UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


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

For the quarterly period ended September 30, 2010

                                       OR

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

For the transition period from              to

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

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

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

                            210 East Kirkwood Avenue
                              Bloomington, IN 47408
                              ---------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (812) 336-0201
                                 --------------
              (Registrant's telephone number, including area code)

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

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

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

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

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

Outstanding Shares of Common Stock on November 5, 2010:  6,229,778

<PAGE>

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

    Item 1.    Financial Statements:

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

                  Consolidated Condensed Statements of Operations - Nine Months..................4

                  Consolidated Condensed Statements of Operations - 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.......................................18

    Item 3.    Quantitative and Qualitative Disclosures about Market Risk.......................30

    Item 4T.   Controls and Procedures..........................................................32

Part II.  Other Information:

    Item 1.    Legal Proceedings................................................................32

    Item 1A.  Risk Factors......................................................................32

    Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds......................33

    Item 3.    Defaults Upon Senior Securities..................................................33

    Item 4.    (Removed and Reserved)...........................................................33

    Item 5.    Other Information................................................................33

    Item 6.    Exhibits.........................................................................33

Signatures......................................................................................35

Exhibit Index...................................................................................36
</TABLE>

                                       2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements

                          MONROE BANCORP AND SUBSIDIARY
                      Consolidated Condensed Balance Sheets
                  (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                                   September 30, December 31,
                                                                                       2010         2009
                                                                                    (Unaudited)
                                                                                     ---------    ---------
<S>                                                                                  <C>          <C>
Assets
         Cash and due from banks .................................................   $  10,835    $  14,394
         Federal funds sold ......................................................      44,024       14,154
         Interest-earning deposits ...............................................      50,222       21,583
                                                                                     ---------    ---------
               Total cash and cash equivalents ...................................     105,081       50,131

         Interest-bearing time deposits ..........................................       7,750         --
         Trading securities, at fair value .......................................       3,644        3,385
         Investment securities:
              Available for sale .................................................     121,798      110,813
              Held to maturity (fair value of $5,862 and $7,059) .................       5,743        7,052
                                                                                     ---------    ---------
                   Total investment securities ...................................     127,541      117,865

         Loans held for sale .....................................................       7,605        3,226
         Loans ...................................................................     539,454      584,139
         Allowance for loan losses ...............................................     (16,082)     (15,256)
                                                                                     ---------    ---------
              Net loans ..........................................................     523,372      568,883
         Premises and equipment ..................................................      19,223       19,879
         Federal Home Loan Bank of Indianapolis stock, at cost ...................       2,353        2,353
         Other assets ............................................................      41,553       36,729
                                                                                     ---------    ---------
                          Total assets ...........................................   $ 838,122    $ 802,451
                                                                                     =========    =========

Liabilities
         Deposits:
              Noninterest-bearing ................................................   $  92,387    $  90,033
              Interest-bearing ...................................................     573,814      544,221
                                                                                     ---------    ---------
                   Total deposits ................................................     666,201      634,254

         Borrowings ..............................................................     105,667      106,056
         Other liabilities .......................................................      10,307        5,939
                                                                                     ---------    ---------
                          Total liabilities ......................................     782,175      746,249

Commitments and Contingent Liabilities

Shareholders' Equity
         Common stock, no-par value
             Authorized, 18,000,000 shares
             Issued and outstanding - 6,229,778 and 6,227,550 shares, respectively         137          137
         Additional paid-in capital ..............................................       4,411        4,391
         Retained earnings .......................................................      50,910       51,607
         Accumulated other comprehensive income ..................................         511           89
         Unearned ESOT shares ....................................................         (22)         (22)
                                                                                     ---------    ---------
                          Total shareholders' equity .............................      55,947       56,202
                                                                                     ---------    ---------
                          Total liabilities and shareholders' equity .............   $ 838,122    $ 802,451
                                                                                     =========    =========
</TABLE>
         See notes to consolidated condensed financial statements.

                                        3
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                 Consolidated Condensed Statements of Operations
                                   (Unaudited)
                  (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>

                                                                            Nine Months Ended
                                                                              September 30,
                                                                          --------------------
                                                                            2010        2009
                                                                          --------    --------
<S>                                                                       <C>         <C>
Interest Income
       Loans, including fees ..........................................   $ 22,393    $ 25,539
       Trading securities .............................................        179          47
       Investment securities
            Taxable ...................................................      1,830       1,558
            Tax exempt ................................................         59         525
       Federal funds sold .............................................         32          28
       Other interest income ..........................................        152          33
                                                                          --------    --------
                    Total interest income .............................     24,645      27,730
                                                                          --------    --------

Interest Expense
       Deposits .......................................................      5,491       8,294
       Short-term borrowings ..........................................         67          62
       Other borrowings ...............................................      2,031       1,303
                                                                          --------    --------
                    Total interest expense ............................      7,589       9,659
                                                                          --------    --------
                    Net interest income ...............................     17,056      18,071
       Provision for loan losses ......................................     10,900       7,000
                                                                          --------    --------
                    Net interest income after provision for loan losses      6,156      11,071
                                                                          --------    --------

Noninterest Income
       Fiduciary activities ...........................................      1,870       1,693
       Service charges on deposit accounts ............................      2,229       2,603
       Commission income ..............................................        713         626
       Gains on sales of available for sale securities ................        640       1,656
       Losses on sales of trading securities ..........................         (3)       (201)
       Unrealized gains on trading securities .........................         72         467
       Net gains on loans sales .......................................        960       1,106
       Debit card interchange fees ....................................      1,003         872
       Bank owned life insurance (BOLI) ...............................      1,005         477
       Net loss on foreclosed assets ..................................       (308)       (874)
       Other operating income .........................................        570         436
                                                                          --------    --------
                    Total other income ................................      8,751       8,861
                                                                          --------    --------

Noninterest Expenses
       Salaries and employee benefits .................................      8,413       8,884
       Net occupancy and equipment expense ............................      2,517       2,757
       Advertising ....................................................        299         427
       Legal fees .....................................................        619         352
       Appreciation in directors' and executives'
            deferred compensation plans ...............................        239         303
       Federal Deposit Insurance Corporation premiums .................      1,132       1,214
       Loan and collection expenses ...................................        415         122
       Automated teller machine (ATM) operating expenses ..............        360         323
       Other operating expense ........................................      2,479       2,393
                                                                          --------    --------
                    Total other expenses ..............................     16,473      16,775
                                                                          --------    --------

                    Income (loss) before income tax ...................     (1,566)      3,157
                    Income tax expense (benefit) ......................     (1,056)        565
                                                                          --------    --------
                                 Net income (loss) ....................   $   (510)   $  2,592
                                                                          ========    ========

       Basic earnings (loss) per share ................................   $ (0.082)   $  0.417
       Diluted earnings (loss) per share ..............................   $ (0.082)   $  0.417
       Dividends declared and paid per share ..........................   $   0.03    $   0.15
</TABLE>
            See notes to consolidated condensed financial statements.

                                        4
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                 Consolidated Condensed Statements of Operations
                                   (Unaudited)
                  (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>

                                                                         Three Months Ended
                                                                           September 30,
                                                                         ------------------
                                                                          2010       2009
                                                                         -------    -------
<S>                                                                      <C>        <C>
Interest Income
       Loans, including fees .........................................   $ 7,353    $ 8,535
       Trading securities ............................................         8         11
       Investment securities
            Taxable ..................................................       656        519
            Tax exempt ...............................................        15         89
       Federal funds sold ............................................        13         11
       Other interest income .........................................        54         10
                                                                         -------    -------
                   Total interest income .............................     8,099      9,175
                                                                         -------    -------

Interest Expense
       Deposits ......................................................     1,661      2,430
       Short-term borrowings .........................................        23         21
       Other borrowings ..............................................       674        640
                                                                         -------    -------
                   Total interest expense ............................     2,358      3,091
                                                                         -------    -------
                   Net interest income ...............................     5,741      6,084
       Provision for loan losses .....................................     3,200      2,200
                                                                         -------    -------
                   Net interest income after provision for loan losses     2,541      3,884
                                                                         -------    -------

Noninterest Income
       Fiduciary activities ..........................................       645        637
       Service charges on deposit accounts ...........................       704        905
       Commission income .............................................       229        225
       Gains on sales of available for sale securities ...............       347        264
       Losses on sales of trading securities .........................      --         (201)
       Unrealized gains on trading securities ........................       141        377
       Net gains on loans sales ......................................       426        361
       Debit card interchange fees ...................................       344        297
       Bank owned life insurance (BOLI) ..............................       164        163
       Net loss on foreclosed assets .................................       (37)      (761)
       Other operating income ........................................       286        146
                                                                         -------    -------
                   Total other income ................................     3,249      2,413
                                                                         -------    -------

Noninterest Expenses
       Salaries and employee benefits ................................     2,731      2,849
       Net occupancy and equipment expense ...........................       794        899
       Advertising ...................................................        76        138
       Legal fees ....................................................       265        115
       Appreciation in directors' and executives'
            deferred compensation plans ..............................       146        184
       Federal Deposit Insurance Corporation premiums ................       446        280
       Loan and collection expenses ..................................       132         55
       Automated teller machine (ATM) operating expenses .............       128        114
       Other operating expense .......................................       884        795
                                                                         -------    -------
                   Total other expenses ..............................     5,602      5,429
                                                                         -------    -------

                   Income before income tax ..........................       188        868
                   Income tax expense (benefit) ......................       (51)       158
                                                                         -------    -------
                                Net income ...........................   $   239    $   710
                                                                         =======    =======

       Basic earnings per share ......................................   $ 0.038    $ 0.114
       Diluted earnings per share ....................................   $ 0.038    $ 0.114
       Dividends declared and paid per share .........................   $  0.01    $  0.01
</TABLE>
            See notes to consolidated condensed financial statements.


                                        5
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
            Consolidated Condensed Statement of Shareholders' Equity
                            For the Nine Months Ended
                               September 30, 2010
                                   (Unaudited)
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                                          Unearned
                                       Common Stock                                       Accumulated     Employee
                                    ------------------ Additional                            Other          Stock
                                      Shares            Paid in   Comprehensive Retained  Comprehensive   Ownership
                                    Outstanding Amount  Capital   Income (Loss) Earnings     Income      Trust Shares   Total
                                    --------------------------------------------------------------------------------------------

<S>                                  <C>         <C>    <C>          <C>        <C>           <C>           <C>        <C>
Balances January 1, 2010 ..........  6,227,550   $ 137  $ 4,391                 $ 51,607      $  89         $ (22)     $ 56,202

Comprehensive Loss:
  Net loss for the period .........                                  $ (510)        (510)                                  (510)
  Other comprehensive income -
    Unrealized gain on securities,
    net of tax and reclassification
    adjustment ....................                                     422                     422                         422
                                                                     ------
Comprehensive Loss ................                                  $  (88)
                                                                     ======
ESOT shares forfeited .............                          (6)                                                             (6)
Stock option compensation
    expense .......................                          12                                                              12
Common stock issued ...............      2,228               14                                                              14
Cash dividend ($0.03 per share) ...                                                 (187)                                  (187)
                                     --------------------------                 -----------------------------------------------
Balances September 30, 2010 .......  6,229,778   $ 137  $ 4,411                 $ 50,910      $ 511         $ (22)     $ 55,947
                                     ==========================                 ===============================================
</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>
                                                                                 Nine Months Ended
                                                                                   September 30,
                                                                               ----------------------
                                                                                 2010         2009
                                                                               ---------    ---------
<S>                                                                            <C>          <C>
Operating Activities
      Net income (loss) ....................................................   $    (510)   $   2,592
      Adjustments to reconcile net income to net cash provided
              by operating activities:
         Provision for loan losses .........................................      10,900        7,000
         Depreciation and amortization .....................................         823          914
         Deferred income tax ...............................................        (893)        (634)
         Investment securities amortization (accretion), net ...............         (72)         (12)
         Available for sale securities gains including redemptions .........        (640)      (1,656)
         Trading securities losses including redemptions ...................           3          201
         Net change in trading securities ..................................        (190)        (532)
         Loss on disposal of premises and equipment ........................          31            9
         Origination of loans held for sale ................................     (57,582)     (76,549)
         Proceeds from sale of loans held for sale .........................      54,163       77,319
         Gain on sale of loans held for sale ...............................        (960)      (1,106)
         ESOT shares forfeited .............................................          (6)         (11)
         Loss on foreclosed assets .........................................         308          874
         Stock-based compensation expense (forfeiture) .....................          12          (11)
         Net change in:
              Interest receivable and other assets .........................       1,665         (788)
              Interest payable and other liabilities .......................       8,368        3,481
                                                                               ---------    ---------
                        Net cash provided by operating activities ..........      15,420       11,091
                                                                               ---------    ---------

Investing Activities
      Net change in interest-bearing time deposits .........................      (7,750)        --
      Purchase of securities available for sale ............................    (274,929)    (274,210)
      Proceeds from paydowns and maturities of securities available for sale     188,041      223,546
      Proceeds from paydowns and maturities of securities held to maturity .       1,308         --
      Proceeds from sales of securities available for sale .................      73,193       65,388
      Net change in loans ..................................................      25,082       16,967
      Purchase of premises and equipment ...................................        (198)        (812)
      Proceeds from sale of foreclosed assets ..............................       1,580          188
      Purchase of FHLB stock ...............................................        --            (41)
                                                                               ---------    ---------
                        Net cash provided by investing activities ..........       6,327       31,026
                                                                               ---------    ---------

Financing Activities
      Net change in:
         Noninterest-bearing, interest-bearing demand and savings deposits .      16,042       40,985
         Certificates of deposit ...........................................      15,905      (51,357)
         Borrowings ........................................................       1,528        7,096
      Proceeds from Federal Home Loan Bank advances ........................       4,000       10,000
      Repayments of Federal Home Loan Bank advances ........................      (4,099)     (18,093)
      Proceeds from subordinated debentures ................................        --         13,000
      Proceeds from sale of common stock ...................................          14         --
      Cash dividends paid ..................................................        (187)        (933)
                                                                               ---------    ---------
                        Net cash provided by financing activities ..........      33,203          698
                                                                               ---------    ---------
Net Change in Cash and Cash Equivalents ....................................      54,950       42,815
Cash and Cash Equivalents, Beginning of Period .............................      50,131       23,721
                                                                               ---------    ---------
Cash and Cash Equivalents, End of Period ...................................   $ 105,081    $  66,536
                                                                               =========    =========

Supplemental cash flow disclosures
      Interest paid ........................................................   $   7,466    $   9,845
      Income tax paid ......................................................         657          450
</TABLE>
            See notes to consolidated condensed financial statements.


                                        7
<PAGE>

Note 1: Basis of Presentation
-----------------------------
The consolidated condensed financial statements include the accounts of Monroe
Bancorp (the "Company") and its wholly-owned subsidiary, Monroe Bank, a
state-chartered bank (the "Bank") and the Bank's wholly-owned subsidiaries,
Sycamore Property Investments, LLC, HIE Enterprises, LLC, MB Portfolio
Management, Inc. ("MB"), the Bank's majority-owned subsidiary CBAI CDE III, LLC,
and MB's majority-owned subsidiary MB REIT, Inc. A summary of significant
accounting policies is set forth in Note 1 of Notes to Financial Statements
included in the December 31, 2009, Annual Report to Shareholders. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

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

The interim consolidated condensed financial statements at September 30, 2010,
and for the three and nine months ended September 30, 2010 and 2009, have not
been audited by independent accountants, but reflect, in the opinion of
Management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows for such periods.

The consolidated condensed balance sheet of the Company as of December 31, 2009
has been derived from the audited consolidated balance sheet of the Company as
of that date. Certain information and note disclosures normally included in the
Company's annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's annual report on Form 10-K filed with the Securities
and Exchange Commission.

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

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

<TABLE>
<CAPTION>
                                                         Nine months ended
                                              --------------------------------------
                                              September 30, 2010  September 30, 2009
                                              ------------------  ------------------
<S>                                               <C>                 <C>
Net income (loss) (in thousands) .............    $      (510)        $     2,592
                                                  ===========         ===========
Weighted average shares outstanding ..........      6,228,659           6,227,550
Average unearned ESOT shares .................         (1,313)             (5,538)
                                                  -----------         -----------
Shares used to compute basic earnings (loss)
     per share ...............................      6,227,346           6,222,012
Effect of dilutive securities- stock options .           --                  --
                                                  -----------         -----------
Shares used to compute diluted earnings (loss)
     per share ...............................      6,227,346           6,222,012
                                                  ===========         ===========

Earnings (loss) per share, basic .............    $    (0.082)        $     0.417
Earnings (loss) per share, diluted ...........    $    (0.082)        $     0.417
</TABLE>

Options to purchase 30,000 shares at $6.00 per share, 5,500 shares at $10.12 per
share, 16,500 shares at $12.73 per share, 5,500 shares at $14.73 per share,
25,000 shares of common stock at $16.00 per share, 10,000 shares of common stock
at $16.83, and 170,000 shares of common stock at $22.00 per share were
outstanding at September 30, 2010 and options to purchase 5,500 shares at $10.12
per share, 22,000 shares at $12.05 per share, 16,500 shares at $12.73 per share,
11,000 shares at $14.73 per share, 30,000 shares of common stock at $16.00 per


                                       8
<PAGE>

share, 13,000 shares of common stock at $16.83, and 210,000 shares of common
stock at $22.00 per share were outstanding at September 30, 2009, but were not
included in the computation of diluted earnings per share for the nine months
ended September 30, 2010 and 2009, respectively because the options were
antidilutive.

<TABLE>
<CAPTION>
                                                        Three months ended
                                             --------------------------------------
                                             September 30, 2010  September 30, 2009
                                             ------------------  ------------------
<S>                                             <C>                  <C>
Net income (in thousands) ..................    $       239          $       710
                                                ===========          ===========
Weighted average shares outstanding ........      6,229,724            6,227,550
Average unearned ESOT shares ...............           (788)              (4,163)
                                                -----------          -----------
Shares used to compute basic earnings
     per share .............................      6,228,936            6,223,387
Effect of dilutive securities- stock options           --                   --
                                                -----------          -----------
Shares used to compute diluted earnings
     per share .............................      6,228,936            6,223,387
                                                ===========          ===========

Earnings per share, basic ..................    $     0.038          $     0.114
Earnings per share, diluted ................    $     0.038          $     0.114
</TABLE>

Options to purchase 30,000 shares at $6.00 per share, 5,500 shares at $10.12 per
share, 16,500 shares at $12.73 per share, 5,500 shares at $14.73 per share,
25,000 shares of common stock at $16.00 per share, 10,000 shares of common stock
at $16.83, and 170,000 shares of common stock at $22.00 per share were
outstanding at September 30, 2010 and options to purchase 5,500 shares at $10.12
per share, 22,000 shares at $12.05 per share, 16,500 shares at $12.73 per share,
11,000 shares at $14.73 per share, 30,000 shares of common stock at $16.00 per
share, 13,000 shares of common stock at $16.83, and 210,000 shares of common
stock at $22.00 per share were outstanding at September 30, 2009, but were not
included in the computation of diluted earnings per share for the three months
ended September 30, 2010 and 2009, respectively because the options were
antidilutive.



                                       9
<PAGE>

Note 3:  Investment Securities
------------------------------
<TABLE>
<CAPTION>
                                                                         Gross       Gross
                                                         Amortized  Unrealized  Unrealized        Fair
                                                              Cost       Gains      Losses       Value
                                                         ---------------------------------------------
<S>                                                       <C>         <C>         <C>         <C>
As of September 30, 2010
Available for Sale
     Federal agencies ................................    $ 58,722    $    188    $   --      $ 58,910
     Corporate bonds .................................         967           5           7         965
     Residential mortgage-backed securities (agencies)      58,317         550          32      58,835
     Marketable equity securities ....................       3,013          75        --         3,088
                                                          --------    --------    --------    --------
           Total available for sale ..................     121,019         818          39     121,798
                                                          --------    --------    --------    --------

Held to Maturity
     Federal agencies ................................       1,001          43        --         1,044
     State and municipal .............................       4,742          76        --         4,818
                                                          --------    --------    --------    --------
           Total held to maturity ....................       5,743         119        --         5,862
                                                          --------    --------    --------    --------

           Total investment securities ...............    $126,762    $    937    $     39    $127,660
                                                          ========    ========    ========    ========


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

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

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

The amortized cost and fair value of securities available for sale and held to
maturity at September 30, 2010, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call or prepayment
penalties.


                                       10
<PAGE>
<TABLE>
<CAPTION>
                                                       Available for Sale         Held to Maturity
                                                     ----------------------    ----------------------
                                                     Amortized         Fair    Amortized         Fair
                                                          Cost        Value         Cost        Value
                                                     ----------------------    ----------------------
<S>                                                   <C>          <C>          <C>          <C>
Within one year .................................     $   --       $   --       $  2,021     $  2,071
One to five years ...............................       55,222       55,403         --           --
Five to ten years ...............................        4,467        4,472        3,722        3,791
Over ten years ..................................         --           --           --           --
                                                      --------     --------     --------     --------
                                                        59,689       59,875        5,743        5,862

Residential mortgage-backed securities (agencies)       58,317       58,835         --           --
Marketable equity securities ....................        3,013        3,088         --           --
                                                      --------     --------     --------     --------

   Totals .......................................     $121,019     $121,798     $  5,743     $  5,862
                                                      ========     ========     ========     ========
</TABLE>

Securities with a carrying value of $75,333,000 and $85,854,000 were pledged at
September 30, 2010 and December 31, 2009, respectively, to secure certain
deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available for sale were $73,193,000 and
$65,388,000 for the nine months ended September 30, 2010 and September 30, 2009,
respectively. Gross gains of $612,000 and $1,648,000 were realized on sales and
$28,000 and $8,000 were realized on redeemed available for sale securities in
the nine months ended September 30, 2010 and September 30, 2009, respectively.
Proceeds from sales of securities available for sale were $32,826,000 and
$12,637,000 for the three months ended September 30, 2010 and September 30,
2009, respectively. Gross gains of $332,000 and $263,000 were realized on sales
in the three months ended September 30, 2010 and September 30, 2009,
respectively. The Bank realized gains of $15,000 and $1,000 on redeemed
available for sale securities in the three months ended September 30, 2010 and
September 30, 2009, respectively.

There were no sales of held to maturity securities during the nine months ended
September 30, 2010 or September 30, 2009.

Trading securities, which consist of mutual funds held in a rabbi trust
associated with the directors' and executives' deferred compensation plans, are
recorded at fair value. Unrealized holding gains on trading securities of
$72,000 were included in earnings in the nine months ended September 30, 2010
while unrealized holding gains on trading securities of $467,000 were included
in earnings in the nine months ended September 30, 2009. Unrealized holding
gains on trading securities of $141,000 were included in earnings in the three
months ended September 30, 2010 while unrealized holding gains on trading
securities of $377,000 were included in earnings in the three months ended
September 30, 2009.

Certain investments in debt and marketable equity securities are reported in the
financial statements at an amount less than their historical cost. Total fair
value of these investments at September 30, 2010 and December 31, 2009 was
$17,424,000 and $51,162,000, which is approximately 13.7 percent and 43.4
percent respectively, of the Company's available for sale and held to maturity
investment portfolio.


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

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


                                       11
<PAGE>

The following table shows our investments' gross unrealized losses and fair
value, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position at September 30,
2010 and December 31, 2009:

<TABLE>
<CAPTION>
                                                                          September 30, 2010
                                                  ------------------------------------------------------------------
                                                   Less than 12 Months    12 Months or More          Total
                                                 -------------------------------------------------------------------
                                                             Unrealized            Unrealized             Unrealized
Description of Securities                          Fair Value    Losses  Fair Value    Losses  Fair Value     Losses
                                                 ----------------------  --------------------  ---------------------
<S>                                                 <C>        <C>        <C>        <C>        <C>         <C>
Corporate bonds .................................   $   492    $    (7)   $  --      $  --      $   492     $    (7)
Residential mortgage-backed securities (agencies)    16,932        (32)      --         --       16,932         (32)
                                                    -------    -------    -------    -------    -------     -------

Total temporarily impaired securities ...........   $17,424    $   (39)   $  --      $  --      $17,424     $   (39)
                                                    =======    =======    =======    =======    =======     =======

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

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

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

The unrealized losses on the Company's investments in direct obligations of U.S.
government agencies, corporate bonds, mortgage-backed securities and municipal
securities were primarily caused by changes in interest rates. The contractual
terms of those investments do not permit the issuer to settle the securities at
a price less than the amortized cost bases of the investments. Because the
Company does not intend to sell the investments and it is not more likely than
not the Company will be required to sell the investments before recovery of
their amortized cost bases, which may be maturity, the Company does not consider
those investments to be other-than-temporarily impaired at September 30, 2010.

Note 4:  Loans and Allowance
----------------------------

                                      September 30,  December 31,
                                               2010          2009
                                      ---------------------------
Commercial and industrial loans .......   $  80,669     $  81,102
Real estate loans .....................     388,690       424,964
Construction loans ....................      56,118        62,351
Installment loans .....................      13,977        15,722
                                          ---------     ---------
                                            539,454       584,139
Allowance for loan losses .............     (16,082)      (15,256)
                                          ---------     ---------

Loans, net of allowance for loan losses   $ 523,372     $ 568,883
                                          =========     =========



                                       12
<PAGE>
<TABLE>
<CAPTION>
                                                         Nine Months Ended September 30,
                                                         -------------------------------
                                                               2010          2009
                                                         -------------------------------
<S>                                                          <C>           <C>
Allowance for Loan Losses
    Balances, January 1 ...................................  $ 15,256      $ 11,172
    Provision for losses ..................................    10,900         7,000
    Recoveries on loans ...................................       503           225
    Loans charged off .....................................   (10,577)       (5,216)
                                                             --------      --------

    Balances, September 30 ................................  $ 16,082      $ 13,181
                                                             ========      ========


Information on impaired loans is summarized below.
                                                         September 30,  December 31,
                                                                 2010          2009
                                                         ------------  ------------
  Impaired loans with an allowance ........................  $ 25,671      $ 10,531
  Impaired loans for which the discounted cash flows or
     collateral value exceeds the carrying value of
     the loan                                                   8,313        14,610
                                                             --------      --------
        Total impaired loans ..............................  $ 33,984      $ 25,141
                                                             ========      ========

  Allowance for impaired loans (included in the Company's
     allowance for loan losses) ...........................  $  4,427      $  3,075
</TABLE>

At September 30, 2010 and December 31, 2009, accruing loans delinquent 90 days
or more totaled $1,559,000 and $1,053,000, respectively. Non-accruing loans at
September 30, 2010 and December 31, 2009 were $25,518,000 and $20,603,000,
respectively.

Note 5:  Fair Value Measurements
--------------------------------
The Company recognizes fair values in accordance with Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 820.
ASC Topic 820 defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements.

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

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

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

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

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

Trading and Available for Sale Securities

Where quoted market prices are available in an active market, securities are
classified within Level 1 of the valuation hierarchy. Level 1 securities include
highly liquid exchange traded equities. If quoted market prices are not
available, then fair values are estimated by using pricing models, certain
market information, and quoted prices of securities with similar characteristics
or discounted cash flows. The fair value measurements consider observable data
that may include dealer quotes, market spreads, cash flows, the U.S. Treasury
yield curve, live trading levels, trade execution data, market consensus
prepayment speeds, credit information and the bond's term and conditions. Level

                                       13
<PAGE>

2 securities include federal agencies, residential mortgage-backed securities
(agencies) and municipal securities. In certain cases where Level 1 or Level 2
inputs are not available, securities are classified within Level 3 of the
hierarchy. At this time the Company has no securities classified as Level 3
securities. The Company obtains fair value measurements from an independent
pricing service.

Impaired Loans (Collateral Dependent)

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

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

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

Other Real Estate Owned

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

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




                                       14
<PAGE>
<TABLE>
<CAPTION>
                                                                          Fair Value Measurements Using
                                                                 --------------------------------------------
                                                                 Quoted Prices in   Significant
                                                                   Active Markets         Other   Significant
                                                                    for Identical    Observable  Unobservable
                                                                           Assets        Inputs        Inputs
                                                         Fair Value     (Level 1)     (Level 2)     (Level 3)
                                                         ----------------------------------------------------
<S>                                                        <C>           <C>           <C>           <C>
As of September 30, 2010
------------------------
Fair value measured on a recurring basis
Trading securities ..................................      $  3,644      $  3,644      $   --        $   --
Available for sale securities
    Federal agencies ................................        58,910          --          58,910          --
    Corporate bonds .................................           965          --             965          --
    Residential mortgage-backed securities (agencies)        58,835          --          58,835          --
    Marketable equity securities ....................         3,088         3,088          --            --
                                                           --------      --------      --------      --------
        Total .......................................      $121,798      $  3,088      $118,710      $   --
                                                           ========      ========      ========      ========

Fair value measured on a non-recurring basis
Impaired loans (collateral dependent), net
   of specific allowance ............................      $ 23,244      $   --        $   --        $ 23,244
Other real estate owned .............................           310          --            --             310

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

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

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

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

Held-to-maturity Securities - The fair value is based on quoted market prices,
if available. If a quoted price is not available, fair value is estimated using
quoted market prices for similar securities.

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

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

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

Deposits - The fair values of noninterest-bearing, interest-bearing demand and
savings accounts are equal to the amount payable on demand at the balance sheet
date. The carrying amounts for variable rate, fixed-term

                                       15
<PAGE>

certificates of deposit approximate their fair values at the balance sheet date.
Fair values for fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly maturities
on such time deposits.

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

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

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

                                               September 30, 2010
                                              --------------------
                                              Carrying        Fair
                                                Amount       Value
                                              --------------------
Assets
  Cash and cash equivalents ..............    $105,081    $105,081
  Interest-bearing time deposits .........       7,750       7,750
  Trading account securities .............       3,644       3,644
  Investment securities available for sale     121,798     121,798
  Investment securities held to maturity .       5,743       5,862
  Loans including loans held for sale, net     530,977     543,261
  Interest receivable ....................       2,172       2,172
  Stock in FHLB ..........................       2,353       2,353

Liabilities
  Deposits ...............................     666,201     673,264
  Borrowings .............................     105,667     104,606
  Interest payable .......................       1,042       1,042

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

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

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

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


                                       16
<PAGE>

Note 6:  Other Comprehensive Income (Loss)
------------------------------------------
<TABLE>
<CAPTION>
                                                                    Nine Months Ended
                                                                      September 30
                                                                    -----------------
                                                                     2010        2009
                                                                   -------     -------
<S>                                                                <C>         <C>
Net unrealized gain on securities available-for-sale ..........    $ 1,289     $ 1,151
Less:  reclassification adjustment for gains included in income        640       1,656
                                                                   -------     -------
    Other comprehensive income (loss), before tax effect ......        649        (505)
Tax benefit (expense) .........................................       (227)        168
                                                                   -------     -------
    Other comprehensive income (loss) .........................    $   422     $  (337)
                                                                   =======     =======

                                                                    Three Months Ended
                                                                      September 30
                                                                    -----------------
                                                                     2010        2009
                                                                   -------     -------
Net unrealized gain on securities available-for-sale ..........    $   545     $   492
Less:  reclassification adjustment for gains included in income        347         264
                                                                   -------     -------
    Other comprehensive income, before tax effect .............        198         228
Tax expense ...................................................        (69)        (80)
                                                                   -------     -------
    Other comprehensive income ................................    $   129     $   148
                                                                   =======     =======
</TABLE>

Note 7:  Borrowings
-------------------
On July 17, 2009, $13 million of Tier 2 capital was raised by the Company
through the issuance of Subordinated Debentures. The Subordinated Debentures
were issued as the result of a public offering. The Subordinated Debentures
carry an interest rate of 10 percent and will mature on June 30, 2019. The
Company has the right to call the Subordinated Debentures at any time after
three years. The Subordinated Debentures were issued pursuant to the prospectus
filed as part of the Company's registration statement under the Securities Act
of 1933. On July 23, 2009, the Company's Board of Directors voted to provide $10
million of the net proceeds of the offering to the Bank, as additional capital,
with the remaining proceeds to be used by the Company for general corporate
purposes.

Note 8:  Reclassifications
--------------------------
Reclassifications of certain amounts in the 2009 consolidated condensed
financial statements have been made to conform to the 2010 presentation.

Note 9:  Contingencies
----------------------
The Company and Bank are from time to time subject to other claims and lawsuits
which arise primarily in the ordinary course of business. It is the opinion of
management that the disposition or ultimate resolution of such claims and
lawsuits will not have a material adverse effect on the consolidated financial
position of the Company.

Note 10:  New Accounting Pronouncements
---------------------------------------
In January 2010, the FASB issued Accounting Standards Update ("ASU") No.
2010-06, "Improving Disclosures About Fair Value Measurements," which added
disclosure requirements about transfers in and out of Levels 1 and 2, clarified
existing fair value disclosure requirements about the appropriate level of
disaggregation, and clarified that a description of valuation techniques and
inputs used to measure fair value was required for recurring and nonrecurring
Level 2 and 3 fair value measurements. Management has determined the adoption of
these provisions of this ASU only affected the disclosure requirements for fair
value measurements and as a result did not have a material effect on the
Company's financial position or results of operations. This ASU also requires
that Level 3 activity about purchases, sales, issuances, and settlements be
presented on a gross basis rather than as a net number as currently permitted.
This provision of the ASU is effective for the Company's reporting period ending
March 31, 2011. Management has determined the adoption of this guidance will not
have a material effect on the Company's financial position or results of
operations.

                                       17
<PAGE>

In July 2010, the Financial Accounting Standards Board issued Accounting
Standards Update ("ASU") No. 2010-20, "Disclosures about the Credit Quality of
Financing Receivables and the Allowance for Credit Losses which added disclosure
requirements about an entity's allowance for loan losses and the credit quality
of its financing receivables. The required disclosures include a roll forward of
the allowance for credit losses on a portfolio segment basis and information
about modified, impaired, non-accrual and past due loan and credit quality
indicators. ASU 2010-20 will be effective for the Company's reporting period
ending December 31, 2010, as it relates to disclosures required as of the end of
a reporting period. Management has determined the adoption of this guidance will
not have a material effect on the Company's financial position or results of
operations.

Note 11: Pending Merger
-----------------------
On October 5, 2010, the Company and Old National Bancorp ("Old National")
entered into a definitive agreement (the "Merger Agreement") pursuant to which
the Company will be merged with and into Old National and at the same time as or
as soon as practicable after such merger, the Company's bank subsidiary, Monroe
Bank, will be merged into Old National's bank subsidiary, Old National Bank.

Under the terms of the Merger Agreement, holders of the Company's common stock
will receive 1.275 shares of Old National common stock for each share of the
Company common stock held by them. The exchange ratio will adjust if the price
of Old National common stock (calculated near the closing date) exceeds $10.98
per share. In such event, the Company's shareholders will receive $14.00 of Old
National common stock for each share of Company common stock held by them. The
exchange ratio is subject to other adjustments under certain circumstances if
delinquent loans (as defined in the Merger Agreement) of the Company exceed
specified amounts as of the tenth day prior to the closing of the merger or if,
as of the end of the month prior to the closing, the consolidated shareholders'
equity of the Company, as adjusted pursuant to the Merger Agreement, falls below
the consolidated shareholders' equity of the Company as of June 30, 2010.

Based upon the closing price of $10.47 per share of Old National common stock
the day before the transaction was announced, the transaction is valued at
approximately $83.5 million. The transaction value will change due to
fluctuations in the price of Old National common stock.

The merger is expected to close on January 1, 2011 or early in the first quarter
of 2011, and is subject to approval by federal and state regulatory authorities
and the Company's shareholders and the satisfaction of the closing conditions
set forth in the Merger Agreement.

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

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

The Bank, with its primary offices located in Bloomington, Indiana, conducts
business from seventeen locations in Monroe, Jackson, Lawrence, Hendricks and
Hamilton counties in Indiana. Approximately 77 percent of the Bank's deposits
are in Monroe County and are concentrated in and around the city of Bloomington.

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

     o    accepting deposits;
     o    making commercial, mortgage and personal loans;
     o    originating fixed and variable rate residential mortgage loans for
          sale into the secondary market;

                                       18
<PAGE>

     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.

On October 5, 2010, the Boards of Directors of Monroe Bancorp and Old National
Bancorp entered into an agreement to merge the two companies. If the merger is
approved by the shareholders of Monroe Bancorp and all other closing conditions
are satisfied, each shareholder of Monroe Bancorp shall receive 1.275 shares of
Old National Bancorp common stock for each share of their Monroe Bancorp common
stock owned before the merger, subject to certain adjustments as described in
the Merger Agreement. See Note 11 to the consolidated condensed financial
statements of the Company. Interested parties should refer to the Merger
Agreement for details as to possible adjustments to the 1.275 exchange rate.
However, the following information is provided to assist in the evaluation of
the possible impact of two adjustments that relate directly to the Company's
financial performance.

The exchange rate will be reduced if the aggregate amount of the Company's
delinquent loans, as defined in the Merger Agreement, exceeds $59,720,000 as of
the tenth day prior to the merger. Delinquent loans, as defined in the Merger
Agreement, were $53,520,000 at June 30, 2010 and $53,118,000 at September 30,
2010.

The exchange rate will also be reduced if, as of the end of the month prior to
the closing of the merger, Monroe Bancorp's shareholders' equity (computed in
accordance with the terms of the Merger Agreement) is less than $55,640,000.
Monroe Bancorp's shareholders' equity, computed in accordance with the terms of
the Merger Agreement, was $56,640,000 at June 30, 2010 and $56,985,000 at
September 30, 2010.

Critical Accounting Policies
----------------------------
The most significant accounting policies followed by the Company are presented
in Note 1 to the consolidated financial statements on pages 27 to 28 of the 2009
Annual Report to Shareholders. Certain of these policies are important to the
portrayal of the Company's financial condition, since they require Management to
make difficult, complex or subjective judgments, some of which may relate to
matters that are inherently uncertain. Management has identified these policies
in the Critical Accounting Policies section of the Management's Discussion and
Analysis on pages 9 to 10 of the 2009 Annual Report to Shareholders. There have
been no changes in these critical accounting policies since the date of the 2009
Annual Report to Shareholders.

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

                                       19
<PAGE>

o    In the "Noninterest Income / Noninterest Expense" section of this document,
     we report noninterest income and noninterest expense without the effect of
     unrealized gains and losses on securities in a grantor trust ("rabbi
     trust") which is a non-GAAP financial measure. Other income includes
     realized and unrealized securities gains and losses and capital gain
     dividends on trading securities (mutual funds) held in a rabbi trust in
     connection with the Company's Directors' and Executives' Deferred
     Compensation Plans. These securities are held as trading securities, and
     hence, unrealized gains and losses are recognized on the income statement.
     Any unrealized or realized loss on securities held in the rabbi trust net
     of any dividend, interest and capital gain dividend income earned on the
     securities in the rabbi trust (included in net interest income) are
     directly offset by a decrease to directors' fee/deferred executive
     compensation expense (included in other expense), and conversely, any net
     realized or unrealized gain combined with interest, dividends and capital
     gain dividends earned on the securities in the trust are directly offset by
     an increase to directors' fee/deferred executive compensation expense.
     These offsets are included in the line item identified on pages 4 and 5 of
     the consolidated financial statements as "Appreciation in directors' and
     executives' deferred compensation plans." The activity in the rabbi trust
     has no effect on the Company's net income. Therefore, Management believes a
     more accurate comparison of current and prior year noninterest income and
     noninterest expense can be made if the rabbi trust realized and unrealized
     gains, losses, capital gain dividends and offsetting appreciation
     (depreciation) on the deferred compensation plans and trustee fees are
     removed.

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

Overview
--------
The Company had net income for the third quarter of 2010 of $239,000, a 66.3
percent decrease from net income of $710,000 for the same quarter last year.
Basic and diluted earnings per share for the third quarter of 2010 were $0.038,
down 66.7 percent from $0.114 basic and diluted earnings per share for the third
quarter of 2009. Annualized return on average equity ("ROAE") for the third
quarter of 2010 decreased to 1.69 percent compared to 4.95 percent for the third
quarter of 2009. The annualized return on average assets ("ROAA") was 0.11
percent for the third quarter of 2010 compared to 0.34 percent for the same
period of 2009.

Net loss for the first nine months of 2010 was $510,000, a 119.7 percent
decrease from net income of $2,592,000 for the same period last year. Basic and
diluted (loss) per share for the first nine months of 2010 were $(0.082), down
119.7 percent from $0.417 basic and diluted earnings per share for the same
period of 2009. Annualized ROAE for the nine months ended September 30, 2010
decreased to (1.21) percent compared to 6.14 percent for the first nine months
of 2009. The annualized ROAA was (0.08) percent for the nine months ended
September 30, 2010 compared to 0.42 percent for the first nine months of 2009.

The decline in net income for the third quarter of 2010 compared to the third
quarter of 2009 resulted primarily from an increase in the provision for loan
losses and a decrease in loan interest income. The provision for loan losses
totaled $3,200,000 for the third quarter of 2010 compared to $2,200,000 for the
same period of 2009. Loan interest income totaled $7,353,000 for the third
quarter of 2010 compared to $8,535,000 for the same period of 2009 due primarily
to a $65,488,000 decrease in loans. Net interest income for the third quarter of
2010, after the provision for loan losses, decreased $1,343,000 or 34.6 percent
from the third quarter of 2009.

The decline in net income for the nine months ended September 30, 2010 compared
to the nine months ended September 30, 2009 resulted primarily from an increase
in the provision for loan losses, a decrease in gains from the sale of available
for sale ("AFS") securities and interest expense on the subordinated debt that
was issued in July 2009. The provision for loan losses totaled $10,900,000 for
the nine months ended September 30, 2010 compared to $7,000,000 for the same
period of 2009. Gains from the sale of AFS securities totaled $640,000 for the
nine months ended September 30, 2010 compared to $1,656,000 for the same period
of 2009. The interest expense on the subordinated debt (including amortization
of debt issuance costs) totaled $1,033,000 for the nine months ended September
30, 2010 compared to $287,000 for the nine months ended September 30, 2009. Net
interest income for the nine months ended September 30, 2010, after the
provision for loan losses, decreased $4,915,000, or 44.4 percent from the same
period in 2009.

                                       20
<PAGE>

The following items affected third quarter and year-to-date results:

o    General Economic Conditions in the Real Estate Markets - Among the primary
     areas of Management focus during 2009 and 2010 were managing the
     deterioration of asset quality resulting from slowing economic activity and
     stresses in the residential housing markets. Nonperforming assets and
     90-day past due loans totaled $40,548,000 (4.8 percent of total assets) at
     September 30, 2010 compared to $38,451,000 (4.5 percent of total assets) at
     June 30, 2010 and $21,622,000 (2.6 percent of total assets) at September
     30, 2009. The provision for loan losses for the nine months ended September
     30, 2010 totaled $10,900,000, a $3,900,000 increase over the $7,000,000
     provision made during the same period of 2009 due to Management's
     assessment of potential losses in the Bank's loan portfolio.

o    Securities Gains - Securities gains of $640,000 were realized from sales of
     AFS securities during the first nine months of 2010 compared to $1,656,000
     in the same period of 2009.

o    Subordinated debt interest expense - Subordinated debt interest expense
     (including amortization of debt issuance costs) incurred in the first nine
     months of 2010 totaled $1,033,000 compared to $287,000 in the same period
     of 2009. The Company issued $13,000,000 of subordinated debt on July 17,
     2009.

o    Compensation Expenses - Total compensation expenses (salaries, incentive
     compensation and benefits) decreased by $471,000 or 5.3 percent to
     $8,413,000 for the first nine months of 2010 compared to $8,884,000 for the
     first nine months of 2009 due primarily to a reduction in staff levels and
     changes to some of the Bank's incentive compensation plans.

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





                                       21
<PAGE>
<TABLE>
<CAPTION>
                                                                           Average Balance Sheets and Interest Rates
                                                          --------------------------------------------------------------------------
                                                                                 (dollar amounts in thousands)
                                                          Nine Months Ended September 30, 2010  Nine Months Ended September 30, 2009
                                                          ------------------------------------  ------------------------------------
                                                            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 .........................................  $ 127,151   $   1,977     2.08%      $  81,724    $   1,577      2.58%
        Tax-exempt (1) ..................................      5,864          88     2.00%         24,004          795      4.43%
                                                           ---------   ---------                ---------    ---------
               Total securities .........................    133,015       2,065     2.08%        105,728        2,372      3.00%

   Loans (2) ............................................    562,470      22,396     5.32%        625,883       25,544      5.46%
   FHLB Stock ...........................................      2,353          32     1.82%          2,339           27      1.54%
   Federal funds sold ...................................     34,340          32     0.12%         25,709           28      0.15%
   Interest-earning deposits ............................     36,431          95     0.35%          6,495           33      0.68%
   Interest-bearing time deposits .......................      5,547          59     1.42%           --           --         --
                                                           ---------   ---------                ---------    ---------
               Total interest earning assets ............    774,156      24,679     4.26%        766,154       28,004      4.89%
                                                           ---------   ---------                ---------    ---------

Noninterest earning assets
  Allowance for loan losses .............................    (16,241)                             (12,798)
  Premises and equipment & other assets .................     64,308                               55,714
  Cash and due from banks ...............................     13,879                               14,008
                                                           ---------                            ---------
               Total assets .............................  $ 836,102                            $ 823,078
                                                           =========                            =========

                LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
  Total interest-bearing deposits .......................  $ 571,492       5,491     1.28%      $ 584,635        8,294      1.90%
  Borrowed funds ........................................     98,977       2,098     2.83%         89,203        1,365      2.05%
                                                           ---------   ---------                ---------    ---------
               Total interest-bearing liabilities .......    670,469       7,589     1.51%        673,838        9,659      1.92%
                                                           ---------   ---------                ---------    ---------


Noninterest-bearing liabilities
  Noninterest-bearing demand deposits ....................    93,328                               82,560
  Other liabilities ......................................    16,066                               10,211
Shareholders' equity .....................................    56,239                               56,469
                                                           ---------                            ---------
               Total liabilities and shareholders' equity  $ 836,102                            $ 823,078
                                                           =========                            =========


Interest margin recap
Net interest income and interest rate spread
  Net interest margin ...................................                            2.95%                                  3.15%
  Tax-equivalent net interest income spread .............                 17,090     2.75%                      18,345      2.97%
  Tax-equivalent net interest margin as a percent of
      total average earning assets ..................                                2.95%                                  3.20%
Tax-equivalent adjustment (1) ...........................                     34                                   274
                                                                       ---------                             ---------

  Net interest income ...................................              $  17,056                             $  18,071
                                                                       =========                             =========
</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.


                                       22
<PAGE>
<TABLE>
<CAPTION>
                                                                           Average Balance Sheets and Interest Rates
                                                         ---------------------------------------------------------------------------
                                                                                 (dollar amounts in thousands)
                                                         Three Months Ended September 30, 2010 Three Months Ended September 30, 2009
                                                         ------------------------------------  -------------------------------------
                                                            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 .........................................  $ 139,101   $     655     1.87%      $  87,679    $     511      2.31%
        Tax-exempt (1) ..................................      4,742          23     1.90%         13,912          135      3.85%
                                                           ---------   ---------                ---------    ---------
               Total securities .........................    143,843         678     1.87%        101,591          646      2.52%

  Loans (2) .............................................    551,073       7,354     5.29%        616,125        8,537      5.50%
  FHLB Stock ............................................      2,353           9     1.52%          2,353           19      3.20%
  Federal funds sold ....................................     38,664          13     0.13%         33,927           11      0.13%
  Interest-earning deposits .............................     43,391          27     0.25%          6,953           10      0.57%
  Interest-bearing time deposits ........................      7,750          27     1.38%           --           --         --
                                                           ---------   ---------                ---------    ---------
               Total interest earning assets ............    787,074       8,108     4.09%        760,949        9,223      4.81%
                                                           ---------   ---------                ---------    ---------

Noninterest earning assets
  Allowance for loan losses .............................    (16,559)                             (13,769)
  Premises and equipment & other assets .................     64,415                               55,994
  Cash and due from banks ...............................     16,098                               13,182
                                                           ---------                            ---------
               Total assets .............................  $ 851,028                            $ 816,356
                                                           =========                            =========

                LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
  Total interest-bearing deposits .......................  $ 577,120       1,661     1.14%      $ 565,264        2,430      1.71%
  Borrowed funds ........................................    103,464         697     2.67%         98,339          661      2.67%
                                                           ---------   ---------                ---------    ---------
               Total interest-bearing liabilities .......    680,584       2,358     1.37%        663,603        3,091      1.85%
                                                           ---------   ---------                ---------    ---------


Noninterest-bearing liabilities
  Noninterest-bearing demand deposits ...................     94,521                               85,037
  Other liabilities .....................................     19,989                               10,797
Shareholders' equity ....................................     55,934                               56,919
                                                           ---------                            ---------
               Total liabilities and shareholders' equity  $ 851,028                            $ 816,356
                                                           =========                            =========


Interest margin recap
Net interest income and interest rate spread
  Net interest margin ...................................                            2.89%                                  3.17%
  Tax-equivalent net interest income spread .............              $   5,750     2.72%                   $   6,132      2.96%
  Tax-equivalent net interest margin as a percent of
      total average earning assets ......................                            2.90%                                  3.20%
Tax-equivalent adjustment (1) ...........................                      9                                    48
                                                                       ---------                             ---------

               Net interest income ......................              $   5,741                             $   6,084
                                                                       =========                             =========
</TABLE>
(1)  Interest income on tax-exempt securities has been adjusted to a tax
     equivalent basis using a marginal income tax rate of 34%.
(2)  Nonaccrual loans are included in average loan balances and loan fees are
     included in interest income.

Net interest income is the primary source of the Company's earnings. It is a
function of the net interest margin and the volume of average earning assets.
The net interest margin as a percent of average earning assets was 2.95 percent
for the first nine months of 2010, down from 3.15 percent for the same period in
2009 and was 2.89 percent for the third quarter of 2010, down from 3.17 percent
for the same period in 2009. Adjusting for tax-exempt income and expense, as
discussed in the "Non-GAAP Financial Measures" section, the tax-equivalent net

                                       23
<PAGE>
interest margin as a percent of average earning assets was 2.95 percent for the
first nine months of 2010, down from 3.20 percent for the same period last year
and was 2.90 percent for the quarter ended September 30, 2010, down from 3.20
percent for the same quarter last year. The 25 basis point drop in the
tax-equivalent net interest margin during the first nine months of 2010 compared
to the same period in 2009 and the 30 basis point drop in the third quarter of
2010 compared to 2009 were primarily the result of higher balances of
nonperforming assets and the increased investment in Federal Funds Sold and
interest bearing deposits that the Company has maintained as part of its
liquidity risk management program in 2010.

Net interest income was $17,056,000 for the nine months ended September 30, 2010
compared to $18,071,000 for the same period in 2009, a decrease of 5.6 percent.
Adjusting for tax-exempt income and expense, as discussed in the "Non-GAAP
Financial Measures" section, tax-equivalent net interest income was $17,090,000
for the nine months ended September 30, 2010 compared to $18,345,000 for the
same period in 2009, a decrease of 6.8 percent, primarily due to $746,000 of
additional subordinated debt interest expense in the first nine months of 2010
compared to 2009.

Net interest income was $5,741,000 for the three months ended September 30, 2010
compared to $6,084,000 for the same period in 2009, a decrease of 5.6 percent.
Adjusting for tax-exempt income and expense, as discussed in the "Non-GAAP
Financial Measures" section, tax-equivalent net interest income was $5,750,000
for the three months ended September 30, 2010 compared to $6,132,000 for the
same period in 2009, a decrease of 6.6 percent.

Noninterest Income / Noninterest Expense
----------------------------------------
Total noninterest income for the first nine months of 2010 was $8,751,000
compared to $8,861,000 for the same period in 2009. Excluding the effect of the
Company's deferred compensation plan, discussed in the "Non-GAAP Financial
Measures" section, noninterest income for the nine months ended September 30,
2010 was $8,682,000 compared to $8,595,000 for the same period of 2009, an
increase of $87,000 or 1.0 percent. The effect of the Company's deferred
compensation plan for the first nine months of 2010 was a $69,000 increase in
noninterest income compared to a $266,000 increase in the same period of 2009.

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

     o    Securities gains of $640,000 were realized from sales of AFS
          securities during the first nine months of 2010 compared to $1,656,000
          in the same period of 2009.

     o    Bank Owned Life Insurance ("BOLI") income was $1,005,000 in the first
          nine months of 2010 compared to $477,000 in the same period of 2009
          due to the receipt of death benefit proceeds under that program. The
          Company did not purchase additional BOLI during 2010.

Total noninterest income for the third quarter of 2010 was $3,249,000, an
$836,000 or 34.6 percent increase from $2,413,000 for the same period in 2009.
Excluding the effect of the Company's deferred compensation plan, discussed in
the "Non-GAAP Financial Measures" section, noninterest income totaled $3,108,000
for the third quarter of 2010 compared to $2,237,000 for the same period of
2009, an increase of $871,000 or 38.9 percent largely due to a $724,000 decrease
in net loss on foreclosed assets. Net loss on foreclosed assets totaled $37,000
in the third quarter of 2010 compared to a net loss of $761,000 loss in the same
period in 2009. The increased loss in the third quarter of 2009 resulted
primarily from declines in market values in the residential housing market and
declining general economic conditions during the Company's holding period for
these assets.

Total noninterest expense was $16,473,000 for the first nine months of 2010
compared to $16,775,000 for the same period in 2009. Excluding the effect of the
Company's deferred compensation plan, discussed in the "Use of Non-GAAP
Financial Measures" section, total noninterest expense for the first nine months
of 2010 was $16,225,000, a $237,000 or 1.4 percent decrease from $16,462,000 for
the same period in 2009, resulting primarily from total compensation expenses
(salaries, incentive compensation and benefits) decreasing by $471,000 or 5.3
percent to $8,413,000 in the first nine months of 2010 compared to $8,884,000 in

                                       24
<PAGE>

the first nine months of 2009. The decrease in total compensation expenses was
due primarily to a reduction in staff levels and changes to some of the Bank's
incentive compensation plans. The effect of the Company's deferred compensation
plan for the first nine months of 2010 was a $248,000 increase in noninterest
expense compared to a $313,000 increase in the same period of 2009.

Total noninterest expense was $5,602,000 for the third quarter of 2010 compared
to $5,429,000 for the same period in 2009. Excluding the effect of the Company's
deferred compensation plan, discussed in the "Use of Non-GAAP Financial
Measures" section, total noninterest expense for the third quarter of 2010 was
$5,453,000, a $211,000 or 4.0 percent increase from $5,242,000 for the same
period in 2009, primarily due to a $166,000 or 59.3 percent increase in FDIC
insurance premium expense in the third quarter of 2010 compared to the same
period in 2009 due to an increase in the Company's insurance premium rate. The
effect of the Company's deferred compensation plan for the third quarter of 2010
was a $149,000 increase in noninterest expense compared to a $187,000 increase
in the same period of 2009.

Income Taxes
------------
The Company records a provision for income taxes currently payable, along with a
provision for those taxes payable in the future. Such deferred taxes arise from
differences in timing of certain items for financial statement reporting rather
than income tax reporting. The major differences between the effective tax rate
applied to the Company's financial statement income and the federal and state
statutory rate of approximately 40 percent are interest on tax-exempt
securities, the Bank's investment in CBAI CDE III, LLC, and the increase in cash
surrender value of the Bank's owned life insurance.

The deferred tax assets and liabilities represent decreases or increases in
taxes expected to be paid in the future because of future reversals of temporary
differences in the bases of assets and liabilities as measured by tax laws and
their bases as reported in the financial statements. Deferred tax assets are
also recognized for tax attributes such as net operating loss carryforwards and
tax credit carryforwards. The net deferred tax asset was $5,382,000 at September
30, 2010, an increase of $371,000 or 7.4 percent compared to $5,011,000 at
September 30, 2009. The increase in the net deferred tax asset was primarily due
to timing differences in the amount of provision for loan loss that was expensed
in 2009 and 2010 compared to the charge-offs experienced. Management estimates
charge-offs in future periods will exceed provision for loan loss expense and
the Company's projected future taxable income will enable the Company to utilize
the net deferred tax asset. In the third quarter of 2010, the Company recorded
an additional deferred tax asset valuation allowance of $403,000 to reduce
deferred state tax assets to the amount Management concluded was expected to be
utilized in future periods. The Company adjusts its unrecognized tax benefits as
necessary when additional information becomes available. The reassessment of the
Company's unrecognized tax benefits may have a material impact on its effective
tax rate in the period in which it occurs.

The Company's effective tax benefit rate was 67.4 percent for the nine months
ended September 30, 2010 compared to an effective tax rate of 17.9 percent for
the same period in 2009. The magnitude of the Company's effective tax benefit
rate for the first nine months of 2010 is less meaningful since the Company
experienced a net loss for the period and has multiple sources of tax-exempt
income.

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

Assets and Liabilities
----------------------
Total assets of the Company at September 30, 2010 were $838,122,000 an increase
of 4.4 percent or $35,671,000 compared to $802,451,000 at December 31, 2009.
Loans (including loans held for sale) totaled $547,059,000 at September 30, 2010
compared to $587,365,000 at December 31, 2009, a decrease of 6.9 percent.
Deposits increased to $666,201,000 at September 30, 2010 compared to
$634,254,000 at December 31, 2009, an increase of $31,947,000 or 5.0 percent,
primarily due to a $27,240,000 increase in interest-bearing checking and NOW
accounts. Borrowings decreased to $105,667,000 at September 30, 2010 compared to
$106,056,000 at December 31, 2009.

                                       25
<PAGE>

Capital
-------
Shareholders' equity decreased by $255,000 at September 30, 2010 compared to
December 31, 2009. This decrease was a result of a year-to-date net loss of
$510,000, ESOT shares forfeited of $6,000, and dividends paid of $187,000 offset
by option expense of $12,000, unrealized gain on securities in the Company's
available for sale securities portfolio totaling $422,000 (net of tax) and
common stock sold of $14,000.

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 September 30, 2010 and
December 31, 2009, the Company and the Bank were categorized as well capitalized
and met all applicable capital adequacy requirements. Effective April 29, 2010,
the Bank entered into a memorandum of understanding ("MOU") with the Federal
Deposit Insurance Corporation (the "FDIC") and the Indiana Department of
Financial Institutions (the "DFI"). The MOU is an informal administrative
agreement in which the Bank has agreed to take various actions and comply with
certain requirements to facilitate improvement in its financial condition. In
accordance with the MOU, the Bank agreed among other things to maintaining a
leverage capital ratio (tier 1 capital to average assets) of not less than 8.00
percent and a total risk-based capital ratio of not less than 12.00 percent.

As of September 30, 2010 and December 31, 2009, the actual and required capital
amounts and ratios are as follows:





                                       26
<PAGE>
<TABLE>
<CAPTION>
                                                                        Required for         To Be Well
                                                      Actual        Adequate Capital (1)   Capitalized (1)
                                                 ---------------------------------------------------------
                                                 Amount    Ratio      Amount    Ratio      Amount    Ratio
                                                 ---------------------------------------------------------
<S>                                              <C>       <C>        <C>       <C>       <C>        <C>
As of September 30, 2010
------------------------
Total capital (1) (to risk-weighted assets)
Consolidated ...............................    $79,800    13.69 %   $46,625    8.00 %        N/A    N/A
Bank .......................................     77,561    13.41      46,265    8.00      $57,831    10.00 %
Tier I capital (1) (to risk-weighted assets)
Consolidated ...............................     59,373    10.19      23,312    4.00          N/A    N/A
Bank .......................................     70,186    12.14      23,132    4.00       34,698     6.00
Tier I capital (1) (to average assets)
Consolidated ...............................     59,373     7.01      33,869    4.00          N/A    N/A
Bank .......................................     70,186     8.33      33,691    4.00       42,114     5.00

As of December 31, 2009
-----------------------
Total capital (1) (to risk-weighted assets)
Consolidated ...............................    $82,066    13.86 %   $47,367    8.00 %        N/A    N/A
Bank .......................................     78,436    13.33      47,063    8.00      $58,828    10.00 %
Tier I capital (1) (to risk-weighted assets)
Consolidated ...............................     61,568    10.40      23,684    4.00          N/A    N/A
Bank .......................................     70,985    12.07      23,531    4.00       35,297     6.00
Tier I capital (1) (to average assets)
Consolidated ...............................     61,568     7.47      32,957    4.00          N/A    N/A
Bank .......................................     70,985     8.65      32,822    4.00       41,027     5.00
</TABLE>
(1) As defined by regulatory agencies

On July 22, 2010, the Board of Directors of the Company adopted a resolution
requiring the Company to obtain the written approval of the Federal Reserve Bank
of Chicago (the "Federal Reserve") at least thirty days prior to the declaration
or payment of corporate dividends, any increase in debt or issuance of trust
preferred obligations, or the redemption of any Company stock. The resolution
was adopted at the direction of the Federal Reserve and will remain in effect
until the Federal Reserve authorizes its rescission.

Classification of Assets, Allowance for Loan Losses, and Nonperforming Loans
----------------------------------------------------------------------------
The Bank currently classifies loans internally to assist Management in
addressing collection and other risks. The Bank maintains a "watch list"
representing credits that require above average attention in order to mitigate
the risk of default or loss. Over the periods noted below, the watch list
consisted of the following:

<TABLE>
<CAPTION>
                                                      9/30/2010  12/31/2009  9/30/2009
                                                      ---------  ----------  ---------
<S>                                                      <C>        <C>         <C>
Total Watch List Loans $                                 69,457      76,208     79,571
Number of Watch List Customers                               76          69         73
Total Watch List $ > 30 Days Past Due                    28,640      32,728     21,823
Total Watch List $ Customers Secured by Real Estate      64,571      71,450     73,704
Total Watch List $ Secured by Non Real Estate             3,233       3,103      4,196
Total Watch List $ Unsecured                              1,653       1,655      1,671
</TABLE>

As of September 30, 2010, 58.8 percent of the Watch List exposure was less than
thirty days past due, compared to 56.8 percent as of June 30, 2010 and 72.6
percent as of September 30, 2009. Of the $69,457,000 of loans on the watch list
on September 30, 2010, $55,351,000 (79.7 percent) were originated out of the
Central Indiana (greater Indianapolis) offices.

The majority of the internally classified loans are secured with real estate
which reduces the potential losses on those loans. In addition, the Company
maintains an allowance for loan losses based upon its quarterly analysis of

                                       27
<PAGE>

losses inherent in the loan portfolio. The allowance for loan losses was
$16,082,000, or 2.98 percent of portfolio loans (excluding loans held for sale)
at September 30, 2010 compared to $15,256,000, or 2.61 percent of portfolio
loans at December 31, 2009. A portion of classified loans consists of
non-accrual loans. The Bank had nonperforming assets (non-accrual loans,
restructured loans, OREO and 90-days past due loans still accruing) totaling
$40,548,000 or 4.84 percent of total assets at September 30, 2010 compared to
$25,424,000 or 3.17 percent of total assets at December 31, 2009.

In the third quarter of 2010, $1,935,000 of new specific reserves were allocated
to sixteen of the Company's existing loans. The addition of these specific
reserves resulted primarily from updated independent appraisals of the real
estate securing these loans which had, based on the appraisals, decreased in
market value. Management believed an increased allowance for loan losses was
prudent given the addition of these specific reserves combined with the
Company's historical charge-off trends. Thus, a higher provision for loan losses
was expensed in the third quarter of 2010 to increase the allowance for loan
losses.

During the third quarter of 2010, the Bank had net loan charge-offs totaling
$4,611,000 compared to $1,979,000 in the third quarter of 2009. Past due loans
(30 days or more) were 5.66 percent of total loans at September 30, 2010
compared to 3.73 percent of total loans at September 30, 2009.

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

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

Short-term liquidity needs resulting from normal deposit/withdrawal functions
are provided by the Company retaining a portion of cash generated from
operations and through utilizing federal funds and repurchase agreements.
Long-term liquidity and other liquidity needs are provided by the ability of the
Company to borrow from the Federal Home Loan Bank of Indianapolis ("FHLB") and
to obtain brokered certificates of deposit ("CDs"). FHLB advances were
$17,272,000 at September 30, 2010 compared to $17,371,000 at December 31, 2009.
At September 30, 2010, the Company had excess borrowing capacity at the FHLB of
$46,231,000 as limited by the FHLB collateral limit. In terms of managing the
Company's liquidity, Management's primary focus is on increasing deposits to
fund future growth.

Over the past year, the Company has also utilized alternative funding sources.
In July 2005, the Company began using brokered CDs as an alternate source of
funding. As of September 30, 2010, the Company had $54,345,000 of brokered CDs
on its balance sheet, compared to $46,201,000 at December 31, 2009 and
$46,201,000 at September 30, 2009.

At the bank holding company level, the Company primarily uses cash to pay
dividends to shareholders and to pay interest on its subordinated debt.
Historically, the main source of funding for the holding company has been
dividends from the Bank. During the first three quarters of 2010, the Bank paid
no dividends to the holding company. Were it not for the FDIC and DFI Memorandum
of Understanding, the amount of dividends the Bank could pay to the parent
company without prior regulatory approval as of October 1, 2010 was $1,844,000,
versus $1,368,000 at January 1, 2010. As discussed in Note 12 to the
Consolidated Financial Statements (page 37 of the 2009 Annual Report to
Shareholders) and Item 1 of the December 31, 2009 Form 10-K, the Bank is subject
to many regulations and, among other things, may be limited in its ability to
pay dividends or transfer funds to the holding company. Effective April 29,

                                       28
<PAGE>

2010, the Bank entered into a memorandum of understanding with the FDIC and DFI
and will refrain from paying cash dividends to the Company without prior
regulatory approval. On July 22, 2010, the Board of Directors of the Company
adopted a resolution requiring the Company to obtain the written approval of the
Federal Reserve prior to the declaration or payment of corporate dividends, any
increase in debt or issuance of trust preferred obligations, or the redemption
of any Company stock. Accordingly, consolidated cash flows as presented in the
Consolidated Statements of Cash Flows on page 7 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 nine
months ended September 30, 2010, $15,420,000 of cash was provided by operating
activities, compared to $11,091,000 provided during the same period in 2009. The
increase in the cash provided in this area was primarily a result of the
$4,887,000 net increase in interest payable and other liabilities. During the
first nine months of 2010, $6,327,000 was provided by investing activities,
compared to $31,026,000 being provided in the same period of 2009. The decrease
in the cash provided in this category occurred primarily due to the $27,111,000
net decrease in the cash provided in activities related to available for sale
and held to maturity securities. During the first nine months of 2010,
$33,203,000 of cash was provided by financing activities compared to $698,000
provided during the same period in 2009. The increase in cash provided by
financing activities was primarily the result of a $67,262,000 increase in the
net change in certificates of deposit offset by a $24,943,000 decrease in the
net change in noninterest-bearing, interest-bearing demand and savings deposits.

Overall, net cash and cash equivalents increased $54,950,000 during the nine
months ended September 30, 2010 compared to an increase of $42,815,000 in the
same period of 2009.

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

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

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

Forward-Looking Statements
--------------------------
This Quarterly Report on Form 10-Q contains forward-looking statements about the
Company which we believe are within the meaning of the Private Securities
Litigation Reform Act of 1995. This Form 10-Q contains certain forward-looking
statements with respect to the financial condition, results of operations,
plans, objectives, future performance and business of the Company.
Forward-looking statements can be identified by the fact that they do not relate
strictly to historical or current facts. They often include the words "believe,"
"expect," "anticipate," "intend," "plan," "estimate" or words of similar
meaning, or future or conditional verbs such as "will," "would," "should,"
"could" or "may" or words of similar meaning. These forward-looking statements,

                                       29
<PAGE>

by their nature, are subject to risks and uncertainties. There are a number of
important factors that could cause future results to differ materially from
historical performance and these forward-looking statements. Factors that might
cause such a difference include, but are not limited to: (1) changes in
competitive pressures among depository institutions; (2) changes in the interest
rate environment; (3) changes in prepayment speeds, charge-offs and loan loss
provisions; (4) changes in general economic conditions, either national or in
the markets in which the Company does business; (5) legislative or regulatory
changes adversely affecting the business of the Company; (6) changes in real
estate values or the real estate markets; (7) the Company's business development
efforts in new markets in and around Hendricks and Hamilton Counties; and (8)
the potential failure to obtain shareholder and regulatory approval for the
merger with Old National or to satisfy other conditions to the merger on the
terms set forth in the Merger Agreement or within the proposed timeframes.
Further information on other factors which could affect the financial results of
the Company is included in the Company's filings with the Securities and
Exchange Commission.

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

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

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

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

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

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

The Company's interest sensitivity position at September 30, 2010 remained
consistent with the Company's primary goal of maximizing interest margin while
maintaining a relatively low exposure to interest rate risk.

The following charts summarize the results of Management's forecast of net
interest income that would be generated by the Company's September 30, 2010 and
December 31, 2009 balance sheets under a variety of sudden and sustained
interest rate changes (shocks). In both cases, due to current economic
conditions, Management feels it is appropriate to perform and analyze upward
interest rate shocks ranging from 100 basis points to 400 basis points. In all
cases the interest rate shocks reveal how the Company's balance sheet as of the
shock date can be expected to perform in terms of net interest income. The
shocks do not reflect any steps that Management might take to counteract that
change.

                                       30
<PAGE>

    Projected Change in Net Interest Income - September 30, 2010
-----------------------------------------------------------------------
                  Projected Net Interest         $ Change
                         Income Over the  in Net Interest   % Change in
Change in Inter       Next Twelve Months           Income  Net Interest
Rate (basis points)       (in thousands)   (in thousands)        Income
-----------------------------------------------------------------------
              +400              $ 19,224        $ (2,574)      (11.81)%
              +300                19,798          (2,000)       (9.18)
              +200                20,414          (1,384)       (6.35)
              +100                20,895            (903)       (4.14)
                 0                21,798             --           --
              -100                21,815              17         0.08
              -200                21,200            (598)       (2.74)


For comparative purposes, the following table summarizes the results of
management's forecast of net interest income that would be generated by the
Bank's December 31, 2009 balance sheet under various rate shocks:

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

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

The September 30, 2010 table indicates that the Bank's interest rate risk
profile has become modestly more sensitive to rising rates relative to the
December 31, 2009 projections. The Company's September 30, 2010 balance sheet is
projected to produce 9.18% less net interest income over the next twelve months
if subjected to a 300 basis point immediate and sustained interest rate shock.
This result is largely driven by the Company having more liabilities, primarily
deposits, which would reprice over the twelve-month horizon than assets. As a
result, net interest expense would increase faster than interest income in the
event of an upward rate shock.

The results from the Company's rate shock analyses continue to indicate the
interest rate sensitivities of the Bank's assets and liabilities are relatively
well matched. The estimated changes in net interest income calculated as of
September 30, 2010 are within the approved guidelines established by the Board
of Directors.

Computations of prospective effects of hypothetical interest rate changes are
based on a number of assumptions, including relative levels of market interest
rates, loan prepayments and deposit run-off rates, and should not be relied upon
as indicative of actual results. These computations do not contemplate actions
management may undertake in response to changes in interest rates.

Certain shortcomings are inherent in the method of computing the estimated net
interest income under hypothetical rate shocks. Actual results may differ from
that information presented in the table above should market conditions vary from
the assumptions used in preparation of the table information. If interest rates

                                       31
<PAGE>

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 4T.           Controls and Procedures.
--------           -----------------------

         (a) Evaluation of disclosure 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 September 30, 2010, an evaluation was
performed under the supervision and with the participation of Management,
including the Chief Executive Officer (the Company's principal executive
officer) and Chief Financial Officer (the Company's principal financial
officer), of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures as of September 30, 2010 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
and are designed to ensure that information required to be disclosed in the
Quarterly Report was accumulated and communicated to management as appropriate
to allow timely decisions regarding required disclosure.

         (b) Changes in internal controls over financial reporting. There were
no changes in the Company's internal control over financial reporting identified
in connection with the Company's evaluation of controls that occurred during the
quarter ended September 30, 2010 that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.

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

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

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

                  The Recently enacted Dodd-Frank Wall Street Reform and
                  Consumer Protection Act may have a material impact on our
                  operations.

                  On July 21, 2010, President Obama signed the Dodd-Frank Wall
                  Street Reform and Consumer Protection Act (the "Dodd-Frank
                  Reform Act") into law. This new law broadly affects the
                  financial services industry by establishing a framework for
                  systemic risk oversight, creating a resolution authority,
                  mandating higher capital and liquidity requirements, requiring
                  banks to pay increased fees to regulatory agencies and
                  containing numerous other provisions aimed at strengthening
                  the sound operation of the financial services sector. The full
                  impact of the Dodd-Frank Act on our business and operations
                  may not be known for years until regulations implementing the
                  statute are written and adopted. The Dodd-Frank Act may have a
                  material impact on our operations, particularly through
                  increased compliance costs.

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

                                       32
<PAGE>

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

                  On July 22, 2010, the Board of Directors of the Company
                  adopted a resolution requiring the Company to obtain the
                  written approval of the Federal Reserve at least thirty days
                  prior to the declaration or payment of corporate dividends,
                  any increase in debt or issuance of trust preferred
                  obligations, or the redemption of any Company stock. The
                  resolution was adopted at the direction of the Federal Reserve
                  and will remain in effect until the Federal Reserve authorizes
                  its rescission.

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

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

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

                  No stock was repurchased by the Company during the fiscal
                  quarter ended September 30, 2010. The Company's stock
                  repurchase plan was announced June 16, 2006. The total dollar
                  amount approved was $10,000,000. Under this repurchase
                  program, the Company purchased 417,792 shares of stock at an
                  average price of $17.29 per share totaling $7,224,000. The
                  Company's most recent stock repurchase transaction took place
                  on August 7, 2007. The plan has no expiration date, but the
                  Board of Directors may terminate the plan at any time. The
                  Board of Directors suspended repurchase activities beginning
                  in the fourth quarter of 2007 and as of September 30, 2010,
                  the Board of Directors has not determined when stock
                  repurchases will recommence.

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

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

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

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

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

2(i)              Agreement and Plan of Merger among Monroe Bancorp and Old
                  National Bancorp dated October 5, 2010 is incorporated by
                  reference to Exhibit 2.1 of Registrant's Form 8-K filed
                  October 6, 2010.

                                       33
<PAGE>

3(i)              Monroe Bancorp Articles of Incorporation are incorporated by
                  reference to registrant's Form 10 filed November 14, 2000
                  (File No. 000-31951).

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

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

10(i)             Voting Agreement is incorporated by reference to Exhibit
                  10.1 to Registrant's Form 8-K filed October 6, 2010 (File
                  No. 000-31951).

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

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

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

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



                                       34
<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: November 8, 2010           By: /s/ Mark D. Bradford
           ----------------               --------------------------------------
                                          Mark D. Bradford, President and
                                          Chief Executive Officer
                                          (Principal Executive Officer)

     Date: November 8, 2010           By: /s/ Gordon M. Dyott
           ----------------               --------------------------------------
                                          Gordon M. Dyott, Exec. Vice President,
                                          Chief Financial Officer
                                          (Principal Financial Officer)












                                       35
<PAGE>

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


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

2(i)           Agreement and Plan of Merger among Monroe Bancorp and Old
               National Bancorp dated October 5, 2010 is incorporated by
               reference to Exhibit 2.1 of Registrant's Form 8-K filed October
               6, 2010.

3(i)           Monroe Bancorp Articles of Incorporation are incorporated by
               reference to registrant's Form 10 filed November 14, 2000 (File
               No. 000-31951).

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

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

10(i)          Voting Agreement is incorporated by reference to Exhibit 10.1 to
               Registrant's Form 8-K filed October 6, 2010 (File No. 000-31951).

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

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

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

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




                                       36