FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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


For the quarterly period ended March 31, 2001

                                       OR

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

For the transition period from            to

Commission File No.  000-31951
                     ---------

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

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

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

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

                                Yes  X>   No
                                    ---      ----

Outstanding Shares of Common Stock on  May 11, 2001:  6,150,240
                                       ------         ---------

<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
                                    FORM 10-Q

                                      INDEX

                                                                        Page No.
                                                                        --------

Forward Looking Statement.....................................................3

Part I. Financial Information:

     Item 1.  Financial Statements:

                   Consolidated Condensed Balance Sheet.......................4

                   Consolidated Condensed Statement of Income.................5

                   Consolidated Condensed Statement of Shareholders' Equity...6

                   Consolidated Condensed Statement 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........................8

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

Part II.  Other Information:

     Item 1.  Legal Proceedings..............................................14

     Item 2.  Changes In Securities..........................................14

     Item 3.  Defaults Upon Senior Securities................................14

     Item 4.  Submission of Matters to a Vote of Security Holders............14

     Item 5.  Other Information..............................................14

     Item 6a. Exhibits.......................................................14

     Item 6b. Reports Filed on Form 8-K......................................14

Signatures...................................................................15

                                       2
<PAGE>

                            FORWARD LOOKING STATEMENT

This Quarterly Report on Form 10-Q ("Form 10-Q") contains statements which
constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Form 10-Q and include statements regarding the intent, belief,
outlook, estimate or expectations of Monroe Bancorp and subsidiary (the
"Company"), its directors or its officers primarily with respect to future
events and the future financial performance of the Company. Readers of this Form
10-Q are cautioned that any such forward looking statements are not guarantees
of future events or performance and involve risks and uncertainties, and that
actual results may differ materially from those in the forward looking
statements as a result of various factors. The accompanying information
contained in this Form 10-Q identifies important factors that could cause such
differences. These factors include changes in interest rates; loss of deposits
and loan demand to other financial institutions; substantial changes in
financial markets; changes in real estate values and the real estate market or
regulatory changes.


                                       3
<PAGE>

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


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

<TABLE>
<CAPTION>
                                                                       March 31,    December 31,
                                                                         2001           2000
                                                                   --------------------------------
<S>                                                                    <C>            <C>
Assets
      Cash and due from banks ....................................     $  20,485      $  19,483
      Federal funds sold .........................................         2,100          6,500
                                                                   --------------------------------
            Cash and cash equivalents ............................        22,585         25,983
      Trading securities .........................................         2,964          3,171
      Investment securities
           Available for sale ....................................        24,425         23,636
           Held to maturity ......................................        70,517         75,443
                                                                   --------------------------------
                Total investment securities ......................        94,942         99,079
      Loans held for sale ........................................           899            794
      Loans, net of allowance for loan losses of $3,959 and $3,873       300,430        292,092
      Premises and equipment .....................................        10,627         10,447
      Federal Home Loan Bank of Indianapolis stock, at cost ......         1,257          1,257
      Interest receivable and other assets .......................         8,078          9,008
                                                                   --------------------------------

           Total assets ..........................................     $ 441,782      $ 441,831
                                                                   ================================

Liabilities
      Deposits
           Noninterest-bearing ...................................     $  65,088      $  58,846
           Interest-bearing ......................................       290,216        284,149
                                                                   --------------------------------
                Total deposits ...................................       355,304        342,995
      Short-term borrowings ......................................        33,958         48,871
      Long-term debt .............................................         7,606          6,542
      Interest payable and other liabilities .....................         6,132          5,691
                                                                   --------------------------------
           Total liabilities .....................................       403,000        404,099
                                                                   --------------------------------

Commitments and Contingent Liabilities

Shareholders' Equity
      Common stock, no-par value
           Authorized - 18,000,000 shares
           Issued and outstanding -6,150,240 shares ..............           137            137
      Additional paid-in capital .................................         3,345          3,346
      Retained earnings ..........................................        35,163         34,392
      Accumulated other comprehensive income .....................           245            (35)
      Unearned ESOT shares .......................................          (108)          (108)
                                                                   --------------------------------
             Total shareholders' equity ..........................        38,782         37,732
                                                                   --------------------------------
           Total liabilities and shareholders' equity ............     $ 441,782      $ 441,831
                                                                   ================================
</TABLE>

See notes to consolidated condensed financial statements.

                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                               Three Months Ended
                                                                    March 31
                                                          ----------------------------
                                                                2001         2000
                                                          ----------------------------
<S>                                                           <C>          <C>
  Interest Income
      Loans, including fees .............................     $ 6,714      $ 6,013
      Trading securities ................................          20           22
      Investment securities
           Taxable ......................................         980        1,016
           Tax exempt ...................................         333          397
       Federal funds sold ...............................          39            2
                                                          ----------------------------
           Total interest income ........................       8,086        7,450
                                                          ----------------------------

Interest Expense
      Deposits ..........................................       3,477        2,916
      Short-term borrowings .............................         500          469
      Long-term debt ....................................          96          215
                                                          ----------------------------
           Total interest expense .......................       4,073        3,600
                                                          ----------------------------

Net Interest Income .....................................       4,013        3,850
      Provision for loan losses .........................         150          180
                                                          ----------------------------
Net Interest Income After Provision for Loan Losses .....       3,863        3,670
                                                          ----------------------------

Other Income
      Trust fees ........................................         214          192
      Service charges on deposit accounts ...............         521          365
      Commission income .................................         114           99
      Securities gains ..................................           3            9
      Unrealized gain (loss) on trading securities ......        (245)          84
      Gain on sale of loans .............................          92           29
      Other operating income ............................         224          246
                                                          ----------------------------
           Total other income ...........................         923        1,024
                                                          ----------------------------

Other Expenses
      Salaries and employee benefits ....................       1,721        1,646
      Premises and equipment ............................         490          465
      Advertising .......................................         117          123
      Appreciation (depreciation) on directors' deferred
            compensation plan ...........................        (224)          99
      Other operating expense ...........................         478          441
                                                          ----------------------------
           Total other expenses .........................       2,582        2,774
                                                          ----------------------------

Income Before Income Tax ................................       2,204        1,920
      Income tax expense ................................         757          638
                                                          ----------------------------

Net Income ..............................................     $ 1,447      $ 1,282
                                                          ============================

Basic earnings per share ................................     $   .24      $   .21
Diluted earnings per share ..............................        . 24          .21
</TABLE>

See notes to consolidated condensed financial statements.

                                       5
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
            Consolidated Condensed Statement of Shareholders' Equity
                    For the Three Months Ended March 31, 2001
                                   (Unaudited)
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                        Unearned
                                    Common Stock                                         Accumulated    Employee
                               -------------------- Additional                              Other         Stock
                                  Shares              Paid In   Comprehensive Retained  Comprehensive   Ownership
                                Outstanding  Amount   Capital      Income     Earnings  Income (Loss)  Trust Shares   Total
                               -----------------------------------------------------------------------------------------------
<S>                               <C>         <C>      <C>          <C>        <C>            <C>         <C>        <C>
Balances, January 1, 2001         6,150,240   $ 137    $ 3,346                 $34,392        $ (35)      $ (108)    $ 37,732

Comprehensive Income:
    Net income for the
      period                                                        $ 1,447      1,447                                  1,447
    Unrealized gains on
      securities                                                        280                      280                      280
    Cash dividend ($.10 per
      share)                                                                     (676)                                  (676)
    ESOT shares earned                                     (1)                                                            (1)
                               -----------------------------------------------------------------------------------------------

Balances, March 31, 2001          6,150,240   $ 137     $3,345      $ 1,727    $35,163         $ 245      $ (108)     $38,782
                               ===============================================================================================
</TABLE>

See notes to consolidated condensed financial statements.

                                       6
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                                       March 31,
                                                                            ----------------------------
                                                                                  2001          2000
                                                                            ----------------------------
<S>                                                                             <C>           <C>
Operating Activities
      Net income ..........................................................     $  1,447      $  1,282
      Adjustments to reconcile net income to net cash provided by
            operating activities
        Provision for loan losses .........................................          150           180
        Depreciation and amortization .....................................          185           181
        Deferred income tax ...............................................          137            48
        Investment securities amortization ................................           47            82
        Securities (gain) .................................................           (3)           (9)
        Origination of loans held for sale ................................       (3,940)       (1,842)
        Proceeds from sale of loans held for sale .........................        3,928         2,294
        Gain on sale of loans held for sale ...............................          (92)          (29)
        ESOT compensation .................................................           (1)            4
        Net change in:
           Trading securities .............................................          210           (64)
           Interest receivable and other assets ...........................          613          (143)
           Interest payable and other liabilities .........................          441           100
                                                                            ----------------------------
                Net cash provided by operating activities .................        3,122         2,084
                                                                            ----------------------------

Investing Activities
      Purchases of securities available for sale ..........................       (3,493)          (51)
      Proceeds from sales of securities available for sale ................                         49
      Proceeds from paydowns and maturities of securities
            available for sale ............................................        3,170
      Purchases of securities held to maturity ............................                     (2,003)
      Proceeds from paydowns and  maturities of securities held to maturity        4,873         2,226
      Net change in loans .................................................       (8,489)       (2,986)
      Purchases of premises and equipment .................................         (365)         (244)
                                                                            ----------------------------
                Net cash used by investing activities .....................       (4,304)       (3,009)
                                                                            ----------------------------

Financing Activities
      Net change in
        Noninterest-bearing, interest-bearing demand and  savings deposits        14,513        21,725
        Certificates of Deposit ...........................................       (2,204)       11,967
        Short-term borrowings .............................................      (14,913)      (17,018)
      Proceeds of long-term debt ..........................................        1,104
      Repayment of long-term debt .........................................          (40)       (3,031)
      Cash dividends paid .................................................         (676)         (613)
                                                                            ----------------------------
                Net cash provided (used) by financing activities ..........       (2,216)       13,030
                                                                            ----------------------------
Net Change in Cash and Cash Equivalents ...................................       (3,398)       12,105
Cash and Cash Equivalents, Beginning of Period ............................       25,983        17,404
                                                                            ----------------------------

Cash and Cash Equivalents, End of Period ..................................     $ 22,585      $ 29,509
                                                                            ============================

Supplemental cash flow disclosures
      Interest paid .......................................................     $  4,070      $  3,570
      Income tax paid .....................................................          140           110
</TABLE>

See notes to consolidated condensed financial statements.

                                       7
<PAGE>

                          MONROE BANCORP AND SUBSIDIARY
              Notes to Consolidated Condensed Financial Statements
                                 March 31, 2001
                                   (Unaudited)

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

The consolidated financial statements include the accounts of Monroe Bancorp
(the "Company") and its wholly owned subsidiary, Monroe County Bank, a state
chartered bank (the "Bank"). A summary of significant accounting policies is set
forth in Note 1 of Notes to Financial Statements included in the December 31,
2000, Annual Report to Shareholders. All significant intercompany accounts and
transactions have been eliminated in consolidation.

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

The interim consolidated financial statements at March 31, 2001, and for the
three months ended March 31, 2001 and 2000, 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.


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

<TABLE>
<CAPTION>
                                                   Three Months Ended                    Three Months Ended
                                                     March 31, 2001                         March 31, 2000
                                       --------------------------------------   -----------------------------------
                                                       Weighted                                Weighted
                                                       Average      Per Share                  Average    Per Share
                                         Income         Shares        Amount        Income      Shares      Amount
                                         ------         ------        ------        ------      ------      ------
<S>                                    <C>             <C>             <C>       <C>           <C>           <C>
Basic earnings per share
       Income available to common
         shareholders                  $ 1,447,000     6,139,651       $ .24     $ 1,282,000   6,132,740     $ .21
                                                                     ========                             ========

Effect of dilutive stock options                 -              -                          -           -
                                       -----------------------------            --------------------------
Diluted earnings per share
       Income available to common
         shareholders and assumed
         conversions                   $ 1,447,000     6,139,351       $ .24     $ 1,282,000   6,132,740     $ .21
                                       ======================================   ==================================
</TABLE>

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

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

The Company has made substantial progress toward expanding into eastern
Hendricks County, which is adjacent to Marion County and the Indianapolis area.
In March 2001, we hired an experienced lender from within the Hendricks County
market to lead the Bank's business development initiatives as regional manager.
We expect to sign a lease in mid-May for our first branch in Avon, Indiana, and
anticipate opening the doors for business in July 2001. We will follow this
branch opening with a second Hendricks County branch in the

                                       8
<PAGE>

fall of 2001 and a third in the spring of 2002. Through competitive pricing,
marketing and an emphasis on personal service, we hope to be able to position
ourselves as a strong competitor in this affluent, fast-growing market.
Additionally, by continuing to hire experienced and established professionals
from within the community, we will have head start in positioning the Bank and
its employees as community leaders.

The Bank, with its primary offices located in Bloomington, Indiana, conducts
business from fourteen locations in Monroe, Jackson and Lawrence Counties,
Indiana. Approximately 85% of the Bank's business is in Monroe County and is
concentrated in and around the city of Bloomington. As a community bank,
management believes that the Bank must continue to promote community involvement
and leadership among Bank employees.

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

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

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


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

Overview
--------
Net income for the first quarter was $1.4 million compared with $1.3 million for
the same quarter last year. Basic and diluted earnings per share were $.24 for
the three months ended March 31, 2001 compared to $.21 for the three months
ended March 31, 2000.

Annualized return on average equity (ROE) for the first quarter increased to
15.30% compared with 14.77% for the same quarter last year. The annualized
return on average assets (ROA) was 1.34% for the three months ended March 31,
2001 compared with 1.22% for the same period in 2000.

Management believes the improvement shown between the first three months of 2001
and the same period in 2000 can be attributed to growth in our core lending
business, strong earnings on new product lines, an increase in mortgage loan
sales and improvement in back office efficiency.

Net Interest Income / Net Interest Margin
-----------------------------------------
Net interest income is the primary source of the Company's earnings. It is a
function of net interest margin and the level of average earning assets. Net
interest income after the provision for loan losses was $3.9 million for the
first quarter ended March 31, 2001 compared to $3.7 million for the same quarter
in 2000. Total interest income increased $636,000, or 8.5%, for the first
quarter of 2001 compared to 2000. This growth resulted primarily from an
increase in the average balance of loans to $298.0 million during the first
quarter of 2001 compared to $276.7 for the same period in 2000 coupled with an
increase in the average yield on loans to 9.1% during the first quarter of 2001
compared to 8.7% for the same period in 2000.

Additionally, investment income decreased 7.1%, for the three months ended March
31, 2001 compared to the three months ended March 31, 2000. The decrease was the
result of a change in asset mix from the securities portfolio to the loan
portfolio. Average security balances declined 7.6% from $105.9 million during
the first quarter of 2000 to $98.4 million during the first quarter of 2001.

                                       9
<PAGE>

Interest expense, increased 13.1%, to $4.1 million for the three months ended
March 31, 2001 compared to $3.6 million for the same period in 2000. Interest on
deposits increased $561,000 for the first quarter of 2001 compared to the first
quarter of 2000. This increase is attributed to an increase of $12.9 million, or
4.7%, in the average balance of interest-bearing deposits for the first quarter
of 2001 compared to the same period in 2000, coupled with an increase in the
average rate on interest bearing deposits to 5.0% during the first quarter of
2001 compared to 4.3% in the first quarter of 2000. Interest expense on
short-term borrowings increased $31,000 primarily as a result of a $9.7 million
or 32.6% increase in the average balance of repurchase agreements in the first
quarter of 2001 compared to the same period in 2000, coupled with a $4.9 million
decrease in average federal funds purchased. The average rate on short-term
borrowings decreased from 5.0% for the first quarter of 2000 to 4.8% for the
first quarter of 2001.

The net interest margin improved to 4.24% for the three months ended March 31,
2001 compared to 4.21% for the same period in 2000. The margin increased during
these periods primarily because the Bank's earning asset mix shifted toward more
loans and fewer securities, and the Bank's liabilities repriced more quickly
than its assets as the prime rate decreased 200 basis points from January 2001
to March 2001.

Noninterest Income / Noninterest Expense
----------------------------------------
Total noninterest income decreased $101,000 for the three months ended March 31,
2001 compared to the same period in 2000. Unrealized securities losses are
comprised entirely of net unrealized losses on trading securities (mutual funds)
held in a grantor trust ("rabbi trust") in connection with the Company's
Directors' Deferred Compensation Plan. These securities are held as trading
securities, hence, unrealized gains and losses are recognized on the income
statement. This net unrealized loss is directly offset by a decrease to
directors' fee expense, and is included in the line item identified on page 5 of
the consolidated condensed financial statements as "Appreciation (depreciation)
on directors' deferred compensation plan." The activity in the rabbi trust has
no effect on the Company's net income.

Omitting the unrealized losses/gains on the rabbi trust from 2001 and 2000,
other income increased $219,000 or 23.1% during the first quarter of 2001
compared to the first quarter of 2000. This growth mainly occurred in two areas.
The Bank sells substantially all fixed rate residential mortgage loans it
originates on the secondary market. Fee income on the sale of real estate
mortgages in the secondary market increased $62,000 or 213.0%, primarily due to
decreases in interest rates experienced during the first quarter of 2001.
Service charges increased $156,000 or 42.7%, mainly due to the introduction of a
new product, the Overdraft Protector.

Total other noninterest expense decreased $192,000 during the first three months
of 2001 compared to the first three months in 2000. As previously discussed
above, the net unrealized losses on trading securities in the rabbi trust
directly reduced director fee expense in 2001, and the net unrealized gains
increased directors' fees in 2000. Without the effect of the rabbi trust on
2001 and 2000, other noninterest expense would have increased $131,000 or 4.9%.
These increases were comprised of several insignificant fluctuations, and
reflected Management's continuing strategy to contain costs and increase
efficiency through the use of technology.

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

Assets and Liabilities
----------------------
Total assets of the Company remained substantially unchanged at March 31, 2001
compared to December 31, 2000. The loan portfolio grew 2.9% during the first
quarter of 2001 and loan activity has picked up substantially during April.
Deposits grew 3.6% during the first quarter, while short-term borrowings,
primarily repurchase agreements, declined 3.0%. Total investment securities
decreased $4.1 million, or 4.2%, at March 31, 2001 compared to December 31,
2000. This occurred primarily because loan demand exceeded average deposit and
repurchase agreement growth, and as securities matured, proceeds were used to
fund loan growth.

                                       10
<PAGE>

Capital
-------
Shareholders' equity increased $1.0 million at March 31, 2001 compared to
December 31, 2000. This increase was a result of year-to-date net income of $1.4
million, dividends paid of $676,000 and other comprehensive income (the net
change in the Company's available-for-sale securities portfolio) of $280,000.

The Company's capital continues to exceed regulatory minimums. At March 31,
2001, the Company had a Tier I risk-based capital ratio of 13.2%, total
risk-based capital ratio of 14.4%, and a leverage ratio of 8.9%. Regulatory
capital guidelines require a Tier I risk-based capital ratio of 4.0% and a total
risk-based capital ratio of 8.0%. Banks with Tier I risk-based capital ratios of
6.0% and total risk-based capital ratios of 10.0% are considered "well
capitalized."

Classification of Assets, Allowance for Loan Losses, and Nonperforming Loans
----------------------------------------------------------------------------
The Bank currently classifies loans internally to assist management in
addressing collection and other risks. These classified loans represent credits
characterized by the distinct possibility that some loss will be sustained if
deficiencies are not corrected. As of March 31, 2001, the Bank had $5.5 million
of loans internally classified. The allowance for loan losses was $4.0 million,
or 1.30% of total loans at March 31, 2001 compared to $3.9 million, or 1.31%, of
net loans receivable at December 31, 2000. A portion of classified loans are
non-accrual loans. The Bank had non-accrual loans totaling $913,000 at March 31,
2001 compared to $332,000 at December 31, 2000.

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

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

Management believes that it has adequate liquidity for the Company's short and
long-term needs. Short-term liquidity needs resulting from normal
deposit/withdrawal functions are provided by the Company by retaining a portion
of cash generated from operations and through utilizing federal funds and
repurchase agreements. Long-term liquidity and other liquidity needs are
provided by the ability of the Company to borrow from the Federal Home Loan Bank
of Indianapolis (FHLBI). FHLBI advances were $6.5 million at both March 31, 2001
and December 31, 2000. As interest rates have declined during 2001, rates on
FHLBI advances have become more attractive, and the Company plans to utilize
advances to assist in funding loan growth.

Impact of Inflation and Changing Prices
---------------------------------------

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

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

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.

                                       11
<PAGE>

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

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

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

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

Beginning March 31, 2001, the Bank was able to use computer generated reports to
more accurately report the repricing of one-to-four family, multi-family and
nonfarm/nonresidential (i.e., commercial) variable rate mortgage loans (see "new
method" table). Prior to March 31, 2001, a single average number of months until
these loans repriced was calculated for each of these loan types (see "old
method" table).

The following two tables represent the Bank's projected change in NPV for the
various rate shock levels as of March 31, 2001:


               Net Portfolio Value at March 31, 2001 (new method)
               --------------------------------------------------

    Change in Interest Rate    Dollar Amount      $ Change in     % Change in
        (basis points)         (in thousands)          NPV             NPV
        --------------         --------------          ---             ---
             +300                 $ 58,144          $ (1,658)        (2.77)%
             +200                   58,707            (1,095)        (1.83)
             +100                   59,258              (544)        (0.91)
                0                   59,802               ---           ---
             -100                   60,276               474          0.79
             -200                   60,615               813          1.36
             -300                   60,575               773          1.29


               Net Portfolio Value at March 31, 2001 (old method)
               --------------------------------------------------

    Change in Interest Rate    Dollar Amount      $ Change in     % Change in
        (basis points)         (in thousands)          NPV             NPV
        --------------         --------------          ---             ---
             +300                 $ 60,631          $   1,994         3.40%
             +200                   60,024              1,387         2.37
             +100                   59,358                721         1.23
                0                   58,637                ---          ---
             -100                   57,793               (844)       (1.44)
             -200                   56,761             (1,876)       (3.20)
             -300                   55,295             (3,342)       (5.70)

                                       12
<PAGE>

The following table represents the Bank's projected change in NPV for the
various rate shock levels as of December 31, 2000 under the old method:

              Net Portfolio Value at December 31, 2000 (old method)
              -----------------------------------------------------

    Change in Interest Rate    Dollar Amount      $ Change in     % Change in
        (basis points)         (in thousands)          NPV             NPV
        --------------         --------------          ---             ---
             +300                 $ 58,148          $ 1,316           2.32%
             +200                   57,766              934           1.64
             +100                   57,324              492           0.87
                0                   56,832              ---           ---
             -100                   56,125             (707)         (1.24)
             -200                   55,096           (1,736)         (3.05)
             -300                   53,858           (2,974)         (5.23)


The March 31, 2001 (new method) table above indicates that the Bank's estimated
NPV would be expected to decrease by 277 basis points as of March 31, 2001 in
the event of a sudden and sustained 300 basis point increase in interest rates.
In the event of sudden and sustained 300 basis point decrease in prevailing
interest rates, the Bank's estimated NPV would be expected to increase 129 basis
points. As of March 31, 2001 the Company's estimated changes in NPV were within
the approved guidelines established by the Board of Directors.

When the March 31, 2001 change in NPV is calculated using the old method of
averaging the repricing term of these loans (March 31, 2001 "old method" table
above), the results are similar to the change in NPV at December 31, 2000.
Management does not believe the maturities or repricing terms of the Bank's
loans or deposits fluctuated significantly between December 31, 2000 and March
31, 2001.

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

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


                                       13
<PAGE>

                           Part II - Other Information

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Item 6b.             Reports filed on Form 8-K.
-------              --------------------------
                     No reports were filed on Form 8-K during the quarter ended
                     March 31, 2001.

                                       14

<PAGE>

                                   SIGNATURES

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

                                     MONROE BANCORP

    Date: May 11, 2001               By: /s/ Mark D. Bradford
          ------------                   ----------------------
                                         Mark D. Bradford, President and
                                         Chief Executive Officer

    Date: May 11, 2001               By: /s/ Kathryn E. Burns
          ------------                   ----------------------
                                         Kathryn E. Burns, Sr. Vice President,
                                         Chief Financial Officer




                                       15