UNITED STATES
                       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, 2010

                                       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 Identification No.)
incorporation or organization)

                            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 Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X]    No [ ]

Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section
232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes [ ]    No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]                                Accelerated filer [ ]
Non-accelerated filer   [ ]                        Smaller reporting company [X]
(Do not check if a smaller reporting company)

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 May 7, 2010:  6,228,635

<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                                    FORM 10-Q
<TABLE>
<CAPTION>
                                                                                           Page No.
                                                                                           -------
<S>                                                                                        <C>
Part I. Financial Information:


    Item 1.    Financial Statements:

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

                  Consolidated Condensed Statements of Operations - 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....................................15

    Item 3.    Quantitative and Qualitative Disclosures about Market Risk....................24

    Item 4.    Controls and Procedures.......................................................25

Part II.  Other Information:

    Item 1.    Legal Proceedings.............................................................26

    Item 1A.   Risk Factors..................................................................26

    Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds...................26

    Item 3.    Defaults Upon Senior Securities...............................................26

    Item 4.    (Removed and Reserved)........................................................26

    Item 5.    Other Information.............................................................26

    Item 6.    Exhibits......................................................................27

Signatures...................................................................................29

Exhibit Index................................................................................30

</TABLE>


                                       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,
                                                                                       2010         2009
                                                                                    (Unaudited)
                                                                                    -----------  -----------
<S>                                                                                  <C>          <C>
Assets
         Cash and due from banks .................................................   $  10,161    $  14,394
         Federal funds sold ......................................................      33,602       14,154
         Interest-earning deposits ...............................................      24,913       21,583
                                                                                     ---------    ---------
               Total cash and cash equivalents ...................................      68,676       50,131

         Interest-bearing time deposits ..........................................       7,750         --
         Trading securities, at fair value .......................................       3,536        3,385
         Investment securities:
              Available for sale .................................................     124,174      110,813
              Held to maturity (fair value of $7,014 and $7,059) .................       6,943        7,052
                                                                                     ---------    ---------
                   Total investment securities ...................................     131,117      117,865

         Loans ...................................................................     566,865      584,139
         Allowance for loan losses ...............................................     (15,898)     (15,256)
                                                                                     ---------    ---------
              Net loans ..........................................................     550,967      568,883
         Loans held for sale .....................................................       2,211        3,226
         Premises and equipment ..................................................      19,704       19,879
         Federal Home Loan Bank of Indianapolis stock, at cost ...................       2,353        2,353
         Other assets ............................................................      37,196       36,729
                                                                                     ---------    ---------
                        Total assets .............................................   $ 823,510    $ 802,451
                                                                                     =========    =========

Liabilities
         Deposits:
              Noninterest-bearing ................................................   $  93,043    $  90,033
              Interest-bearing ...................................................     576,608      544,221
                                                                                     ---------    ---------
                   Total deposits ................................................     669,651      634,254

         Borrowings ..............................................................      90,322      106,056
         Other liabilities .......................................................       7,471        5,939
                                                                                     ---------    ---------
                        Total liabilities ........................................     767,444      746,249

Commitments and Contingent Liabilities

Shareholders' Equity
         Common stock, no-par value
             Authorized, 18,000,000 shares
             Issued and outstanding - 6,228,547 and 6,227,550 shares, respectively         137          137
         Additional paid-in capital ..............................................       4,400        4,391
         Retained earnings .......................................................      51,443       51,607
         Accumulated other comprehensive income ..................................         108           89
         Unearned ESOT shares ....................................................         (22)         (22)
                                                                                     ---------    ---------
                        Total shareholders' equity ...............................      56,066       56,202
                                                                                     ---------    ---------
                        Total liabilities and shareholders' equity ...............   $ 823,510    $ 802,451
                                                                                     =========    =========
</TABLE>
         See notes to consolidated condensed financial statements.

                                       3
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                 Consolidated Condensed Statements of Operations
                                   (Unaudited)
                  (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                                                 March 31,
                                                                             ------------------
                                                                              2010       2009
                                                                             -------    -------
<S>                                                                          <C>        <C>
Interest Income
        Loans, including fees ............................................   $ 7,620    $ 8,511
        Trading securities ...............................................        81         18
        Investment securities
             Taxable .....................................................       513        574
             Tax exempt ..................................................        24        253
        Federal funds sold ...............................................         9          7
        Other interest income ............................................        37         15
                                                                             -------    -------
                       Total interest income .............................     8,284      9,378
                                                                             -------    -------

Interest Expense
        Deposits .........................................................     1,994      3,090
        Short-term borrowings ............................................        22         20
        Other borrowings .................................................       692        326
                                                                             -------    -------
                       Total interest expense ............................     2,708      3,436
                                                                             -------    -------
                       Net interest income ...............................     5,576      5,942
        Provision for loan losses ........................................     3,200      2,600
                                                                             -------    -------
                       Net interest income after provision for loan losses     2,376      3,342
                                                                             -------    -------

Noninterest Income
        Fiduciary activities .............................................       622        527
        Service charges on deposit accounts ..............................       744        811
        Commission income ................................................       225        171
        Gains on sales of available for sale securities ..................       106      1,028
        Losses on sales of trading securities ............................        (1)      --
        Unrealized gains (losses) on trading securities ..................        64       (132)
        Net gains on loans sales .........................................       249        290
        Debit card interchange fees ......................................       314        277
        Bank owned life insurance (BOLI) .................................       160        151
        Net gain (loss) on foreclosed assets .............................        63        (10)
        Other operating income ...........................................       164        149
                                                                             -------    -------
                       Total other income ................................     2,710      3,262
                                                                             -------    -------

Noninterest Expenses
        Salaries and employee benefits ...................................     2,882      2,964
        Net occupancy and equipment expense ..............................       898        928
        Advertising ......................................................       136        129
        Legal fees .......................................................       164        126
        Appreciation (depreciation) in directors' and executives'
             deferred compensation plans .................................       140       (118)
        Federal Deposit Insurance Corporation premiums ...................       267        283
        Other operating expense ..........................................       930        911
                                                                             -------    -------
                       Total other expenses ..............................     5,417      5,223
                                                                             -------    -------

                       Income (loss) before income tax ...................      (331)     1,381
                       Income tax expense (benefit) ......................      (229)       274
                                                                             -------    -------
                                     Net income (loss) ...................   $  (102)   $ 1,107
                                                                             =======    =======

        Basic earnings per share .........................................   $(0.016)   $ 0.178
        Diluted earnings per share .......................................   $(0.016)   $ 0.178
        Dividends declared and paid per share ............................   $  0.01    $  0.13
</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, 2010
                                   (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 (Loss) Earnings     Income    Trust Shares   Total
                                      ------------------------------------------------------------------------------------------
<S>                                    <C>         <C>      <C>                    <C>           <C>         <C>       <C>
Balances January 1, 2010.............  6,227,550   $ 137    $ 4,391                $ 51,607      $  89       $ (22)    $ 56,202

Comprehensive Income:
  Net loss for the period............                                    $ (102)       (102)                               (102)
  Other comprehensive income -
    Unrealized gain on securities,
    net of tax and reclassification
    adjustment.......................                                        19                     19                       19
                                                                         ------
Comprehensive Income.................                                    $  (83)
                                                                         ======
ESOT shares earned (forfeited).......                            (2)                                                         (2)
Stock option compensation
     expense.........................                             4                                                           4
Common stock issued..................        997                  7                                                           7
Cash dividend ($0.01 per share)......                                                   (62)                                (62)
                                       ----------------------------                --------------------------------------------
Balances March 31, 2010..............  6,228,547   $ 137    $ 4,400                $ 51,443      $ 108       $ (22)    $ 56,066
                                       ============================                ============================================
</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,
                                                                                ----------------------
                                                                                  2010         2009
                                                                                ---------    ---------
<S>                                                                             <C>          <C>
Operating Activities
       Net income (loss) ....................................................   $    (102)   $   1,107
       Adjustments to reconcile net income to net cash provided
               by operating activities:
            Provision for loan losses .......................................       3,200        2,600
            Depreciation and amortization ...................................         302          309
            Deferred income tax .............................................        (915)        (419)
            Investment securities accretion, net ............................         (64)         (10)
            Available for sale securities gains including redemptions .......        (106)      (1,028)
            Trading securities losses including redemptions .................           1         --
            Net change in trading securities ................................         (88)         145
            Loss on disposal of premises and equipment ......................        --              1
            Origination of loans held for sale ..............................     (13,568)     (20,741)
            Proceeds from sale of loans held for sale .......................      14,832       19,762
            Gain on sale of loans held for sale .............................        (249)        (290)
            ESOT shares earned (forfeited) ..................................          (2)          (3)
            (Gain) loss on foreclosed assets ................................         (63)          10
            Stock-based compensation expense ................................           4            7
            Net change in:
                 Interest receivable and other assets .......................         479            5
                 Interest payable and other liabilities .....................       1,532        1,114
                                                                                ---------    ---------
                           Net cash provided by operating activities ........       5,193        2,569
                                                                                ---------    ---------

Investing Activities
       Net change in interest-bearing time deposits .........................      (7,750)        --
       Purchase of securities available for sale ............................    (124,196)    (134,407)
       Proceeds from paydowns and maturities of securities available for sale      92,446      111,107
       Proceeds from paydowns and maturities of securities held to maturity .         109         --
       Proceeds from sales of securities available for sale .................      18,526       37,267
       Net change in loans ..................................................       8,967          265
       Purchase of premises and equipment ...................................        (127)        (677)
       Proceeds from sale of foreclosed assets ..............................         261           90
                                                                                ---------    ---------
                           Net cash provided (used) by investing activities .     (11,764)      13,645
                                                                                ---------    ---------

Financing Activities
       Net change in:
            Noninterest-bearing, interest-bearing demand and savings deposits      21,605       20,860
            Certificates of deposit .........................................      13,792       (9,482)
            Borrowings ......................................................     (10,213)       1,697
       Proceeds from Federal Home Loan Bank advances ........................        --         10,000
       Repayments of Federal Home Loan Bank advances ........................         (13)     (18,012)
       Proceeds from sale of common stock ...................................           7         --
       Cash dividends paid ..................................................         (62)        (809)
                                                                                ---------    ---------
                           Net cash provided by financing activities ........      25,116        4,254
                                                                                ---------    ---------
Net Change in Cash and Cash Equivalents .....................................      18,545       20,468
Cash and Cash Equivalents, Beginning of Period ..............................      50,131       23,721
                                                                                ---------    ---------
Cash and Cash Equivalents, End of Period ....................................   $  68,676    $  44,189
                                                                                =========    =========

Supplemental cash flow disclosures
       Interest paid ........................................................   $   2,450    $   3,536
       Income tax paid ......................................................        --           --
</TABLE>
        See notes to consolidated condensed financial statements.

                                       6
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
              Notes to Consolidated Condensed Financial Statements
                       (Table dollar amounts in thousands)
                                 March 31, 2010
                                   (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 subsidiaries, Sycamore
Property Investments, LLC, HIE Enterprises, LLC and 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, 2009, 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, 2010, and
for the three months ended March 31, 2010 and 2009, 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, 2009
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.

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, 2010  March 31, 2009
                                              --------------  --------------

Net income (loss) ...........................   $      (102)    $     1,107
                                                ===========     ===========
Weighted average shares outstanding .........     6,227,600       6,227,550
Average unearned ESOT shares ................        (1,838)         (6,913)
                                                -----------     -----------
Shares used to compute basic earnings
     per share ..............................     6,225,762       6,220,637
Effect of dilutive securities - stock options          --              --
                                                -----------     -----------
Shares used to compute diluted earnings
     per share ..............................     6,225,762       6,220,637
                                                ===========     ===========

Earnings (loss) per share, basic ............   $    (0.016)    $     0.178
Earnings (loss) per share, diluted ..........   $    (0.016)    $     0.178



                                       7
<PAGE>

Options to purchase 30,000 shares at $6.00 per share, 5,500 shares at $10.12 per
share, 16,500 shares at $12.73 per share, 11,000 shares at $14.73 per share,
25,000 shares of common stock at $16.00 per share, 10,000 shares of common stock
at $16.83, and 170,000 shares of common stock at $22.00 per share were
outstanding at March 31, 2010 and options to purchase 5,500 shares at $10.12 per
share, 27,500 shares at $12.05 per share, 19,250 shares at $12.73 per share,
11,000 shares at $14.73 per share, 30,000 shares of common stock at $16.00 per
share, 13,000 shares of common stock at $16.83, and 210,000 shares of common
stock at $22.00 per share were outstanding at March 31, 2009, but were not
included in the computation of diluted earnings per share for the three months
ended March 31, 2010 and 2009, respectively because the options were
antidilutive.

Note 3:  Investment Securities
------------------------------
<TABLE>
<CAPTION>
                                                                                Gross       Gross
                                                                Amortized  Unrealized  Unrealized        Fair
                                                                     Cost       Gains      Losses       Value
                                                                ---------------------------------------------
<S>                                                              <C>         <C>         <C>         <C>
As of March 31, 2010
Available for Sale
            Federal Agencies ................................    $ 77,879    $     56    $     35    $ 77,900
            State and municipal .............................         318        --          --           318
            Residential mortgage-backed securities (agencies)      42,803         246         105      42,944
            Marketable equity securities ....................       3,012        --          --         3,012
                                                                 --------    --------    --------    --------
               Total available for sale .....................     124,012         302         140     124,174
                                                                 --------    --------    --------    --------

Held to Maturity
            Federal Agencies ................................       1,002          57        --         1,059
            State and municipal .............................       5,941          28          14       5,955
                                                                 --------    --------    --------    --------
               Total held to maturity .......................       6,943          85          14       7,014
                                                                 --------    --------    --------    --------

               Total investment securities ..................    $130,955    $    387    $    154    $131,188
                                                                 ========    ========    ========    ========


As of December 31, 2009
Available for Sale
            Federal Agencies ................................    $ 71,996    $     59    $     48    $ 72,007
            Corporate Bonds .................................       1,000        --          --         1,000
            State and municipal .............................       1,843           2        --         1,845
            Residential mortgage-backed securities (agencies)      32,831         260         117      32,974
            Marketable equity securities ....................       3,013        --            26       2,987
                                                                 --------    --------    --------    --------
               Total available for sale .....................     110,683         321         191     110,813
                                                                 --------    --------    --------    --------

Held to Maturity
            Federal Agencies ................................       1,002          61        --         1,063
            State and municipal .............................       6,050          36          90       5,996
                                                                 --------    --------    --------    --------
               Total held to maturity .......................       7,052          97          90       7,059
                                                                 --------    --------    --------    --------

               Total investment securities ..................    $117,735    $    418    $    281    $117,872
                                                                 ========    ========    ========    ========
</TABLE>

The amortized cost and fair value of securities available for sale and held to
maturity at March 31, 2010, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because issuers may have the
right to call or prepay obligations with or without call or prepayment
penalties.


                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                      Available for Sale      Held to Maturity
                                                    ---------------------   ---------------------
                                                    Amortized        Fair   Amortized        Fair
                                                         Cost       Value        Cost       Value
                                                    ---------------------   ---------------------
<S>                                                  <C>         <C>         <C>         <C>
Within one year .................................    $   --      $   --      $  2,000    $  2,028
One to five years ...............................      78,197      78,218       1,002       1,059
Five to ten years ...............................        --          --         3,941       3,927
Over ten years ..................................        --          --          --          --
                                                     --------    --------    --------    --------
                                                       78,197      78,218       6,943       7,014

Residential mortgage-backed securities (agencies)      42,803      42,944        --          --
Marketable equity securities ....................       3,012       3,012        --          --
                                                     --------    --------    --------    --------

   Totals .......................................    $124,012    $124,174    $  6,943    $  7,014
                                                     ========    ========    ========    ========
</TABLE>

Securities with a carrying value of $64,629,000 and $85,854,000 were pledged at
March 31, 2010 and December 31, 2009, respectively, to secure certain deposits
and for other purposes as permitted or required by law.

Proceeds from sales of securities available for sale were $18,526,000 and
$37,267,000 for the three months ended March 31, 2010 and March 31, 2009,
respectively. Gross gains of $102,000 and $1,024,000 were realized on first
quarter sales in 2010 and 2009, respectively. During the first quarter of 2010
and 2009, the Bank realized gains of $4,000 and $4,000 on redeemed available for
sales securities.

There were no sales of held to maturity securities during the three months ended
March 31, 2010 or March 31, 2009.

Trading securities, which consist of mutual funds held in a rabbi trust
associated with the directors' and executives' deferred compensation plans, are
recorded at fair value. Unrealized holding gains on trading securities of
$64,000 were included in earnings in the three months ended March 31, 2010 and
unrealized holding losses on trading securities of $132,000 were included as an
offset to earnings in the three months ended March 31, 2009.

Certain investments in debt and marketable equity securities are reported in the
financial statements at an amount less than their historical cost. Total fair
value of these investments at March 31, 2010 and December 31, 2009 was
$50,414,000 and $51,162,000, which is approximately 38.4 percent and 43.4
percent respectively, of the Company's available for sale and held to maturity
investment portfolio.

Based on evaluation of available evidence, including recent changes in market
interest rates, credit rating information and information obtained from
regulatory filings, management believes the declines in fair value for these
securities are temporary.

Should the impairment of any of these securities become other than temporary,
the cost basis of the investment will be reduced and the resulting loss
recognized in net income in the period the other-than-temporary impairment is
identified.

The following table shows our investments' gross unrealized losses and fair
value, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position at March 31, 2010
and December 31, 2009:


                                       9
<PAGE>

<TABLE>
<CAPTION>
                                                                                March 31, 2010
                                                   ---------------------------------------------------------------------
                                                    Less than 12 Months     12 Months or More             Total
                                                   ---------------------------------------------------------------------
                                                               Unrealized             Unrealized              Unrealized
Description of Securities                          Fair Value    Losses   Fair Value    Losses    Fair Value    Losses
                                                   ----------  ---------- ----------  ----------  ----------  ----------
<S>                                                  <C>        <C>         <C>         <C>         <C>        <C>
U.S. government agencies ........................    $33,459    $   (35)    $  --       $  --       $33,459    $   (35)
Residential mortgage-backed securities (agencies)     13,028       (105)       --          --        13,028       (105)
State and political subdivisions ................      3,927        (14)       --          --         3,927        (14)
                                                     -------    -------     -------     -------     -------    -------

Total temporarily impaired securities ...........    $50,414    $  (154)    $  --       $  --       $50,414    $  (154)
                                                     =======    =======     =======     =======     =======    =======

                                                                              December 31, 2009
                                                   ---------------------------------------------------------------------
                                                    Less than 12 Months     12 Months or More             Total
                                                   ---------------------------------------------------------------------
                                                               Unrealized             Unrealized              Unrealized
Description of Securities                          Fair Value    Losses   Fair Value    Losses    Fair Value    Losses
                                                   ----------  ---------- ----------  ----------  ----------  ----------

U.S. government agencies ........................    $37,649    $   (48)    $  --       $  --       $37,649    $   (48)
Residential mortgage-backed securities (agencies)      6,566       (117)       --          --         6,566       (117)
State and political subdivisions ................      3,960        (90)       --          --         3,960        (90)
Marketable equity securities ....................       --         --         2,987         (26)      2,987        (26)
                                                     -------    -------     -------     -------     -------    -------

Total temporarily impaired securities ...........    $48,175    $  (255)    $ 2,987     $   (26)    $51,162    $  (281)
                                                     =======    =======     =======     =======     =======    =======
</TABLE>

The unrealized losses on the Company's investments in direct obligations of U.S.
government agencies, mortgage-backed securities and municipal securities were
primarily caused by changes in interest rates. The contractual terms of those
investments do not permit the issuer to settle the securities at a price less
than the amortized cost bases of the investments. Because the Company does not
intend to sell the investments and it is not more likely than not the Company
will be required to sell the investments before recovery of their amortized cost
bases, which may be maturity, the Company does not consider those investments to
be other-than-temporarily impaired at March 31, 2010.

Note 4:  Fair Value Measurements
--------------------------------

Effective January 1, 2008, the Company adopted Financial Accounting Standards
Board ("FASB") Accounting Standards Codification ("ASC") Topic 820. ASC Topic
820 defines fair value, establishes a framework for measuring fair value and
expands disclosures about fair value measurements. ASC Topic 820 has been
applied prospectively as of the beginning of the period.

ASC Topic 820 defines fair value as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. ASC Topic 820 also establishes a fair
value hierarchy which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value.
The standard describes three levels of inputs that may be used to measure fair
value:

     Level 1: Quoted prices in active markets for identical assets or
     liabilities,

     Level 2: Observable inputs other than Level 1 prices, such as quoted prices
     for similar assets or liabilities; quoted prices in markets that are not
     active; or other inputs that are observable or can be corroborated by
     observable market data for substantially the full term of the assets or
     liabilities,

     Level 3: Unobservable inputs that are supported by little or no market
     activity and that are significant to the fair value of the assets or
     liabilities.

Below is a description of the valuation methodologies used for instruments
measured at fair value on a recurring and non-recurring basis and recognized in
the accompanying balance sheet, as well as the general classification of such
instruments pursuant to the valuation hierarchy.


                                       10
<PAGE>

Trading and Available for Sale Securities

Where quoted market prices are available in an active market, securities are
classified within Level 1 of the valuation hierarchy. Level 1 securities include
highly liquid exchange traded equities. If quoted market prices are not
available, then fair values are estimated by using pricing models, certain
market information, and quoted prices of securities with similar characteristics
or discounted cash flows. The fair value measurements consider observable data
that may include dealer quotes, market spreads, cash flows, the U.S. Treasury
yield curve, live trading levels, trade execution data, market consensus
prepayment speeds, credit information and the bond's term and conditions. Level
2 securities include federal agencies, residential mortgage-backed securities
(agencies) and municipal securities. In certain cases where Level 1 or Level 2
inputs are not available, securities are classified within Level 3 of the
hierarchy. At this time the Company has no securities classified as Level 3
securities. The Company obtains fair value measurements from an independent
pricing service.

Impaired Loans (Collateral Dependent)

Loans for which it is probable that the Company will not collect all principal
and interest due according to contractual terms are measured for impairment.
Allowable methods for determining the amount of impairment include estimating
fair value include using the fair value of the collateral for collateral
dependent loans.

If the impaired loan is identified as collateral dependent, then the fair value
method of measuring the amount of impairment is utilized. This method requires
obtaining a current independent appraisal of the collateral and applying a
discount factor to the value.

Impaired loans that are collateral dependent are classified within Level 3 of
the fair value hierarchy when impairment is determined using the fair value
method.

Other Real Estate Owned

Other real estate owned are reported at fair value less cost to sell and are
measured using Level 3 inputs within the fair value hierarchy. Level 3 inputs
for other real estate owned included third party appraisals adjusted for cost to
sell.

The following table presents the fair value measurements of assets recognized in
the accompanying balance sheets measured at fair value on a recurring and
non-recurring basis and the level within the ASC Topic 820 fair value hierarchy
in which the fair value measurements fall:






                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                                 Fair Value Measurements Using
                                                        --------------------------------------------
                                                        Quoted Prices in   Significant
                                                          Active Markets         Other   Significant
                                                           for Identical    Observable  Unobservable
                                                                  Assets        Inputs        Inputs
                                                Fair Value     (Level 1)     (Level 2)     (Level 3)
                                                ----------------------------------------------------
<S>                                               <C>           <C>           <C>           <C>
As of March 31, 2010
--------------------
Fair value measured on a recurring basis
Trading securities .........................      $  3,536      $  3,536      $   --        $   --
Available for sale securities
    Federal agencies .......................        77,900          --          77,900          --
    State and municipal ....................           318          --             318          --
    Mortgage-backed securities .............        42,944          --          42,944          --
    Marketable equity securities ...........         3,012         3,012          --            --
                                                  --------      --------      --------      --------
        Total ..............................      $124,174      $  3,012      $121,162      $   --
                                                  ========      ========      ========      ========

Fair value measured on a non-recurring basis
Impaired loans (collateral dependent), net
   of specific allowance ...................      $ 16,361      $   --        $   --        $ 16,361
Other real estate owned ....................          --            --            --            --

As of December 31, 2009
-----------------------
Fair value measured on a recurring basis
Trading securities .........................      $  3,385      $  3,385      $   --        $   --
Available for sale securities
    Federal agencies .......................        72,007          --          72,007          --
    Corporate bonds ........................         1,000          --           1,000          --
    State and municipal ....................         1,845          --           1,845          --
    Mortgage-backed securities .............        32,974          --          32,974          --
    Marketable equity securities ...........         2,987         2,987          --            --
                                                  --------      --------      --------      --------
        Total ..............................      $110,813      $  2,987      $107,826      $   --
                                                  ========      ========      ========      ========

Fair value measured on a non-recurring basis
Impaired loans (collateral dependent), net
   of specific allowance ...................      $ 12,287      $   --        $   --        $ 12,287
Other real estate owned ....................         3,080          --            --           3,080
</TABLE>

The following methods and assumptions were used to estimate the fair value of
all other financial instruments not recognized in the accompanying balance
sheet:

Cash, Cash Equivalents and Interest-Bearing Time Deposits - The fair value of
cash, cash equivalents and interest-bearing time deposits approximates carrying
value.

Loans - The fair value for loans is estimated using discounted cash flow
analyses that use interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality.

Interest Receivable/Payable - The fair values of interest receivable/payable
approximate carrying values.

FHLB Stock - Fair value of FHLB stock is based on the price at which it may be
resold to the FHLB.

Deposits - The fair values of noninterest-bearing, interest-bearing demand and
savings accounts are equal to the amount payable on demand at the balance sheet
date. The carrying amounts for variable rate, fixed-term certificates of deposit
approximate their fair values at the balance sheet date. Fair values for
fixed-rate certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on certificates
to a schedule of aggregated expected monthly maturities on such time deposits.

Borrowings - The fair value of Federal Home Loan Bank advances and other
long-term debt are estimated using a discounted cash flow calculation, based on
current rates for similar debt. For short-term borrowings, carrying value
approximates fair value.


                                       12
<PAGE>

Off-Balance Sheet Commitments - Commitments include commitments to purchase and
originate mortgage loans, commitments to sell mortgage loans, and standby
letters of credit and are generally of a short-term nature. The fair value of
such commitments is based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
counterparties' credit standing.

The estimated fair values of the Company's financial instruments are as follows:

                                                   March 31, 2010
                                               ---------------------
                                               Carrying         Fair
                                                 Amount        Value
                                               ---------------------
Assets
  Cash and cash equivalents ..............     $ 68,676     $ 68,676
  Interest-bearing time deposits .........        7,750        7,750
  Trading account securities .............        3,536        3,536
  Investment securities available for sale      124,174      124,174
  Investment securities held to maturity .        6,943        7,014
  Loans including loans held for sale, net      553,178      557,138
  Interest receivable ....................        2,311        2,311
  Stock in FHLB ..........................        2,353        2,353

Liabilities
  Deposits ...............................      669,651      653,208
  Borrowings .............................       90,322       87,916
  Interest payable .......................        1,176        1,176

Off-Balance Sheet Commitments ............         --           --


                                                 December 31, 2009
                                               ---------------------
                                               Carrying         Fair
                                                 Amount        Value
                                               ---------------------
Assets
Cash and cash equivalents ................     $ 50,131     $ 50,131
Trading account securities ...............        3,385        3,385
Investment securities available for sale .      110,813      110,813
Investment securities held to maturity ...        7,052        7,059
Loans including loans held for sale, net .      572,109      574,568
Interest receivable ......................        2,402        2,402
Stock in FHLB ............................        2,353        2,353

Liabilities
Deposits .................................      634,254      613,354
Borrowings ...............................      106,056       99,511
Interest payable .........................          918          918

Off-Balance Sheet Commitments ............         --           --



                                       13
<PAGE>

Note 5:  Accumulated Other Comprehensive Income (Loss)
------------------------------------------------------
<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                          March 31
                                                                    --------------------
                                                                      2010         2009
                                                                    -------      -------
<S>                                                                 <C>          <C>
Net unrealized gain on securities available-for-sale ..........     $   135      $   650
Less:  reclassification adjustment for gains included in income         106        1,028
                                                                    -------      -------
    Other comprehensive loss, before tax effect ...............          29         (378)
Tax benefit (expense) .........................................         (10)         132
                                                                    -------      -------
    Other comprehensive income (loss) .........................     $    19      $  (246)
                                                                    =======      =======
</TABLE>

Note 6:  Borrowings
-------------------
On July 17, 2009, $13 million of Tier 2 capital was raised through the issuance
of Subordinated Debentures. The Subordinated Debentures were issued as the
result of a public offering. The Subordinated Debentures carry an interest rate
of 10 percent and will mature on June 30, 2019. The Company has the right to
call the Subordinated Debentures at any time after three years. The Subordinated
Debentures were issued pursuant to the prospectus filed as part of the Company's
registration statement under the Securities Act of 1933. On July 23, 2009, the
Company's Board of Directors voted to provide $10 million of the net proceeds of
the offering to the Bank, as additional capital, with the remaining proceeds to
be used by the Company for general corporate purposes.

Note 7:  Reclassifications
--------------------------
Reclassifications of certain amounts in the 2009 consolidated condensed
financial statements have been made to conform to the 2010 presentation.

Note 8:  Contingencies
----------------------
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.

Note 9:  New Accounting Pronouncements
--------------------------------------
In June 2009, the FASB issued new accounting guidance related to accounting for
transfers of financial assets. The FASB Board's objective in issuing this new
guidance is to improve the relevance, representational faithfulness, and
comparability of the information that a reporting entity provides in its
financial statements about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance, and cash flows; and a
transferor's continuing involvement, if any, in transferred financial assets.
This guidance is effective as of the beginning of the first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period and for interim and annual reporting periods
thereafter. Earlier application is prohibited. This guidance must be applied to
transfers occurring on or after the effective date. Management has determined
the adoption of this guidance did not have a material effect on the Company's
financial position or results of operations.

In June 2009, the FASB issued new accounting guidance on consolidation of
variable interest entities, which include: 1) the elimination of the exemption
for qualifying special purpose entities, 2) a new approach for determining who
should consolidate a variable interest entity, and 3) changes to when it is
necessary to reassess who should consolidate a variable interest entity. This
new guidance is effective as of the beginning of the first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period, and for interim and annual reporting periods
thereafter. Earlier application is prohibited. Management has determined the
adoption of this guidance did not have a material effect on the Company's
financial position or results of operations.


                                       14
<PAGE>

In January 2010, the FASB issued Accounting Standards Update ("ASU") No.
2010-06, "Improving Disclosures About Fair Value Measurements," which added
disclosure requirements about transfers in and out of Levels 1 and 2, clarified
existing fair value disclosure requirements about the appropriate level of
disaggregation, and clarified that a description of valuation techniques and
inputs used to measure fair value was required for recurring and nonrecurring
Level 2 and 3 fair value measurements. Management has determined the adoption of
these provisions of this ASU only affected the disclosure requirements for fair
value measurements and as a result did not have a material effect on the
Company's financial position or results of operations. This ASU also requires
that Level 3 activity about purchases, sales, issuances, and settlements be
presented on a gross basis rather than as a net number as currently permitted.
This provision of the ASU is effective for the Company's reporting period ending
March 31, 2011. Management has determined the adoption of this guidance will not
have a material effect on the Company's financial position or results of
operations.

Note 10:  Subsequent Events
---------------------------
Subsequent events have been evaluated for potential recognition and disclosure
through the date financial statements were issued. In April 2010, a former
employee, who was still insured under the Company's Bank Owned Life Insurance
("BOLI") program, passed away. This unfortunate event is projected to create a
tax exempt gain of approximately $520,000 for the Bank in the second quarter of
2010.

Item 2.     Management's Discussion and Analysis of Financial Condition and
-------     Results of Operations
            ---------------------------------------------------------------
                       (Table dollar amounts in thousands)

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, Hendricks and
Hamilton counties in Indiana. Approximately 78 percent of the Bank's deposits
are in Monroe County and are 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 and variable 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 27 to 28 of the 2009
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 9 to 10 of the 2009 Annual Report to Shareholders. There have
been no changes in these critical accounting policies since the date of the 2009
Annual Report to Shareholders.

Non-GAAP Financial Measures
---------------------------
In January 2003, the United States Securities and Exchange Commission ("SEC")


                                       15
<PAGE>

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 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 measures 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.

     o    In the "Noninterest Income / Noninterest Expense" section of this
          document, we report noninterest income and noninterest expense without
          the effect of unrealized gains and losses on securities in a grantor
          trust ("rabbi trust") which is a non-GAAP financial measure. Other
          income includes realized and unrealized securities gains and losses
          and capital gain dividends on trading securities (mutual funds) held
          in a rabbi trust in connection with the Company's Directors' and
          Executives' Deferred Compensation Plans. These securities are held as
          trading securities, and hence, unrealized gains and losses are
          recognized on the income statement. Any unrealized or realized loss on
          securities held in the rabbi trust net of any dividend, interest and
          capital gain dividend income earned on the securities in the rabbi
          trust (included in net interest income) are directly offset by a
          decrease to directors' fee/deferred executive compensation expense
          (included in other expense), and conversely, any net realized or
          unrealized gain combined with interest, dividends and capital gain
          dividends earned on the securities in the trust are directly offset by
          an increase to directors' fee/deferred executive compensation expense.
          These offsets are included in the line item identified on page 4 of
          the consolidated financial statements as "Depreciation in directors'
          and executives' deferred compensation plans." The activity in the
          rabbi trust has no effect on the Company's net income, therefore,
          Management believes a more accurate comparison of current and prior
          year noninterest income and noninterest expense can be made if the
          rabbi trust realized and unrealized gains, losses, capital gain
          dividends and offsetting appreciation (depreciation) on the deferred
          compensation plans and trustee fees are removed.

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

Overview
--------
The Company had a net loss for the first quarter of 2010 of $102,000, a 109.2
percent decrease from net income of $1,107,000 for the same quarter last year.
Basic and diluted earnings per share for the first quarter of 2010 were
$(0.016), down 109.0 percent from $0.178 per basic and diluted share for the
first quarter of 2009. Annualized return on average equity for the first quarter
of 2010 decreased to (0.74) percent compared to 8.00 percent for the first
quarter of 2009. The annualized return on average assets was (0.05) percent for
the first quarter of 2010 compared to 0.54 percent for the same period of 2009.

The decline in net income resulted primarily from a an increase in the provision
for loan losses, a decrease in gains from the sale of available for sale ("AFS")
securities, and interest expense on the subordinated debt that was issued in
July 2009. The provision for loan losses totaled $3,200,000 for the first
quarter of 2010 compared to $2,600,000 for the same period of 2009. Gains from
the sale of AFS securities totaled $106,000 for the first quarter of 2010
compared to $1,028,000 for the same period of 2009. The interest expense on the
subordinated debt totaled $325,000 for the first quarter of 2010. Net interest
income for the first quarter of 2010, after the provision for loan losses,
decreased $966,000, or 28.9 percent from the first quarter of 2009.


                                       16
<PAGE>


The following items affected first quarter results:

     o    General Economic Conditions in the Real Estate Markets - Among the
          primary areas of Management focus during 2009 and 2010 were managing
          the deterioration of asset quality resulting from slowing economic
          activity and stresses in the residential housing markets.
          Nonperforming assets and 90-day past due loans totaled $33,968,000
          (4.12 percent of total assets) at March 31, 2010 compared to
          $25,424,000 (3.17 percent of total assets) at December 31, 2009 and
          $17,289,000 (2.10 percent of total assets) at March 31, 2009. The
          provision for loan losses for the three months ended March 31, 2010
          totaled $3,200,000, a $600,000 increase over the $2,600,000 provision
          made during the same period of 2009 due to Management's assessment of
          potential losses in the Bank's loan portfolio.
     o    Securities Gains - Securities gains of $106,000 were realized from
          sales of AFS securities during the first three months of 2010 compared
          to $1,028,000 in the same period of 2009.
     o    Subordinated debt interest expense - Subordinated debt interest
          expense incurred in the first quarter of 2010 totaled $325,000. The
          Company issued $13,000,000 of subordinated debt on July 17, 2009.
     o    Trust and Commission Income - Trust fees grew $95,000 or 18.0 percent
          and commission income grew $54,000 or 31.6 percent in the three months
          ended March 31, 2010 compared to the same period of 2009 due to an
          improving stock market and an increase in trust assets under
          management. Trust assets under management reached $352,972,000 at
          March 31, 2010, growing 20.4 percent, or $59,729,000 over the
          $293,243,000 at March 31, 2009. Management does not anticipate that
          trust assets will sustain this rate of growth on an ongoing basis.
     o    Compensation Expenses - Total compensation expenses (salaries,
          incentive compensation and benefits) decreased by $82,000 or 2.8
          percent to $2,882,000 for the first three months of 2010 compared to
          $2,964,000 for the first three months of 2009 due primarily to a
          reduction in staff levels.

Net Interest Income / Net Interest Margin
-----------------------------------------
The following table 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.



                                       17
<PAGE>
<TABLE>
<CAPTION>
                                                                           Average Balance Sheets and Interest Rates
                                                              -------------------------------------------------------------------
                                                              Three Months Ended March 31, 2010 Three Months Ended March 31, 2009
                                                              --------------------------------- ---------------------------------
                                                                Average           Average Rate    Average           Average Rate
                                                                Balance  Interest (annualized)    Balance  Interest (annualized)
                                                                -------  -------- ------------    -------  -------- ------------
<S>                                                            <C>        <C>         <C>        <C>        <C>         <C>
                        ASSETS
Interest earning assets
     Securities
          Taxable .........................................    $ 110,267  $  583      2.14%      $  77,501  $  596      3.12%
          Tax-exempt (1) ..................................        6,852      36      2.15%         33,227     383      4.68%
                                                               ---------  ------                 ---------  ------
               Total securities ...........................      117,119     619      2.14%        110,728     979      3.59%

     Loans (2) ............................................      578,289   7,621      5.34%        632,877   8,512      5.45%
     FHLB Stock ...........................................        2,353      11      1.90%          2,312      (4)    -0.70%
     Federal funds sold ...................................       29,079       9      0.13%         16,029       7      0.18%
     Interest-earning deposits ............................       33,478      34      0.41%          7,789      15      0.78%
     Interest-bearing time deposits .......................        1,070       3      1.14%           --      --        0.00%
                                                               ---------  ------                 ---------  ------
                 Total interest earning assets ............      761,388   8,297      4.42%        769,735   9,509      5.01%
                                                               ---------  ------                 ---------  ------

Noninterest earning assets
    Allowance for loan losses .............................      (15,927)                          (11,821)
     Premises and equipment & other assets ................       64,824                            56,053
     Cash and due from banks ..............................       12,795                            12,747
                                                               ---------                         ---------
               Total assets ...............................    $ 823,080                         $ 826,714
                                                               =========                         =========

           LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
     Total interest-bearing deposits ......................    $ 562,242   1,994      1.44%      $ 599,119   3,090      2.09%
     Borrowed funds .......................................       98,743     714      2.93%         83,022     346      1.69%
                                                               ---------  ------                 ---------  ------
          Total interest-bearing liabilities ..............      660,985   2,708      1.66%        682,141   3,436      2.04%
                                                               ---------  ------                 ---------  ------


Noninterest-bearing liabilities
     Noninterest-bearing demand deposits ..................       91,126                            79,257
     Other liabilities ....................................       14,701                             9,211
     Shareholders' equity .................................       56,268                            56,105
                                                               ---------                         ---------
                 Total liabilities and shareholders' equity    $ 823,080                         $ 826,714
                                                               =========                         =========


Interest margin recap
Net interest income and interest rate spread
     Tax-equivalent net interest income spread ............               $5,589      2.76%                 $6,073      2.97%
     Tax-equivalent net interest margin as a percent of
          total average earning assets ....................                           2.98%                             3.20%
Tax-equivalent adjustment (1) .............................                   13                               131
                                                                          ------                            ------

                Net interest income .......................               $5,576                            $5,942
                                                                          ======                            ======
</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.

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 net interest margin as a percent of average earnings assets was 2.97 percent
for the first three months of 2010, down from 3.13 percent for the same period


                                       18
<PAGE>

in 2009. Adjusting for tax-exempt income and expense, as discussed in the
"Non-GAAP Financial Measures" section, the tax-equivalent net interest margin as
a percent of average earning assets was 2.98 percent for the first three months
of 2010, down from 3.20 percent for the same period last year. The 22 basis
point drop in the tax-equivalent net interest margin during the first three
months of 2010 compared to the same period in 2009 was primarily the result of
higher balances of nonperforming assets during the first quarter of 2010.

Net interest income was $5,576,000 for the three months ended March 31, 2010
compared to $5,942,000 for the same period in 2009, a decrease of 6.2 percent.
Adjusting for tax-exempt income and expense, as discussed in the "Non-GAAP
Financial Measures" section, tax-equivalent net interest income was $5,589,000
for the three months ended March 31, 2010 which was $484,000 less than the
$6,073,000 in the same period in 2009.

Noninterest Income / Noninterest Expense
----------------------------------------
Total noninterest income for the first quarter of 2010 was $2,710,000 compared
to $3,262,000 for the same period in 2009. Excluding the effect of the Company's
deferred compensation plan, discussed in the "Non-GAAP Financial Measures"
section, noninterest income for the first quarter of 2010 was $2,646,000
compared to $3,394,000 for the same period of 2009, a decrease of $748,000 or
22.0 percent. The effect of the Company's deferred compensation plan for the
first quarter of 2010 was a $64,000 increase in noninterest income compared to a
$132,000 decrease in the same period of 2009.

Significant changes in noninterest income occurred primarily in the following
areas:
     o    Securities gains of $106,000 were realized from sales of AFS
          securities during the first quarter of 2010 compared to $1,028,000 in
          the same period of 2009.
     o    Trust fees grew $95,000 or 18.0 percent and commission income grew
          $54,000 or 31.6 percent during the first quarter of 2010 compared to
          the same period of 2009 due to an improving stock market and an
          increase in trust assets under management.

Total noninterest expense was $5,417,000 for the first quarter of 2010 compared
to $5,223,000 for the same period in 2009. Excluding the effect of the Company's
deferred compensation plan, discussed in the "Use of Non-GAAP Financial
Measures" section, total noninterest expense for the first quarter of 2010 was
$5,272,000, a $65,000 or 1.2 percent decrease from $5,337,000 for the same
period in 2009. The effect of the Company's deferred compensation plan for the
first quarter of 2010 was a $145,000 increase in noninterest expense compared to
a $114,000 decrease in the same period of 2009. Total compensation expenses
(salaries, incentive compensation and benefits) decreased by $82,000 or 2.8
percent to $2,882,000 in the first quarter of 2010 compared to $2,964,000 in the
first quarter of 2009.

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 differences between the effective tax rate
applied to the Company's financial statement income and the federal and state
statutory rate of approximately 40 percent are interest on tax-exempt
securities, the Bank's investment in CBAI CDE III, LLC, and the increase in cash
surrender value of the Bank's owned life insurance.

The deferred tax assets and liabilities represent decreases or increases in
taxes expected to be paid in the future because of future reversals of temporary
differences in the bases of assets and liabilities as measured by tax laws and
their bases as reported in the financial statements. Deferred tax assets are
also recognized for tax attributes such as net operating loss carryforwards and
tax credit carryforwards. The net deferred tax asset was $6,282,000 at March 31,
2010, an increase of $1,530,000 or 32.2 percent compared to $4,752,000 at March
31, 2009. The increase in the net deferred tax asset was primarily due to timing
differences in the amount of provision for loan loss that was expensed in 2009
compared to the charge-offs experienced. Management estimates charge-offs in
future periods will exceed provision for loan loss expense and the Company's
projected future taxable income will enable the Company to utilize the net
deferred tax asset. In the first quarter of 2010, the Company recorded an
additional deferred tax asset valuation allowance of $161,000 to reduce deferred
state tax assets to the amount Management concluded was expected to be utilized
in future periods. The Company adjusts its unrecognized tax benefits as
necessary when additional information becomes available. The reassessment of the


                                       19
<PAGE>

Company's unrecognized tax benefits may have a material impact on its effective
tax rate in the period in which it occurs.

The Company's effective tax benefit rate was 69.2 percent for the first quarter
of 2010 compared to an effective tax rate of 19.8 percent for the same period in
2009.

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

Assets and Liabilities
----------------------
Total assets of the Company at March 31, 2010 were $823,510,000 an increase of
2.6 percent or $21,059,000 compared to $802,451,000 at December 31, 2009. Loans
(including loans held for sale) totaled $569,076,000 at March 31, 2010 compared
to $587,365,000 at December 31, 2009, a decrease of 3.1 percent. Deposits
increased to $669,651,000 at March 31, 2010 compared to $634,254,000 at December
31, 2009, an increase of $35,397,000 or 5.6 percent, primarily due to a
$17,688,000 increase in interest-bearing checking and NOW accounts and a
$13,788,000 increase in certificates of deposit greater than $100,000.
Borrowings decreased to $90,322,000 at March 31, 2010 compared to $106,056,000
at December 31, 2009, a 14.8 percent decrease primarily due to a $15,721,000
combined decrease in securities and loans sold under repurchase agreements.

Capital
-------
Shareholders' equity decreased by $136,000 at March 31, 2010 compared to
December 31, 2009. This decrease was a result of quarterly net loss of $102,000,
ESOT shares forfeited of $2,000, and dividends paid of $62,000 offset by option
expense of $4,000, unrealized gain on securities in the Company's available for
sale securities portfolio totaling $19,000 (net of tax) and common stock sold of
$7,000.

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, 2010 and December
31, 2009, the Company and the Bank were categorized as well capitalized and met
all applicable capital adequacy requirements. Effective April 29, 2010, the Bank
entered into a memorandum of understanding ("MOU") with the Federal Deposit
Insurance Corporation (the "FDIC") and the Indiana Department of Financial
Institutions (the "DFI"). The MOU is an informal administrative agreement in
which the Bank has agreed to take various actions and comply with certain
requirements to facilitate improvement in its financial condition. In accordance
with the MOU, the Bank agreed among other things to maintaining a leverage
capital ratio (tier 1 capital to average assets) of not less than 8.00 percent
and a total risk-based capital ratio of not less than 12.00 percent.




                                       20
<PAGE>

The actual and required capital amounts and ratios are as follows:
<TABLE>
<CAPTION>
                                                                     Required for          To Be Well
                                                      Actual       Adequate Capital (1)  Capitalized (1)
                                                  -----------------------------------------------------
                                                  Amount   Ratio     Amount   Ratio      Amount   Ratio
                                                  -----------------------------------------------------
<S>                                              <C>       <C>      <C>        <C>      <C>      <C>
As of March 31, 2010
--------------------
Total capital (1) (to risk-weighted assets)
Consolidated...................................  $ 80,810  13.77 %  $ 46,935   8.00 %        N/A    N/A
Bank...........................................    77,362  13.29      46,568   8.00     $ 58,210  10.00 %
Tier I capital (1) (to risk-weighted assets)
Consolidated...................................    60,371  10.29      23,468   4.00          N/A    N/A
Bank...........................................    69,979  12.02      23,284   4.00       34,926   6.00
Tier I capital (1) (to average assets)
Consolidated...................................    60,371   7.37      32,770   4.00          N/A    N/A
Bank...........................................    69,979   8.58      32,623   4.00       40,779   5.00

As of December 31, 2009
-----------------------
Total capital (1) (to risk-weighted assets)
Consolidated...................................  $ 82,066  13.86 %  $ 47,367   8.00 %        N/A    N/A
Bank...........................................    78,436  13.33      47,063   8.00     $ 58,828  10.00 %
Tier I capital (1) (to risk-weighted assets)
Consolidated...................................    61,568  10.40      23,684   4.00          N/A    N/A
Bank...........................................    70,985  12.07      23,531   4.00       35,297   6.00
Tier I capital (1) (to average assets)
Consolidated...................................    61,568   7.47      32,957   4.00          N/A    N/A
Bank...........................................    70,985   8.65      32,822   4.00       41,027   5.00
</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. The Bank maintains a "watch list"
representing credits that require above average attention in order to mitigate
the risk of default or loss. Over the periods noted below, the watch list
consisted of the following:

<TABLE>
<CAPTION>
                                                          3/31/2010     12/31/2009    03/31/2009
                                                          --------------------------------------
<S>                                                          <C>            <C>           <C>
Total Watch List Loans $                                     76,891         76,208        79,073
Number of Watch List Customers                                   81             69            67
Total Watch List $ > 30 Days Past Due                        31,846         32,728        22,370
Total Watch List $ Customers Secured by Real Estate          71,939         71,450        72,005
Total Watch List $ Secured by Non R/E                         3,313          3,103         6,878
Total Watch List $ Unsecured                                  1,639          1,655           190
</TABLE>

As of March 31, 2010, 58.6 percent of the Watch List exposure was less than
thirty days past due, compared to 57.1 percent as of December 31, 2009 and 71.7
percent as of March 31, 2009. Of the $76,891,000 of loans on the watch list on
March 31, 2010, $56,465,000 (73.4 percent) were originated out of the Central
Indiana (greater Indianapolis) offices.

Although the amount of loans internally classified has increased, Management
believes that the Bank has sufficient collateral to reduce potential losses. The
allowance for loan losses was $15,898,000, or 2.80 percent of portfolio loans
(excluding loans held for sale) at March 31, 2010 compared to $15,256,000, or
2.61 percent of portfolio loans at December 31, 2009. A portion of classified
loans are non-accrual loans. The Bank had nonperforming assets (non-accrual
loans, restructured loans, OREO and 90-days past due loans still accruing)
totaling $33,968,000 or 4.12 percent of total assets at March 31, 2010 compared
to $25,424,000 or 3.17 percent of total assets at December 31, 2009.


                                       21
<PAGE>

During the first quarter of 2010, the Bank had net loan charge-offs totaling
$2,559,000 compared to $1,436,000 in the first quarter of 2009. Past due loans
(30 days or more) were 6.18 percent of total loans at March 31, 2010 compared to
3.98 percent of total loans at March 31, 2009.

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. Members of the Company's internal
Asset/Liability Committee (ALCO) regularly discuss projected loan demand and
appropriate funding sources to 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") and
to obtain brokered certificates of deposit ("CDs"). FHLB advances were
$17,358,000 at March 31, 2010 compared to $17,371,000 at December 31, 2009. At
March 31, 2010, the Company had excess borrowing capacity at the FHLB of
$46,372,000 as limited by the FHLB collateral limit. In terms of managing the
Company's liquidity, Management's primary focus is on increasing deposits to
fund future growth.

Over the past year, the Company has also utilized alternative funding sources.
In July 2005, the Company began using brokered CDs as an alternate source of
funding. As of March 31, 2010, the Company had $52,312,000 of brokered CDs on
its balance sheet, compared to $46,201,000 at December 31, 2009 and $68,062,000
at March 31, 2009.

At the bank holding company level, the Company primarily uses cash to pay
dividends to shareholders. During the past twelve months, the main source of
funding for the holding company has been dividends from the Bank. During the
first quarter of 2010, the Bank paid no dividends to the holding company. As of
April 1, 2010, the amount of dividends the Bank can pay to the parent company
without prior regulatory approval was $1,593,000, versus $1,368,000 at January
1, 2010. As discussed in Note 12 to the Consolidated Financial Statements (page
37 of the 2009 Annual Report to Shareholders) and Item 1 of the December 31,
2009 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. Effective April 29, 2010, the Bank entered into a memorandum of
understanding with the FDIC and DFI and will refrain from paying cash dividends
without prior regulatory approval. 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.

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, 2010, $5,193,000 of cash was provided by operating
activities, compared to $2,569,000 provided during the same period in 2009. The
increase in the cash provided in this area was primarily a result of the
$2,284,000 net increase in origination, proceeds from sale, and gain on sale of
loans held for sale. During the first three months of 2010, $11,764,000 was used
by investing activities, compared to $13,645,000 being provided in the same
period of 2009. The increase in the cash used in this category occurred
primarily due to the $27,082,000 net increase in the cash used in activities
related to securities available for sale and held to maturity offset in part by
a $9,232,000 increase in cash provided from loan activities. During the first
three months of 2010, $25,116,000 of cash was provided by financing activities
compared to $4,254,000 provided during the same period in 2009. The increase in


                                       22
<PAGE>

cash provided by financing activities was primarily the result of a $23,274,000
increase in the net change in certificates of deposit.

Overall, net cash and cash equivalents increased $18,545,000 during the three
months ended March 31, 2010 compared to an increase of $20,468,000 in the same
period of 2009.

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 and 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.

Forward-Looking Statements
--------------------------
This Quarterly Report on Form 10-Q contains 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) changes in
competitive pressures among depository institutions; (2) changes in the interest
rate environment; (3) changes in prepayment speeds, charge-offs and loan loss
provisions; (4) continued deterioration in general economic conditions, either
national or in the markets in which the Company does business; (5) legislative
or regulatory changes adversely affecting the business of the Company; (6)
changes in real estate values or the real estate markets; (7) the Company's
business development efforts in new markets in and around Hendricks and Hamilton
Counties; (8) actions of the Federal Reserve Board; (9) changes in accounting
principles and interpretations; and (10) actions of the Department of the
Treasury and the Federal Deposit Insurance Corporation under the Emergency
Economic Stabilization Act of 2008 and the Federal Deposit Insurance Act and
other legislative and regulatory actions and reforms. These forward-looking
statements speak only as of the date of this Form 10-Q and Monroe Bancorp
undertakes no obligation to update any such forward-looking statement to reflect
events or circumstances that occur after the date hereof. 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, 2009 as
filed with the Securities and Exchange Commission.


                                       23
<PAGE>


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-earning assets are primarily funded by interest-bearing
liabilities. These financial instruments have varying levels of sensitivity to
changes in market interest rates resulting in market risk. We are subject to
interest rate risk to the extent that our interest-bearing liabilities with
short and intermediate-term maturities reprice more rapidly, or on a different
basis, than our interest-earning assets.

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 economic value (Economic Value of Equity or EVE)
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 Company'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 Company to measure interest rate risk is an interest rate sensitivity gap
analysis. The gap analysis is utilized to quantify the repricing characteristics
of the Company'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.

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 Company's interest sensitivity position at March 31, 2010 remained
consistent with the Company's primary goal of maximizing interest margin while
maintaining a relatively low exposure to interest rate risk.

The following charts summarize the results of Management's forecast of net
interest income that would be generated by the Company's March 31, 2010 and
December 31, 2009 balance sheets under a variety of sudden and sustained
interest rate changes (shocks). In both cases, due to current economic
conditions, Management feels it is appropriate to perform and analyze upward
interest rate shocks ranging from 100 basis points to 400 basis points. In all
cases the interest rate shocks reveal how the Company's balance sheet as of the
shock date can be expected to perform in terms of net interest income. The
shocks do not reflect any steps that Management might take to counteract that
change.

           Projected Change in Net Interest Income - March 31, 2010
-------------------------------------------------------------------------------
                     Projected Net Interest           $ Change
                            Income Over the    in Net Interest     % Change in
Change in Interest       Next Twelve Months             Income    Net Interest
Rate (basis points)           (in thousands)     (in thousands)         Income
-------------------------------------------------------------------------------
              +400                 $ 20,393           $ (2,022)         (9.02)%
              +300                   20,895             (1,520)         (6.78)
              +200                   21,424               (991)         (4.42)
              +100                   22,019               (396)         (1.77)
                 0                   22,415                  0              0
              -100                   22,560                145           0.65
              -200                   21,740               (675)         (3.01)


                                       24
<PAGE>

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, 2009 balance sheet under various rate shocks:

        Projected Change in Net Interest Income - December 31, 2009
-------------------------------------------------------------------------------
                     Projected Net Interest           $ Change
                            Income Over the    in Net Interest     % Change in
Change in Interest       Next Twelve Months             Income    Net Interest
Rate (basis points)           (in thousands)     (in thousands)         Income
-------------------------------------------------------------------------------
              +400                 $ 19,907           $ (2,658)        (11.78)%
              +300                   20,610             (1,955)         (8.66)
              +200                   21,317             (1,248)         (5.53)
              +100                   21,814               (751)         (3.33)
                 0                   22,565                  0              0
              -100                   22,813                248           1.10
              -200                   22,303               (262)         (1.16)

Management believes a meaningful and sustained decline in interest rates is
unlikely over the next twelve months, while an increase in rates over the next
twelve months is certainly possible.

The March 31, 2010 table indicates that the Bank's interest rate risk profile in
regards to rising rates has improved modestly over the past three months. The
Company's March 31, 2010 balance sheet is projected to produce 6.78 percent less
net interest income over the next twelve months if subjected to a 300 basis
point immediate and sustained interest rate shock. 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.

The results from the Company's rate shock analyses continue to indicate the
interest rate sensitivities of the Bank's assets and liabilities are relatively
well matched. The estimated changes in net interest income calculated as of
March 31, 2010 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.

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, 2010, an
evaluation was performed under the supervision and with the participation of
Management, including the Chief Executive Officer (the Company's principal
executive officer) and Chief Financial Officer (the Company's principal
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, 2010 were effective in


                                       25
<PAGE>

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, 2010 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.
-------           ------------------
                  None

Item 1A.          Risk Factors.
--------          -------------
                  There have been no material changes in the risk factors from
                  those described in our 2009 Annual Report on Form 10-K except
                  as set forth below.

                  We are required to comply with the terms of a pending
                  memorandum of understanding issued by the Federal Deposit
                  Insurance Corporation and the Indiana Department of Financial
                  Institutions and lack of compliance could result in additional
                  regulatory actions.

                  Effective April 29, 2010, the Bank entered into a memorandum
                  of understanding with the FDIC and the DFI. In accordance with
                  the MOU, the Bank agreed, among other things, to (a) maintain
                  certain capital ratios; (b) refrain from paying cash dividends
                  without prior regulatory approval; and (c) develop and
                  implement plans to reduce the amounts of its assets classified
                  "Substandard" or "Doubtful" in its most recent FDIC
                  examination. The MOU will remain in effect until modified or
                  terminated by the FDIC and the DFI.

                  The Board of Directors and Management of the Bank has been
                  taking action and implementing programs intended to comply
                  with the requirements of the MOU. Notwithstanding the efforts
                  of the Board of Directors and Management of the Bank, the FDIC
                  or the DFI may determine that the issues raised by the MOU
                  have not been addressed satisfactorily, or that any current or
                  past actions, violations or deficiencies could be the subject
                  of further regulatory enforcement actions. Such enforcement
                  actions could involve penalties or limitations on our business
                  at the Bank and negatively affect our ability to implement our
                  business plan, as well as our financial condition and results
                  of operations.

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

                  Stock Repurchased During the First Quarter of 2010
                  --------------------------------------------------

                  No stock was repurchased by the Company during the fiscal
                  quarter ended March 31, 2010. The Company's stock repurchase
                  plan was announced June 16, 2006. The total dollar amount
                  approved was $10,000,000. The plan has no expiration date, but
                  the Board of Directors may terminate the plan at anytime. The
                  Board of Directors suspended repurchase activities beginning
                  in the fourth quarter of 2007 and as of March 31, 2010, the
                  Board of Directors has not determined when stock repurchases
                  will recommence.

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

Item 4.           (Removed and Reserved)
-------           ----------------------

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


                                       26
<PAGE>

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 (File
               No. 000-31951).

3(ii)          Monroe Bancorp Amended and Restated By-laws, amended April 29,
               2010, are incorporated by reference to registrant's Form 8-K
               filed May 4, 2010 (File No. 000-31951).

4              Indenture dated as of July 17, 2009 by and between Wells Fargo
               Bank, N.A., and Monroe Bancorp is incorporated by reference to
               registrant's Form 8-K filed July 23, 2009 (File No. 000-31951).

10(i)          1999 Directors' Stock Option Plan of Monroe Bancorp is
               incorporated by reference to registrant's Form 10 filed November
               14, 2000 (File No. 000-31951).

10(ii)         1999 Management Stock Option Plan of Monroe Bancorp is
               incorporated by reference to registrant's Form 10 filed November
               14, 2000 (File No. 000-31951).

10 (iii)       Deferred Compensation Trust for Monroe Bancorp is incorporated by
               reference to registrant's Form 10 filed November 14, 2000 (File
               No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

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 (File No.
               000-31951).

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 (File No. 000-31951).

10(viii)       Monroe Bancorp Directors' Deferred Compensation Plan as Amended
               and Restated Effective January 1, 1999 and First and Second
               Amendments are incorporated by reference to registrant's Form
               10-K filed March 29, 2004 (File No. 000-31951).

10(ix)         Monroe Bancorp Executives' Deferred Compensation Plan as Amended
               and Restated Effective January 1, 1999 and First, Second and
               Third Amendments are incorporated by reference to registrant's
               Form 10-K filed March 29, 2004 (File No. 000-31951).

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 (File No. 000-31951).

10(xi)         Schedule of Directors Compensation is incorporated by reference
               to registrant's Form 8-K filed December 21, 2009 (File No.
               000-31951).

10(xii)        Schedule of Executive Officers Compensation is incorporated by
               reference to registrant's Form 8-K filed April 16, 2010 (File No.
               000-31951).


                                       27
<PAGE>

10(xiii)       Fourth Amendment to the Monroe Bancorp Employees' Stock Ownership
               Plan is incorporated by reference to Form 10-Q filed May 9, 2005
               (File No. 000-31951).

10(xiv)        Monroe Bancorp Directors' 2005 Deferred Compensation Plan
               incorporated by reference to Form 10-K filed March 14, 2006 (File
               No. 000-31951).

10(xv)         Monroe Bancorp Executives' 2005 Deferred Compensation Plan
               incorporated by reference to Form 10-K filed March 14, 2006 (File
               No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

10(xxiii)      Sixth Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, incorporated by reference to Form 10-Q
               filed May 8, 2007 (File No. 000-31951).

10(xxiv)       Seventh Amendment to the Monroe Bancorp Thrift Plan as Amended
               and Restated January 1, 2001, incorporated by reference to Form
               10-K filed March 13, 2008 (File No. 000-31951).

10(xxv)        Fifth Amendment to the Monroe Bancorp Employees' Stock Ownership
               Plan is incorporated by reference to Form 10-K filed March 13,
               2008 (File No. 000-31951).

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

31(ii)         Certification for Quarterly 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.



                                       28
<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 10, 2010           By: /s/ Mark D. Bradford
              ------------               ----------------------------------
                                         Mark D. Bradford, President and
                                         Chief Executive Officer
                                        (Principal Executive Officer)

        Date: May 10, 2010           By: /s/ Gordon M. Dyott
              ------------               ----------------------------------
                                         Gordon M. Dyott, Exec. Vice President,
                                         Chief Financial Officer
                                         (Principal Financial Officer)












                                       29
<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 (File
               No. 000-31951).

3(ii)          Monroe Bancorp Amended and Restated By-laws, amended April 29,
               2010, are incorporated by reference to registrant's Form 8-K
               filed May 4, 2010 (File No. 000-31951).

4              Indenture dated as of July 17, 2009 by and between Wells Fargo
               Bank, N.A., and Monroe Bancorp is incorporated by reference to
               registrant's Form 8-K filed July 23, 2009 (File No. 000-31951).

10(i)          1999 Directors' Stock Option Plan of Monroe Bancorp is
               incorporated by reference to registrant's Form 10 filed November
               14, 2000 (File No. 000-31951).

10(ii)         1999 Management Stock Option Plan of Monroe Bancorp is
               incorporated by reference to registrant's Form 10 filed November
               14, 2000 (File No. 000-31951).

10 (iii)       Deferred Compensation Trust for Monroe Bancorp is incorporated by
               reference to registrant's Form 10 filed November 14, 2000 (File
               No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

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 (File No.
               000-31951).

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 (File No. 000-31951).

10(viii)       Monroe Bancorp Directors' Deferred Compensation Plan as Amended
               and Restated Effective January 1, 1999 and First and Second
               Amendments are incorporated by reference to registrant's Form
               10-K filed March 29, 2004 (File No. 000-31951).

10(ix)         Monroe Bancorp Executives' Deferred Compensation Plan as Amended
               and Restated Effective January 1, 1999 and First, Second and
               Third Amendments are incorporated by reference to registrant's
               Form 10-K filed March 29, 2004 (File No. 000-31951).

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 (File No. 000-31951).

10(xi)         Schedule of Directors Compensation is incorporated by reference
               to registrant's Form 8-K filed December 21, 2009 (File No.
               000-31951).

10(xii)        Schedule of Executive Officers Compensation is incorporated by
               reference to registrant's Form 8-K filed April 16, 2010 (File No.
               000-31951).


                                       30
<PAGE>

10(xiii)       Fourth Amendment to the Monroe Bancorp Employees' Stock Ownership
               Plan is incorporated by reference to Form 10-Q filed May 9, 2005
               (File No. 000-31951).

10(xiv)        Monroe Bancorp Directors' 2005 Deferred Compensation Plan
               incorporated by reference to Form 10-K filed March 14, 2006 (File
               No. 000-31951).

10(xv)         Monroe Bancorp Executives' 2005 Deferred Compensation Plan
               incorporated by reference to Form 10-K filed March 14, 2006 (File
               No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

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 (File No. 000-31951).

10(xxiii)      Sixth Amendment to the Monroe Bancorp Thrift Plan as Amended and
               Restated January 1, 2001, incorporated by reference to Form 10-Q
               filed May 8, 2007 (File No. 000-31951).

10(xxiv)       Seventh Amendment to the Monroe Bancorp Thrift Plan as Amended
               and Restated January 1, 2001, incorporated by reference to Form
               10-K filed March 13, 2008 (File No. 000-31951).

10(xxv)        Fifth Amendment to the Monroe Bancorp Employees' Stock Ownership
               Plan is incorporated by reference to Form 10-K filed March 13,
               2008 (File No. 000-31951).

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

31(ii)         Certification for Quarterly 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.



                                       31