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 which 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 principles 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-seven 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.

Critical Accounting Policies

During the quarter ended June 30, 2009, 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). 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 2.3 million shares of common stock. 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 6 to the Consolidated Financial Statements for additional information regarding the Stock Option Plan and related expense.

Results of Operations

For the three months ended June 30, 2009, the Company recorded a net operating loss of $5.2 million. After an effective dividend of $1.2 million to the U.S. Treasury on preferred stock, the Company reported a net loss to common stockholders of $6.4 million, or $0.24 per diluted common share, compared to earnings of $4.9 million, or $0.18 per diluted common share, in the second quarter of 2008. For the six months ended June 30, 2009, the Company reported a net loss to common stockholders of $9.6 million compared to earnings of $9.1 million for the same period in 2008. Earnings for both the three and six- month periods were significantly impacted by loan loss provisions of $18.4 million and $31.8 million, respectively, due to the year-over-year increase in the level of non-performing assets and $29.3 million in net charge-offs in 2009.

On a pre-tax, pre-provision basis, operating income of $10.4 million for the three months ended June 30, 2009, was down $874 thousand as compared to $11.2 million for the three months ended June 30, 2008. However, the current quarter results include a special, one-time FDIC insurance assessment of $1.2 million. On a sequential basis, pre-tax, pre-provision operating income was up $809 thousand, despite the special assessment.

Since December 31, 2008, net loans are down $55.1 million, or 2.4%, with non-farm non-residential loans up $30.9 million, construction loans down $78.8 million, and one-to-four family residential loans for portfolio up $12.4

million. In addition, one-to-four family residential loans originated for sale totaled $64.8 million for the quarter ended June 30, 2009, and $125.9 million year-to-date, compared to $22.5 million and $44.2 million for the same periods in 2008.

Year-to-date loan production has been negatively impacted by declining economic activity and demand in both the business and consumer sectors, a reallocation of personnel resources to problem loan identification and resolution and a strategic decision to moderate land acquisition, development and construction loan growth in the face of an uncertain economy and heightened risk factors. Going forward, lending efforts will be focused on building greater market share in commercial and industrial lending, especially in sectors forecast for growth, such as government contract lending and select service industries through strategic hiring, marketing campaigns and calling efforts.

For the six months ended June 30, 2009, total deposits were up $19.3 million and included an increase in demand deposits of $44.9 million, or 23.0%, from $194.8 million at December 31, 2008, to $239.7 million at June 30, 2009, an increase in savings and interest-bearing demand deposits of $241.8 million, or 46.7%, and a decrease in time deposits of $267.3 million, from $1.46 billion at December 31, 2008, to $1.19 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. The declines in time deposits are reflective of lower loan volume and a strategy to reduce the Bank's historically heavy reliance on certificates of deposit as a funding source with deposit gathering efforts increasingly focused on demand deposits as well as cross-selling activities tied to the acquisition of savings and interest-bearing demand accounts. The proportionate share of time deposits relative to total deposits has declined from 67.2% at year-end 2008 to 54.4% as of June 30, 2009, and is expected to be in the 45-50% range by the end of this year.

Repurchase agreements, the majority of which represent funds of significant commercial demand deposit customers, and Fed funds purchased decreased $22.2 million, or 11.8%, from $188.0 million at December 31, 2008, to $165.7 million at June 30, 2009, with $12 million of the decline in Federal funds purchased. There were no Federal funds purchased as of June 30, 2009.

As noted, for the six months ended June 30, 2009, the Company recorded a net income operating loss of $7.6 million as compared to earnings of 9.1 million for the six months ended June 30, 2008, as net interest income increased $2.6 million, or 6.4%, non-interest income increased $409 thousand, or 12.2%, non-interest expense rose $4.6 million, or 21.0%, and provisions for loan losses were up $24.0 million. The Company's annualized return on average assets and return on average equity were a negative 0.56% and 6.11% for the current six month period compared to a positive 0.73% and 10.43% for the six months ended June 30, 2008.

For the three months ended June 30, 2009, the Company recorded a net operating loss of $5.2 million compared to earnings of $4.9 million for the same period in 2008 as net interest income rose $1.3 million, or 6.2%, non-interest income increased $220 thousand, or 12.7%, non-interest expense increased $2.4 million, or 21.2%, and provisions for loan losses were up $14.8 million. The return on average assets and return on average equity were a negative 0.77% and 8.36% for the three months ended June 30, 2009, compared to a positive 0.76% and 11.18% for the same period in 2008.

Stockholders' equity decreased $10.3 million, or 4.1%, from $253.3 million at December 31, 2008, to $243.0 million at June 30, 2009, with a net loss to common stockholders of $9.6 million and a decline in other comprehensive income related to the investment securities portfolio, net of tax.

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 $2.6 million, or 6.4%, from $40.2 million for the six months ended June 30, 2008, to $42.8 million for the six month period ended June 30, 2009, and increased $1.3 million, or 6.2%, from $20.7 million for the three months ended June 30, 2008, to $22.0 million for the three months ended June 30, 2009. Increases for both periods were due to overall balance sheet growth as the net interest margin declined from 3.32% for the six months ended June 30, 2008, to 3.25% for the current six-month period while the margin increased from 3.30% for the three months ended June 30, 2008, to 3.35% for the three months ended June 30, 2009. Year-over-year, yields on loans are down 106 basis points due to reductions in the prime rate and increases in the level of non-performing loans, while the cost of interest-bearing liabilities are down 96 basis points due to the changes noted above in the funding

mix. With market rates expected to remain mostly unchanged through the remainder of 2009, Management anticipates the margin to average from 3.30% to 3.40%.

The following tables show the average balance sheets for each of the three months and six months ended June 30, 2009 and 2008. 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 $892 thousand and $1.4 million for the three months ended June 30, 2009, and 2008, respectively, and totaled $1.7 million and $2.7 million for the six month periods.

                                               Three months ended June 30,
                                       2009                                  2008
                                       Interest    Average                   Interest    Average
(Dollars in               Average       Income-     Yields      Average       Income-     Yields
thousands)                Balance       Expense     /Rates      Balance       Expense     /Rates

Assets
Securities (1)          $    334,487   $   3,985       4.93 % $    331,321   $   4,167       5.14 %
Loans, net of
unearned income            2,294,007      33,186       5.81 %    2,150,165      35,935       6.71 %
Interest-bearing
deposits in other
banks                             79           -       0.12 %       13,311          85       2.58 %
Federal funds sold            27,400          12       0.17 %       41,595         213       2.03 %
Total
interest-earning
assets                  $  2,655,973   $  37,183       5.65 % $  2,536,392   $  40,400       6.41 %
Other assets                  60,769                                54,700
Total Assets            $  2,716,742                          $  2,591,092

Liabilities and
Stockholders' Equity
Interest-bearing
deposits:
NOW accounts            $    229,785   $     717       1.25 % $    167,541   $     689       1.65 %
Money market accounts        160,923         573       1.43 %      212,071       1,437       2.72 %
Savings accounts             304,347       1,720       2.27 %      180,939       1,367       3.03 %
Time deposits              1,264,340       9,786       3.10 %    1,346,262      13,814       4.12 %
Total
interest-bearing
deposits                $  1,959,395   $  12,796       2.62 % $  1,906,813   $  17,307       3.64 %
Securities sold under
agreement to
repurchase and
federal funds
purchased                    187,897         835       1.78 %      231,347       1,418       2.46 %
Other borrowed funds          25,000         269       4.25 %       25,275         270       4.23 %
Trust preferred
capital notes                 65,898       1,283       7.70 %       40,000         691       6.83 %
Total
interest-bearing
liabilities             $  2,238,190   $  15,183       2.72 % $  2,203,435   $  19,686       3.58 %
Demand deposits and
other liabilities            229,881                               211,168
Total liabilities       $  2,468,071                          $  2,414,603
Stockholders' equity         248,671                               176,489
Total liabilities and
stockholders' equity    $  2,716,742                          $  2,591,092
Interest rate spread                                   2.93 %                                2.83 %
Net interest income
and margin                             $  22,000       3.35 %                $  20,714       3.30 %

                                                Six months ended June 30,
                                       2009                                  2008
                                       Interest    Average                   Interest    Average
(Dollars in               Average       Income-     Yields      Average       Income      Yields
thousands)                Balance       Expense     /Rates      Balance       Expense     /Rates

Assets
Securities (1)          $    336,576   $   8,076       4.95 % $    326,155   $   8,309       5.20 %
Loans, net of
unearned income            2,303,301      66,629       5.84 %    2,090,394      71,826       6.90 %
Interest-bearing
deposits in other
banks                             91           -       0.12 %        7,340         102       2.79 %
Federal funds sold            34,354          32       0.18 %       21,899         226       2.04 %
Total
interest-earning
assets                  $  2,674,322   $  74,737       5.66 % $  2,445,788   $  80,463       6.62 %
Other assets                  57,411                                58,133
Total Assets            $  2,731,733                          $  2,503,921

Liabilities and
Stockholders' Equity
Interest-bearing
deposits:
NOW accounts            $    210,409   $   1,326       1.27 % $    156,930   $   1,201       1.53 %
Money market accounts        155,362       1,151       1.49 %      209,303       3,093       2.96 %
Savings accounts             273,059       3,159       2.33 %      172,887       2,808       3.26 %
Time deposits              1,343,894      21,791       3.27 %    1,281,000      28,235       4.42 %
Total
interest-bearing
deposits                $  1,982,724   $  27,427       2.79 % $  1,820,120   $  35,337       3.89 %
Securities sold under
agreement to
repurchase and
federal funds
purchased                    186,561       1,455       1.57 %      232,771       3,101       2.67 %
Other borrowed funds          25,000         534       4.25 %       25,138         464       3.66 %
Trust preferred
capital notes                 65,865       2,564       7.74 %       40,000       1,382       6.83 %
Total
interest-bearing
liabilities             $  2,260,150   $  31,980       2.85 % $  2,118,029   $  40,284       3.81 %
Demand deposits and
other liabilities            221,005                               211,456
Total liabilities       $  2,481,155                          $  2,329,485
Stockholders' equity         250,578                               174,436
Total liabilities and
stockholders' equity    $  2,731,733                          $  2,503,921
Interest rate spread                                   2.81 %                                2.81 %
Net interest income
and margin                             $  42,757       3.25 %                $  40,179       3.32 %

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. Provisions for loan losses were $18.4 million for the three months ended June 30, 2009, compared to $3.7 million in the same period in 2008, due to an increase in non-performing assets and loans 90+ days past due from $43.9 million at June 30, 2008, to $139.6 million at June 30, 2009. For the six months ended June 30, 2009, provisions totaled $31.8 million compared to $7.8 million for the six months ended June 30, 2008, with 2009 year-to-date net charge-offs of $29.3 million compared to $3.9 million in the first half of 2008.

The higher levels of provisions and net-charge-offs are attributable to Management's focus on aggressive problem loan resolution, as total non-performing assets and loans 90+ days past due declined by $22.5 million during the quarter from $162.1 million, or 5.84% of total assets, to $139.6 million, or 5.17% of total assets. Non-accrual loans decreased by $19.7 million, loans 90+ days past due decreased by $18.6 million and other real estate owned (foreclosed properties) increased by $15.7 million. In addition to the quarterly decline in non-accruals and loans 90+ days past due, loans past due 30 to 89 days were reduced significantly from $55.7 million at March 31, 2009, to $19.2 million. See "Risk Elements and Non-performing Assets" for additional discussion relating to non-performing assets and impaired loans.

Management feels that the allowance for loan losses is adequate at June 30, 2009. However, there can be no assurance that additional provisions for loan losses will not be required in the future, including as a result of 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.

The following schedule summarizes the changes in the allowance for loan losses:

                                               Six Months         Six Months          Twelve Months
                                                  Ended              Ended                Ended
                                              June 30, 2009      June 30, 2008      December 31, 2008
                                                              (Dollars in thousands)

Allowance, at beginning of period            $        36,475    $        22,260    $            22,260
Provision charged against income                      31,813              7,768                 25,378
Recoveries:
Consumer loans                                            55                 21                     65
Commercial                                                64                  -                     16
Real estate one-to-four family
residential:
Permanent first and second                                 -                  -                     48
Home equity loans and liens                                2                  2                      2
Real estate-nonfarm, nonresidential                        -                  -                     27
Real estate-construction                                 170                  -                      -
. . .