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 June 30, 2007

                                       OR

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

For the transition period from              to

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

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

          Indiana                                         35-1594017
          -------                                         ----------
(State or other jurisdiction of               (IRS Employer 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 Sections 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X]           No [ ]


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

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


Outstanding Shares of Common Stock on July 31, 2007:  6,253,592

<PAGE>


                          MONROE BANCORP AND SUBSIDIARY
                                    FORM 10-Q

                                      INDEX
                                                                        Page No.
                                                                        -------

Part I. Financial Information:


    Item 1.    Financial Statements:

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

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

                  Consolidated Condensed Statements of Income - Three Months...5

                  Consolidated Condensed Statement of Shareholders' Equity.....6

                  Consolidated Condensed Statements of Cash Flows..............7

                  Notes to Consolidated Condensed Financial Statements.........8

    Item 2.    Management's Discussion and Analysis of Financial
                      Condition and Results of Operations.....................10

    Item 3.    Quantitative and Qualitative Disclosures about Market Risk.....21

    Item 4.    Controls and Procedures........................................22

Part II.  Other Information:

    Item 1.    Legal Proceedings..............................................23

    Item 1A.   Risk Factors...................................................23

    Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds....23

    Item 3.    Defaults Upon Senior Securities................................23

    Item 4.    Submission of Matters to a Vote of Security Holders............23

    Item 5.    Other Information..............................................24

    Item 6.    Exhibits.......................................................24

Signatures....................................................................26

Exhibit Index.................................................................27


                                       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>
                                                                       June 30,   December 31,
                                                                         2007         2006
                                                                     (Unaudited)
                                                                      ---------    ---------
<S>                                                                   <C>          <C>
Assets
       Cash and due from banks ....................................   $  15,300    $  24,415
       Federal funds sold .........................................      20,533        5,803
       Interest-earning deposits ..................................       3,432        3,328
                                                                      ---------    ---------
             Total cash and cash equivalents ......................      39,265       33,546

       Trading securities, at fair value ..........................       3,592        3,557
       Investment securities:
            Available for sale ....................................     116,931      115,040
            Held to maturity ......................................       1,007        1,653
                                                                      ---------    ---------
                 Total investment securities ......................     117,938      116,693

       Loans ......................................................     560,898      556,918
       Allowance for loan losses ..................................      (6,487)      (6,144)
                                                                      ---------    ---------
            Net loans .............................................     554,411      550,774
       Loans held for sale ........................................       3,091        2,545
       Premises and equipment .....................................      17,674       15,411
       Federal Home Loan Bank of Indianapolis stock, at cost ......       2,312        2,312
       Other assets ...............................................      25,094       23,355
                                                                      ---------    ---------
                  Total assets ....................................   $ 763,377    $ 748,193
                                                                      =========    =========

Liabilities
       Deposits:
            Noninterest-bearing ...................................   $  83,136    $  79,783
            Interest-bearing ......................................     531,456      509,545
                                                                      ---------    ---------
                 Total deposits ...................................     614,592      589,328

       Borrowings .................................................      89,204       98,079
       Other liabilities ..........................................       7,986        7,281
                                                                      ---------    ---------
                  Total liabilities ...............................     711,782      694,688

Commitments and Contingent Liabilities

Shareholders' Equity
       Common stock, no-par value
           Authorized, 18,000,000 shares
           Issued and outstanding - 6,283,592 and 6,515,342 shares,
           respectively ...........................................         137          137
       Additional paid-in capital .................................       5,260        9,284
       Retained earnings ..........................................      47,827       45,136
       Accumulated other comprehensive loss .......................      (1,395)        (818)
       Unearned ESOT shares .......................................        (234)        (234)
                                                                      ---------    ---------
                  Total shareholders' equity ......................      51,595       53,505
                                                                      ---------    ---------
                  Total liabilities and shareholders' equity ......   $ 763,377    $ 748,193
                                                                      =========    =========
</TABLE>
            See notes to consolidated condensed financial statements.

                                        3
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                   Consolidated Condensed Statements of Income
                                   (Unaudited)
                  (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                          Six Months Ended
                                                                               June 30,
                                                                        -------------------
                                                                           2007       2006
                                                                        --------   --------
<S>                                                                     <C>        <C>
Interest Income
       Loans, including fees ........................................   $ 21,166   $ 18,687
       Trading securities ...........................................         54         42
       Investment securities
            Taxable .................................................      1,958      1,712
            Tax exempt ..............................................        601        459
       Federal funds sold ...........................................        262        185
       Other interest income ........................................         60         46
                                                                        --------   --------
                  Total interest income .............................     24,101     21,131
                                                                        --------   --------

Interest Expense
       Deposits .....................................................     10,502      8,119
       Short-term borrowings ........................................      1,312      1,133
       Other borrowings .............................................        703        765
                                                                        --------   --------
                  Total interest expense ............................     12,517     10,017
                                                                        --------   --------
                  Net interest income ...............................     11,584     11,114
       Provision for loan losses ....................................        540        600
                                                                        --------   --------
                  Net interest income after provision for loan losses     11,044     10,514
                                                                        --------   --------

Noninterest Income
       Fiduciary activities .........................................      1,022        813
       Service charges on deposit accounts ..........................      1,799      1,846
       Commission income ............................................        471        416
       Securities gains .............................................         42         51
       Unrealized gains/losses on trading securities ................        116        (13)
       Net gains on loans sales .....................................        439        481
       Debit card interchange fees ..................................        452        380
       Other operating income .......................................        791        646
                                                                        --------   --------
                  Total other income ................................      5,132      4,620
                                                                        --------   --------

Noninterest Expenses
       Salaries and employee benefits ...............................      6,187      5,868
       Net occupancy and equipment expense ..........................      1,536      1,559
       Advertising ..................................................        387        423
       Legal fees ...................................................        273        127
       Appreciation in directors' and executives'
            deferred compensation plans .............................        212         81
       Other operating expense ......................................      1,764      1,716
                                                                        --------   --------
                  Total other expenses ..............................     10,359      9,774
                                                                        --------   --------

                  Income before income tax ..........................      5,817      5,360
                  Income tax expense ................................      1,615      1,646
                                                                        --------   --------
                             Net income .............................   $  4,202   $  3,714
                                                                        ========   ========

       Basic earnings per share......................................   $  0.660   $  0.562
       Diluted earnings per share....................................   $  0.657   $  0.560
       Dividends declared and paid per share.........................       0.24       0.24
</TABLE>
            See notes to consolidated condensed financial statements.

                                       4
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                   Consolidated Condensed Statements of Income
                                   (Unaudited)
                  (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                         Three Months Ended
                                                                               June 30,
                                                                        -------------------
                                                                           2007       2006
                                                                        --------   --------
<S>                                                                     <C>        <C>
Interest Income
       Loans, including fees ........................................   $ 10,754   $  9,656
       Trading securities ...........................................         27         22
       Investment securities
            Taxable .................................................        989        860
            Tax exempt ..............................................        305        243
       Federal funds sold ...........................................        136        143
       Other interest income ........................................         38         32
                                                                        --------   --------
                  Total interest income .............................     12,249     10,956
                                                                        --------   --------

Interest Expense
       Deposits .....................................................      5,408      4,285
       Short-term borrowings ........................................        607        616
       Other borrowings .............................................        381        372
                                                                        --------   --------
                  Total interest expense ............................      6,396      5,273
                                                                        --------   --------
                  Net interest income ...............................      5,853      5,683
       Provision for loan losses ....................................        255        300
                                                                        --------   --------
                  Net interest income after provision for loan losses      5,598      5,383
                                                                        --------   --------

Noninterest Income
       Fiduciary activities .........................................        537        404
       Service charges on deposit accounts ..........................        932        980
       Commission income ............................................        239        214
       Securities gains .............................................         41          8
       Unrealized gains (losses) on trading securities ..............         83        (43)
       Net gains on loans sales .....................................        262        297
       Debit card interchange fees ..................................        238        196
       Other operating income .......................................        353        315
                                                                        --------   --------
                  Total other income ................................      2,685      2,371
                                                                        --------   --------

Noninterest Expenses
       Salaries and employee benefits ...............................      3,198      3,041
       Net occupancy and equipment expense ..........................        717        782
       Advertising ..................................................        162        204
       Legal fees ...................................................        118         40
       Appreciation (depreciation) in directors' and executives'
            deferred compensation plans .............................        148        (15)
       Other operating expense ......................................        923        900
                                                                        --------   --------
                  Total other expenses ..............................      5,266      4,952
                                                                        --------   --------

                  Income before income tax ..........................      3,017      2,802
                  Income tax expense ................................        827        861
                                                                        --------   --------
                             Net income .............................   $  2,190   $  1,941
                                                                        --------   --------

       Basic earnings per share......................................   $  0.348   $  0.294
       Diluted earnings per share....................................   $  0.346   $  0.293
       Dividends declared and paid per share.........................       0.12       0.12
</TABLE>
            See notes to consolidated condensed financial statements.

                                       5
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
            Consolidated Condensed Statement of Shareholders' Equity
                            For the Six Months Ended
                                  June 30, 2007
                                   (Unaudited)
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                                          Unearned
                                                                                           Accumulated    Employee
                                       Common Stock    Additional                             Other         Stock
                                     Shares             Paid in   Comprehensive Retained  Comprehensive   Ownership
                                   Outstanding  Amount  Capital       Income    Earnings       Loss      Trust Shares  Total
                                   ------------------------------------------------------------------------------------------
<S>                                 <C>         <C>     <C>          <C>         <C>        <C>            <C>        <C>
Balances January 1, 2007..........  6,515,342   $ 137   $ 9,284                  $45,136    $   (818)      $ (234)    $53,505

Comprehensive Income:
  Net income for the period.......                                   $ 4,202       4,202                                4,202
  Other comprehensive income
    -unrealized loss on securities                                      (577)                   (577)                    (577)
ESOT shares earned................                           32                                                            32
Stock option compensation
    expense.......................                           30                                                            30
Repurchase of stock, at cost......   (231,750)           (4,086)                                                       (4,086)
Cash dividend ($0.24 per share)                                                   (1,511)                              (1,511)
                                   ------------------------------------------------------------------------------------------
Balances June 30, 2007............  6,283,592   $ 137   $ 5,260      $ 3,625     $47,827    $ (1,395)      $ (234)    $51,595
                                   ==========================================================================================
</TABLE>

See notes to consolidated condensed financial statements.

                                        6
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                 Consolidated Condensed Statements of Cash Flows
                                   (Unaudited)
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                 Six Months Ended
                                                                                     June 30,
                                                                              ---------------------
                                                                                 2007        2006
                                                                              --------    --------
<S>                                                                           <C>         <C>
Operating Activities
     Net income ...........................................................   $  4,202    $  3,714
     Adjustments to reconcile net income to net cash provided
             by operating activities:
         Provision for loan losses ........................................        540         600
         Depreciation and amortization ....................................        550         564
         Deferred income tax ..............................................        (75)       (208)
         Investment securities amortization, net ..........................        (25)         50
         Securities gain ..................................................        (41)        (51)
         Origination of loans held for sale ...............................    (31,454)    (38,178)
         Proceeds from sale of loans held for sale ........................     31,347      35,226
         Gain on sale of loans held for sale ..............................       (439)       (481)
         Gain on sale of land .............................................        (81)         --
         ESOT compensation ................................................         32          20
         Stock-based compensation expense .................................         30          32
         Net change in:
              Trading securities ..........................................          6         139
              Interest receivable and other assets ........................     (1,363)         69
              Interest payable and other liabilities ......................     (1,922)        745
                                                                              --------    --------
                        Net cash provided by operating activities .........      1,307       2,241
                                                                              --------    --------

Investing Activities
     Purchase of securities available for sale ............................    (30,123)    (15,950)
     Proceeds from sales of securities available for sale .................        250          --
     Proceeds from paydowns and maturities of securities available for sale     29,756      19,316
     Proceeds from paydowns and maturities of securities held to maturity .        646         301
     Net change in loans ..................................................     (4,177)    (30,750)
     Purchase of premises and equipment ...................................     (2,732)     (1,529)
                                                                              --------    --------
                        Net cash used by investing activities .............     (6,380)    (28,612)
                                                                              --------    --------

Financing Activities
     Net change in:
         Noninterest-bearing, interest-bearing demand and savings deposits      45,653      25,127
         Certificates of deposit ..........................................    (20,388)     (7,452)
         Borrowings .......................................................    (14,009)     28,506
     Repayments of Federal Home Loan Bank advances ........................        (22)     (4,000)
     Cash dividends paid ..................................................     (1,511)     (1,587)
     Proceeds from trust preferred debentures .............................      5,155          --
     Repurchase of common stock ...........................................     (4,086)         --
                                                                              --------    --------
                        Net cash provided by financing activities .........     10,792      40,594
                                                                              --------    --------
Net Change in Cash and Cash Equivalents ...................................      5,719      14,223
Cash and Cash Equivalents, Beginning of Period ............................     33,546      36,600
                                                                              --------    --------
Cash and Cash Equivalents, End of Period ..................................   $ 39,265    $ 50,823
                                                                              ========    ========

Supplemental cash flow disclosures
     Interest paid ........................................................   $ 11,863    $  9,731
     Income tax paid ......................................................      1,520       1,612
</TABLE>
            See notes to consolidated condensed financial statements.

                                        7
<PAGE>


                          MONROE BANCORP AND SUBSIDIARY
              Notes to Consolidated Condensed Financial Statements
                                  June 30, 2007
                                   (Unaudited)

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

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

The interim consolidated condensed financial statements at June 30, 2007, and
for the three and six months ended June 30, 2007 and 2006, have not been audited
by independent accountants, but reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows for
such periods.

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

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


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

                                                        Six months ended
                                                 -------------------------------
                                                 June 30, 2007     June 30, 2006
                                                 -------------     -------------

Net income (in thousands) ..................      $     4,202       $     3,714
                                                  ===========       ===========
Weighted average shares outstanding ........        6,389,074         6,639,842
Average unearned ESOT shares ...............          (19,900)          (29,975)
                                                  -----------       -----------
Shares used to compute basic earnings
     per share .............................        6,369,174         6,609,867
Effect of dilutive securities- stock options           25,971            20,744
                                                  -----------       -----------
Shares used to compute diluted earnings
     per share .............................        6,395,145         6,630,611
                                                  ===========       ===========

Earnings per share, basic ..................      $     0.660       $     0.562
Earnings per share, diluted ................      $     0.657       $     0.560


                                       8
<PAGE>

Options to purchase 210,000 shares of common stock at $22 per share were
outstanding at June 30, 2007, and options to purchase 30,000 shares of common
stock at $16 per share and 210,000 shares of common stock at $22 per share were
outstanding at June 30, 2006, but were not included in the computation of
diluted earnings per share for the six months ended June 30, 2007 and 2006,
respectively because the options' exercise price was greater than the average
market price of the common shares.

                                                       Three months ended
                                                 -------------------------------
                                                 June 30, 2007     June 30, 2006
                                                 -------------     -------------

Net income (in thousands) ..................      $     2,190       $     1,941
                                                  ===========       ===========
Weighted average shares outstanding ........        6,317,424         6,639,842
Average unearned ESOT shares ...............          (18,700)          (29,013)
                                                  -----------       -----------
Shares used to compute basic earnings
     per share .............................        6,298,724         6,610,829
Effect of dilutive securities- stock options           26,236            20,722
                                                  -----------       -----------
Shares used to compute diluted earnings
     per share .............................        6,324,960         6,631,551
                                                  ===========       ===========

Earnings per share, basic ..................      $     0.348       $     0.294
Earnings per share, diluted ................      $     0.346       $     0.293


Options to purchase 210,000 shares of common stock at $22 per share were
outstanding at June 30, 2007, and options to purchase 30,000 shares of common
stock at $16 per share and 210,000 shares of common stock at $22 per share were
outstanding at June 30, 2006, but were not included in the computation of
diluted earnings per share for the three months ended June 30, 2007 and 2006,
respectively because the options' exercise price was greater than the average
market price of the common shares.

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

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

Note 5: Trust Preferred Securities
----------------------------------

On March 20, 2007, the Company completed a private placement of $5 million in
trust preferred securities through Monroe Bancorp Statutory Trust II (the
"Trust"), a statutory business trust formed by the Company. The securities were
sold pursuant to an applicable exemption from registration under the Securities
Act of 1933, as amended. The Company received the proceeds from the sale of the
securities in exchange for subordinated debt issued by the Company to the Trust.
Because the Trust will not be consolidated with the Company, pursuant to
Financial Accounting Standard Board Interpretation No. 46, the Company's
financial statements will reflect the subordinated debt issued to the Trust.

                                       9
<PAGE>

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

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

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

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

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

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

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

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


                                       10
<PAGE>

     ("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 pages 4
     and 5 of the consolidated financial statements as "Appreciation
     (depreciation) on 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 and capital gain
     dividends and offsetting appreciation (depreciation) on the deferred
     compensation plans and trustee fees are removed.

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

Overview
--------
Net income for the second quarter of 2007 was $2,190,000, a 12.8 percent
increase from net income of $1,941,000 for the same quarter last year. Basic
earnings per share for the second quarter of 2007 were $0.348, up 18.4 percent
from $0.294 per share for the second quarter of 2006. Diluted earnings per share
for the second quarter of 2007 were $0.346, up 18.1 percent from $0.293 per
share for the second quarter of 2006. Annualized return on average equity (ROE)
for the second quarter of 2007 increased to 16.93 percent compared to 15.04
percent for second quarter of 2006. The annualized return on average assets
(ROA) was 1.17 percent for the second quarter of 2007 compared to 1.07 percent
for the same period of 2006.

Net income for the first six months of 2007 was $4,202,000, a 13.1 percent
increase from net income of $3,714,000 for the same period last year. Basic
earnings per share for the first six months of 2007 were $0.660, up 17.4 percent
from $0.562 per share for the same period of 2006. Diluted earnings per share
for the first six months of 2007 were $0.657, up 17.3 percent from $0.560 per
share for the same period of 2006. Annualized ROE for the six months ended June
30, 2007 increased to 16.09 percent compared to 14.55 percent for the first six
months of 2006. The annualized ROA was 1.14 percent for the six months ended
June 30, 2007 compared to 1.04 percent for the first six months of 2006.

Growth in net income primarily resulted from loan growth and growth in
noninterest income offset by modest increases in noninterest expense. Net
interest income for the second quarter of 2007, after the provision for loan
losses, increased $215,000, or 4.0 percent over the second quarter of 2006. Net
interest income for the six months ended June 30, 2007 increased by $530,000 or
5.0 percent over the same period in 2006.

The following items affected second quarter and year-to-date results:
o    Trust Fee Income - Trust fees grew $133,000 or 32.9 percent to $537,000 for
     the three months ended June 30, 2007 compared to $404,000 for the same
     period of 2006. For the six months ended June 30, 2007, trust fees grew
     $209,000 or 25.7 percent to $1,022,000 compared to $813,000 for the same
     period in 2006. The increase in trust fees was driven by growth in trust
     assets under management. Trust assets under management reached $329,147,000
     at June 30, 2007, growing 21.1 percent, or $57,381,000 over the
     $271,766,000 at December 31, 2006 and by 34.2 percent, or $83,895,000 over
     the June 30, 2006 total of $245,252,000. Management does not anticipate
     that trust assets will sustain this rate of growth on an ongoing basis.
o    Sale of Brownsburg Land - The Company realized an $81,000 gain on the sale
     of a small parcel of land for a road-widening project during the first
     quarter of 2007. The sale of the land, which was in front of the Company's
     Brownsburg Banking Center, will have no impact on its operation and minimal
     impact on its overall appearance.
o    Stock Buyback Activity, Funded With Trust Preferred Stock - The Company
     repurchased 69,750 shares of its common stock during the second quarter at
     an average price including commission of $17.26, and has


                                       11
<PAGE>

     purchased a total of 361,750 shares at a total cost of $6,429,000 since the
     program was announced in June 2006. The Company's repurchase activity was
     funded with proceeds from trust preferred subordinated debentures and other
     debt. Trust preferred subordinated debentures are being used as the primary
     source of funding for the Company's stock repurchase activity. As of March
     31, 2007 the Company had issued a total of $8,248,000 of trust preferred
     subordinated debentures at an average cost of 6.76 percent. No additional
     trust preferred shares were issued during the three months ended June 30,
     2007.
o    Formation of a Real Estate Investment Trust - The Bank formed a Real Estate
     Investment Trust (REIT) involving approximately $80,000,000 of its existing
     commercial real estate loans during the fourth quarter of 2006. The net tax
     savings generated by the REIT increased the Company's net income by $60,000
     during the second quarter of 2007 and $121,000 for the six months ended
     June 30, 2007.
o    Loan Related Legal Expense -loan related legal expense for the second
     quarter of 2007 was $85,000, which was $65,000 or 325 percent greater than
     during the second quarter of 2006. For the six months ended June 30, 2007,
     loan related legal expense was $201,000, which was $123,000 or 158 percent
     higher than the same period in 2006. Most of the increase is related to a
     case that has recently been favorably resolved. Management is exploring
     options to recover amounts attributable to certain loans that were
     charged-off or written down in earlier periods related to this case.

A primary management focus for the remainder of 2007 is to accelerate loan
growth while maintaining credit quality. Loans at June 30, 2007 totaled
$563,989,000 compared to $559,281,000 at June 30, 2006. The $4,708,000 or 0.84
percent increase in loans is well below the $53,966,000 or 10.68 percent growth
in loans that took place between June 30, 2005 and June 30, 2006. The reduction
in the Company's loan growth rate is the result of several factors including a
general slowdown in commercial real estate development and new loan activity
being largely offset by loans being paid off or refinanced elsewhere. The
reduction in the rate of loan growth, if it continues, could have an adverse
affect on the growth of net interest income.

Management is pleased with the progress of the full-service Brownsburg banking
center in Hendricks County, which was opened January 2006. Average deposits for
the month of June 2007 were $44,816,000 compared to $29,730,000 for June 2006.
The Company plans to open three more full-service banking centers over the next
fifteen months. On May 30, 2007, the Company broke ground for two new
full-service banking centers which will replace limited service offices in Avon
and Plainfield, two high growth communities in Hendricks County, west of
Indianapolis. These centers are expected to open in the fourth quarter of 2007.
The third center will be located in Noblesville, a high growth community located
in Hamilton County, north of Indianapolis. The Noblesville banking center is
expected to open during the summer of 2008.

Net Interest Income / Net Interest Margin
-----------------------------------------
The two tables on the following pages present 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.









                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                            Average Balance Sheets and Interest Rates
                                                               ------------------------------------------------------------------
                                                                Six Months Ended June 30, 2007    Six Months Ended June 30, 2006
                                                               -------------------------------    -------------------------------
                                                               Average             Average Rate  Average             Average Rate
                             ASSETS                            Balance   Interest  (annualized)  Balance   Interest  (annualized)
                                                               -------   --------  ------------  -------   --------  ------------

<S>                                                           <C>         <C>         <C>       <C>        <C>           <C>
Interest earning assets
     Securities
          Taxable .........................................   $  86,706   $ 1,960     4.56%     $  88,321  $ 1,688       3.85%
          Tax-exempt (1) ..................................      34,615       911     5.30%        28,498      695       4.92%
                                                              ---------   -------               ---------  -------
               Total securities ...........................     121,321     2,871     4.77%       116,819    2,383       4.11%

     Loans (2) ............................................     561,486    21,172     7.60%       542,951   18,720       6.95%
     FHLB Stock ...........................................       2,312        52     4.54%         2,545       65       5.15%
     Federal funds sold ...................................       9,538       262     5.54%         6,876      185       5.43%
     Interest-earning deposits ............................       3,393        84     4.97%         3,047       71       4.68%
                     --                                       ---------   -------               ---------  -------
                 Total interest earning assets ............     698,050    24,441     7.06%       672,238   21,424       6.43%
                                                              ---------   -------               ---------  -------

Noninterest earning assets
    Allowance for loan losses .............................      (6,305)                           (5,695)
     Premises and equipment & other assets ................      39,969                            35,980
     Cash and due from banks ..............................      14,624                            16,617
                                                              ---------                         ---------
               Total assets ...............................   $ 746,338                         $ 719,140
                                                              =========                         =========

              LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
     Total interest-bearing deposits ......................   $ 523,493    10,502     4.05%     $ 494,545    8,119       3.31%
     Borrowed funds .......................................      83,867     2,015     4.85%        88,155    1,898       4.34%
                                                              ---------   -------               ---------  -------
          Total interest-bearing liabilities ..............     607,360    12,517     4.16%       582,700   10,017       3.47%
                                                              ---------   -------               ---------  -------


Noninterest-bearing liabilities
     Noninterest-bearing demand deposits ..................      78,017                            77,301
     Other liabilities ....................................       8,305                             7,651
     Shareholders' equity .................................      52,656                            51,488
                                                              ---------                         ---------
                 Total liabilities and shareholders' equity   $ 746,338                         $ 719,140
                                                              =========                         =========


Interest margin recap
Net interest income and interest rate spread
     Tax-equivalent net interest income margin ............                11,924     2.90%                 11,407       2.96%
     Tax-equivalent net interest margin as a percent of
            total average earning assets ..................                           3.44%                              3.42%
Tax-equivalent adjustment (1) .............................                   340                              293
                                                                        ---------                        ---------

      Net interest income .................................             $  11,584                        $  11,114
                                                                        =========                        =========
</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.

                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                                           Average Balance Sheets and Interest Rates
                                                               ------------------------------------------------------------------
                                                               Three Months Ended June 30, 2007  Three Months Ended June 30, 2006
                                                               --------------------------------  --------------------------------
                                                               Average             Average Rate  Average             Average Rate
                             ASSETS                            Balance   Interest  (annualized)  Balance   Interest  (annualized)
                                                               -------   --------  ------------  -------   --------  ------------

<S>                                                           <C>         <C>         <C>       <C>        <C>           <C>
Interest earning assets
     Securities
          Taxable .........................................   $  86,072   $   995     4.64%     $  86,127  $    848      3.95%
          Tax-exempt (1) ..................................      34,981       462     5.30%        29,557       368      5.00%
                                                              ---------   -------               ---------  --------
               Total securities ...........................     121,053     1,457     4.83%       115,684     1,216      4.22%

     Loans (2) ............................................     565,373    10,761     7.63%       548,671     9,674      7.07%
     FHLB Stock ...........................................       2,312        22     3.82%         2,545        33      5.20%
     Federal funds sold ...................................       9,693       136     5.63%         9,873       144      5.85%
     Interest-earning deposits ............................       4,233        52     4.97%         4,293        48      4.53%
                                                              ---------   -------               ---------  --------
                 Total interest earning assets ............     702,664    12,428     7.09%       681,066    11,115      6.55%
                                                              ---------   -------               ---------  --------

Noninterest earning assets
    Allowance for loan losses .............................      (6,329)                           (5,750)
     Premises and equipment & other assets ................      41,180                            36,291
     Cash and due from banks ..............................      13,965                            16,729
                                                              ---------                         ---------
               Total assets ...............................   $ 751,480                         $ 728,336
                                                              =========                         =========

              LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
     Total interest-bearing deposits ......................   $ 530,015     5,408     4.09%     $ 502,601     4,286      3.42%
     Borrowed funds .......................................      81,231       988     4.88%        88,710       987      4.46%
                                                              ---------   -------               ---------  --------
          Total interest-bearing liabilities ..............     611,246     6,396     4.20%       591,311     5,273      3.58%
                                                              ---------   -------               ---------  --------


Noninterest-bearing liabilities
     Noninterest-bearing demand deposits ..................      79,405                            77,294
     Other liabilities ....................................       8,937                             7,943
     Shareholders' equity .................................      51,892                            51,788
                                                              ---------                         ---------
                 Total liabilities and shareholders' equity   $ 751,480                         $ 728,336
                                                              =========                         =========


Interest margin recap
Net interest income and interest rate spread
     Tax-equivalent net interest income margin ............               $ 6,032     2.90%                $  5,842      2.97%
     Tax-equivalent net interest margin as a percent of
          total average earning assets ....................                           3.44%                              3.44%
Tax-equivalent adjustment (1) .............................                   179                               159
                                                                          -------                          --------

                Net interest income .......................               $ 5,853                          $  5,683
                                                                          =======                          ========
</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.

                                       14
<PAGE>

Net Interest Income / Net Interest Margin (continued)
-----------------------------------------------------
Net interest income is the primary source of the Company's earnings. It is a
function of the net interest margin and the volume of average earning assets.
The tax-equivalent net interest margin as a percent of average earning assets
was 3.44 percent for the first six months of 2007, up from 3.42 percent for the
same period last year. Overall increases in rates on interest bearing assets
compared to increases in rates on interest bearing liabilities were fairly
evenly matched.

The tax-equivalent net interest margin as a percent of average earning assets
was 3.44 percent for the quarter ended June 30, 2007, unchanged from 3.44
percent for the same quarter last year.

Tax-equivalent net interest income was $11,924,000 for the six months ended June
30, 2007 compared to $11,407,000 for the same period in 2006, an increase of
4.53 percent.

Tax-equivalent net interest income was $6,032,000 for the three months ended
June 30, 2007 compared to $5,842,000 for the same period in 2006, an increase of
3.25 percent.

Noninterest Income / Noninterest Expense
----------------------------------------
Total noninterest income for the second quarter of 2007 was $2,685,000 compared
to $2,371,000 for the same period in 2006. Excluding the effect of the Company's
deferred compensation plan, discussed in the "Use of Non-GAAP Financial
Measures" section (page 10), total noninterest income for the second quarter of
2007 was $2,560,000, a $155,000 or 6.4 percent increase from $2,405,000 for the
same period in 2006.

Significant changes in noninterest income occurred primarily in the following
areas:
o    Trust fee income totaled $537,000 for the second quarter of 2007 compared
     to $404,000 for the second quarter of 2006, an increase of $133,000 or 32.9
     percent. This increase was driven by growth in Trust assets under
     management. Management does not anticipate that trust fee income will
     sustain this rate of growth on an ongoing basis.
o    Debit card interchange fees were $238,000 for the second quarter of 2007
     compared to $196,000 for the same period in 2006, an increase of $42,000 or
     21.4 percent due to an increase in debit card usage.
o    Commission income was $239,000 for the second quarter of 2007 compared to
     $214,000 for the same period in 2006, an increase of $25,000 or 11.7
     percent. This growth was attributed to a $31,000, or 26.4 percent increase
     in branch-based annuity and mutual fund sales, personnel changes, improved
     sales efforts and progress being made in the transition from a transaction
     based commission business into one that is management fee based. This was
     partially offset by a decrease of $6,000 in full-service brokerage fees.

Total noninterest income for the first six months of 2007 was $5,132,000
compared to $4,620,000 for the same period in 2006. Excluding the effect of the
Company's deferred compensation plan, discussed in the "Use of Non-GAAP
Financial Measures" section above, total noninterest income for the six months
ended June 30, 2007 was $4,967,000, a $393,000 or 8.6 percent increase from
$4,574,000 for the same period in 2006.

Significant changes in noninterest income occurred primarily in the following
areas:
o    Trust fee income totaled $1,022,000 for the first six months of 2007
     compared to $813,000 for the same period of 2006, an increase of $209,000
     or 25.7 percent. Management does not anticipate that trust fee income will
     sustain this rate of growth on an ongoing basis.
o    Debit card interchange fees were $452,000 for the first six months of 2007
     compared to $380,000 for the same period in 2006, an increase of $72,000 or
     19.0 percent due to an increase in debit card usage.
o    Commission income was $471,000 for the first six months of 2007 compared to
     $416,000 for the same period in 2006, an increase of $55,000 or 13.2
     percent. This growth was attributed to a $78,000, or 35.6 percent increase
     in branch-based annuity and mutual fund sales, personnel changes, improved
     sales efforts and progress being made in the transition from a transaction
     based commission business into one that is management fee based. This was
     partially offset by a decrease of $23,000 in full-service brokerage fees.


                                       15
<PAGE>

For the quarter ended June 30, 2007, total noninterest expense was $5,266,000
compared to $4,952,000 for the same period in 2006. 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 second quarter of
2007 was $5,114,000, a $150,000 or 3.0 percent increase from $4,964,000 for the
same period in 2006.

Significant changes in noninterest expense occurred in the following areas:
o    Salary and employee benefits increased by $157,000 or 5.2 percent during
     the second quarter of 2007 compared to the same period in 2006. The
     increase was primarily due to annual raises with the remainder being the
     result of growth in the number of employees.
o    Legal fees increased $78,000 or 195.0 percent during the second quarter of
     2007 compared to the same period in 2006, primarily due to a case that has
     recently been favorably resolved. Management is exploring options to
     recover amounts attributed to certain loans related to this case that were
     charged-off or written down in earlier periods.

For the six months ended June 30, 2007, total noninterest expense was
$10,359,000 compared to $9,774,000 for the same period in 2006. 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 second
quarter of 2007 was $10,140,000, a $454,000 or 4.7 percent increase from
$9,686,000 for the same period in 2006.

Significant changes in noninterest expense occurred in the following areas:
o    Salary and employee benefits increased by $319,000 or 5.4 percent during
     the first six months of 2007 compared to the same period in 2006. This
     increase was primarily the result of annual raises with the remainder being
     the result of growth in the number of employees.
o    Legal fees increased $131,000 or 162.0 percent during the first six months
     of 2007 compared to the same period in 2006, primarily due to a case that
     has recently been favorably resolved.

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

The Company's effective tax rate was 27.8 percent for the six months ended June
30, 2007 compared to 30.7 percent for the same period in 2006. The tax rate
decreased primarily because municipal bond (tax-exempt) income represented a
higher percentage of total income in the first and second quarters of 2007 and
because of the impact of a REIT established during the fourth quarter of 2006.

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

Assets and Liabilities
----------------------
Total assets of the Company at June 30, 2007 were $763,377,000 an increase of
2.0 percent or $15,184,000 compared to $748,193,000 at December 31, 2006. Loans
(including loans held for sale) grew to $563,989,000 at June 30, 2007 compared
to $559,463,000 at December 31, 2006, an increase of 0.8 percent. Total cash and
cash equivalents increased to $39,265,000 at June 30, 2007 compared to
$33,546,000 at December 31, 2006, an increase of 17.0 percent. The increase
relates to additional federal funds sold. Deposits increased to $614,592,000 at
June 30, 2007 compared to $589,328,000 at December 31, 2006, an increase of
$25,264,000 or 4.3 percent. Borrowings decreased to $89,204,000 at June 30, 2007
compared to $98,079,000 at December 31, 2006, a 9.0 percent decrease. At June
30, 2007, the total amount of trust preferred subordinated debentures
outstanding was $8,248,000, compared to none at June 30, 2006.


                                       16
<PAGE>

Capital
-------
Shareholders' equity decreased by $1,910,000 at June 30, 2007 compared to
December 31, 2006. This decrease was a result of year-to-date net income of
$4,202,000, ESOP shares earned of $32,000, and option expense of $30,000, offset
by stock repurchased of $4,086,000, dividends paid of $1,511,000, and other
comprehensive loss, consisting solely of the change (decrease) in net
unrecognized losses in the Company's available-for-sale securities portfolio of
$577,000.

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 June 30, 2007 and December 31,
2006, the Company and the Bank were categorized as well capitalized and met all
applicable capital adequacy requirements. There are no conditions or events
since June 30, 2007 that management believes have changed the Company's or
Bank's classification.

The actual and required capital amounts and ratios are as follows:

<TABLE>
<CAPTION>
                                                                          Required for Adequate       To Be Well
                                                           Actual               Capital(1)           Capitalized(1)
                                                 ----------------------------------------------------------------------
                                                      Amount      Ratio       Amount     Ratio      Amount     Ratio
                                                  ----------------------------------------------------------------------

           As of June 30, 2007
           -------------------
<S>                                                     <C>       <C>          <C>        <C>    <C>            <C>
           Total capital(1)(to risk-weighted
              assets)
               Consolidated....................... $    67,651    11.54%   $   46,897     8.0%           N/A    N/A
               Bank...............................      67,191    11.54        46,575     8.0    $    58,219    10.0%
           Tier I capital(1)(to risk-weighted
              assets)
               Consolidated.......................      61,164    10.43        23,449     4.0            N/A    N/A
               Bank...............................      60,704    10.43        23,288     4.0         34,933     6.0
           Tier I capital(1)(to average
              assets)
               Consolidated.......................      61,164     8.14        30,059     4.0            N/A    N/A
               Bank...............................      60,704     8.12        29,892     4.0         37,365     5.0

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


                                       17
<PAGE>

Classification of Assets, Allowance for Loan Losses, and Nonperforming Loans
----------------------------------------------------------------------------
The Bank currently classifies loans internally to assist management in
addressing collection and other risks. These classified loans represent credits
characterized by the distinct possibility that some loss will be sustained if
deficiencies are not corrected. As of June 30, 2007, the Bank had $13,768,000 of
loans internally classified compared to $10,009,000 at December 31, 2006, a 37.6
percent increase. This increase is primarily comprised of six large credits.
Management believes that the Company has sufficient collateral to minimize any
potential losses on internally classified loans. The allowance for loan losses
was $6,487,000, or 1.16 percent of portfolio loans (excluding loans held for
sale) at June 30, 2007 compared to $6,144,000, or 1.10 percent, of portfolio
loans at December 31, 2006. A portion of classified loans are nonaccrual loans.
The Bank had nonperforming assets (nonaccrual loans, restructured loans, OREO
and 90-days past due loans still accruing) totaling $3,397,000, or 0.44 percent
of total assets at June 30, 2007 compared to $2,497,000 or 0.33 percent of total
assets at December 31, 2006. June 30, 2007 nonperforming assets increased
compared to June 30, 2006, when nonperforming assets were $1,346,000, or 0.18
percent of total assets. While the trend in nonperforming assets and 90-day past
due loans still accruing has recently been unfavorable, management believes the
overall level does not give cause for concern.

During the first six months of 2007, the Bank had net loan charge offs totaling
$196,000 compared to $369,000 charged off for the same period in 2006. Past due
loans (30 days or more) were 1.29 percent of total loans at June 30, 2007
compared to 0.58 percent of total loans at June 30, 2006.

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

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

Short-term liquidity needs resulting from normal deposit/withdrawal functions
are provided by the Company retaining a portion of cash generated from
operations and through utilizing federal funds and repurchase agreements.
Long-term liquidity and other liquidity needs are provided by the ability of the
Company to borrow from the Federal Home Loan Bank of Indianapolis (FHLB), to
obtain brokered certificates of deposit (CDs) and to borrow on a line of credit.
FHLB advances were $19,408,000 at June 30, 2007 compared to $19,430,000 at
December 31, 2006. At June 30, 2007, the Company had excess borrowing capacity
at the FHLB of $35,061,000 as limited by the Company's board resolution in
effect at that date. In terms of managing the Company's liquidity, management's
primary focus is on increasing deposits to fund future growth. However, the
Board may increase its resolution limit on FHLB advances if the Company needs
additional liquidity.

Over the past year, the Company has also utilized alternative funding sources.
The Company obtained an unsecured line of credit with U.S. Bank during 2006. The
maximum amount that can be borrowed is $10,000,000. The line of credit carries a
variable interest rate of 1.50 percent over LIBOR and changes monthly. At June
30, 2007, the Company had borrowed $977,000 and had $9,023,000 available on this
line of credit. In July 2005, the Company began using brokered CDs as an
alternate source of funding. At June 30, 2007, the Company had $21,611,000
brokered CDs on its balance sheet, compared to $27,061,000 at December 31, 2006
and $48,387,000 at June 30, 2006. In July 2006, the Company formed Monroe
Bancorp Capital Trust I (Trust I). Trust I issued 3,000 shares of Fixed/Floating
Rate Capital Securities with a liquidation amount of $3,000,000 in a private
placement, and 93 Common Securities with a liquidation amount of $1,000 per
Common Security to the Company for $93,000. The aggregate proceeds of $3,093,000
were used by Trust I to purchase $3,093,000 in Fixed/Floating Rate Junior
Subordinated Debentures from the Company. In March 2007, the Company formed
Monroe Bancorp Statutory Trust II (Trust II). Trust II issued 5,000 shares of
Fixed/Floating

                                       18
<PAGE>

Rate Capital Securities with a liquidation amount of $5,000,000 in a private
placement, and 155 Common Securities with a liquidation amount of $1,000 per
Common Security to the Company for $155,000. The aggregate proceeds of
$5,155,000 were used by Trust II to purchase $5,155,000 in Fixed/Floating Rate
Junior Subordinated Debentures from the Company. The proceeds of these
debentures are intended to be used to repurchase Company stock.

At the bank holding company level, the Company primarily uses cash to pay
dividends to shareholders and to repurchase stock. During the past twelve
months, the main source of funding for the holding company has been proceeds
from trust preferred debentures. Prior to that, the main source of funding for
the holding company was dividends from its subsidiary (the Bank). During the six
months ended June 30, 2007, the Bank declared dividends to the holding company
of $1,675,000. As of July 1, 2007, the amount of dividends the Bank can pay to
the parent company without prior regulatory approval was $13,303,000, versus
$10,586,000 at January 1, 2007. As discussed in Note 11 to the Consolidated
Financial Statements (page 47 of the 2006 Annual Report to Shareholders) and
Item 1 of the December 31, 2006 Form 10-K, the Bank is subject to many
regulations and, among other things, may be limited in its ability to pay
dividends or transfer funds to the holding company. Accordingly, consolidated
cash flows as presented in the Consolidated Statements of Cash Flows on page 6
may not represent cash immediately available to the holding company.

Sources and Uses of Cash
The following discussion relates to the Consolidated Statements of Cash Flows
(page 7 of the consolidated condensed financial statements). During the six
months ended June 30, 2007, $1,307,000 of cash was provided by operating
activities, compared to $2,241,000 provided during the same period in 2006. The
decrease in this area was primarily a result of changes in other assets and
other liabilities. During the first six months of 2007, $6,380,000 was used for
investing activities, compared to $28,612,000 in the same period of 2006. The
decrease in the use of funds in this category occurred primarily because the
Company had a $4,177,000 increase in loans in the first six months of 2007
compared to a $30,750,000 increase in the same period of 2006. During the first
six months of 2007, $10,792,000 was provided by financing activities compared to
$40,594,000 of cash provided by financing activities during the same period in
2006. The decrease in this area was primarily a result of a $14,009,000 decrease
in borrowings during the first six months of 2007 compared to a $28,506,000
increase in the same period of 2006. Overall, net cash and cash equivalents
increased $5,719,000 during the six months ended June 30 2007 compared to an
increase of $14,223,000 in the same period of 2006.

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

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

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


                                       19
<PAGE>

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

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

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

Forward-Looking Statements
--------------------------
Portions of information in this Form 10-Q contain forward-looking statements
about the Company which we believe are within the meaning of the Private
Securities Litigation Reform Act of 1995. This Form 10-Q contains certain
forward-looking statements with respect to the financial condition, results of
operations, plans, objectives, future performance and business of the Company.
Forward-looking statements can be identified by the fact that they do not relate
strictly to historical or current facts. They often include the words "believe,"
"expect," "anticipate," "intend," "plan," "estimate" or words of similar
meaning, or future or conditional verbs such as "will," "would," "should,"
"could" or "may" or words of similar meaning. These forward-looking statements,
by their nature, are subject to risks and uncertainties. There are a number of
important factors that could cause future results to differ materially from
historical performance and these forward-looking statements. Factors that might
cause such a difference include, but are not limited to: (1) competitive
pressures among depository institutions; (2) changes in the interest rate
environment; (3) prepayment speeds, charge-offs and loan loss provisions; (4)
general economic conditions, either national or in the markets in which the
Company does business; (5) legislative or regulatory changes adversely affect
the business of the Company; (6) changes in real estate values or the real
estate markets; and (7) the Company's business developments in new markets in
and around Hendricks and Hamilton Counties. 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, 2006 as filed with the
Securities and Exchange Commission.




                                       20
<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 sensitivity position at June 30, 2007 remained consistent
with the Company's primary goal of maximizing interest margin while maintaining
a low exposure to interest rate risk.

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

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

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

The following table summarizes the results of management's forecast of net
interest income that would be generated by the Bank's June 30, 2007 balance
sheet under various rate shocks:

Projected Change in Net Interest Income - June 30, 2007
<TABLE>
<CAPTION>

                            Projected Net Interest           $ Change
                                 Income Over the          in Net Interest        % Change
Change in Interest Rate        Next Twelve Months              Income         in Net Interest
    (basis points)               (in thousands)            (in thousands)         Income
---------------------------------------------------------------------------------------------
<S>       <C>                      <C>                       <C>                  <C>
         +200                      $ 22,698                  $ (1,089)            (4.58) %
         +100                        23,299                      (488)            (2.05)
           0                         23,787                         0                 0
         -100                        24,022                       235              0.99
         -200                        23,854                        67              0.28
</TABLE>

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


                                       21
<PAGE>

Projected Change in Net Interest Income - December 31, 2006
<TABLE>
<CAPTION>
                            Projected Net Interest           $ Change
                                 Income Over the          in Net Interest        % Change
Change in Interest Rate        Next Twelve Months              Income         in Net Interest
    (basis points)               (in thousands)            (in thousands)         Income
---------------------------------------------------------------------------------------------
<S>       <C>                      <C>                       <C>                  <C>
         +200                      $ 20,593                  $ (1,197)            (5.49) %
         +100                        21,264                      (526)            (2.41)
           0                         21,790                         0                 0
         -100                        22,070                       280              1.28
         -200                        21,954                       164              0.75
</TABLE>

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

The June 30, 2007 table indicates that the Bank's projected net interest income
for the next twelve months would decline by 4.6 percent in the event of a sudden
and sustained 200 basis point increase in interest rates. This result is largely
driven by the Company having more liabilities, primarily deposits that would
reprice over the twelve-month horizon than assets. As a result, net interest
expense would increase faster than interest income in the event of an upward
rate shock.

Net interest income is projected to increase modestly (0.3 percent) in the event
of an immediate 200 basis point decrease in interest rates. The projected 0.3
percent increase in net interest may seem low considering the Company has more
liabilities than assets repricing over the twelve month horizon. The explanation
is found in the fact the Company has deposits that are currently priced below
2.00 percent which could not be repriced to match the 200 basis point drop in
market rates. Alternatively, virtually all of the Company's interest earning
assets subject to repricing could reprice downward the full 200 basis points.

The forecasts from both time periods indicate the interest rate sensitivities of
the Bank's assets and liabilities are relatively well matched over the rate
shock ranges between a decrease of 100 basis points and an increase of 200 basis
points. The estimated changes in net interest income calculated as of June 30,
2007, are within the approved guidelines established by the Board of Directors.

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

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

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

Monroe Bancorp's management is responsible for establishing and maintaining
effective disclosure controls and procedures, as defined under Rules 13a-15(e)
and 15d-15(e) of the Securities Exchange Act of 1934. As of June


                                       22
<PAGE>

30, 2007, an evaluation was performed under the supervision and with the
participation of management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures as of June 30, 2007 were effective in
ensuring material information required to be disclosed in this Quarterly Report
on Form 10-Q was recorded, processed, summarized, and reported on a timely
basis.

There were no changes in the Company's internal control over financial reporting
that occurred during the quarter ended June 30, 2007 that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

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

Item 1.           Legal Proceedings.
-------           ------------------
                  None

Item 1A.          Risk Factors.
--------          -------------
                  There have been no material changes in our risk factors from
                  those disclosed in our 2006 Annual Report on Form 10-K.

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

Stock Repurchased During the Second Quarter of 2007
---------------------------------------------------
<TABLE>
<CAPTION>
                                                                  (d) Maximum Number
                                                                   (or Approximate
                                                                   Dollar Value) of
                                            (c) Total Number of    Shares that May
                   (a) Total                Shares Purchased as    Yet Be Purchased
                   Number of   (b) Average    Part of Publicly     Under the Plans
                     Shares    Price Paid     Announced Plans     or Programs (dollar
    Period         Purchased    per Share       or Programs       amount in thousands)
--------------------------------------------------------------------------------------
<S>                 <C>          <C>             <C>                    <C>
April 1-30, 2007       -         $  -               -                   $4,956
May 1-31, 2007       64,750       17.25           64,750                 3,839
June 1-30, 2007       5,000       17.45            5,000                 3,751
                  ----------------------------------------
     Totals          69,750      $ 17.26          69,750
                  ----------------------------------------
</TABLE>

                  The stock repurchase plan was announced June 16, 2006. Total
                  dollar amount approved: $10,000,000. The plan has no
                  expiration date, but the Board of Directors may terminate the
                  plan at anytime.

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

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

     a)   On April 26, 2007, the Corporation held its annual meeting of
          shareholders.
     b)   At the annual meeting, the following individuals were elected to a
          three-year term expiring in 2010:
          a.   Joyce Claflin Harrell
          b.   Charles R. Royal, Jr.
          c.   Harry F. McNaught, Jr.

          The following individual's terms as directors continued after the
          meeting:


                                       23
<PAGE>

              Mark D. Bradford
              James D. Bremner
              Bradford J. Bomba, Jr.
              Timothy D. Ellis
              Paul W. Mobley

     c)   At the annual meeting, the first item was the election of three
          directors. The vote tabulation for the election of Joyce Claflin
          Harrell was 5,729,590 "for" and 14,979 withheld; the vote tabulation
          for Charles R. Royal, Jr. was 5,607,056 "for", 220 "no" and 137,512
          withheld; and the vote tabulation for Harry F. McNaught, Jr. was
          5,727,665 "for" and 16,904 withheld.

          The second item was the ratification of BKD, LLP, Certified Public
          Accountants, as the Corporation's independent auditors for fiscal year
          ending December 31, 2007. This matter was approved by a vote of
          5,301,673 shares "for", 7,474 shares "against", and 434,651 shares
          abstained.

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

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

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

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

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

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

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

10 (iii)            Deferred Compensation Trust for Monroe Bancorp is
                    incorporated by reference to registrant's Form 10 filed
                    November 14, 2000.

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

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

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

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

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

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


                                       24
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

10(xxiii)           Sixth Amendment to the Monroe Bancorp Thrift Plan as Amended
                    and Restated January 1, 2001, incorporated by reference to
                    Form 10-Q filed May 8, 2007.

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

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

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

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


                                       25
<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: August 7, 2007            By:  /s/ Mark D. Bradford
               --------------                ----------------------------------
                                             Mark D. Bradford, President and
                                             Chief Executive Officer
                                             (Principal Executive Officer)

         Date: August 7, 2007            By: /s/ Gordon M. Dyott
               --------------                ----------------------------------
                                             Gordon M. Dyott, Exec. Vice
                                             President, Chief Financial Officer
                                             (Principal Financial Officer)




















                                       26
<PAGE>

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

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

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

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

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

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

10 (iii)            Deferred Compensation Trust for Monroe Bancorp is
                    incorporated by reference to registrant's Form 10 filed
                    November 14, 2000.

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

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

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

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

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

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

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

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

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

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

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


                                       27
<PAGE>

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

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

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

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

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

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

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

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

10(xxiii)           Sixth Amendment to the Monroe Bancorp Thrift Plan as Amended
                    and Restated January 1, 2001, incorporated by reference to
                    Form 10-Q filed May 8, 2007.

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

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

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

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







                                       28