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, 2007

                                       OR

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

For the transition period from             to

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

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

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

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

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

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

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

Outstanding Shares of Common Stock on October 31, 2007: 6,227,550

                                       1
<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 - Nine Months ....4

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

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

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

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

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

   Item 3.  Quantitative and Qualitative Disclosures about Market Risk.......22

   Item 4.  Controls and Procedures..........................................23

Part II. Other Information:

   Item 1.  Legal Proceedings................................................24

   Item 1A. Risk Factors.....................................................24

   Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds......24

   Item 3.  Defaults Upon Senior Securities .................................24

   Item 4.  Submission of Matters to a Vote of Security Holders..............24

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

   Item 6.  Exhibits.........................................................25

Signatures...................................................................27

Exhibit Index................................................................28

                                       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,
                                                                                     2007         2006
                                                                                  (Unaudited)
                                                                                 ------------- ------------
<S>                                                                              <C>           <C>
Assets
     Cash and due from banks..................................................... $   12,847   $   24,415
     Federal funds sold..........................................................     10,149        5,803
     Interest-earning deposits...................................................      2,224        3,328
                                                                                  ----------   ----------
          Total cash and cash equivalents                                             25,220       33,546

     Trading securities, at fair value...........................................      3,665        3,557
     Investment securities:
         Available for sale......................................................    121,326      115,040
         Held to maturity........................................................      1,007        1,653
                                                                                  ----------   ----------
            Total investment securities..........................................    122,333      116,693

     Loans.......................................................................    563,029      556,918
     Allowance for loan losses...................................................     (6,147)      (6,144)
                                                                                  ----------   ----------
         Net loans................................................................   556,882      550,774
     Loans held for sale.........................................................      1,875        2,545
     Premises and equipment......................................................     18,343       15,411
     Federal Home Loan Bank of Indianapolis stock, at cost.......................      2,312        2,312
     Other assets................................................................     24,156       23,355
                                                                                  ----------   ----------

                    Total assets................................................. $  754,786   $  748,193
                                                                                  ==========   ==========

Liabilities
     Deposits:
         Noninterest-bearing..................................................... $   77,874   $   79,783
         Interest-bearing........................................................    533,630      509,545
                                                                                  ----------   ----------
            Total deposits.......................................................    611,504      589,328

     Borrowings..................................................................     80,628       98,079
     Other liabilities...........................................................      9,732        7,281
                                                                                  ----------   ----------
                    Total liabilities............................................    701,864      694,688

Commitments and Contingent Liabilities

Shareholders' Equity
     Common stock, no-par value
        Authorized, 18,000,000 shares
        Issued and outstanding - 6,227,550 and 6,515,342 shares, respectively            137          137
     Additional paid-in capital..................................................      4,320        9,284
     Retained earnings...........................................................     49,080       45,136
     Accumulated other comprehensive loss........................................       (381)        (818)
     Unearned ESOT shares........................................................       (234)        (234)
                                                                                  ----------   ----------
                    Total shareholders' equity...................................     52,922       53,505
                                                                                  ----------   ----------
                    Total liabilities and shareholders' equity................... $  754,786   $  748,193
                                                                                  ==========   ==========
</TABLE>
     See notes to consolidated condensed financial statements.

                                       3
<PAGE>

                         MONROE BANCORP AND SUBSIDIARY
                  Consolidated Condensed Statements of Income
                                  (Unaudited)
                 (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                                               Nine Months Ended
                                                                                                 September 30,
                                                                                            -----------------------
                                                                                               2007         2006
                                                                                            ---------    ----------
<S>                                                                                         <C>          <C>
Interest Income
     Loans, including fees................................................................. $  31,779    $   28,878
     Trading securities....................................................................        79            65
     Investment securities
         Taxable...........................................................................     2,997         2,634
         Tax exempt........................................................................       917           724
     Federal funds sold....................................................................       481           340
     Other interest income.................................................................        80            80
                                                                                            ---------    ----------
                    Total interest income..................................................    36,333        32,721
                                                                                            ---------    ----------

Interest Expense
     Deposits..............................................................................    16,125        12,884
     Short-term borrowings.................................................................     1,835         1,789
     Other borrowings......................................................................     1,085         1,140
                                                                                            ---------    ----------
                    Total interest expense.................................................    19,045        15,813
                                                                                            ---------    ----------
                    Net interest income....................................................    17,288        16,908
     Provision for loan losses.............................................................       885           900
                                                                                            ---------    ----------
                    Net interest income after provision for loan losses....................    16,403        16,008
                                                                                            ---------    ----------

Noninterest Income
     Fiduciary activities..................................................................     1,639         1,248
     Service charges on deposit accounts...................................................     2,715         2,747
     Commission income.....................................................................       681           598
     Securities gains .....................................................................        44           112
     Unrealized gains on trading securities................................................       170            52
     Net gains on loans sales..............................................................       670           812
     Debit card interchange fees...........................................................       695           575
     Other operating income................................................................     1,169           973
                                                                                            ---------    ----------
                    Total other income.....................................................     7,783         7,117
                                                                                            ---------    ----------

Noninterest Expenses
     Salaries and employee benefits........................................................     9,274         8,863
     Net occupancy and equipment expense...................................................     2,335         2,345
     Advertising...........................................................................       536           607
     Legal fees............................................................................       357           229
     Appreciation in directors' and executives'
         deferred compensation plans.......................................................       290           166
     Other operating expense...............................................................     2,850         2,575
                                                                                            ---------    ----------
                    Total other expenses...................................................    15,642        14,785
                                                                                            ---------    ----------

                    Income before income tax...............................................     8,544         8,340
                    Income tax expense.....................................................     2,344         2,573
                                                                                            ---------    ----------
                                   Net income.............................................. $   6,200    $    5,767
                                                                                            =========    ==========

     Basic earnings per share.............................................................. $   0.981    $    0.874
     Diluted earnings per share............................................................ $   0.977    $    0.871
     Dividends declared and paid per share.................................................      0.36          0.36
</TABLE>
     See notes to consolidated condensed financial statements.

                                       4
<PAGE>

                         MONROE BANCORP AND SUBSIDIARY
                  Consolidated Condensed Statements of Income
                                  (Unaudited)
                 (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                                              Three Months Ended
                                                                                                 September 30,
                                                                                            ----------------------
                                                                                               2007         2006
                                                                                            ---------    ---------
<S>                                                                                         <C>          <C>
Interest Income
     Loans, including fees................................................................. $  10,614    $  10,191
     Trading securities....................................................................        25           23
     Investment securities
         Taxable...........................................................................     1,038          922
         Tax exempt........................................................................       316          265
     Federal funds sold....................................................................       219          155
     Other interest income.................................................................        20           34
                                                                                            ---------    ---------
                    Total interest income..................................................    12,232       11,590
                                                                                            ---------    ---------

Interest Expense
     Deposits..............................................................................     5,622        4,763
     Short-term borrowings.................................................................       523          657
     Other borrowings......................................................................       383          376
                                                                                            ---------    ---------
                    Total interest expense.................................................     6,528        5,796
                                                                                            ---------    ---------
                    Net interest income....................................................     5,704        5,794
     Provision for loan losses.............................................................       345          300
                                                                                            ---------    ---------
                    Net interest income after provision for loan losses....................     5,359        5,494
                                                                                            ---------    ---------

Noninterest Income
     Fiduciary activities..................................................................       617          435
     Service charges on deposit accounts...................................................       917          901
     Commission income.....................................................................       210          182
     Securities gains......................................................................         2           60
     Unrealized gains on trading securities................................................        55           65
     Net gains on loans sales..............................................................       231          332
     Debit card interchange fees...........................................................       243          195
     Other operating income................................................................       376          327
                                                                                            ---------    ---------
                    Total other income.....................................................     2,651        2,497
                                                                                            ---------    ---------

Noninterest Expenses
     Salaries and employee benefits........................................................     3,086        2,995
     Net occupancy and equipment expense...................................................       799          786
     Advertising...........................................................................       149          184
     Legal fees............................................................................        85          102
     Appreciation in directors' and executives'
         deferred compensation plans.......................................................        78           85
     Other operating expense...............................................................     1,086          859
                                                                                            ---------    ---------
                    Total other expenses...................................................     5,283        5,011
                                                                                            ---------    ---------

                    Income before income tax...............................................     2,727        2,980
                    Income tax expense.....................................................       729          927
                                                                                            ---------    ---------
                                   Net income.............................................. $   1,998    $   2,053
                                                                                            =========    =========

     Basic earnings per share.............................................................. $   0.321    $   0.312
     Diluted earnings per share............................................................ $   0.319    $   0.311
     Dividends declared and paid per share.................................................      0.12         0.12
</TABLE>
     See notes to consolidated condensed financial statements.

                                       5
<PAGE>

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

Comprehensive Income:
Net income for the period........                                       $  6,200      6,200                                 6,200
Other comprehensive income
   -unrealized gain on securities                                            437                     437                      437
ESOT shares earned...............                                48                                                            48
Stock option compensation
  expense........................                                49                                                            49
Repurchase of stock, at cost.....     (287,792)              (5,061)                                                       (5,061)
Cash dividend ($0.36 per share)                                                      (2,256)                               (2,256)
                                    ---------------------------------------------------------------------------------------------

Balances September 30, 2007......    6,227,550    $  137   $  4,320     $  6,637   $ 49,080     $   (381)     $   (234)  $ 52,922
                                    =============================================================================================
</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,
                                                                                   ---------------------
                                                                                      2007        2006
                                                                                   ---------   ---------
<S>                                                                                <C>         <C>
Operating Activities
      Net income.................................................................. $   6,200   $   5,767
      Adjustments to reconcile net income to net cash provided
           by operating activities:
          Provision for loan losses...............................................       885         900
          Depreciation and amortization...........................................       814         853
          Deferred income tax.....................................................       106        (259)
          Investment securities amortization, net.................................       (34)         45
          Securities gain.........................................................       (44)       (111)
          Origination of loans held for sale......................................   (46,410)    (61,564)
          Proceeds from sale of loans held for sale...............................    47,750      60,191
          Gain on sale of loans held for sale.....................................      (670)       (804)
          Gain on sale of land....................................................       (81)         --
          ESOT compensation.......................................................        48          31
          Stock-based compensation expense........................................        49          49
          Net change in:
              Trading securities..................................................       (65)         49
              Interest receivable and other assets................................    (1,133)     (3,267)
              Interest payable and other liabilities..............................       888      (1,687)
                                                                                   ---------   ---------
                    Net cash provided by operating activities.....................     8,303         193
                                                                                   ---------   ---------

Investing Activities
      Purchase of securities available for sale...................................   (36,122)    (32,252)
      Proceeds from sales of securities available for sale........................       250       1,990
      Proceeds from paydowns and maturities of securities available for sale......    31,847      30,132
      Proceeds from paydowns and maturities of securities held to maturity........       646         301
      Purchase of FHLB stock......................................................        --         154
      Net change in loans.........................................................    (6,993)    (28,737)
      Purchase of premises and equipment..........................................    (3,665)     (2,732)
                                                                                   ---------   ---------
                    Net cash used by investing activities.........................   (14,037)    (31,144)
                                                                                   ---------   ---------

Financing Activities
      Net change in:
          Noninterest-bearing, interest-bearing demand and savings deposits.......   (15,133)     11,137
          Certificates of deposit.................................................    37,310     (21,211)
          Borrowings..............................................................   (21,526)     34,862
      Proceeds from Federal Home Loan Bank advances...............................        --       1,765
      Repayments of Federal Home Loan Bank advances...............................    (1,081)    (11,047)
      Cash dividends paid.........................................................    (2,256)     (2,371)
      Proceeds from trust preferred debentures....................................     5,155          --
      Stock options exercised.....................................................        --          51
      Repurchase of common stock..................................................    (5,061)     (1,651)
                                                                                   ---------   ---------
                    Net cash provided/used by financing activities................    (2,592)     11,535
                                                                                   ---------   ---------
Net Change in Cash and Cash Equivalents...........................................    (8,326)    (19,416)

Cash and Cash Equivalents, Beginning of Period....................................    33,546      36,600
                                                                                   ---------   ---------

Cash and Cash Equivalents, End of Period.......................................... $  25,220   $  17,184
                                                                                   =========   =========

Supplemental cash flow disclosures
      Interest paid............................................................... $  18,324   $  15,663
      Income tax paid.............................................................     2,410       2,632
</TABLE>
See notes to consolidated condensed financial statements.

                                       7
<PAGE>

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

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

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

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

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

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


Note 2: Earnings Per Share
--------------------------
The number of shares used to compute basic and diluted earnings per share was as
follows:
<TABLE>
<CAPTION>
                                                                              Nine months ended
                                                                        ----------------------------
                                                                        Sept 30, 2007  Sept 30, 2006
                                                                        -------------  -------------
<S>                                                                     <C>            <C>
                  Net income (in thousands)...........................  $      6,200   $      5,767
                                                                        =============  =============
                  Weighted average shares outstanding.................     6,340,552      6,627,189
                  Average unearned ESOT shares........................       (18,700)       (29,012)
                                                                        -------------  -------------
                  Shares used to compute basic earnings
                      per share.......................................     6,321,852      6,598,177
                  Effect of dilutive securities- stock options........        26,620         21,640
                                                                        -------------  -------------
                  Shares used to compute diluted earnings
                      per share.......................................     6,348,472      6,619,817
                                                                        =============  =============

                  Earnings per share, basic...........................  $      0.981   $      0.874
                  Earnings per share, diluted.........................  $      0.977   $      0.871
</TABLE>

Options to purchase 210,000 shares of common stock at $22 per share were
outstanding at September 30, 2007, and options to purchase 30,000 shares of
common stock at $16 per share and 210,000 shares of common stock at

                                       8
<PAGE>

$22 per share were outstanding at September 30, 2006, but were not included in
the computation of diluted earnings per share for the nine months ended
September 30, 2007 and 2006, respectively because the options' exercise price
was greater than the average market price of the common shares.
<TABLE>
<CAPTION>
                                                                             Three months ended
                                                                        ----------------------------
                                                                        Sept 30, 2007  Sept 30, 2006
                                                                        -------------  -------------
<S>                                                                     <C>            <C>
                  Net income (in thousands)...........................  $      1,998   $      2,053
                                                                        =============  =============
                  Weighted average shares outstanding.................     6,245,089      6,601,885
                  Average unearned ESOT shares........................       (16,300)       (27,088)
                                                                        -------------  -------------
                  Shares used to compute basic earnings
                     per share........................................     6,228,789      6,574,797
                  Effect of dilutive securities- stock options........        27,921         23,432
                                                                        -------------  -------------
                  Shares used to compute diluted earnings
                     per share........................................     6,256,710      6,598,229
                                                                        =============  =============

                  Earnings per share, basic...........................  $      0.321    $     0.312
                  Earnings per share, diluted.........................  $      0.319    $     0.311
</TABLE>

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

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

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

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



                                       9
<PAGE>

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

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

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

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

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

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

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

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

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

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

o   In the "Noninterest Income / Noninterest Expense" section of this document,
    we report noninterest income and noninterest expense without the effect of
    unrealized gains and losses on securities in a grantor trust ("rabbi trust")
    which is a non-GAAP financial measure. Other income includes realized and
    unrealized securities gains and losses and capital gain dividends on trading
    securities (mutual funds) held in a grantor trust ("rabbi trust") in
    connection with the Company's Directors' and Executives' Deferred
    Compensation

                                       10
 <PAGE>

    Plans. These securities are held as trading securities, and hence,
    unrealized gains and losses are recognized on the income statement. Any
    unrealized or realized loss on securities held in the rabbi trust net of any
    dividend, interest and capital gain dividend income earned on the securities
    in the rabbi trust (included in net interest income) are directly offset by
    a decrease to directors' fee/deferred executive compensation expense
    (included in other expense), and conversely, any net realized or unrealized
    gain combined with interest, dividends and capital gain dividends earned on
    the securities in the trust are directly offset by an increase to directors'
    fee/deferred executive compensation expense. These offsets are included in
    the line item identified on pages 4 and 5 of the consolidated financial
    statements as "Appreciation (depreciation) on directors' and executives'
    deferred compensation plans." The activity in the rabbi trust has no effect
    on the Company's net income, therefore, management believes a more accurate
    comparison of current and prior year noninterest income and noninterest
    expense can be made if the rabbi trust realized and unrealized gains,
    losses, capital gain dividends and offsetting appreciation (depreciation) on
    the deferred compensation plans and trustee fees are removed.

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

Overview
--------
Net income for the third quarter of 2007 was $1,998,000, a 2.7 percent decrease
from net income of $2,053,000 for the same quarter last year. Basic earnings per
share for the third quarter of 2007 were $0.321, up 2.9 percent from $0.312 per
share for the third quarter of 2006. Diluted earnings per share for the third
quarter of 2007 were $0.319, up 2.6 percent from $0.311 per share for the third
quarter of 2006. Annualized return on average equity (ROE) for the third quarter
of 2007 decreased to 15.27 percent compared to 15.62 percent for third quarter
of 2006. The annualized return on average assets (ROA) was 1.05 percent for the
third quarter of 2007 compared to 1.11 percent for the same period of 2006.

Net income for the first nine months of 2007 was $6,200,000, a 7.5 percent
increase from net income of $5,767,000 for the same period last year. Basic
earnings per share for the first nine months of 2007 were $0.981, up 12.2
percent from $0.874 per share for the same period of 2006. Diluted earnings per
share for the first nine months of 2007 were $0.977, up 12.2 percent from $0.871
per share for the same period of 2006. Annualized ROE for the nine months ended
September 30, 2007 increased to 15.80 percent compared to 14.91 percent for the
first nine months of 2006. The annualized ROA was 1.11 percent for the nine
months ended September 30, 2007 compared to 1.06 percent for the first nine
months of 2006.

Net interest income for the third quarter of 2007, after the provision for loan
losses, decreased $135,000, or 2.5 percent from the third quarter of 2006. Net
interest income after the provision for loan losses for the nine months ended
September 30, 2007 increased by $395,000 or 2.5 percent over the same period in
2006.

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

o   Trust Fee Income - Trust fees grew $182,000 or 41.8 percent to $617,000 for
    the three months ended September 30, 2007 compared to $435,000 for the same
    period of 2006. For the nine months ended September 30, 2007, trust fees
    grew $391,000 or 31.3 percent to $1,639,000 compared to $1,248,000 for the
    same period in 2006. The increase in trust fees was driven by growth in
    trust assets under management and, in smaller measure, to a fee increase.
    Trust assets under management reached $348,653,000 at September 30, 2007,
    growing 28.3 percent, or $76,887,000 over the $271,766,000 at December 31,
    2006 and by 33.7 percent, or $87,805,000 over the September 30, 2006 total
    of $260,848,000. The Bank added an experienced trust officer in late 2006
    that has contributed significantly to the growth pattern this year.
    Management does not anticipate that trust assets will sustain this rate of
    growth on an ongoing basis.

o   Sale of Brownsburg Land - The Company realized an $81,000 gain on the sale
    of a small parcel of land for a road-widening project during the first
    quarter of 2007. The sale of the land, which was in front of the Company's
    Brownsburg Banking Center, will have no impact on its operation and minimal
    impact on its overall appearance.

o   Stock Buyback Activity, Funded With Trust Preferred Stock  The Company
    repurchased 56,042 shares of its common stock during the third quarter at an
    average price including commission of $17.40, and has purchased a total of
    417,792 shares at a total cost of $7,224,000 since the program was announced
    in June

                                       11
<PAGE>

    2006. The Company's repurchase activity was funded with proceeds from trust
    preferred subordinated debentures and other debt. As of September 30, 2007
    the Company had issued a total of $8,248,000 of trust preferred subordinated
    debentures at an average cost of 6.76 percent. No additional trust preferred
    shares were issued during the three months ended September 30, 2007.

o   Formation of a Real Estate Investment Trust - The Bank formed a Real Estate
    Investment Trust (REIT) involving approximately $80,000,000 of its existing
    commercial real estate loans during the fourth quarter of 2006. The net tax
    savings generated by the REIT increased the Company's net income by $74,000
    during the third quarter of 2007 and $195,000 for the nine months ended
    September 30, 2007.

o   Loan Related Legal Expense - loan related legal expense for the third
    quarter of 2007 was $31,000, which was $41,000 or 56.9 percent less than
    during the third quarter of 2006. For the nine months ended September 30,
    2007, loan related legal expense was $231,000, which was $81,000 or 54.0
    percent higher than the same period in 2006. Most of the increase is related
    to a case that has recently been favorably resolved. Management is exploring
    options to recover amounts attributable to certain loans that were
    charged-off or written down in earlier periods related to this case.

A primary management focus is to accelerate loan growth while maintaining or
improving credit quality. Loans, including loans held for sale, at September 30,
2007 totaled $564,904,000 compared to $555,990,000 at September 30, 2006. The
$8,914,000 or 1.6 percent increase in loans is well below the $44,238,000 or 8.6
percent growth in loans that took place between September 30, 2005 and September
30, 2006. The reduction in the Company's loan growth rate is the result of
several factors including a general slowdown in commercial real estate
development and new loan activity being largely offset by loans being paid off
or refinanced elsewhere. The reduction in the rate of loan growth, if it
continues, could have an adverse affect on the growth of net interest income.

Management is pleased with the progress of the full-service Brownsburg banking
center in Hendricks County, which was opened January 2006. Average deposits for
the quarter ended September 30, 2007 were $49,706,000 compared to $39,168,000
for the quarter ended September 30, 2006. The Company plans to open three more
full-service banking centers over the next twelve months. On May 30, 2007, the
Company broke ground for two new full-service banking centers which will replace
limited service offices in Avon and Plainfield, two high growth communities in
Hendricks County, West of Indianapolis. The Plainfield center is slated to open
on December 10, 2007 and the Avon center in January of 2008. The third center
will be located in Noblesville, a high growth community located in Hamilton
County, north of Indianapolis. The Noblesville banking center is expected to
open during the summer of 2008.

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



                                       12
<PAGE>
<TABLE>
<CAPTION>
                                                                          Average Balance Sheets and Interest Rates
                                                        ----------------------------------------------------------------------------
                                                         Nine Months Ended September 30, 2007   Nine Months Ended September 30, 2006
                                                        -------------------------------------   ------------------------------------
                                                          Average                Average Rate    Average                Average Rate
                             ASSETS                       Balance     Interest   (annualized)    Balance     Interest   (annualized)
                                                        ----------   ----------  ------------  ----------   ----------  ------------
<S>                                                     <C>          <C>          <C>          <C>          <C>          <C>
Interest earning assets
   Securities
      Taxable.......................................... $   86,919   $    2,998       4.61%    $   87,794   $   2,607        3.97%
      Tax-exempt (1)...................................     34,984        1,389       5.31%        29,258       1,097        5.01%
                                                        ----------   ----------                ----------   ---------
          Total securities.............................    121,903        4,387       4.81%       117,052       3,704        4.23%


   Loans (2)...........................................    561,184       31,791       7.57%       546,309      28,927        7.08%
   FHLB Stock..........................................      2,312           78       4.51%         2,500          92        4.92%
   Federal funds sold..................................     11,661          481       5.51%         8,643         340        5.26%
   Interest-earning deposits...........................      2,888          111       5.13%         3,424         113        4.41%
                                                        ----------   ----------                ----------   ---------
           Total interest earning assets...............    699,948       36,848       7.04%       677,928      33,177        6.54%
                                                        ----------   ----------                ----------   ---------


Noninterest earning assets
  Allowance for loan losses............................     (6,348)                                (5,780)
   Premises and equipment & other assets...............     40,893                                 36,474
   Cash and due from banks.............................     14,521                                 16,508
                                                        ----------                             ----------
          Total assets................................. $  749,014                             $  725,130
                                                        ==========                             ==========

      LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
   Total interest-bearing deposits..................... $  528,588       16,125       4.08%    $  500,308      12,884        3.44%
   Borrowed funds......................................     81,017        2,920       4.82%        87,641       2,929        4.47%
                                                        ----------   ----------                ----------   ---------
      Total interest-bearing liabilities...............    609,605       19,045       4.18%       587,949      15,813        3.60%
                                                        ----------   ----------                ----------   ---------




Noninterest-bearing liabilities
   Noninterest-bearing demand deposits.................     78,686                                 77,710
   Other liabilities...................................      8,269                                  7,773
   Shareholders' equity................................     52,454                                 51,698
                                                        ----------                             ----------
           Total liabilities and shareholders' equity.. $  749,014                             $  725,130
                                                        ==========                             ==========


Interest margin recap
Net interest income and interest rate spread
   Tax-equivalent net interest income margin...........                  17,803       2.86%                    17,364        2.94%
   Tax-equivalent net interest margin as a percent of

      total average earning assets.....................                               3.40%                                  3.42%
Tax-equivalent adjustment (1)..........................                     515                                   456
                                                                     ----------                             ---------

          Net interest income..........................              $   17,288                             $  16,908
                                                                     ==========                             =========
</TABLE>
(1) Interest income on tax-exempt securities has been adjusted to a tax
    equivalent basis using a marginal income tax rate of 34%.
(2) Nonaccrual loans are included in average loan balances and loan fees are
    included in interest income.

                                       13
<PAGE>
<TABLE>
<CAPTION>
                                                                         Average Balance Sheets and Interest Rates
                                                        ----------------------------------------------------------------------------
                                                        Three Months Ended September 30, 2007  Three Months Ended September 30, 2006
                                                        -------------------------------------  -------------------------------------
                                                          Average                Average Rate    Average                Average Rate
                             ASSETS                       Balance     Interest   (annualized)    Balance     Interest   (annualized)
                                                        ----------   ----------  ------------  ----------   ----------  ------------
<S>                                                     <C>          <C>          <C>          <C>          <C>          <C>
Interest earning assets
   Securities
      Taxable.......................................... $   87,336    $   1,038       4.72%    $   86,758   $     917        4.19%
      Tax-exempt (1)...................................     35,712          479       5.32%        30,754         402        5.19%
                                                        ----------   ----------                ----------   ---------
          Total securities.............................    123,048        1,517       4.89%       117,512       1,319        4.45%


   Loans (2)...........................................    560,590       10,619       7.51%       552,915      10,207        7.32%
   FHLB Stock..........................................      2,312           26       4.46%         2,413          27        4.44%
   Federal funds sold..................................     15,837          219       5.49%        12,119         155        5.07%
   Interest-earning deposits...........................      1,894           27       5.70%         4,166          44        4.19%
                                                        ----------   ----------                ----------   ---------
           Total interest earning assets...............    703,681       12,408       7.00%       689,125      11,752        6.77%
                                                        ----------   ----------                ----------   ---------


Noninterest earning assets
  Allowance for loan losses............................     (6,432)                                (5,948)
   Premises and equipment & other assets...............     42,710                                 37,443
   Cash and due from banks.............................     14,318                                 16,294
                                                        ----------                             ----------
          Total assets................................. $  754,277                             $  736,914
                                                        ==========                             ==========

      LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
   Total interest-bearing deposits.....................  $ 538,614        5,622       4.14%    $  511,648       4,763        3.69%
   Borrowed funds......................................     75,409          906       4.77%        86,630       1,033        4.73%
                                                        ----------   ----------                ----------   ---------
      Total interest-bearing liabilities...............    614,023        6,528       4.22%       598,278       5,796        3.84%
                                                        ----------   ----------                ----------   ---------




Noninterest-bearing liabilities
   Noninterest-bearing demand deposits.................     80,001                                 78,512
   Other liabilities...................................      8,367                                  7,985
   Shareholders' equity................................     51,886                                 52,139
                                                        ----------                             ----------
           Total liabilities and shareholders' equity..  $ 754,277                             $  736,914
                                                        ==========                             ==========


Interest margin recap
Net interest income and interest rate spread
   Tax-equivalent net interest income margin...........              $    5,880       2.78%                 $   5,956        2.92%
   Tax-equivalent net interest margin as a percent of
      total average earning assets.....................                               3.31%                                  3.43%
Tax-equivalent adjustment (1)..........................                     176                                   162
                                                                     ----------                             ---------

          Net interest income..........................              $    5,704                             $   5,794
                                                                     ==========                             =========
</TABLE>
(1) Interest income on tax-exempt securities has been adjusted to a tax
    equivalent basis using a marginal income tax rate of 34%.
(2) Nonaccrual loans are included in average loan balances and loan fees are
    included in interest income.

                                       14
<PAGE>

Net Interest Income / Net Interest Margin (continued)
-----------------------------------------------------
Net interest income is the primary source of the Company's earnings. It is a
function of the net interest margin and the volume of average earning assets.
The net interest margin as a percent of average earnings assets was 3.30 percent
for the first nine months of 2007 down from 3.33 percent for the same period
last year. Adjusting for tax exempt income and expense, as discussed in the
"Non-GAAP Financial Measures" section above, the tax-equivalent net interest
margin as a percent of average earning assets was 3.40 percent for the first
nine months of 2007, down from 3.42 percent for the same period last year.
Overall increases in rates on interest bearing assets compared to increases in
rates on interest bearing liabilities were not evenly matched.

The net interest margin as a percent of average earnings assets was 3.22 percent
for the quarter ended September 30, 2007, down from 3.34 percent for the same
quarter last year. Adjusting for tax exempt income and expense, as discussed in
the "Non-GAAP Financial Measures" section above, the tax-equivalent net interest
margin as a percent of average earning assets was 3.31 percent for the quarter
ended September 30, 2007, down from 3.43 percent for the same quarter last year.
The tax-equivalent net interest margin for the third quarter of 2007 was reduced
by approximately seven basis points due to the impact of loans being placed on
non-accrual during the quarter.

Net interest income was $17,288,000 for the nine months ended September 30, 2007
compared to $16,908,000 for the same period in 2006, an increase of 2.2 percent.
Adjusting for tax exempt income and expense, as discussed in the "Non-GAAP
Financial Measures" section above, tax-equivalent net interest income was
$17,803,000 for the nine months ended September 30, 2007 compared to $17,364,000
for the same period in 2006, an increase of 2.5 percent.

Net interest income was $5,704,000 for the three months ended September 30, 2007
compared to $5,794,000 for the same period in 2006, a decrease of 1.6 percent.
Adjusting for tax exempt income and expense, as discussed in the "Non-GAAP
Financial Measures" section above, tax-equivalent net interest income was
$5,880,000 for the three months ended September 30, 2007 compared to $5,956,000
for the same period in 2006, a decrease of 1.3 percent.

Noninterest Income / Noninterest Expense
----------------------------------------
Total noninterest income for the third quarter of 2007 was $2,651,000 compared
to $2,497,000 for the same period in 2006. Excluding the effect of the Company's
deferred compensation plan, discussed in the "Non-GAAP Financial Measures"
section (page 10 and 11), total noninterest income for the third quarter of 2007
was $2,594,000, a $162,000 or 6.7 percent increase from $2,432,000 for the same
period in 2006.

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

o   Trust fee income totaled $617,000 for the third quarter of 2007 compared to
    $435,000 for the third quarter of 2006, an increase of $182,000 or 41.8
    percent. The increase in trust fees was driven by growth in trust assets
    under management and, in smaller measure, to a fee increase. Management does
    not anticipate that trust fee income will sustain this rate of growth on an
    ongoing basis.
o   Debit card interchange fees were $243,000 for the third quarter of 2007
    compared to $195,000 for the same period in 2006, an increase of $48,000 or
    24.6 percent due to an increase in debit card usage.
o   Commission income was $210,000 for the third quarter of 2007 compared to
    $182,000 for the same period in 2006, an increase of $28,000 or 15.4
    percent. This growth was attributed to a $25,000, or 28.3 percent increase
    in branch-based annuity and mutual fund sales, personnel changes, improved
    sales efforts and progress being made in the transition from a transaction
    based commission business into one that is management fee based.

Total noninterest income for the first nine months of 2007 was $7,783,000
compared to $7,117,000 for the same period in 2006. Excluding the effect of the
Company's deferred compensation plan, discussed in the "Non-GAAP Financial
Measures" section above, total noninterest income for the nine months ended
September 30, 2007 was $7,561,000, a $555,000 or 7.9 percent increase from
$7,006,000 for the same period in 2006.

                                       15
<PAGE>

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

o   Trust fee income totaled $1,639,000 for the first nine months of 2007
    compared to $1,248,000 for the same period of 2006, an increase of $391,000
    or 31.3 percent. The increase in trust fees was driven by growth in trust
    assets under management and, in smaller measure, to a fee increase.
    Management does not anticipate that trust fee income will sustain this rate
    of growth on an ongoing basis.
o   Debit card interchange fees were $695,000 for the first nine months of 2007
    compared to $575,000 for the same period in 2006, an increase of $120,000 or
    20.9 percent due to an increase in debit card usage.
o   Commission income was $681,000 for the first nine months of 2007 compared to
    $598,000 for the same period in 2006, an increase of $83,000 or 13.9
    percent. This growth was attributed to a $103,000, or 33.5 percent increase
    in branch-based annuity and mutual fund sales, personnel changes, improved
    sales efforts and progress being made in the transition from a transaction
    based commission business into one that is management fee based. This was
    partially offset by a decrease of $20,000 in full-service brokerage fees.

For the quarter ended September 30, 2007, total noninterest expense was
$5,283,000 compared to $5,011,000 for the same period in 2006. Excluding the
effect of the Company's deferred compensation plan, discussed in the "Non-GAAP
Financial Measures" section, total noninterest expense for the third quarter of
2007 was $5,201,000, a $278,000 or 5.6 percent increase from $4,923,000 for the
same period in 2006.

Significant changes in noninterest expense occurred in the following areas:

o   Salary and employee benefits increased by $91,000 or 3.0 percent during the
    third quarter of 2007 compared to the same period in 2006. The increase was
    primarily due to annual raises with the remainder being the result of growth
    in the number of employees.
o   Outside services, loan origination & collection, and business development
    expense increased $89,000 or 22.5 percent during the third quarter of 2007
    compared to the same period in 2006, primarily due to increased legal and
    audit related expenses.

For the nine months ended September 30, 2007, total noninterest expense was
$15,642,000 compared to $14,785,000 for the same period in 2006. Excluding the
effect of the Company's deferred compensation plan, discussed in the "Non-GAAP
Financial Measures" section, total noninterest expense for the third quarter of
2007 was $15,341,000, a $732,000 or 5.0 percent increase from $14,609,000 for
the same period in 2006.

Significant changes in noninterest expense occurred in the following areas:

o   Salary and employee benefits increased by $411,000 or 4.6 percent during the
    first nine months of 2007 compared to the same period in 2006. This increase
    was primarily the result of annual raises with the remainder being the
    result of growth in the number of employees.
o   Outside services, loan origination & collection, and business development
    expense increased $256,000 or 23.4 percent during the first nine months of
    2007 compared to the same period in 2006, primarily due to increased legal
    and audit related expenses.

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

The Company's effective tax rate was 27.4 percent for the nine months ended
September 30, 2007 compared to 30.9 percent for the same period in 2006. The tax
rate decreased primarily because municipal bond (tax-exempt) income represented
a higher percentage of total income in the first, second and third quarters of
2007 and because of the impact of a REIT established during the fourth quarter
of 2006.

                                       16
<PAGE>

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

Assets and Liabilities
----------------------
Total assets of the Company at September 30, 2007 were $754,786,000 an increase
of 0.9 percent or $6,593,000 compared to $748,193,000 at December 31, 2006.
Loans (including loans held for sale) grew to $564,904,000 at September 30, 2007
compared to $559,463,000 at December 31, 2006, an increase of 1.0 percent. Total
cash and cash equivalents decreased to $25,220,000 at September 30, 2007
compared to $33,546,000 at December 31, 2006, a decrease of 24.8 percent. Total
cash and cash equivalents at September 30, 2007 were lower than normal as
indicated by the fact that the average total cash and cash equivalents for the
quarter ended September 30, 2007 were $32,049,000 compared to an average of
$31,018,000 for the quarter ended December 31, 2006. Deposits increased to
$611,504,000 at September 30, 2007 compared to $589,328,000 at December 31,
2006, an increase of $22,176,000 or 3.8 percent. Borrowings decreased to
$80,628,000 at September 30, 2007 compared to $98,079,000 at December 31, 2006,
a 17.8 percent decrease. At September 30, 2007, the total amount of trust
preferred subordinated debentures outstanding was $8,248,000, compared to
$3,093,000 at September 30, 2006.

Capital
-------
Shareholders' equity decreased by $583,000 at September 30, 2007 compared to
December 31, 2006. This decrease was a result of year-to-date net income of
$6,200,000, ESOP shares earned of $48,000, option expense of $49,000, and other
comprehensive income, consisting of the increase in net unrecognized gain in the
Company's available-for-sale securities portfolio of $437,000, offset by stock
repurchased of $5,061,000, and dividends paid of $2,256,000.

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

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

                                       17
<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, 2007
------------------------
Total capital (1) (to risk-weighted assets)
    Consolidated...................................    $   67,646  11.67 %  $   45,735      8.00 %         N/A       N/A
    Bank............................................       67,250  11.67        45,454      8.00    $   56,817     10.00 %
Tier I capital (1) (to risk-weighted assets)
    Consolidated...................................        61,499  10.61        22,868      4.00           N/A       N/A
    Bank............................................       61,103  10.61        22,727      4.00        34,090      6.00
Tier I capital (1) (to average assets)
    Consolidated...................................        61,499   8.15        30,171      4.00           N/A       N/A
    Bank............................................       61,103   8.14        30,014      4.00        37,517      5.00

As of December 31, 2006
-----------------------
Total capital (1) (to risk-weighted assets)
    Consolidated...................................    $   63,513  11.08 %  $   45,838      8.00 %         N/A       N/A
    Bank............................................       64,127  11.26        45,568      8.00    $   56,960     10.00 %
Tier I capital (1) (to risk-weighted assets)
    Consolidated...................................        57,369  10.01        22,919      4.00           N/A       N/A
    Bank............................................       57,983  10.18        22,784      4.00        34,176      6.00
Tier I capital (1) (to average assets)
    Consolidated...................................        57,369   7.70        29,800      4.00           N/A       N/A
    Bank............................................       57,983   7.82        29,658      4.00        37,073      5.00
</TABLE>
(1) As defined by regulatory agencies



Classification of Assets, Allowance for Loan Losses, and Nonperforming Loans
----------------------------------------------------------------------------
The Bank currently maintains a watch list of loans internally to assist
management in addressing collection and other risks. These criticized loans
maintained on the Bank's internal watch list, represent credits that are
potentially weak or have well defined weaknesses that, if not addressed, could
jeopardize the ultimate collectability of the loan and interest. As of September
30, 2007, the Bank had $20,900,000 of loans on its internal watch list compared
to $10,009,000 at December 31, 2006, a 108.8 percent increase, and $10,098,000
at September 30, 2006, a 107.0 percent increase. The watch list loans are
primarily secured by collateral per the following chart:

                               Collateral for Watch List Loans
                                                Quarters Ended
                                   Sep 30, 2007  Dec 31, 2006  Sep 30, 2006
                                   ------------  ------------  ------------
            Business Assets        $  2,620,000  $  2,328,000  $  1,046,000
            Crops & Livestock            15,000       173,000        20,000
            Equipment                    13,000         3,000        63,000
            Financial Assets             24,000        42,000       109,000
            Real Estate              17,910,000     7,292,000     8,672,000
            Unsecured                   299,000       141,000        82,000
            Vehicle (RV or Boat)          7,000         9,000         9,000
            Vehicle (Heavy Truck)        12,000        21,000        97,000

                                   ------------  ------------  ------------
            Total                  $ 20,900,000  $ 10,009,000  $ 10,098,000
                                   ------------  ------------  ------------

A portion of watch list loans are nonaccrual loans. The Bank had nonperforming
assets (nonaccrual loans, restructured loans, OREO and 90-days past due loans
still accruing) totaling $5,159,000, or 0.68 percent of total assets at
September 30, 2007 compared to $2,497,000 or 0.33 percent of total assets at
December 31, 2006, and $2,795,000, or 0.38 percent of total assets at September
30, 2006.

                                       18
<PAGE>

Management believes the growth of nonperforming loans as well as loans listed on
the internal watch list reflects the weakness in the housing and residential
construction markets. Management also believes that emerging economic conditions
could result in further deterioration in this pool of assets resulting in the
potential for higher delinquencies, non-performing loans and net charge-offs.
Management is devoting significant attention to the resolution of problem or
potential problem assets.

The allowance for loan losses was $6,147,000, or 1.09 percent of portfolio loans
(excluding loans held for sale) at September 30, 2007 compared to $6,144,000, or
1.10 percent, of portfolio loans at December 31, 2006. Based upon factors
including but not limited to an assessment of collateral associated with watch
list loans, the payment performance of watch list loans, Management's more
aggressive stance towards placing loans on the Bank's internal watch list, local
and national economic trends, a more aggressive approach to charging-off watch
list loans and loan charge-offs that have already occurred, Management and the
Board of Directors feel that the allowance for loan losses was adequate as of
September 30, 2007.

During the first nine months of 2007, the Bank had net loan charge-offs totaling
$882,000 compared to $391,000 charged-off for the same period in 2006. Past due
loans (30 days or more) were 1.16 percent of total loans at September 30, 2007
compared to 0.93 percent of total loans at September 30, 2006. The chart on the
following page details the distribution of past due aging for watch list assets:

<TABLE>
<CAPTION>
                                  Past Due Aging for Watch List Assets
                                                        Quarters Ended
                                Sep 30, 2007             Dec 31, 2006              Sep 30, 2006
                           ----------------------   -----------------------   -----------------------
<S>                        <C>             <C>      <C>              <C>      <C>              <C>
     0-14 Days Past Due    $ 14,083,000     67.4%   $  4,992,000      49.9%   $  4,977,000      49.3%
    15-29 Days Past Due       1,377,000      6.6%        901,000       9.0%        712,000       7.1%
    30-59 Days Past Due         499,000      2.4%        181,000       1.8%        670,000       6.6%
    60-89 Days Past Due         663,000      3.2%      1,880,000      18.8%      1,093,000      10.8%
    90-119 Days Past Due         66,000      0.3%        235,000       2.3%      1,169,000      11.6%
    > 119 Days Past Due       4,212,000     20.2%      1,820,000      18.2%      1,477,000      14.6%
                           ------------    ------   ------------     ------   ------------     ------
    Total                  $ 20,900,000    100.0%   $ 10,009,000     100.0%   $ 10,098,000     100.0%
                           ------------    ------   ------------     ------   ------------     ------
</TABLE>

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

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

Short-term liquidity needs resulting from normal deposit/withdrawal functions
are provided by the Company retaining a portion of cash generated from
operations and through utilizing federal funds and repurchase agreements.
Long-term liquidity and other liquidity needs are provided by the ability of the
Company to borrow from the Federal Home Loan Bank of Indianapolis (FHLB), to
obtain brokered certificates of deposit (CDs) and to borrow on a line of credit.
FHLB advances were $18,349,000 at September 30, 2007 compared to $19,430,000 at
December 31, 2006. At September 30, 2007, the Company had excess borrowing
capacity at the FHLB of $36,120,000 as limited by the Company's board resolution
in effect at that date. In terms of managing the Company's liquidity,
management's primary focus is on increasing deposits to fund future growth.
However, the Board may increase its resolution limit on FHLB advances if the
Company needs additional liquidity.

                                       19
<PAGE>

Over the past year, the Company has also utilized alternative funding sources.
The Company obtained an unsecured line of credit with U.S. Bank during 2006. The
maximum amount that can be borrowed is $10,000,000. The line of credit carries a
variable interest rate of 1.50 percent over LIBOR and changes monthly. At
September 30, 2007, the Company had a zero balance with $10,000,000 available on
this line of credit. In July 2005, the Company began using brokered CDs as an
alternate source of funding. At September 30, 2007, the Company had $18,756,000
in brokered CDs on its balance sheet, compared to $27,061,000 at December 31,
2006 and $35,101,000 at September 30, 2006. In July 2006, the Company formed
Monroe Bancorp Capital Trust I (Trust I). Trust I issued 3,000 shares of
Fixed/Floating Rate Capital Securities with a liquidation amount of $3,000,000
in a private placement, and 93 Common Securities with a liquidation amount of
$1,000 per Common Security to the Company for $93,000. The aggregate proceeds of
$3,093,000 were used by Trust I to purchase $3,093,000 in Fixed/Floating Rate
Junior Subordinated Debentures from the Company. In March 2007, the Company
formed Monroe Bancorp Statutory Trust II (Trust II). Trust II issued 5,000
shares of Fixed/Floating Rate Capital Securities with a liquidation amount of
$5,000,000 in a private placement, and 155 Common Securities with a liquidation
amount of $1,000 per Common Security to the Company for $155,000. The aggregate
proceeds of $5,155,000 were used by Trust II to purchase $5,155,000 in
Fixed/Floating Rate Junior Subordinated Debentures from the Company. The
proceeds of these debentures are intended to be used to repurchase Company
stock.

At the bank holding company level, the Company primarily uses cash to pay
dividends to shareholders and to repurchase stock. During the past twelve
months, the main source of funding for the holding company has been proceeds
from trust preferred debentures. Prior to that, the main source of funding for
the holding company was dividends from its subsidiary (the Bank). During the
nine months ended September 30, 2007, the Bank declared dividends to the holding
company of $3,672,000. As of October 1, 2007, the amount of dividends the Bank
can pay to the parent company without prior regulatory approval was $13,414,000,
versus $10,586,000 at January 1, 2007. As discussed in Note 11 to the
Consolidated Financial Statements (page 47 of the 2006 Annual Report to
Shareholders) and Item 1 of the December 31, 2006 Form 10-K, the Bank is subject
to many regulations and, among other things, may be limited in its ability to
pay dividends or transfer funds to the holding company. Accordingly,
consolidated cash flows as presented in the Consolidated Statements of Cash
Flows on page 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, 2007, $8,303,000 of cash was provided by operating
activities, compared to $193,000 provided during the same period in 2006. The
decrease in this area was primarily a result of changes in other assets and
other liabilities. During the first nine months of 2007, $14,037,000 was used
for investing activities, compared to $31,144,000 in the same period of 2006.
The decrease in the use of funds in this category occurred primarily because the
Company had a $6,993,000 increase in loans in the first nine months of 2007
compared to a $28,737,000 increase in the same period of 2006. During the first
nine months of 2007, $2,592,000 was used by financing activities compared to
$11,535,000 of cash provided by financing activities during the same period in
2006. The decrease in this area was primarily a result of a $21,526,000 decrease
in borrowings during the first nine months of 2007 compared to a $34,862,000
increase in the same period of 2006. Overall, net cash and cash equivalents
decreased $8,326,000 during the nine months ended September 30, 2007 compared to
a decrease of $19,416,000 in the same period of 2006.

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

The primary assets and liabilities of the Company are monetary in nature.
Consequently, interest rates generally have a more significant impact on
performance than the effects of inflation. Interest rates, however, do not
necessarily move in the same direction or with the same magnitude as the price
of goods and services. In a period of rapidly rising interest rates, the
liquidity and the maturity structure of the Company's assets and

                                       20
<PAGE>

liabilities are critical to the maintenance of acceptable performance levels.
The Company constantly monitors the liquidity and maturity structure of its
assets and liabilities, and believes active asset/liability management has been
an important factor in its ability to record consistent earnings growth through
periods of interest rate volatility.

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

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

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

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

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

                                       21
<PAGE>

does business; (5) legislative or regulatory changes adversely affect the
business of the Company; (6) changes in real estate values or the real estate
markets; and (7) the Company's business developments in new markets in and
around Hendricks and Hamilton Counties. Further information on other factors
which could affect the financial results of the Company are included in the
Company's Form 10-K for the year ended December 31, 2006 as filed with the
Securities and Exchange Commission.

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

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

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

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

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

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

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


Projected Change in Net Interest Income - September 30, 2007
<TABLE>
<CAPTION>
                               Projected Net Interest           $ Change
                                  Income Over the             in Net Interest              % Change
  Change in Interest Rate       Next Twelve Months                Income                in Net Interest
       (basis points)              (in thousands)             (in thousands)                Income
--------------------------------------------------------------------------------------------------------
<S>                                    <C>                   <C>                             <C>
            +200                   $   21,958                $      (891)                    (3.90) %
            +100                       22,471                       (378)                    (1.65)
              0                        22,849                          0                         0
            -100                       22,882                         33                      0.14
            -200                       22,668                       (181)                    (0.79)
</TABLE>

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

                                       22
<PAGE>

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

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

The September 30, 2007 table indicates that the Bank's projected net interest
income for the next twelve months would decline by 3.9 percent in the event of a
sudden and sustained 200 basis point increase in interest rates. This result is
largely driven by the Company having more liabilities, primarily deposits that
would reprice over the twelve-month horizon, than assets. As a result, net
interest expense would increase faster than interest income in the event of an
upward rate shock.

Net interest income is projected to decrease modestly (0.79 percent) in the
event of an immediate 200 basis point decrease in interest rates. The projected
0.79 percent decrease in net interest income may seem counter intuitive
considering the Company has more liabilities than assets repricing over the
twelve month horizon. The explanation is found in the fact the Company has
deposits that are currently priced below 2.00 percent which could not be
repriced to match the 200 basis point drop in market rates. Alternatively,
virtually all of the Company's interest earning assets subject to repricing
could reprice downward the full 200 basis points.

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

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

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

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

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

                                       23
<PAGE>

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

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

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

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

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

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

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

                  Stock Repurchased During the Third Quarter of 2007
                  --------------------------------------------------
<TABLE>
<CAPTION>
                                                                       (d) Maximum Number
                                                                        (or Approximate
                                                                        Dollar Value) of
                                                 (c) Total Number of    Shares that May
                        (a) Total                Shares Purchased as    Yet Be Purchased
                        Number of   b) Average    Part of Publicly      Under the Plans
                         Shares     Price Paid    Announced Plans      or Programs (dollar
        Period          Purchased   per Share       or Programs        amount in thousands)
-------------------------------------------------------------------------------------------
<S>                      <C>        <C>               <C>                  <C>
July 1-31, 2007          30,000     $    17.40        30,000               $   3,229
August 1-31, 2007        26,042          17.39        26,042                   2,776
September 1-30, 2007         --             --            --                   2,776
                      ---------------------------------------
   Totals                56,042     $    17.40        56,042
                      ---------------------------------------
</TABLE>


                  The stock repurchase plan was announced June 16, 2006. Total
                  dollar amount approved: $10,000,000. The plan has no
                  expiration date, but the Board of Directors may terminate the
                  plan at anytime. The Board recently decided to suspend
                  repurchase activities for the fourth quarter of 2007 and the
                  first quarter of 2008. The Company's most recent stock
                  repurchase transaction took place on August 7, 2007.

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

Item 4.           Submission of Matters to a Vote of Security Holders
-------           ---------------------------------------------------
                  Not applicable.

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

                                       24
<PAGE>

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

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

3 (ii)      Monroe Bancorp By-laws as Amended and Restated August 16, 2007, are
            incorporated by reference to registrant's Form 8-K filed August 22,
            2007.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       25
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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



                                       26
<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, 2007           By: /s/ Mark D. Bradford
                                         -------------------------------
                                         Mark D. Bradford, President and
                                         Chief Executive Officer
                                         (Principal Executive Officer)

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





















                                       27
<PAGE>

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

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

3 (ii)      Monroe Bancorp By-laws as Amended and Restated August 16, 2007, are
            incorporated by reference to registrant's Form 8-K filed August 22,
            2007.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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







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