Forward-Looking Statements

This management's discussion and analysis and other portions of this report, contain forward-looking statements within the meaning of the Securities and Exchange Act of 1934, as amended, including statements of goals, intentions, and expectations as to future trends, plans, events or results of Company operations and policies and regarding general economic conditions. In some cases, forward-looking statements can be identified by use of words such as "may," "will," "anticipates," "believes," "expects," "plans," "estimates," "potential," "continue," "should," and similar words or phrases. These statements are based upon current and anticipated economic conditions, nationally and in the Company's market, interest rates and interest rate policy, competitive factors, and other conditions which by their nature, are not susceptible to accurate forecast, and are subject to significant uncertainty. Because of these uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results may differ materially from those indicated herein. Readers are cautioned against placing undue reliance on any such forward-looking statements. The Company's past results are not necessarily indicative of future performance.

Non-GAAP Presentations

This management's discussion and analysis refers to the efficiency ratio, which is computed by dividing non-interest expense by the sum of net interest income on a tax equivalent basis and non-interest income. This is a non-GAAP financial measure that we believe provides investors with important information regarding our operational efficiency. Comparison of our efficiency ratio with those of other companies may not be possible because other companies may calculate the efficiency ratio differently. The Company, in referring to its net income, is referring to income under accounting principals generally accepted in the United States, or "GAAP".

General

The following presents management's discussion and analysis of the consolidated financial condition and results of operations of Virginia Commerce Bancorp, Inc. and subsidiaries (the "Company") as of the dates and for the periods indicated. This discussion should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto, and other financial data appearing elsewhere in this report. The Company is the parent bank holding company for Virginia Commerce Bank (the "Bank"), a Virginia state-chartered bank that commenced operations in May 1988. The Bank pursues a traditional community banking strategy, offering a full range of business and consumer banking services through twenty-six branch offices, one residential mortgage office and one investment services office.

Headquartered in Arlington, Virginia, Virginia Commerce serves the Northern Virginia suburbs of Washington, D.C., including Arlington, Fairfax, Fauquier, Loudoun, Prince William, Spotsylvania and Stafford Counties and the cities of Alexandria, Fairfax, Falls Church, Fredericksburg, Manassas and Manassas Park. Its service area also covers, to a lesser extent, Washington, D.C. and the nearby Maryland counties of Montgomery and Prince Georges. The Bank's customer base includes small-to-medium sized businesses including firms that have contracts with the U.S. government, associations, retailers and industrial businesses, professionals and their firms, business executives, investors and consumers. Additionally, the Bank has strong market niches in commercial real estate and construction lending and operates its residential mortgage lending division as its only business segment.

Critical Accounting Policies

During the quarter ended September 30, 2008 there were no changes in the Company's critical accounting policies as reflected in the last report.

The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). The financial information contained within our statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability. We use historical loss factors as one factor in determining the

inherent loss that may be present in our loan portfolio. Actual losses could differ significantly from the historical factors that we use. In addition, GAAP itself may change from one previously acceptable method to another method. Although the economics of our transactions would be the same, the timing of events that would impact our transactions could change.

The allowance for loan losses is an estimate of the losses that are inherent in our loan portfolio. The allowance is based on two basic principles of accounting: (i) SFAS 5, Accounting for Contingencies, which requires that losses be accrued when they are probable of occurring and estimable and (ii) SFAS 114, Accounting by Creditors for Impairment of a Loan, which requires that losses be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.

Our allowance for loan losses has two basic components: the specific allowance and the unallocated allowance. Each of these components is determined based upon estimates that can and do change when the actual events occur. The specific allowance is used to individually allocate an allowance for impaired loans. Impairment testing includes consideration of the borrower's overall financial condition, resources and payment record, support available from financial guarantors and the fair market value of collateral. These factors are combined to estimate the probability and severity of inherent losses based on the Company's calculation of the loss embedded in the individual loan. Large groups of smaller balance, homogeneous loans are collectively evaluated for impairment. Impaired loans which meet the criteria for substandard, doubtful and loss are segregated from performing loans within the portfolio. Internally classified loans are then grouped by loan type (commercial, commercial real estate, commercial construction, residential real estate, residential construction or installment). When impairment testing reflects no need for specific reserves on a particular loan, the loan is then assigned the unallocated allowance factor for its loan type. The unallocated formula is used to estimate the loss of non-classified loans. These un-criticized loans are also segregated by loan type and allowance factors are assigned by management based on delinquencies, loss history, trends in volume and terms of loans, effects of changes in lending policy, the experience and depth of management, national and local economic trends, concentrations of credit, quality of the loan review system and the effect of external factors (i.e. competition and regulatory requirements). The factors assigned differ by loan type. The unallocated allowance recognizes potential losses whose impact on the portfolio has yet to be recognized by a specific allowance. Allowance factors and the overall size of the allowance may change from period to period based on management's assessment of the above described factors and the relative weights given to each factor. Further information regarding the allowance for loan losses is provided under the caption: Allowance for Loan Losses/Provision for Loan Loss Expense, later in this report.

The Company's 1998 Stock Option Plan (the "Plan"), which is shareholder-approved, permits the grant of share options to its directors and officers for up to 2.42 million shares of common stock, as adjusted for a ten-percent stock dividend paid on May 7, 2008. Option awards are generally granted with an exercise price equal to the market price of the Company's stock at the date of grant, generally vest based on 5 years of continuous service and have 10-year contractual terms. The fair value of each option award is estimated on the date of grant using a Black-Scholes option pricing model that currently uses historical volatility of the Company's stock based on a 7.2 year expected term, before exercise, for the options granted, and a risk-free interest rate based on the U.S. Treasury curve in effect at the time of the grant to estimate total stock-based compensation expense. This amount is then amortized on a straight-line basis over the requisite service period, currently 5 years, to salaries and benefits expense. See Note 5 to the Consolidated Financial Statements for additional information regarding the Stock Option Plan and related expense.

Results of Operations

For the nine months ended September 30, 2008, the Bank experienced strong growth in assets, loans and deposits, with total assets rising $322.0 million, or 13.8%, from $2.34 billion at December 31, 2007, to $2.66 billion at September 30, 2008, as total deposits grew $286.7 million, or 15.3%, from $1.87 billion to $2.16 billion. Earnings for the period of $11.7 million were down $8.5 million, or 41.8%, compared to $20.2 million earned in the same period in 2007. On a diluted per share basis, earnings for the nine months ended September 30, 2008, were $0.43 compared to $0.74 for the same period in 2007, a decrease of 41.9%. For the three months ended September 30, 2008, earnings of $2.7 million were down $4.1 million, or 60.9%, from 2007 third quarter earnings of $6.8 million. Earnings for both the three and nine months ended September 30, 2008, were significantly impacted by loan loss provisions of $8.3 million and $16.1 million, respectively. These higher provisions were the result of increases in the level of non-performing assets and other impaired loans, $5.7 million in net charge-offs year-to-date, and overall loan portfolio growth.

Loans, net of the allowance for loan losses, increased $308.0 million, or 16.0%, from $1.92 billion at December 31, 2007, to $2.23 billion at September 30, 2008, and represented 103.6% of total deposits at September 30, 2008, compared to 103.0% at December 31, 2007. The majority of the growth in loans occurred in non-farm, non-residential real estate loans which increased $167.6 million, or 20.1%, from $835.5 million at December 31, 2007, to $1.0 billion at September 30, 2008, while one-to-four family residential real estate loans rose by $62.7 million and construction loans increased by $49.9 million. Increases in one-to-four family residential loans are due to the Bank holding more of its originations in portfolio rather than selling them, due to a reduction in demand and available products in the secondary market, while the growth in construction loans was concentrated in commercial real estate projects.

Total deposit growth of $286.7 million included a decrease in demand deposits of $7.9 million, or 3.4%, from $213.8 million at December 31, 2007, to $206.5 million at September 30, 2008, an increase in savings and interest-bearing demand deposits of $19.5 million, or 3.8%, and an increase in time deposits of $274.5 million, or 24.1%, from $1.14 billion at December 31, 2007, to $1.41 billion. The majority of the Bank's deposits are attracted from individuals and businesses in the Northern Virginia and the Metropolitan Washington, D.C. area, and the interest rates the Bank pays are generally near the top of the local market.

Repurchase agreements, the majority of which represent funds of significant commercial demand deposit customers, and Fed funds purchased decreased $24.5 million, or 11.0%, from $222.5 million at December 31, 2007, to $198.0 million at September 30, 2008. As of September 30, 2008, Fed funds purchased represented $22.0 million of the $198.0 million in total repurchase agreements and Fed funds purchased.

As noted, for the nine months ended September 30, 2008, net income decreased $8.5 million, or 41.8%, from $20.2 million for the nine months ended September 30, 2007, to $11.7 million, as net interest income increased $6.7 million, or 12.0%, non-interest income decreased $1.1 million, or 18.2%, non-interest expense rose $4.0 million, or 13.6%, and provisions for loan losses were up $14.5 million. Diluted earnings per share, adjusted giving effect to a 10% stock dividend in May 2008, of $0.43 were down $0.31, or 41.9%, from $0.74 for the comparable period in 2007. The Company's annualized return on average assets and return on average equity were 0.61% and 8.91% for the current nine month period compared to 1.30% and 17.99% for the nine months ended September 30, 2007.

For the three months ended September 30, 2008, net income of $2.7 million was down $4.1 million, or 60.9%, compared to $6.8 million for the same period in 2007 as net interest income rose $3.0 million, or 16.1%, non-interest income decreased $629 thousand, or 28.3%, and provisions for loan losses were up $7.4 million. Diluted earnings per share declined $0.15, or 60.0%, from $0.25 for the three months ended September 30, 2007, to $0.10 for the three month period ended September 30, 2008. The return on average assets and return on average equity were 0.40% and 5.98% for the three months ended September 30, 2008, compared to 1.25% and 17.25% for the same period in 2007.

Stockholders' equity increased $9.2 million, or 5.4%, from $169.1 million at December 31, 2007, to $178.3 million at September 30, 2008, on earnings of $11.7 million, $303 thousand in proceeds and tax benefits related to the exercise of options by Company directors, officers and employees, $439 thousand in stock based compensation expense credits, $1.3 million in warrants expense associated with the issuance of warrants to purchase 1.5 million shares of common stock at an exercise price of $6.83 per share to the purchasers of $25 million in trust preferred securities in September 2008, and a decrease of $4.5 million in other comprehensive income related to the investment securities portfolio, net of tax. In May 2008, the Company paid a 10% stock dividend increasing the number of shares outstanding to 26.6 million.

Net Interest Income

Net interest income is the excess of interest earned on loans and investments over the interest paid on deposits and borrowings, and is the Company's primary revenue source. Net interest income is thereby affected by balance sheet growth, changes in interest rates and changes in the mix of investments, loans, deposits and borrowings. Net interest income increased $6.7 million, or 12.0%, from $55.4 million for the nine months ended September 30, 2007, to $62.1 million for the nine month period ended September 30, 2008, and increased $3.0 million, or 16.1%, from $18.9 million for the three months ended September 30, 2007, to $21.9 million for the three months ended September 30, 2008. Increases for both periods were due to overall balance sheet growth as the net interest margin

declined from 3.69% for the nine months ended September 30, 2007, to 3.31% for the current nine-month period and from 3.58% for the three months ended September 30, 2007, to 3.38% for the three months ended September 30, 2008.

The year-over-year declines in the net interest margin continue to be primarily the result of lower yields on loans due to reductions in the prime rate from 8.25% in September 2007, to 5.00% as of September 30, 2008. As a result, the yield on loans fell 148 basis points, from 7.90% for the three months ended September 30, 2007, to 6.42% in the current period. On the funding side, ongoing strong competition for deposits in the local market has not allowed for the same level of decline in the cost of interest-bearing liabilities, which decreased 127 basis points, from 4.54% for the three months ended September 30, 2007, to 3.27%. Increases in non-performing loans have also impacted the margin, accounting for a twelve basis point decline in the third quarter of 2008, and a ten basis point decline year-to-date. Over the next six months, with the Fed funds target rate expected to remain at 1.00%, Management anticipates the margin will continue to range from 3.25% to 3.50%.

The following tables show the average balance sheets for each of the three months and nine months ended September 30, 2008 and 2007. In addition, the amounts of interest earned on interest-earning assets, with related yields on a tax-equivalent basis, and interest expense on interest-bearing liabilities, with related rates, are shown. Loans placed on a non-accrual status are included in the average balances. Net loan fees and late charges included in interest income on loans totaled $1.2 million and $1.4 million for the three months ended September 30, 2008, and 2007, respectively, and totaled $3.9 million and $4.2 million for the nine month periods.

                                                        Three months ended September 30,
                                               2008                                          2007
                                                              Average                                       Average
                              Average         Interest         Yields       Average         Interest         Yields
(Dollars in thousands)        Balance      Income-Expense      /Rates       Balance      Income-Expense      /Rates
Assets
Securities (1)              $   337,796    $         4,198        5.09 %  $   289,115    $         3,614        5.09 %
Loans, net of unearned
income                        2,250,390             36,329        6.42 %    1,783,272             35,441        7.90 %
Interest-bearing
deposits in other banks           4,348                 38        3.45 %        1,230                 17        5.48 %
Federal funds sold                  413                  2        1.80 %       31,502                405        5.03 %
Total interest-earning
assets                      $ 2,592,947    $        40,567        6.23 %  $ 2,105,119    $        39,477        7.46 %
Other assets                     67,511                                        67,157
Total Assets                $ 2,660,458                                   $ 2,172,276

Liabilities and
Stockholders' Equity
Interest-bearing
deposits:
NOW accounts                $   173,396    $           776        1.77 %  $   154,587    $           669        1.72 %
Money market accounts           208,711              1,380        2.62 %      219,190              2,207        4.00 %
Savings accounts                184,480              1,245        2.68 %      136,230              1,533        4.47 %
Time deposits                 1,379,898             12,772        3.67 %    1,080,603             13,821        5.07 %
Total interest-bearing
deposits                    $ 1,946,485    $        16,173        3.30 %  $ 1,590,610    $        18,230        4.55 %
Securities sold under
agreements to repurchase
and federal funds
purchased                       224,384              1,376        2.43 %      162,312              1,563        3.82 %
Other borrowed funds             50,000                426        3.33 %        2,717                 22        3.21 %
Trust preferred capital
notes                            41,602                683        6.42 %       43,000                787        7.16 %
Total interest-bearing
liabilities                 $ 2,262,471    $        18,658        3.27 %  $ 1,798,639    $        20,602        4.54 %
Demand deposits and
other liabilities               220,630                                       216,654
Total liabilities           $ 2,483,101                                   $ 2,015,293
Stockholders' equity            177,357                                       156,983
Total liabilities and
stockholders' equity        $ 2,660,458                                   $ 2,172,276
Interest rate spread                                              2.96 %                                        2.92 %
Net interest income and
margin                                     $        21,909        3.38 %                 $        18,875        3.58 %

                                                          Nine months ended September 30,
                                                2008                                           2007
                                                                Average                                        Average
                               Average          Interest         Yields       Average          Interest         Yields
(Dollars in thousands)         Balance       Income-Expense      /Rates       Balance       Income-Expense      /Rates
Assets
Securities (1)               $   329,945    $         12,507        5.01 %  $   263,790    $          9,603        4.86 %
Loans, net of unearned
income                         2,144,115             108,155        6.73 %    1,728,996             102,756        7.95 %
Interest-bearing deposits
in other banks                     6,336                 140        2.93 %        1,252                  52        5.59 %
Federal funds sold                14,685                 228        2.04 %       24,492                 952        5.12 %
Total interest-earning
assets                       $ 2,495,081    $        121,030        6.49 %  $ 2,018,530    $        113,363        7.53 %
Other assets                      56,128                                         63,736
Total Assets                 $ 2,551,209                                    $ 2,082,266

Liabilities and
Stockholders' Equity
Interest-bearing
deposits:
NOW accounts                 $   162,458    $          1,977        1.62 %  $   157,086    $          1,990        1.69 %
Money market accounts            209,104               4,473        2.85 %      227,926               6,755        3.96 %
Savings accounts                 176,780               4,053        3.05 %      107,011               3,512        4.39 %
Time deposits                  1,314,207              41,007        4.16 %    1,036,200              38,919        5.02 %
Total interest-bearing
deposits                     $ 1,862,549    $         51,510        3.68 %  $ 1,528,223    $         51,176        4.48 %
Securities sold under
agreement to repurchase
and federal funds
purchased                        229,955               4,477        2.59 %      151,355               4,399        3.89 %
Other borrowed funds              33,485                 890        3.49 %          916                  22        3.21 %
Trust preferred capital
notes                             40,538               2,065        6.69 %       43,000               2,346        7.19 %
Total interest-bearing
liabilities                  $ 2,166,527    $         58,942        3.62 %  $ 1,723,494    $         57,943        4.49 %
Demand deposits and other
liabilities                      209,216                                        208,770
Total liabilities            $ 2,375,743                                    $ 1,932,264
Stockholders' equity             175,466                                        150,002
Total liabilities and
stockholders' equity         $ 2,551,209                                    $ 2,082,266
Interest rate spread                                                2.87 %                                         3.04 %
Net interest income and
margin                                      $         62,088        3.34 %                 $         55,420        3.69 %

Allowance for Loan Losses / Provision for Loan Loss Expense

The provision for loan losses is based upon management's estimate of the amount required to maintain an adequate allowance for loan losses reflective of the risks in the loan portfolio. For the nine months ended September 30, 2008, provisions for loan losses were $16.1 million compared to $1.6 million in the same period in 2007. This was due to a $73.8 million increase in non-performing assets from December 31, 2007, to September 30, 2008, higher net loan growth of $308.0 million in 2008 as compared to growth of $186.5 million for the nine months ended September 30, 2007, and $5.7 million in net charge-offs year-to-date. In addition, other impaired loans, which, although well-secured and currently performing, but in some instances requiring higher reserve levels, increased from $15.4 million at December 31, 2007, to $56.0 million at September 30, 2008. As a result, the allowance for loan losses to total loans rose from 1.14% at December 31, 2007, to 1.44% as of September 30, 2008. See "Risk Elements and Non-performing Assets" for additional discussion relating to the increase in non-performing assets and potential problem loans.

Management feels that the allowance for loan losses is adequate at September 30, 2008. However, there can be no assurance that additional provisions for loan losses will not be required in the future, due to possible changes in the economic assumptions underlying management's estimates and judgments, adverse developments in the economy, on a national basis or in the Company's market area, or changes in the circumstances of particular borrowers.

The Company generates a quarterly analysis of the allowance for loan losses, with the objective of quantifying portfolio risk into a dollar figure of inherent losses, thereby translating the subjective risk value into an objective number. Emphasis is placed on semi-annual independent external loan reviews and monthly internal reviews. The determination of the allowance for loan losses is based on applying and summing the results of eight qualitative factors and one quantitative factor to each category of loans along with any specific allowance for impaired and adversely classified loans within the particular category. Each factor is assigned a percentage weight and that total weight is applied to each loan category. The resulting sum from each loan category is then combined to arrive at a total allowance for all categories. Factors are different for each loan category. Qualitative factors include: levels and trends in delinquencies and non-accruals, trends in volumes and terms of loans, effects of any changes in lending policies, the experience, ability and depth of management, national and local economic trends and conditions, concentrations of credit, quality of the Company's loan review system, and regulatory requirements. The total allowance required thus changes as the percentage weight assigned to each factor is increased or decreased due to its particular circumstance, as the various types and categories of loans change as a percentage of total loans and as specific allowances are required on impaired loans.

. . .