FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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


For the quarterly period ended March 31, 2002

                                       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.  000-31951
                     ---------

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

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

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.

                                                     Yes  X     No
                                                         ---       ---

Outstanding Shares of Common Stock on March 31, 2002:  6,150,240
                                                       ---------

<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                                    FORM 10-Q

                                      INDEX

                                                                        Page No.
                                                                        --------

Part I. Financial Information:

    Item 1.  Financial Statements:

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

               Consolidated Condensed Statements of Income - Three Months.  4

               Consolidated Condensed Statement of Shareholders' Equity...  5

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

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

    Item 2.  Management's Discussion and Analysis of Financial
               Condition and Results of Operations........................  8

    Item 3.  Quantitative and Qualitative Disclosures about Market Risk... 12

Forward Looking Statements................................................ 14

Part II.  Other Information:

    Item 1.  Legal Proceedings............................................ 15

    Item 2.  Changes In Securities........................................ 15

    Item 3.  Defaults Upon Senior Securities.............................. 15

    Item 4.  Submission of Matters to a Vote of Security Holders.......... 15

    Item 5.  Other Information............................................ 15

    Item 6a. Exhibits..................................................... 15

    Item 6b. Reports Filed on Form 8-K.................................... 15

Signatures................................................................ 16


                                       2
<PAGE>

Item 1.           Financial Statements
-------           ---------------------


                          MONROE BANCORP AND SUBSIDIARY
                      Consolidated Condensed Balance Sheets
                                   (Unaudited)
                  (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                     March 31,   December 31,
                                                                       2002          2001
                                                                     -----------------------
<S>                                                                  <C>           <C>
Assets
     Cash and due from banks ....................................    $  12,878     $  17,276
       Federal funds sold .......................................        8,100            --
                                                                     -----------------------
            Cash and cash equivalents ...........................       20,978        17,276
     Trading securities .........................................        3,090         3,060
     Investment securities
         Available for sale .....................................       16,456        17,821
         Held to maturity .......................................       68,982        67,569
                                                                     -----------------------
              Total investment securities .......................       85,438        85,390
       Loans held for sale ......................................        2,432         8,032
     Loans, net of allowance for loan losses of $4,278 and $3,959      370,171       359,570
     Premises and equipment .....................................       11,842        11,633
     Federal Home Loan Bank of Indianapolis stock, at cost ......        1,882         1,534
     Interest receivable and other assets .......................        7,942         9,058
                                                                     -----------------------

         Total assets ...........................................    $ 503,775     $ 495,553
                                                                     =======================

Liabilities
     Deposits
         Noninterest-bearing ....................................    $  58,108     $  55,034
         Interest-bearing .......................................      324,401       304,172
                                                                     -----------------------
              Total deposits ....................................      382,509       359,206
     Short-term borrowings ......................................       34,600        58,212
     Other borrowings ...........................................       39,129        31,785
     Interest payable and other liabilities .....................        6,137         5,666
                                                                     -----------------------
         Total liabilities ......................................      462,375       454,869
                                                                     -----------------------

Commitments and Contingent Liabilities

Shareholders' Equity
     Common stock, no-par value
         Authorized - 18,000,000 shares
         Issued and outstanding - 6,150,240 shares ..............          137           137
     Additional paid-in capital .................................        3,359         3,359
     Retained earnings ..........................................       38,210        37,449
     Accumulated other comprehensive income .....................          291           336
     Unearned ESOT shares .......................................         (597)         (597)
                                                                     -----------------------
            Total shareholders' equity ..........................       41,400        40,684
                                                                     -----------------------
         Total liabilities and shareholders' equity .............    $ 503,775     $ 495,553
                                                                     =======================
</TABLE>

See notes to consolidated condensed financial statements.

                                       3
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                   Consolidated Condensed Statements of Income
                                   (Unaudited)
                  (Dollars in thousands, except per share data)

                                                       Three Months Ended
                                                            March 31
                                                       -------------------
                                                         2002        2001
                                                       -------------------
Interest Income
     Loans, including fees ........................    $ 6,380     $ 6,714
     Trading securities ...........................         16          20
     Investment securities
         Taxable ..................................        805         980
         Tax exempt ...............................        279         333
     Federal funds sold ...........................         31          39
                                                       -------------------
         Total interest income ....................      7,511       8,086
                                                       -------------------

Interest Expense
     Deposits .....................................      2,310       3,477
     Short-term borrowings ........................        118         500
     Other borrowings .............................        456          96
                                                       -------------------
         Total interest expense ...................      2,884       4,073
                                                       -------------------

Net Interest Income ...............................      4,627       4,013
     Provision for loan losses ....................        276         150
                                                       -------------------
Net Interest Income After Provision for Loan Losses      4,351       3,863
                                                       -------------------

Other Income
     Fiduciary activities .........................        217         214
     Service charges on deposit accounts ..........        595         521
     Commission income ............................        208         114
     Securities gains .............................         --           3
     Unrealized loss on trading securities ........        (13)       (245)
     Net gains on loan sales ......................        219          92
     Other operating income .......................        189         224
                                                       -------------------
         Total other income .......................      1,415         923
                                                       -------------------

Other Expenses
     Salaries and employee benefits ...............      2,166       1,721
     Net occupancy and equipment expenses .........        595         490
     Advertising ..................................        156         117
     Depreciation in directors' deferred
         compensation plan ........................         --        (224)
     Other operating expense ......................        593         478
                                                       -------------------
         Total other expenses .....................      3,510       2,582
                                                       -------------------

Income Before Income Tax ..........................      2,256       2,204
     Income tax expense ...........................        757         757
                                                       -------------------

Net Income ........................................    $ 1,499     $ 1,447
                                                       ===================

Basic earnings per share ..........................    $   .25     $   .24
Diluted earnings per share ........................        .25         .24

  See notes to consolidated condensed financial statements.


                                       4
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
            Consolidated Condensed Statement of Shareholders' Equity
                    For the Three Months Ended March 31, 2002
                                   (Unaudited)
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                                                             Unearned
                                    Common Stock                                              Accumulated    Employee
                               ----------------------  Additional                               Other         Stock
                                  Shares                Paid In    Comprehensive  Retained   Comprehensive  Ownership
                               Outstanding   Amount     Capital       Income      Earnings   Income (Loss) Trust Shares  Total
                               ------------ --------- ----------- -------------- ----------- ------------- ------------ ----------
<S>                              <C>           <C>       <C>           <C>         <C>             <C>        <C>         <C>
Balances, January 1, 2002        6,150,240     $ 137    $ 3,359                    $37,449         $ 336      $ (597)    $ 40,684

Comprehensive Income:
    Net income for the period                                          $ 1,499       1,499                                  1,499
    Unrealized losses on securities                                        (45)                      (45)                     (45)
    Cash dividend ($.12 per share)                                                    (738)                                  (738)

                               ------------ --------- ----------- -------------- ----------- ------------- ------------ ----------
Balances, March 31, 2002         6,150,240     $ 137     $3,359        $ 1,454     $38,210         $ 291      $ (597)     $41,400
                               ============ ========= =========== ============== =========== ============= ============ ==========
</TABLE>


See notes to consolidated condensed financial statements.


                                       5
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                 Consolidated Condensed Statements of Cash Flows
                                   (Unaudited)
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                               Three Months Ended
                                                                                    March 31,
                                                                              ---------------------
                                                                                2002         2001
                                                                              ---------------------
<S>                                                                           <C>          <C>
Operating Activities
     Net income ..........................................................    $  1,499     $  1,447
     Adjustments to reconcile net income to net cash provided by
           operating activities
       Provision for loan losses .........................................         276          150
       Depreciation and amortization .....................................         214          185
       Deferred income tax ...............................................         (27)         137
       Investment securities amortization ................................          65           47
       Securities (gain) loss ............................................          --           (3)
       Origination of loans held for sale ................................      (7,208)      (3,940)
       Proceeds from sale of loans held for sale .........................      13,028        3,928
       Gain on sale of loans held for sale ...............................        (219)         (92)
       ESOT compensation .................................................          --           (1)
       Net change in:
         Trading securities ..............................................         (31)         210
         Interest receivable and other assets ............................       1,168          613
         Interest payable and other liabilities ..........................         471          441
                                                                              ---------------------
              Net cash provided by operating activities ..................       9,236        3,122
                                                                              ---------------------

Investing Activities
     Purchases of securities available for sale ..........................          --       (3,493)
     Proceeds from sales of securities available for sale ................         109           --
     Proceeds from paydowns and maturities of securities
         available for sale ..............................................       1,175        3,170
     Purchases of securities held to maturity ............................      (5,078)          --
     Proceeds from paydowns and  maturities of securities held to maturity       3,610        4,873
     Purchase of FHLB stock ..............................................        (348)          --
     Net change in loans .................................................     (10,876)      (8,489)
     Purchases of premises and equipment .................................        (423)        (365)
                                                                              ---------------------
              Net cash used by investing activities ......................     (11,831)      (4,304)
                                                                              ---------------------

Financing Activities
     Net change in
       Noninterest-bearing, interest-bearing demand and savings deposits .       4,729       14,513
       Certificates of deposit ...........................................      18,574       (2,204)
       Short-term borrowings .............................................     (23,612)     (14,913)
     Proceeds of long-term debt ..........................................       7,395        1,104
     Repayment of long-term debt .........................................         (51)         (40)
     Cash dividends paid .................................................        (738)        (676)
                                                                              ---------------------
              Net cash provided (used) by financing activities ...........       6,297       (2,216)
                                                                              ---------------------
Net Change in Cash and Cash Equivalents ..................................       3,702       (3,398)
Cash and Cash Equivalents, Beginning of Period ...........................      17,276       25,983
                                                                              ---------------------

Cash and Cash Equivalents, End of Period .................................    $ 20,978     $ 22,585
                                                                              =====================

Supplemental cash flow disclosures
     Interest paid .......................................................    $  2,946     $  4,070
     Income tax paid .....................................................         150          140
</TABLE>

See notes to consolidated condensed financial statements.

                                       6
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
              Notes to Consolidated Condensed Financial Statements
                                 March 31, 2002
                                   (Unaudited)

Note 1: Basis of Presentation
-----------------------------

The consolidated financial statements include the accounts of Monroe Bancorp
(the "Company") and its wholly owned subsidiary, Monroe Bank, a state chartered
bank (the "Bank"). A summary of significant accounting policies is set forth in
Note 1 of Notes to Financial Statements included in the December 31, 2001,
Annual Report to Shareholders. All significant intercompany accounts and
transactions have been eliminated in consolidation.

The interim consolidated 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 financial statements at March 31, 2002, and for the
three months ended March 31, 2002 and 2001, 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, 2001
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 condensed financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company's Form 10-K annual report filed with the
Securities and Exchange Commission.

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


Note 2: Earnings Per Share
--------------------------

The number of shares used to compute basic and diluted earnings per share was as
follows:

                                                      Three months ended
                                                      ------------------
                                              March 31, 2002     March 31, 2001
                                              --------------     --------------
Weighted average shares outstanding.........     6,150,240          6,150,240
Average unearned ESOT shares................       (49,185)           (10,589)
                                                 ---------          ---------
   Shares used to compute basic
       earnings per share...................     6,101,055          6,139,651

Effect of dilutive securities
    Stock options...........................         2,042                 --
                                                 ----------         ---------

   Shares used to compute diluted
        earnings per share..................     6,103,097          6,139,651
                                                 =========          =========

Options to purchase 105,000 and 115,000 shares at March 31, 2002 and 2001 were
not included in the earnings per share calculation because the exercise price
exceeded the average market price.


                                       7
<PAGE>

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

General
-------

Monroe Bancorp (the "Company") is a one-bank holding company formed under
Indiana law in 1984. The Company holds all of the outstanding stock of Monroe
Bank, formerly Monroe County Bank, (the "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 sixteen locations in Monroe, Jackson, Lawrence, and Hendricks
Counties, Indiana. Approximately 85 percent of the Bank's business is in Monroe
County and is concentrated in and around the city of Bloomington.

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

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

Market Expansion
----------------
The Company opened two full service branch offices in eastern Hendricks County,
which is adjacent to Marion County and Indianapolis, Indiana, in September and
October of 2001. As of March 31, 2002, these two branches were ahead of plan
with $26.7 million in deposits and $21.2 million in loans. Another Hendricks
County branch in Brownsburg, Indiana was opened in May 2002. The Bank's strategy
in opening these branches is as follows:

o    Hire experienced and established professionals from within the market. This
     accelerates the Bank's ability to build name recognition and credibility in
     the new market.
o    Avoid the start-up expense associated with pursuing the mass retail market.
     Instead open relatively low cost offices in professional buildings. Target
     marketing efforts to the high potential commercial real estate, residential
     mortgage, and large depositor segments.
o    Stress community involvement and business development activities supported
     by the involvement of executives from the Company's primary market.

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

Overview
--------
Net income for the first quarter 2002 was $1.5 million a 3.6 percent increase
over the same quarter last year. Basic and diluted earnings per share were $0.25
for the three months ended March 31, 2002 compared to $0.24 for the same period
last year.

Annualized return on average equity (ROE) for the first quarter of 2002
increased to 14.77 percent compared to 14.52 percent ROE for year ending
December 31, 2001. However, first quarter 2002 ROE decreased when

                                       8
<PAGE>

compared to ROE of 15.30 percent for first quarter 2001. The annualized return
on average assets (ROA) was 1.22 percent for the first quarter of 2002 compared
with 1.34 percent for the same period in 2001.

The growth in net income shown between the first three months of 2002 and the
same period in 2001 can be attributed to growth in our core lending business, an
increase in mortgage loan sales, and the maturity of high yielding time
deposits. As expected, expenses associated with opening the Company's new
Hendricks County branches had an adverse impact on ROA and ROE during the first
quarter, but the net loss experienced by the Hendricks County branches was less
than planned.

As of March 31, 2002, first quarter dividends paid were $0.12 per share,
compared to $0.11 per share for the same period in 2001, an increase of 9.1
percent. In keeping with management's strategy, the Company has increased the
dividend rate each year for more than 15 years. At March 31, 2002 the dividend
yield was 3.92 percent compared to 5.59 percent at March 31, 2001. The decrease
in yield occurred due to an increase in the market value of the stock. At March
31, 2002, the closing market price of Monroe Bancorp stock was $12.25 per share
compared to $7.94 per share at March 31, 2001, an increase of 54.3 percent.

Net Interest Income / Net Interest Margin
-----------------------------------------
Net interest income is the primary source of the Company's earnings. It is a
function of the net interest margin and the volume of average earning assets.
The tax-equivalent net interest margin was 4.13 percent for the quarter ended
March 31, 2002, a decrease from 4.19 percent for the same quarter last year. The
first quarter margin declined compared to prior year primarily for two reasons.
First, the Bank consciously obtained longer term deposits and Federal Home Loan
Bank of Indianapolis (FHLBI) advances over the past six months for
asset/liability gap management purposes. These deposits/borrowings carry a
higher rate of interest than if the Bank had obtained short-term deposits and
borrowings. Management believes that the longer term fixed rate funding has
reduced the Company's interest rate risk even though the short-term effect is a
decline in the margin. Second, during the first quarter of 2002, deposit growth
outpaced loan growth and the Bank had higher than usual average federal funds
sold during February, which contributed to the decline in the margin.

Net interest income after the provision for loan losses was $4.4 million for the
three months ended March 31, 2002 compared to $3.9 million for the same period
in 2001, an increase of 12.6 percent. Total interest income decreased by
$575,000, or 7.1 percent, for the first quarter of 2002 compared to the first
quarter of 2001. This decrease was the result of a decrease in the average
tax-equivalent yield on earning assets to 6.6 percent compared to 8.3 percent
for the first quarter of 2001. This decrease reflects the declining interest
rate environment. At March 31, 2002, the prime rate was 4.75 percent, compared
to 8.0 percent at March 31, 2001. The decline in yields on earning assets was
more than offset by the decline in interest expense. Interest expense decreased
by $1.2 million for the first quarter of 2002 compared to the first quarter of
2001. This decrease resulted from a decrease in the average rate paid on
interest bearing liabilities to 2.9 percent during the first quarter of 2002
from 4.9 percent for the same quarter in 2001.

Also contributing to the growth in net interest income was an increase in the
volume of loans. The average balance of loans grew to $373.4 million during the
first quarter of 2002 compared to $298.0 million for the same period in 2001, an
increase of $75.4 million, or 25.3 percent. This growth was partially offset by
a decrease in the average balance of investment securities to $86.4 million in
the first quarter of 2002 compared to $100.6 million in the first quarter of
2001. Average interest bearing liabilities increased $61.5 million, or 18.3
percent, in the first quarter of 2002 compared to first quarter 2001.

Noninterest Income / Noninterest Expense
----------------------------------------
Total noninterest income increased $492,000, for the three months ended March
31, 2002 compared to the same period in 2001. Unrealized securities gains and
losses are comprised entirely of net unrealized gains and losses on trading
securities (mutual funds) held in a grantor trust ("rabbi trust") in connection
with the Company's Directors' Deferred Compensation Plan. These securities are
held as trading securities, hence, unrealized gains

                                       9
<PAGE>

and losses are recognized on the income statement. Any net unrealized loss is
directly offset by a decrease to directors' fee expense, and conversely, any net
unrealized gain is directly offset by an increase to directors' fee expense.
This is included in the line item identified on page 5 of the consolidated
condensed financial statements as "Depreciation on directors' deferred
compensation plan." The activity in the rabbi trust has no effect on the
Company's net income.

Omitting the unrealized losses/gains on the rabbi trust from 2002 and 2001,
noninterest income increased $260,000 or 22.3 percent during the first quarter
of 2002 compared to the first quarter of 2001. This growth mainly occurred in
three areas. First, the Bank sells substantially all fixed rate residential
mortgage loans it originates on the secondary market. Gains on these sales
increased $127,000 during the first quarter of 2002 compared to 2001, or 138.0
percent, primarily because the Company expanded its marketing and loan
origination efforts to take advantage of the opportunity created by decreases in
interest rates which have prompted customers to refinance their home mortgages.
Management does not believe this same rate of growth in gains on the sale of
real estate loans will occur for the remainder of 2002, due to changing market
conditions. Second, commission income increased $94,000, or 82.5 percent during
the first quarter of 2002 compared to 2001 with growth primarily occurring in
commissions on fixed annuity sales. First quarter 2001 fixed annuity sale
commissions were unusually low. The growth in 2002 annuity sales reflects an
improvement in the sales process, including training and incentive programs.
Third, service charges increased $74,000 or 14.2 percent, mainly due to the
maturation of a new product introduced at the beginning of 2001, the Overdraft
Protector.

Total other noninterest expense increased $928,000 during the first quarter of
2002 compared to the same period in 2001. As previously discussed, the net
unrealized losses on trading securities in the rabbi trust directly increased
director fee expense in 2002 and 2001. Without the effect of the rabbi trust on
2002 and 2001, other noninterest expense increased $704,000 or 25.1 percent.
Salaries and employee benefits increased $445,000 or 25.9 percent for three
reasons. First, salaries increased $169,000 primarily because the Company hired
new employees to staff its new Hendricks County branches. Second, commission
expense, increased $139,000 because higher commissions were paid to mortgage
loan originators and annuity salespeople due to increased volume. Third, health
insurance expense increased $65,000 because the Bank is partially self-insured
and several large claims were paid on employees during the first quarter of 2002
which added to the overall increase in rates on insurance. Occupancy expense
increased $105,000, or 21.4 percent, primarily due to opening two new branches
in Hendricks County. Other operating expense increased $115,000, or 24.1 percent
primarily because we outsourced our proof operation during the fourth quarter of
2001. This expense was partially offset by a reduction in salaries when our
proof department was eliminated.

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

Assets and Liabilities
----------------------
Total assets of the Company at March 31, 2002 increased 1.7 percent, or $8.2
million compared to December 31, 2001. As mentioned before, deposit growth
exceeded loan growth during the first quarter of 2002. At March 31, 2002, total
loans grew by $5.0 million, or 1.4 percent over December 31, 2001 balances.
Average deposits grew by $10.7 million, or 2.9 percent during first three months
of 2002, and average short-term borrowings (federal funds purchased and
repurchase agreements) increased $2.6 million, primarily due to an increase in
average federal funds purchased. Average other borrowings, primarily FHLBI
advances, increased $7.8 million or 25.6 percent during the first three months
of 2002. This increase is attributed to an increase in FHLBI advances. The
Company has obtained longer term FHLBI advances to lock in relatively low rates
for an extended period of time, and for gap management purposes.


Capital
-------
Shareholders' equity increased $716,000 at March 31, 2002 compared to December
31, 2001. This increase was a result of year-to-date net income of $1.5 million,
dividends paid of $738,000 and other comprehensive

                                       10
<PAGE>

loss, consisting solely of the change (decrease) in net unrecognized gains in
the Company's available-for-sale securities portfolio, of $45,000.

The Company's capital continues to exceed regulatory minimums. At March 31,
2002, the Company had a Tier I risk-based capital ratio of 12.2 percent, total
risk-based capital ratio of 13.5 percent, and a leverage ratio of 8.2 percent.
Regulatory capital guidelines require a Tier I risk-based capital ratio of 4.0
percent and a total risk-based capital ratio of 8.0 percent. Banks with Tier I
risk-based capital ratios of 6.0 percent and total risk-based capital ratios of
10.0 percent are considered "well capitalized."

Classification of Assets, Allowance for Loan Losses, and Nonperforming Loans
----------------------------------------------------------------------------
The Bank currently classifies loans internally to assist management in
addressing collection and other risks. These classified loans represent credits
characterized by the distinct possibility that some loss will be sustained if
deficiencies are not corrected. As of March 31, 2002, the Bank had $8.0 million
of loans internally classified compared to $6.4 million at December 31, 2001.
The allowance for loan losses was $4.3 million, or 1.14 percent of total loans
at March 31, 2002 compared to $4.2 million, or 1.13 percent, of total loans at
December 31, 2001. A portion of classified loans are non-accrual loans. The Bank
had non-accrual loans totaling $1.2 million of total loans at March 31, 2002
compared to $710,000 at December 31, 2001. At March 31, 2002, the Bank had
$850,000 of loans 90 days or more past due but still accruing, compared to $1.7
million at December 31, 2001.

Liquidity and Capital Resources
-------------------------------

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.

Management believes that it has adequate liquidity for the Company's short and
long-term needs. Short-term liquidity needs resulting from normal
deposit/withdrawal functions are provided for by retaining a portion of cash
generated from operations and through utilizing federal funds and repurchase
agreements. Long-term liquidity and other liquidity needs are supplemented by
the ability of the Company to borrow from the FHLBI. FHLBI advances were $37.6
million at March 31, 2002 compared to $30.7 million at December 31, 2001. The
Company has additional borrowing capacity at the FHLBI of $7.4 million as
limited by a Board resolution. If the Company's borrowing capacity were not
limited by the Board resolution, the Company would have excess borrowing
capacity of $55.3 million. Management's primary focus is on increasing deposits
to fund future growth, but the Board anticipates it would increase its
resolution limit if the Bank needs additional liquidity.

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

                                       11
<PAGE>

been an important factor in its ability to record consistent earnings growth
through periods of interest rate volatility.

Other
-----

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


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 and
Capital Resources."

The Company's interest sensitivity position at March 31, 2002 remained adequate
to meet the Company's primary goal of achieving optimum interest margins while
avoiding undue interest rate risk.

The Bank's interest rate risk is measured by computing estimated changes in net
interest income and the net portfolio value ("NPV") of its cash flows from
assets and liabilities in the event of adverse movements in interest rates.
Interest rate risk exposure is measured using an interest rate sensitivity
analysis to determine the change in NPV in the event of hypothetical changes in
interest rates. Another method also used to enhance the overall process is
interest rate sensitivity gap analysis. This method is utilized to determine the
repricing characteristics of the Bank's assets and liabilities.

NPV represents the market value of portfolio equity and is equal to the market
value of assets minus the market value of liabilities. This particular analysis
assesses the risk of loss in market risk sensitive instruments in the event of a
sudden and sustained 1 percent to 3 percent (100 to 300 basis point) increase or
decrease in interest rates. The Company's Board of Directors adopted an interest
rate risk policy which established a 10 percent maximum increase or decrease in
the NPV in the event of a sudden and sustained 2 percent (200 basis point)
increase or decrease in interest rates.

The following two tables represent the Bank's projected change in NPV for the
various rate change (rate shock) levels as of March 31, 2002:

                      Net Portfolio Value at March 31, 2002
                      -------------------------------------

     Change in Interest Rate      Dollar Amount     $ Change in       % Change
          (basis points)         (in thousands)          NPV           in NPV
     -----------------------     --------------     -----------       --------
               +300                  $ 60,348         $ (1,601)        (2.59)%
               +200                    60,923           (1,026)        (1.66)
               +100                    61,434             (515)        (0.83)
                  0                    61,949               --            --
               -100                    62,401              452          0.73
               -200                    62,724              775          1.25
               -300                    65,440            3,491          5.64


                                       12
<PAGE>

The following table represents the Bank's projected change in NPV for the
various rate shock levels as of December 31, 2001:

                    Net Portfolio Value at December 31, 2001
                    ----------------------------------------

     Change in Interest Rate      Dollar Amount     $ Change in       % Change
          (basis points)         (in thousands)          NPV           in NPV
     -----------------------     --------------     -----------       --------
               +300                  $ 58,855         $ (2,236)        (3.66)%
               +200                    59,619           (1,472)        (2.41)
               +100                    60,358             (733)        (1.20)
                  0                    61,091               --            --
               -100                    61,761              670          1.10
               -200                    61,974              883          1.45
               -300                    69,062            7,971         13.05

Management believes a 300 basis point (3 percent) decrease in rates is remote
and a 200 basis point decrease is unlikely, therefore, we will focus our
discussion on the effects of a 100 basis point decrease and a 300 basis point
increase.

The March 31, 2002 table above indicates that the Bank's estimated NPV would be
expected to decrease by 2.59 percent in the event of a sudden and sustained 300
basis point increase in interest rates. This would indicate that the Bank's
interest bearing liabilities are slightly more sensitive to an increase in rates
than its assets. In the event of a sudden and sustained 100 basis point decrease
in prevailing interest rates, the Bank's estimated NPV would be expected to
increase 0.73 percent. This would indicate that the Bank's assets would reprice
downward at a pace modestly slower (on average) than the Bank's liabilities. As
of March 31, 2002, the Company's estimated changes in NPV at all levels of
interest rate changes were well within the approved guidelines established by
the Board of Directors. The direction and amount of change in NPV did not vary
greatly between March 31, 2002 and December 31, 2001. Several floors on deposits
were lowered when the Bank's March 31, 2002 analysis was performed, which
lowered the increase in NPV at a decrease in rates of 300 basis points.

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 any
actions management may undertake in response to changes in interest rates. The
NPV calculation is based on the net present value of discounted cash flows
utilizing certain prepayment assumptions and market interest rates.

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


                                       13
<PAGE>

                       Impact of New Accounting Standards
                       ----------------------------------

In July 2001, SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and
Other Intangible Assets were issued. SFAS No. 141 requires that all business
combinations initiated after June 30, 2001 be accounted for under the purchase
method and addresses the initial recognition and measurement of goodwill and
other intangible assets acquired in a business combination. SFAS No. 142
addresses the initial recognition and measurement of intangible assets acquired
outside of a business combination and the accounting for goodwill and other
intangible assets subsequent to their acquisition. SFAS No. 142 provides that
intangible assets with finite useful lives be amortized and that goodwill and
intangible assets with indefinite lives not be amortized, but rather be tested
at least annually for impairment. The Company has no goodwill or other
intangible assets recorded in its financial statements.

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which is effective for financial statements
issued for fiscal years beginning after December 15, 2001. SFAS No. 144
addresses the financial accounting and reporting for the impairment or disposal
of long-lived assets. The Company currently believes that the impact, if any, of
adopting this statement will not be significant to its financial position and
net income.


                           Forward-Looking Statements
                           --------------------------

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



                                       14
<PAGE>

                           Part II - Other Information

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

Item 2.           Changes in Securities.
-------           ----------------------
                  None

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

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

Item 5.           Other Information.
-------           ------------------
                  None.

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

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

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

3 (ii)            Monroe Bancorp Bylaws are incorporated by reference to
                  registrant's Form 10 filed November 14, 2000.

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

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

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

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

10 (v)            Monroe Bancorp Thrift Plan is incorporated by reference to
                  registrant's Form 10 filed November 14, 2000.

10 (vi)           Monroe Bancorp Employee Stock Ownership Plan is incorporated
                  by reference to registrant's Form 10 filed November 14, 2000.

Item 6b.          Reports filed on Form 8-K.
--------          --------------------------

                  Monroe Bancorp filed an 8-K on February 22, 2002 to report the
                  release of a summary of fourth quarter 2001 and calendar year
                  2001 financial information issued February 22, 2002,

                                       15
<PAGE>

                                   SIGNATURES

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

                                   MONROE BANCORP

    Date:    May 14, 2002          By: /s/ Mark D. Bradford
             ------------              ----------------------------------
                                       Mark D. Bradford, President and
                                       Chief Executive Officer

    Date:    May 14, 2002          By: /s/ Gordon M. Dyott
             ------------              ----------------------------------
                                       Gordon M. Dyott, Exec. Vice President,
                                       Chief Financial Officer
                                       (Principal Financial Officer)







                                       16