
The Company is a creditor in two Chapter 11 cases filed by a real estate
developer and his real estate development corporation. The Chapter 11 Trustee
appointed in the bankruptcy cases filed a complaint in the Bankruptcy Court
against the Company and 17 other named defendants seeking unspecified damages on
theories of fraudulent transfer and preference. The Company and the Trustee
reached a settlement in April 2006 of the Trustee's claims against the Company
for payment of the sum of $50,000, plus assignment of a promissory note payable
by the Trustee to the Company in the principal amount of $20,000. Most of the 17
other named defendants alleged cross claims against the Company for
indemnification and those claims were


                                       8
<PAGE>

dismissed by the Bankruptcy Court for lack of jurisdiction. These other
defendants may subsequently reassert their alleged indemnification claims
against the Company in other forums. In addition, some of these other defendants
have alleged certain other claims in other pending litigation or have threatened
claims against the Bank. While the Company denies any liability for any of these
claims, it is impossible to predict the outcome of any such pending litigation
or potential future litigation or the full range of potential loss to the
Company. Based upon current facts and circumstances, it is not possible at this
time to predict the effect that these proceedings will have on the financial
statements of the Company. The Company has not recorded any liability in its
March 31, 2007 financial statements for these matters.

The Company and Bank are from time to time subject to other claims and lawsuits
which arise primarily in the ordinary course of business. It is the opinion of
management that the disposition or ultimate resolution of such claims and
lawsuits will not have a material adverse effect on the consolidated financial
position of the Company.


Item 2.         Management's Discussion and Analysis of Financial Condition and
-------         Results of Operations
                ---------------------------------------------------------------

General
-------
Monroe Bancorp is a one-bank holding company formed under Indiana law in 1984.
The Company holds all of the outstanding stock of Monroe Bank, which was formed
in 1892. Banking is the primary business activity of the Company.

The Bank, with its primary offices located in Bloomington, Indiana, conducts
business from seventeen locations in Monroe, Jackson, Lawrence, Hamilton and
Hendricks counties in Indiana. Approximately 70 percent of the Bank's business
is in Monroe County and is concentrated in and around the city of Bloomington.

The Bank is a traditional community bank which provides a variety of financial
services to its customers, including:

o    accepting deposits;
o    making commercial, mortgage and personal loans;
o    originating fixed rate residential mortgage loans for sale into the
     secondary market;
o    providing personal and corporate trust services;
o    providing investment advisory and brokerage services; and
o    providing annuities and other investment products.

The majority of the Bank's revenue is derived from interest and fees on loans
and investments, and the majority of its expense is interest paid on deposits
and general and administrative expenses related to its business.

Critical Accounting Policies
----------------------------
The most significant accounting policies followed by the Company are presented
in Note 1 to the consolidated financial statements on pages 37 to 39 of the 2006
Annual Report to Shareholders. Certain of these policies are important to the
portrayal of the Company's financial condition, since they require management to
make difficult, complex or subjective judgments, some of which may relate to
matters that are inherently uncertain. Management has identified these policies
in the Critical Accounting Policies section of the Management's Discussion and
Analysis on pages 19 to 20 of the 2006 Annual Report to Shareholders. There have
been no changes in these critical accounting policies to date.

Non-GAAP Financial Measures
---------------------------
In January 2003, the United States Securities and Exchange Commission ("SEC")
issued Regulation G, "Conditions for Use of Non-GAAP Financial Measures." A
non-GAAP financial measure is a numerical measure of a company's historical or
future performance, financial position, or cash flow that excludes (includes)
amounts or adjustments that are included (excluded) in the most directly
comparable measure calculated in accordance with generally accepted accounting
principles ("GAAP"). Regulation G requires


                                       9
<PAGE>

companies that present non-GAAP financial measures to disclose a numerical
reconciliation to the most directly comparable measurement using GAAP as well as
the reason why the non-GAAP measure is an important measure.

Management has used the following non-GAAP financial measure throughout this
quarterly report on Form 10-Q.

o    In the "Net Interest Income / Net Interest Margin" section, the discussion
     is focused on tax-equivalent rates and margin. Municipal bond and municipal
     loan interest has been converted to a tax-equivalent rate using a federal
     tax rate of 34 percent. Management believes a discussion of the changes in
     tax-equivalent rates and margin is more relevant because it better explains
     changes in after-tax net income.

Results of Operations
---------------------

Overview
--------
Net income for the first quarter of 2007 was $2,012,000, a 13.5 percent increase
from net income of $1,773,000 for the same quarter last year. Basic and diluted
earnings per share for the first quarter of 2007 were $0.31, up 14.8 percent
from $0.27 per share for the first quarter of 2006. Annualized return on average
equity (ROE) for the first quarter of 2007 increased to 15.33 percent compared
to 14.05 percent for first quarter of 2006. The annualized return on average
assets (ROA) was 1.10 percent for the first quarter of 2007 compared to 1.01
percent for the same period of 2006.

Growth in net income primarily resulted from loan growth coupled with an
improvement in the net interest margin, growth in noninterest income offset by
modest increases in noninterest expense. Net interest income for the first
quarter of 2007, after the provision for loan losses, increased $315,000, or 6.1
percent over the first quarter of 2006. Noninterest income for the first quarter
of 2007 increased by $198,000 or 8.8 percent over the same period of 2006.
Noninterest expense increased by $271,000, or 5.6 percent.

The following items affected first quarter results:
     o    Sale of Brownsburg Land - The Company realized a $78,000 gain on the
          sale of a small parcel of land for a road-widening project. The sale
          of the land, which was in front of the Company's Brownsburg Banking
          Center, will have no impact on its operation and minimal impact on its
          overall appearance.
     o    Stock Buyback Activity, Funded With Trust Preferred Stock - The
          Company repurchased 162,000 shares of its common stock during the
          first quarter at an average price including commission of $17.79.
          However, due to the timing of the purchases, the repurchase activity
          only reduced average outstanding shares for the quarter by 54,000. The
          Company has purchased a total of 292,000 shares at an average price
          including commission of $17.28 since the program was announced in June
          of 2006. The Company's repurchase activity during the first quarter
          was funded with proceeds from trust preferred subordinated debentures
          and other debt. Net interest expense during the quarter associated
          with the stock buyback activity totaled $87,000. Trust preferred
          subordinated debentures are being used as the primary source of
          funding for the Company's stock repurchase activity. As of March 31,
          2007 the Company had issued a total of $8,248,000 of trust preferred
          subordinated debentures at an average cost of 6.76 percent.
     o    Formation of a Real Estate Investment Trust - The Bank formed a Real
          Estate Investment Trust (REIT) involving approximately $80,000,000 of
          its existing commercial real estate loans during the fourth quarter of
          2006. The REIT is structured such that it can be used by the Company
          to raise capital if needed. Due to startup expenses, the REIT did not
          have a material impact on the Company's net income during the fourth
          quarter of 2006. However, the REIT increased the Company's net income
          by $61,000 during the first quarter on 2007.
     o    Loan Related Legal Expense -Loan legal expense for the first quarter
          of 2007 was $58,000 greater than during the first quarter of 2006.
          Most of the increase is related to a case that has recently been
          favorably resolved. Management is exploring options to recover amounts
          attributable to certain loans that were charged-off or written down in
          earlier periods related to this case.


                                       10
<PAGE>

Nonperforming assets and 90-day past due loans totaled $2,999,000 (0.40 percent
of total assets) at March 31, 2007 compared to $1,620,000 (0.23 percent of total
assets) at March 31, 2006 and $2,497,000 (0.33 percent of total assets) at
December 31, 2006. The Company's loan delinquency ratio (loan balances past due
30 days or more as a percent of total loans) was 0.72 percent at March 31, 2007,
up from 0.45 percent at March 31, 2006. While the trend in nonperforming assets,
delinquencies and 90-day past due loans has recently been unfavorable,
management believes the overall level is still very low.

The Company also opened a new full-service banking center in Brownsburg, Indiana
in January 2006, which replaced a limited-service office opened in 2002.
Management is very pleased with the progress of the Brownsburg banking center.
Average deposits for the month of March 2007 were $43,265,000 compared to
$24,861,000 for March 2006. The Company continues to make progress on its
planned opening of two more full-service banking centers in Hendricks County
before the end of 2007 and one full-service banking center in Hamilton County in
2008.

Net Interest Income / Net Interest Margin
-----------------------------------------
The table on the following page presents information to assist in analyzing net
interest income. The table of Average Balance Sheets and Interest Rates presents
the major components of interest-earning assets and interest-bearing
liabilities, related interest income and expense and the resulting yield or
cost. Interest income presented in the table has been adjusted to a
tax-equivalent basis assuming a 34 percent tax rate. The tax equivalent
adjustment recognizes the income tax savings when comparing taxable and
tax-exempt assets.

















                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                                                Average Balance Sheets and Interest Rates
                                                                --------------------------------------------------------------------
                                                                Three Months Ended March 31, 2007  Three Months Ended March 31, 2006
                                                                ---------------------------------  ---------------------------------
                                                                Average              Average Rate  Average              Average Rate
                             ASSETS                             Balance    Interest  (annualized)  Balance    Interest  (annualized)
                                                               ---------  ---------  ------------ ---------  ---------  ------------
<S>                                                            <C>        <C>            <C>      <C>        <C>            <C>
Interest earning assets
     Securities
          Taxable .........................................    $  87,348  $     967      4.49%    $  90,537  $     841      3.77%
          Tax-exempt (1) ..................................       34,244        448      5.31%       27,427        327      4.84%
                                                               ---------  ---------               ---------  ---------
               Total securities ...........................      121,592      1,415      4.72%      117,964      1,168      4.02%

     Loans (2) ............................................      557,556     10,411      7.57%      537,168      9,046      6.83%
     FHLB Stock ...........................................        2,312         31      5.44%        2,545         33      5.26%
     Federal funds sold ...................................        9,381        125      5.40%        3,846         41      4.32%
     Interest-earning deposits ............................        2,543         30      4.82%        1,787         21      4.70%
                                                               ---------  ---------               ---------  ---------
                 Total interest earning assets ............      693,384     12,013      7.03%      663,310     10,309      6.30%
                                                               ---------  ---------               ---------  ---------

Noninterest earning assets
    Allowance for loan losses .............................       (6,280)                            (5,639)
     Premises and equipment & other assets ................       38,746                             35,396
     Cash and due from banks ..............................       15,290                             16,774
                                                               ---------                          ---------
               Total assets ...............................    $ 741,140                          $ 709,841
                                                               =========                          =========

              LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
     Total interest-bearing deposits ......................    $ 516,896      5,095      4.00%    $ 486,399      3,835      3.20%
     Borrowed funds .......................................       86,533      1,026      4.81%       87,594        909      4.21%
                                                               ---------  ---------               ---------  ---------
          Total interest-bearing liabilities ..............      603,429      6,121      4.11%      573,993      4,744      3.35%
                                                               ---------  ---------               ---------  ---------


Noninterest-bearing liabilities
     Noninterest-bearing demand deposits ..................       76,615                             77,308
     Other liabilities ....................................        7,866                              7,384
     Shareholders' equity .................................       53,230                             51,156
                                                               ---------                          ---------
                 Total liabilities and shareholders' equity    $ 741,140                          $ 709,841
                                                               =========                          =========


Interest margin recap
Net interest income and interest rate spread
     Tax-equivalent net interest income margin ............               $   5,892      2.92%               $   5,565      2.95%
     Tax-equivalent net interest margin as a percent of
          total average earning assets ....................                              3.45%                              3.40%
Tax-equivalent adjustment (1) .............................                     161                                134
                                                                          ---------                          ---------

                Net interest income .......................               $   5,731                          $   5,431
                                                                          =========                          =========
</TABLE>
(1)  Interest income on tax-exempt securities has been adjusted to a tax
     equivalent basis using a marginal income tax rate of 34%.
(2)  Nonaccrual loans are included in average loan balances and loan fees are
     included in interest income.



                                       12
<PAGE>

Net Interest Income / Net Interest Margin (continued)
-----------------------------------------------------
Net interest income is the primary source of the Company's earnings. It is a
function of the net interest margin and the volume of average earning assets.
The tax-equivalent net interest margin as a percent of average earning assets
was 3.45 percent for the quarter ended March 31, 2007, up from 3.40 percent for
the same quarter last year. The increase in the margin was primarily the result
of yields on interest bearing assets increasing faster than the average cost of
funding liabilities. Overall increases in rates on interest bearing assets
compared to increases in rates on interest bearing liabilities were fairly
evenly matched.

Tax-equivalent net interest income was $5,892,000 for the three months ended
March 31, 2007 compared to $5,565,000 for the same period in 2006, an increase
of 5.9 percent.

Noninterest Income / Noninterest Expense
----------------------------------------
Total noninterest income for the first quarter of 2007 was $2,447,000, a
$198,000 or 8.8 percent increase from $2,249,000 for the same period in 2006.

Significant changes in noninterest income occurred primarily in the following
areas:

     o    Trust fee income totaled $485,000 for the first quarter of 2007
          compared to $409,000 for the first quarter of 2006, an increase of
          $76,000 or 18.6 percent. Trust assets under management reached
          $319,112,000 at March 31, 2007, growing 17.4 percent, or $47,346,000
          over the $271,766,000 at December 31, 2006 and by 30.8 percent, or
          $75,136,000 over the March 31, 2006 total of $243,976,000. The revenue
          impact of the asset growth that took place in the first quarter was
          largely offset by the recognition of certain expenses (e.g.,
          safekeeping asset transfer fees) associated with moving new trust
          assets to the Company. Management does not anticipate that trust
          assets will sustain this rate of growth on an ongoing basis.
     o    The Company realized a $78,000 gain on the sale of a small parcel of
          land for a road-widening project. The sale of the land, which was in
          front of the Brownsburg Banking Center, will have no impact on its
          operation and minimal impact on its overall appearance.
     o    Gains of $44,000 were recognized from sales of mutual funds held in a
          trust associated with the directors deferred compensation plan to make
          plan distributions during the first quarter of 2006. Only $1,000 of
          gains were recognized on similar sales during the first quarter of
          2007, a decline of $43,000.
     o    Debit card interchange fees were $214,000 for the first quarter of
          2007 compared to $184,000 for the same period in 2006, an increase of
          $30,000 or 16.3 percent due to an increase in debit card usage.
     o    Commission income was $232,000 for the first quarter of 2007 compared
          to $202,000 for the same period in 2006, an increase of $30,000 or
          14.9 percent. This growth was attributed to a $47,000, or 46.2 percent
          increase in branch-based annuity and mutual fund sales, personnel
          changes, improved sales efforts and progress being made in the
          transition from a transaction based commission business into one that
          is management fee based. This was partially offset by a decrease of
          $17,000 in full-service brokerage fees.

For the quarter ending March 31, 2007, total noninterest expense was $5,093,000
an increase of $271,000 or 5.6 percent compared to $4,822,000 for the same
period in 2006.

Significant changes in noninterest expense occurred in the following areas:

     o    Salary and employee benefits increased by $162,000 or 5.7 percent
          during the first quarter of 2007 compared to the same period in 2006.
          Approximately 4 percent of this increase was the result of annual
          raises with the remainder being the result of growth in the number of
          employees.

     o    Legal fees increased $68,000 or 78.2 percent during the first quarter
          of 2007 compared to the same period in 2006, primarily due to a case
          that has recently been favorably resolved (discussed under Part II,
          Item I, Legal Proceedings on page 20). Management is exploring options
          to recover amounts attributed to certain loans related to this case
          that were charged-off or written down in earlier periods.


                                       13
<PAGE>

Income Taxes
------------
The Company records a provision for income taxes currently payable, along with a
provision for those taxes payable in the future. Such deferred taxes arise from
differences in timing of certain items for financial statement reporting rather
than income tax reporting. The major difference between the effective tax rate
applied to the Company's financial statement income and the federal and state
statutory rate of approximately 40 percent is interest on tax-exempt securities
and the effect of the Company's Delaware based investment holding company and a
real estate investment trust (REIT) formed during the fourth quarter of 2006.

The Company's effective tax rate was 28.1 percent for the three months ended
March 31, 2007 compared to 30.7 percent for the same period in 2006. The tax
rate decreased primarily because municipal bond (tax-exempt) income represented
a higher percentage of total income in the first quarter of 2007 and because of
the impact of a REIT established during the fourth quarter of 2006.

Financial Condition
-------------------

Assets and Liabilities
----------------------
Total assets of the Company at March 31, 2007 were $751,621,000 an increase of
0.4 percent or $3,428,000 compared to $748,193,000 at December 31, 2006. Loans
(including loans held for sale) grew to $562,724,000 at March 31, 2007 compared
to $559,463,000 at December 31, 2006, an increase of 0.6 percent. Deposits
increased to $595,061,000 at March 31, 2007 compared to $589,328,000 at December
31, 2006, an increase of $5,733,000 or 1.0 percent. Borrowings decreased to
$95,143,000 at March 31, 2007 compared to $98,079,000 at December 31, 2006, a
3.0 percent decrease. An increase of $5,155,000 in trust preferred subordinated
debentures was offset by decreases in repurchase agreements of $5,194,000 and
federal funds purchased of $2,075,000. At March 31, 2007, the total amount of
trust preferred subordinated debentures outstanding was $8,248,000, compared to
none at March 31, 2006.

Capital
-------
Shareholders' equity decreased by $1,604,000 at March 31, 2007 compared to
December 31, 2006. This decrease was a result of year-to-date net income of
$2,012,000, ESOP shares earned of $16,000, and option expense of $15,000, offset
by stock repurchased of $2,882,000 dividends paid of $760,000, and other
comprehensive loss, consisting solely of the change (decrease) in net
unrecognized losses in the Company's available-for-sale securities portfolio of
$5,000.

The Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies and are assigned to a capital
category. The assigned capital category is largely determined by three ratios
that are calculated according to the regulations: total risk adjusted capital,
Tier 1 capital, and Tier 1 leverage ratios. The ratios are intended to measure
capital relative to assets and credit risk associated with those assets and
off-balance sheet exposures of the entity. The capital category assigned to an
entity can also be affected by qualitative judgments made by regulatory agencies
about the risk inherent in the entity's activities that are not part of the
calculated ratios.

There are five capital categories defined in the regulations ranging from well
capitalized to critically undercapitalized. Classification of a bank in any of
the undercapitalized categories can result in actions by regulators that could
have a material effect on a bank's operations. At March 31, 2007 and December
31, 2006, the Company and the Bank were categorized as well capitalized and met
all applicable capital adequacy requirements. There are no conditions or events
since March 31, 2007 that management believes have changed the Company's or
Bank's classification.



                                       14
<PAGE>

The actual and required capital amounts and ratios are as follows:
<TABLE>
<CAPTION>
                                                            Required for Adequate      To Be Well
                                                 Actual           Capital(1)         Capitalized(1)
                                          ----------------------------------------------------------
                                            Amount    Ratio   Amount     Ratio      Amount     Ratio
                                          ----------------------------------------------------------
<S>                                         <C>     <C>      <C>         <C>      <C>         <C>
     As of March 31, 2007
     --------------------
     Total capital(1)(to risk-weighted
        assets)
         Consolidated .................    $67,146   11.55%  $46,513      8.0%         N/A       N/A
         Bank .........................     66,317   11.49    46,186      8.0      $57,733     10.0%
     Tier I capital(1)(to risk-weighted
        assets)
         Consolidated .................     67,146   10.48    23,256      4.0          N/A       N/A
         Bank .........................     66,317   10.41    23,093      4.0       34,640      6.0
     Tier I capital(1)(to average
        assets)
         Consolidated .................     60,930    8.22    29,646      4.0          N/A       N/A
         Bank .........................     60,101    8.15    29,491      4.0       36,863      5.0

     As of December 31, 2006
     -----------------------
     Total capital(1)(to risk-weighted
        assets)
         Consolidated .................    $63,513   11.08%  $45,838      8.0%         N/A       N/A
         Bank .........................     64,127   11.26    45,568      8.0      $56,960     10.0%
     Tier I capital(1)(to risk-weighted
        assets)
         Consolidated .................     57,369   10.01    22,919      4.0          N/A       N/A
         Bank .........................     57,983   10.18    22,784      4.0       34,176      6.0
     Tier I capital(1)(to average
        assets)
         Consolidated .................     57,369    7.70    29,800      4.0          N/A       N/A
         Bank .........................     57,983    7.82    29,658      4.0       37,073      5.0
</TABLE>
     (1) As defined by regulatory agencies

Classification of Assets, Allowance for Loan Losses, and Nonperforming Loans
----------------------------------------------------------------------------
The Bank currently classifies loans internally to assist management in
addressing collection and other risks. These classified loans represent credits
characterized by the distinct possibility that some loss will be sustained if
deficiencies are not corrected. As of March 31, 2007, the Bank had $13,812,000
of loans internally classified compared to $10,009,000 at December 31, 2006, a
38.0 percent increase. This increase is primarily comprised of four large
credits. Although the amount of loans internally classified has increased, the
specific reserve amount associated with internally classified loans has
decreased to $57,000 at March 31, 2007 from $162,000 at December 31, 2006.
Management believes that the Company has sufficient collateral to minimize any
potential losses on internally classified loans. The allowance for loan losses
was $6,216,000, or 1.11 percent of portfolio loans (excluding loans held for
sale) at March 31, 2007 compared to $6,144,000, or 1.10 percent, of portfolio
loans at December 31, 2006. A portion of classified loans are nonaccrual loans.
The Bank had nonperforming assets (nonaccrual loans, restructured loans, OREO
and 90-days past due loans still accruing) totaling $2,999,000, or 0.40 percent
of total assets at March 31, 2007 compared to $2,497,000 or 0.33 percent of
total assets at December 31, 2006. March 31, 2007 nonperforming assets increased
compared to March 31, 2006, when nonperforming assets were $1,620,000, or 0.23
percent of total assets. While the trend in nonperforming assets and 90-day past
due loans still accruing has recently been unfavorable, management believes the
overall level is still low.

During the first quarter of 2007, the Bank had net loan charge offs totaling
$213,000 compared to $210,000 charged off for the same period in 2006. Past due
loans (30 days or more) were 0.72 percent of total loans at March 31, 2007
compared to 0.45 percent of total loans at March 31, 2006.


                                       15
<PAGE>

Liquidity
---------
Liquidity refers to the ability of a financial institution to generate
sufficient cash to fund current loan demand, meet savings deposit withdrawals
and pay operating expenses. The primary sources of liquidity are cash,
interest-bearing deposits in other financial institutions, marketable
securities, loan repayments, increased deposits and total institutional
borrowing capacity.

Cash Requirements
Management believes that the Company has adequate liquidity and adequate sources
for obtaining additional liquidity if needed. The Company's internal
Asset/Liability Committee (ALCO) meets regularly to review projected loan demand
and discuss appropriate funding sources to adequately manage the Company's gap
position and minimize interest rate risk.

Short-term liquidity needs resulting from normal deposit/withdrawal functions
are provided by the Company retaining a portion of cash generated from
operations and through utilizing federal funds and repurchase agreements.
Long-term liquidity and other liquidity needs are provided by the ability of the
Company to borrow from the Federal Home Loan Bank of Indianapolis (FHLB), to
obtain brokered certificates of deposit (CDs) and to borrow on a line of credit.
FHLB advances were $19,419,000 at March 31, 2007 compared to $19,430,000 at
December 31, 2006. At March 31, 2007, the Company had excess borrowing capacity
at the FHLB of $35,050,000 as limited by the Company's board resolution in
effect at that date. In terms of managing the Company's liquidity, management's
primary focus is on increasing deposits to fund future growth. However, the
Board may increase its resolution limit on FHLB advances if the Company needs
additional liquidity.

Over the past year, the Company has also utilized alternative funding sources.
The Company obtained an unsecured line of credit with U. S. Bank during 2006.
The maximum amount that can be borrowed is $10,000,000. The line of credit
carries a variable interest rate of 1.50 percent over LIBOR and changes monthly.
At March 31, 2007, the Company had $10,000,000 available on this line of credit.
In July 2005, the Company began using brokered CDs as an alternate source of
funding. At March 31, 2007, the Company had $17,972,000 brokered CDs on its
balance sheet, compared to $27,061,000 at December 31, 2006 and $50,880,000 at
March 31, 2006. In July 2006, the Company formed Monroe Bancorp Capital Trust I
(Trust I). Trust I issued 3,000 shares of Fixed/Floating Rate Capital Securities
with a liquidation amount of $3,000,000 in a private placement, and 93 Common
Securities with a liquidation amount of $1,000 per Common Security to the
Company for $93,000. The aggregate proceeds of $3,093,000 were used by Trust I
to purchase $3,093,000 in Fixed/Floating Rate Junior Subordinated Debentures
from the Company. In March 2007, the Company formed Monroe Bancorp Statutory
Trust II (Trust II). Trust II issued 5,000 shares of Fixed/Floating Rate Capital
Securities with a liquidation amount of $5,000,000 in a private placement, and
155 Common Securities with a liquidation amount of $1,000 per Common Security to
the Company for $155,000. The aggregate proceeds of $5,155,000 were used by
Trust II to purchase $5,155,000 in Fixed/Floating Rate Junior Subordinated
Debentures from the Company. The proceeds of these debentures are intended to be
used to repurchase Company stock. As of March 31, 2007, $5,044,000 has been used
for this purpose.

At the bank holding company level, the Company primarily uses cash to pay
dividends to shareholders and to repurchase stock. During the past twelve
months, the main source of funding for the holding company has been proceeds
from trust preferred debentures. Prior to that, the main source of funding for
the holding company was dividends from its subsidiary (the Bank). During the
first quarter of 2007, the Bank declared no dividends to the holding company. As
of April 1, 2007, the amount of dividends the Bank can pay to the parent company
without prior regulatory approval was $12,681,000, versus $10,586,000 at January
1, 2007. As discussed in Note 11 to the Consolidated Financial Statements (page
47 of the 2006 Annual Report to Shareholders) and Item 1 of the December 31,
2006 Form 10-K, the Bank is subject to many regulations and, among other things,
may be limited in its ability to pay dividends or transfer funds to the holding
company. Accordingly, consolidated cash flows as presented in the Consolidated
Statements of Cash Flows on page 6 may not represent cash immediately available
to the holding company.


                                       16
<PAGE>

Sources and Uses of Cash
The following discussion relates to the Consolidated Statements of Cash Flows
(page 6 of the consolidated condensed financial statements). During the three
months ended March 31, 2007, $2,879,000 of cash was provided by operating
activities, compared to $238,000 used during the same period in 2006. The
increase in this area was primarily a result of an increase in other
liabilities. During the first three months of 2007, $4,363,000 was used for
investing activities, compared to $16,510,000 in the same period of 2006. The
decrease in the use of funds in this category occurred primarily because the
Company had a $3,656,000 increase in loans in the first three months of 2007
compared to a $14,524,000 increase in the same period of 2006. During the first
three months of 2007, $846,000 was used by financing activities compared to
$1,050,000 of cash used by financing activities during the same period in 2006.
Although the overall change in this area was minor, the bank obtained funding
primarily from certificates of deposit and trust preferred debentures in the
first three months of 2007 compared to repurchase agreements in 2006. Overall,
net cash and cash equivalents decreased $2,330,000 during the three months ended
March 31, 2007 compared to a decrease of $17,798,000 in the same period of 2006.

Impact of Inflation and Changing Prices
---------------------------------------
The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles. These principles
require the measurement of financial position and operating results in terms of
historical dollars, without considering changes in the relative purchasing power
of money over time, due to inflation.

The primary assets and liabilities of the Company are monetary in nature.
Consequently, interest rates generally have a more significant impact on
performance than the effects of inflation. Interest rates, however, do not
necessarily move in the same direction or with the same magnitude as the price
of goods and services. In a period of rapidly rising interest rates, the
liquidity and the maturity structure of the Company's assets and liabilities are
critical to the maintenance of acceptable performance levels. The Company
constantly monitors the liquidity and maturity structure of its assets and
liabilities, and believes active asset/liability management has been an
important factor in its ability to record consistent earnings growth through
periods of interest rate volatility.

Other
-----
The Securities and Exchange Commission maintains a Web site that contains
reports, proxy information statements, and other information regarding
registrants that file electronically with the Commission, including Monroe
Bancorp (ticker symbol MROE). The address is http://www.sec.gov.

Future Accounting Matters
-------------------------
In September 2006, the FASB issued Statement No. 157, Fair Value Measurements.
This Statement defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. This Statement
establishes a fair value hierarchy about the assumptions used to measure fair
value and clarifies assumptions about risk and the effect of a restriction on
the sale or use of an asset. The standard is effective for fiscal years
beginning after November 15, 2007. The Company does not expect that the adoption
of SFAS No. 157 will have a material impact on financial condition or results of
operations.

In September 2006, the FASB Emerging Issues Task Force (EITF) finalized Issue
No. 06-5, Accounting for Purchases of Life Insurance - Determining the Amount
That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4
(Accounting for Purchases of Life Insurance). This issue requires that a
policyholder consider contractual terms of a life insurance policy in
determining the amount that could be realized under the insurance contract. It
also requires that if the contract provides for a greater surrender value if all
individual policies in a group are surrendered at the same time, that the
surrender value be determined based on the assumption that policies will be
surrendered on an individual basis. Lastly, the issue discusses whether the cash
surrender value should be discounted when the policyholder is contractually
limited in its ability to surrender a policy. This issue is effective for fiscal
years beginning after December 15, 2006. The Company does not expect that the
adoption EITF No. 06-5 will have a material impact on financial condition of
results of operations.


                                       17
<PAGE>

On February 15, 2007, the FASB issued its Statement No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities--Including an Amendment of
FASB Statement No. 115. FAS 159 permits entities to elect to report most
financial assets and liabilities at their fair value with changes in fair value
included in net income. The fair value option may be applied on an
instrument-by-instrument or instrument class-by-class basis. The option is not
available for deposits withdrawable on demand, pension plan assets and
obligations, leases, instruments classified as stockholders' equity, investments
in consolidated subsidiaries and variable interest entities and certain
insurance policies. The new standard is effective at the beginning of the
Company's fiscal year beginning January 1, 2008, and early application may be
elected in certain circumstances. The Company expects to first apply the new
standard at the beginning of its 2008 fiscal year. The Company does not expect
that the adoption of SFAS No. 159 will have a material impact on financial
condition or results of operations.

Forward-Looking Statements
--------------------------
Portions of information in this Form 10-Q contain forward-looking statements
about the Company which we believe are within the meaning of the Private
Securities Litigation Reform Act of 1995. This Form 10-Q contains certain
forward-looking statements with respect to the financial condition, results of
operations, plans, objectives, future performance and business of the Company.
Forward-looking statements can be identified by the fact that they do not relate
strictly to historical or current facts. They often include the words "believe,"
"expect," "anticipate," "intend," "plan," "estimate" or words of similar
meaning, or future or conditional verbs such as "will," "would," "should,"
"could" or "may" or words of similar meaning. These forward-looking statements,
by their nature, are subject to risks and uncertainties. There are a number of
important factors that could cause future results to differ materially from
historical performance and these forward-looking statements. Factors that might
cause such a difference include, but are not limited to: (1) competitive
pressures among depository institutions; (2) changes in the interest rate
environment; (3) prepayment speeds, charge-offs and loan loss provisions; (4)
general economic conditions, either national or in the markets in which the
Company does business; (5) legislative or regulatory changes adversely affect
the business of the Company; and (6) changes in real estate values or the real
estate markets. Further information on other factors which could affect the
financial results of the Company are included in the Company's Form 10-K for the
year ended December 31, 2005 as filed with the Securities and Exchange
Commission.


Item 3.         Quantitative and Qualitative Disclosures about Market Risk
-------         ----------------------------------------------------------

Market risk of the Company encompasses exposure to both liquidity risk and
interest rate risk and is reviewed on an ongoing basis by management and
quarterly by the Asset/Liability Committee ("ALCO") and the Board of Directors.
Liquidity was addressed as part of the discussion entitled "Liquidity."

The Company's interest sensitivity position at March 31, 2007 remained
consistent with the Company's primary goal of maximizing interest margin while
maintaining a low exposure to interest rate risk.

Management uses several techniques to measure interest rate risk. Interest rate
risk exposure is measured using an interest rate sensitivity analysis to
determine the change in the net portfolio value ("NPV") of its cash flows from
assets and liabilities in the event of hypothetical changes in interest rates.
Management also forecasts the net interest income that the Bank's current
balance sheet would yield over the next twelve months assuming the same
hypothetical changes in interest rates. A third method used by the Bank to
measure interest rate risk is an interest rate sensitivity gap analysis. The gap
analysis is utilized to quantify the repricing characteristics of the Bank's
assets and liabilities.

Management believes that its forecast of changes in net interest income under
various rate shocks is the more valuable and easiest to interpret interest rate
risk measurement technique. Management believes that interested parties will
derive a better understanding of how the Company's intermediation activities
will perform under different rate scenarios from its presentation of projected
net interest income under various rate shocks. This should help users of the
information form clearer opinions of the Company's interest rate sensitivity.


                                       18
<PAGE>

The Company's Board of Directors adopted an interest rate risk policy which
established a 20 percent maximum increase or decrease in net interest income in
the event of a sudden and sustained 2 percent (200 basis point) increase or
decrease in interest rates.

The following table summarizes the results of management's forecast of net
interest income that would be generated by the Bank's March 31, 2007 balance
sheet under various rate shocks:

Projected Change in Net Interest Income - March  31, 2007

<TABLE>
<CAPTION>
                            Projected Net Interest        $ Change
                                Income Over the       in Net Interest       % Change
Change in Interest Rate       Next Twelve Months           Income        in Net Interest
    (basis points)              (in thousands)         (in thousands)        Income
----------------------------------------------------------------------------------------
<S>       <C>                     <C>                     <C>                <C>
         +200                     $ 22,036                $ (942)            (4.10) %
         +100                       22,572                  (406)            (1.77)
           0                        22,978                     0                 0
         -100                       23,155                   177              0.77
         -200                       22,920                   (58)            (0.25)

</TABLE>

For comparative purposes, the following table summarizes the results of
management's forecast of net interest income that would be generated by the
Bank's December 31, 2006 balance sheet under various rate shocks:

Projected Change in Net Interest Income - December 31, 2006

<TABLE>
<CAPTION>
                            Projected Net Interest        $ Change
                                Income Over the       in Net Interest       % Change
Change in Interest Rate       Next Twelve Months           Income        in Net Interest
    (basis points)              (in thousands)         (in thousands)        Income
----------------------------------------------------------------------------------------
<S>       <C>                     <C>                     <C>                <C>
         +200                     $ 20,593                $ (1,197)          (5.49) %
         +100                       21,264                    (526)          (2.41)
           0                        21,790                       0               0
         -100                       22,070                     280            1.28
         -200                       21,954                     164            0.75
</TABLE>

Management believes a 200 basis point (2 percent) change in interest rates, in
either direction, over the next twelve months is unlikely. Nonetheless, it is
informative to quantify how rate changes of this magnitude could affect net
interest income derived from the Company's current balance sheet and use this
measure to the Company's interest rate risk.

The March 31, 2007 table indicates that the Bank's projected net interest income
for the next twelve months would decline by 4.1 percent in the event of a sudden
and sustained 200 basis point increase in interest rates. This result is largely
driven by the Company having more liabilities, primarily deposits, that would
reprice over the twelve month horizon than assets. As a result, net interest
expense would increase faster than interest income in the event of an upward
rate shock.

Net interest income is also projected to decline in the event of an immediate
200 basis point decrease in interest rates. The projected 0.3 percent decline in
net interest income is largely result of the fact that the Company has deposits
that are currently priced below 2.00% which could not be repriced to match the
200 basis point drop in market rates. Alternatively, virtually all of the
Company's interest earning assets subject to repricing could reprice downward
the full 200 basis points. The modest decline in net interest income projected
under this scenario therefore results from net interest income declining
slightly faster than interest expense.


                                       19
<PAGE>

The forecasts from both time periods indicate the interest rate sensitivities of
the Bank's assets and liabilities are relatively well matched over the rate
shock ranges between a decrease of 100 basis points and an increase of 200 basis
points. The estimated changes in net interest income calculated as of March 31,
2007, are within the approved guidelines established by the Board of Directors.

Computations of prospective effects of hypothetical interest rate changes are
based on a number of assumptions, including relative levels of market interest
rates, loan prepayments and deposit run-off rates, and should not be relied upon
as indicative of actual results. These computations do not contemplate actions
management may undertake in response to changes in interest rates. The NPV
calculation is based on the net present value of discounted cash flows utilizing
certain prepayment assumptions and market interest rates.

Certain shortcomings are inherent in the method of computing the estimated net
interest income under hypothetical rate shocks. Actual results may differ from
that information presented in the table above should market conditions vary from
the assumptions used in preparation of the table information. If interest rates
remain or decrease below current levels, the proportion of adjustable rate loans
in the loan portfolio could decrease in future periods due to refinancing
activity. Also, in the event of an interest rate change, prepayment and early
withdrawal levels would likely be different from those assumed in the table.
Lastly, the ability of many borrowers to repay their adjustable rate debt may
decline during a rising interest rate environment.

Item 4.         Controls and Procedures.
------          -----------------------

Monroe Bancorp's management is responsible for establishing and maintaining
effective disclosure controls and procedures, as defined under Rules 13a-15(e)
and 15d-15(e) of the Securities Exchange Act of 1934. As of March 31, 2007, an
evaluation was performed under the supervision and with the participation of
management, including the Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures as of March 31, 2007 were effective in ensuring material information
required to be disclosed in this Quarterly Report on Form 10-Q was recorded,
processed, summarized, and reported on a timely basis.

There were no changes in the Company's internal control over financial reporting
that occurred during the quarter ended March 31, 2007 that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.


Part II - Other Information
-------   -----------------

Item 1.        Legal Proceedings.
-------        ------------------

               Except as set forth below, there are no material pending legal
               proceedings, other than routine litigation incidental to the
               business of the Company or the Bank, to which the Company or the
               Bank is a party or of which any of its property is subject.
               Further, there is no material legal proceeding in which any
               director, officer, principal shareholder, or affiliate of the
               Company, or any associate of such director, officer, principal
               shareholder or affiliate is a party, or has a material interest,
               adverse to the Company.

               The Bank is a plaintiff in an action to recover amounts due on
               mortgage loans to a real estate developer and related entities.
               The borrower is in bankruptcy proceedings and also has been
               indicted by a federal grand jury. The Trustee in the borrower's
               bankruptcy petition filed an action against the Bank and other
               defendants for damages from fraudulent transfer and preference
               payments, and to set aside certain mortgages granted to the Bank
               by the borrower (Case No. 02-21300-JKC-11, United States
               Bankruptcy Court Southern District of Indiana, Indianapolis
               Division, Plaintiff: Robert W. Leasure, Jr., Trustee of Royal
               Haven Builders, Inc. and Eric H. Tauer). The Company and the
               Trustee reached a settlement in April 2006 of the Trustee's
               claims against the Company for payment of the sum of $50,000,
               plus assignment of a


                                       20
<PAGE>

               promissory note payable by the Trustee to the Company in the
               principal amount of $20,000. Most of the 17 other named
               defendants alleged cross claims against the Bank for
               indemnification and those claims have been dismissed by the
               Bankruptcy Court for lack of jurisdiction. These other defendants
               may subsequently reassert their alleged indemnification claims
               against the Company in other forums. In addition, some of these
               other defendants have alleged certain other claims in other
               pending litigation or have threatened claims against the Bank.
               Based upon current facts and circumstances, it is not possible at
               this time to predict the effect that these proceedings will have
               on the financial statements of the Company.

               On February 17, 2005, the loan officer who made the loans related
               to the claims and threatened claims also was indicted by a
               federal grand jury. On March 23, 2007, this individual was
               acquitted by a United States district court.

Item 1A.       Risk Factors.
--------       -------------

               There have been no material changes in our risk factors from
               those disclosed in our 2006 Annual Report on Form 10-K.

Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds.
-------        ------------------------------------------------------------

               Stock Repurchased During the First Quarter of 2007
               --------------------------------------------------
<TABLE>
<CAPTION>
                                                                                  (d) Maximum Number
                                                                                   (or Approximate
                                                                                   Dollar Value) of
                                                             (c) Total Number of   Shares that May
                                    (a) Total                Shares Purchased as   Yet Be Purchased
                                    Number of   (b) Average   Part of Publicly     Under the Plans
                                      Shares    Price Paid     Announced Plans    or Programs (dollar
                    Period          Purchased    per Share       or Programs      amount in thousands)
               ---------------------------------------------------------------------------------------
<S>                                  <C>          <C>              <C>                  <C>
               January 1-31, 2007         --      $    --               --              $7,838
               February 1-28, 2007    42,000        17.63           42,000               7,098
               March 1-31, 2007      120,000        17.85          120,000               4,956
                                    ---------------------------------------
                    Totals           162,000      $ 17.79          162,000
                                    =======================================
</TABLE>

               The stock repurchase plan was announced June 16, 2006. Total
               dollar amount approved: $10,000,000. The plan has no expiration
               date.

Item 3.        Defaults upon Senior Securities.
-------        --------------------------------
               Not applicable.

Item 4.        Submission of Matters to a Vote of Security Holders.
-------        ----------------------------------------------------
               None

Item 5.        Other Information.
-------        ------------------
               Not applicable.

Item 6.        Exhibits.
-------        ---------

Exhibit No:    Description of Exhibit:
-----------    -----------------------

3 (i)          Monroe Bancorp Articles of Incorporation are incorporated by
               reference to registrant's Form 10 filed November 14, 2000.


                                       21
<PAGE>

3 (ii)         Monroe Bancorp By-laws as Amended and Restated March 23, 2006,
               are incorporated by reference to registrant's Form 10-Q filed
               August 8, 2006.

10 (i)         1999 Directors' Stock Option Plan of Monroe Bancorp is
               incorporated by reference to registrant's Form 10 filed November
               14, 2000.

10 (ii)        1999 Management Stock Option Plan of Monroe Bancorp is
               incorporated by reference to registrant's Form 10 filed November
               14, 2000.

10 (iii)       Deferred Compensation Trust for Monroe Bancorp is incorporated by
               reference to registrant's Form 10 filed November 14, 2000. 10
               (iv) Monroe County Bank Agreement for Supplemental Death or
               Retirement Benefits is incorporated by reference to registrant's
               Form 10 filed November 14, 2000.

10 (iv)        Monroe County Bank Agreement for Supplemental Death or Retirement
               Benefits incorporated by reference to registrant's Form 10 filed
               November 14, 2000.

10 (v)         Monroe Bancorp Thrift Plan as Amended and Restated January 1,
               2001 is incorporated by reference to registrant's Form 10-Q filed
               November 13, 2002.

10 (vi)        Monroe Bancorp Employee Stock Ownership Plan as Amended and
               Restated January 1, 2001 is incorporated by reference to
               registrant's Form 10-Q filed November 13, 2002.

10(vii)        Third Amendment to the Monroe Bancorp Employees' Stock Ownership
               Plan is incorporated by reference to registrant's Form 10-K filed
               March 29, 2004.

10(viii)       Monroe Bancorp Directors' Deferred Compensation Plan as Amended
               and Restated Effective January 1, 1999 and First, Second and
               First Amendments are incorporated by reference to registrant's
               Form 10-K filed March 29, 2004.

10(ix)         Monroe Bancorp Executives' Deferred Compensation Plan as Amended
               and Restated Effective January 1, 1999 and First, Second and
               First Amendments are incorporated by reference to registrant's
               Form 10-K filed March 29, 2004.

10 (x)         Form of agreement under the 1999 Management Stock Option Plan of
               Monroe Bancorp is incorporated by reference to registrant's Form
               10-K filed March 15, 2005.

10 (xi)        Schedule of 2007 Directors Compensation Arrangements is
               incorporated by reference to registrant's Form 8-K filed December
               13, 2006.

10 (xii)       Schedule of 2007 Executive Officers Compensation Arrangements is
               incorporated by reference to registrant's Form 8-K filed December
               13, 2006.

10(xiii)       Fourth Amendment to the Monroe Bancorp Employees' Stock Ownership
               Plan is incorporated by reference to Form 10-Q filed May 9, 2005.

10(xiv)        Monroe Bancorp Directors' 2005 Deferred Compensation Plan
               incorporated by reference to Form 10-K filed March 14, 2006.

10(xv)         Monroe Bancorp Executives' 2005 Deferred Compensation Plan
               incorporated by reference to Form 10-K filed March 14, 2006.

10(xvi)        Form of agreement under the Monroe Bancorp Directors' 2005
               Deferred Compensation Plan incorporated by reference to Form 10-K
               filed March 14, 2006.

10(xvii)       Form of agreement under the Monroe Bancorp Executives' 2005
               Deferred Compensation Plan incorporated by reference to Form 10-K
               filed March 14, 2006.


                                       22
<PAGE>

10(xviii)      First Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, incorporated by reference to Form 10-Q
               filed May 9, 2006.

10(xix)        Second Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, incorporated by reference to Form 10-Q
               filed May 9, 2006.

10(xx)         Third Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, incorporated by reference to Form 10-Q
               filed May 9, 2006.

10(xxi)        Fourth Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, incorporated by reference to Form 10-Q
               filed May 9, 2006.

10(xxii)       Fifth Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, incorporated by reference to Form 10-Q
               filed May 9, 2006.

10(xxiii)      Sixth Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, filed as part of this form 10-Q.

31(i)          Certification for Annual Report on Form 10-Q by Principal
               Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
               Act of 2002.

31(ii)         Certification for Annual Report on Form 10-Q by Principal
               Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
               Act of 2002.

32(i)          Certification of Principal Executive Officer pursuant to Section
               906 of the Sarbanes-Oxley Act of 2002.

32 (ii)        Certification of Principal Financial Officer pursuant to Section
               906 of the Sarbanes-Oxley Act of 2002.















                                       23
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                          MONROE BANCORP

     Date: May 8, 2007                    By:  /s/ Mark D. Bradford
           -----------                         -------------------------------
                                               Mark D. Bradford, President and
                                               Chief Executive Officer
                                               (Principal Executive Officer)

     Date: May 8, 2007                    By: /s/ Gordon M. Dyott
           -----------                        --------------------------------
                                              Gordon M. Dyott, Exec. Vice
                                              President, Chief Financial Officer
                                              (Principal Financial Officer)



















                                       24
<PAGE>

                                  Exhibit Index
                                  -------------


Exhibit No:    Description of Exhibit:
-----------    -----------------------

3 (i)          Monroe Bancorp Articles of Incorporation are incorporated by
               reference to registrant's Form 10 filed November 14, 2000.

3 (ii)         Monroe Bancorp By-laws as Amended and Restated March 23, 2006,
               are incorporated by reference to registrant's Form 10-Q filed
               August 8, 2006.

10 (i)         1999 Directors' Stock Option Plan of Monroe Bancorp is
               incorporated by reference to registrant's Form 10 filed November
               14, 2000.

10 (ii)        1999 Management Stock Option Plan of Monroe Bancorp is
               incorporated by reference to registrant's Form 10 filed November
               14, 2000.

10 (iii)       Deferred Compensation Trust for Monroe Bancorp is incorporated by
               reference to registrant's Form 10 filed November 14, 2000. 10
               (iv) Monroe County Bank Agreement for Supplemental Death or
               Retirement Benefits is incorporated by reference to registrant's
               Form 10 filed November 14, 2000.

10 (iv)        Monroe County Bank Agreement for Supplemental Death or Retirement
               Benefits incorporated by reference to registrant's Form 10 filed
               November 14, 2000.

10 (v)         Monroe Bancorp Thrift Plan as Amended and Restated January 1,
               2001 is incorporated by reference to registrant's Form 10-Q filed
               November 13, 2002.

10 (vi)        Monroe Bancorp Employee Stock Ownership Plan as Amended and
               Restated January 1, 2001 is incorporated by reference to
               registrant's Form 10-Q filed November 13, 2002.

10(vii)        Third Amendment to the Monroe Bancorp Employees' Stock Ownership
               Plan is incorporated by reference to registrant's Form 10-K filed
               March 29, 2004.

10(viii)       Monroe Bancorp Directors' Deferred Compensation Plan as Amended
               and Restated Effective January 1, 1999 and First, Second and
               First Amendments are incorporated by reference to registrant's
               Form 10-K filed March 29, 2004.

10(ix)         Monroe Bancorp Executives' Deferred Compensation Plan as Amended
               and Restated Effective January 1, 1999 and First, Second and
               First Amendments are incorporated by reference to registrant's
               Form 10-K filed March 29, 2004.

10 (x)         Form of agreement under the 1999 Management Stock Option Plan of
               Monroe Bancorp is incorporated by reference to registrant's Form
               10-K filed March 15, 2005.

10 (xi)        Schedule of 2007 Directors Compensation Arrangements is
               incorporated by reference to registrant's Form 8-K filed December
               13, 2006.

10 (xii)       Schedule of 2007 Executive Officers Compensation Arrangements is
               incorporated by reference to registrant's Form 8-K filed December
               13, 2006.

10(xiii)       Fourth Amendment to the Monroe Bancorp Employees' Stock Ownership
               Plan is incorporated by reference to Form 10-Q filed May 9, 2005.

10(xiv)        Monroe Bancorp Directors' 2005 Deferred Compensation Plan
               incorporated by reference to Form 10-K filed March 14, 2006.


                                       25
<PAGE>

10(xv)         Monroe Bancorp Executives' 2005 Deferred Compensation Plan
               incorporated by reference to Form 10-K filed March 14, 2006.

10(xvi)        Form of agreement under the Monroe Bancorp Directors' 2005
               Deferred Compensation Plan incorporated by reference to Form 10-K
               filed March 14, 2006.

10(xvii)       Form of agreement under the Monroe Bancorp Executives' 2005
               Deferred Compensation Plan incorporated by reference to Form 10-K
               filed March 14, 2006.

10(xviii)      First Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, incorporated by reference to Form 10-Q
               filed May 9, 2006.

10(xix)        Second Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, incorporated by reference to Form 10-Q
               filed May 9, 2006.

10(xx)         Third Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, incorporated by reference to Form 10-Q
               filed May 9, 2006.

10(xxi)        Fourth Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, incorporated by reference to Form 10-Q
               filed May 9, 2006.

10(xxii)       Fifth Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, incorporated by reference to Form 10-Q
               filed May 9, 2006.

10(xxiii)      Sixth Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, filed as part of this form 10-Q.

31(i)          Certification for Annual Report on Form 10-Q by Principal
               Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
               Act of 2002.

31(ii)         Certification for Annual Report on Form 10-Q by Principal
               Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
               Act of 2002.

32(i)          Certification of Principal Executive Officer pursuant to Section
               906 of the Sarbanes-Oxley Act of 2002.

32 (ii)        Certification of Principal Financial Officer pursuant to Section
               906 of the Sarbanes-Oxley Act of 2002.










                                       26