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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K

ANNUAL REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended
December 31, 2010

Commission file number 001-33543





FIRST CAPITAL BANCORP, INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Virginia                                                       |  | 11-3782033                          
|(State or other jurisdiction of
Incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|4222 Cox Road, Suite 200 Glen Allen, Virginia                  |  | 23060                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrants telephone number, including area code (804)-273-1160

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Act:



|                              |  |                                            
|----------------------------- |  | -------------------------------------------
|Common Stock, $4.00 par value |  | NASDAQ Capital Market                      
|(Title of Class)              |  | (Name of each Exchange on which registered)





Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act    Yes   ̈    No  x

Indicate
by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days    x  Yes     ̈  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      ̈  Yes     ̈  No

Indicate by check mark if no disclosure of delinquent filers in response to Item 405 of Regulation S-B is contained in this form, and no disclosure will be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K  x

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of large accelerated
filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  | x

State
the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days. The aggregate
market value of the voting stock held by non-affiliates computed based on a sale price of $4.18 for the Banks common stock on March 21, 2011 is approximately $10,872,000.

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all
documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a
court.    Yes   ̈    No   ̈

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 2,971,171 Shares of Common Stock, $4.00 par value





DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the Proxy Statement for the Annual Meeting of Stockholders (Part III)

Transitional Small Business Disclosure Format (Check
One):    Yes   ̈    No  x









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FIRST CAPITAL BANCORP, INC.

FORM 10-K

Fiscal Year Ended December 31, 2010

TABLE OF CONTENTS



|           |  |  |          |  |  |                                                                                                |  |  |    | 
|---------- |  |  | -------- |  |  | ---------------------------------------------------------------------------------------------- |  |  | -- | 
|PART I     |  |  |          |  |  |                                                                                                |  |  |    | 
|           |  |  | Item 1.  |  |  | Business                                                                                       |  |  | 4  | 
|           |  |  | Item 2.  |  |  | Properties                                                                                     |  |  | 21 | 
|           |  |  | Item 3.  |  |  | Legal Proceedings                                                                              |  |  | 22 | 
|           |  |  | Item 4.  |  |  | Removed and Reserved                                                                           |  |  | 22 | 
|           |  |  |         
|PART II    |  |  |          |  |  |                                                                                                |  |  |    | 
|           |  |  | Item 5.  |  |  | Market for Registrants Common Equity and Related Stockholder Matters                          |  |  | 22 | 
|           |  |  | Item 6.  |  |  | Selected Financial Data                                                                        |  |  | 23 | 
|           |  |  | Item 7.  |  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations          |  |  | 25 | 
|           |  |  | Item 8.  |  |  | Financial Statements                                                                           |  |  | 43 | 
|           |  |  | Item 9.  |  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           |  |  | 43 | 
|           |  |  | Item 9A. |  |  | Controls and Procedures                                                                        |  |  | 43 | 
|           |  |  | Item 9B. |  |  | Other Information                                                                              |  |  | 44 | 
|           |  |  |         
|PART III   |  |  |          |  |  |                                                                                                |  |  |    | 
|           |  |  | Item 10. |  |  | Directors and Executive Officers of the Registrant                                             |  |  | 44 | 
|           |  |  | Item 11. |  |  | Executive Compensation                                                                         |  |  | 44 | 
|           |  |  | Item 12. |  |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  |  | 44 | 
|           |  |  | Item 13. |  |  | Certain Relationships and Related Transactions, and Director Independence                      |  |  | 45 | 
|           |  |  | Item 14. |  |  | Principal Accountant Fees and Services                                                         |  |  | 45 | 
|           |  |  |         
|PART IV    |  |  |          |  |  |                                                                                                |  |  |    | 
|           |  |  | Item 15. |  |  | Exhibits                                                                                       |  |  | 45 | 
|           |  | 
|SIGNATURES |  |  |          |  |  | 48                                                                                             | 
|           |  | 
|EXHIBITS   |  |  |          |  |  |                                                                                                | 



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PART I

Company

First Capital Bancorp, Inc. is a bank holding company
headquartered in Glen Allen, Virginia. We conduct our primary operations through our wholly-owned subsidiary, First Capital Bank, which opened for business in 1998.

We emphasize personalized service, access to decision makers and a quick turn around time on lending decisions. Our slogan is Where People Matter. We have a management team, officers and other
employees with extensive experience in our primary market which is the Richmond, Virginia metropolitan area. We strive to develop personal, knowledgeable relationships with our customers, while at the same time offering products comparable to those
offered by larger banks in our market area.

First Capital Bank operates seven full service branch offices (alternatively
referred to herein as branches and offices), throughout the greater Richmond metropolitan area. Our bank engages in a general commercial banking business, with a particular focus on the needs of small and medium-sized
businesses and their owners and key employees, and the professional community.

We continued to experience growth in assets
during 2010. As of December 31, 2010, we had assets of $536.0 million, a $5.6 million, or 1.06%, increase from December 31, 2009. The severe economic conditions in the real estate market in 2010 significantly affected our profitability as
we made significant additions to our allowance for loan losses during the year. For 2010, our net loss was $2.2 million compared to net income for 2009 of $308 thousand. Our earnings per diluted share for 2010 were a loss of $0.96 (after payment of
TARP dividends and accretion of discount) compared to a loss of $0.07 for 2009. The continued deterioration of the real estate market, unemployment and the difficulties of the financial sector will continue to adversely affect our profitability.

CAUTION ABOUT FORWARD-LOOKING STATEMENTS

Certain information contained in this Report on Form 10-K may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are generally identified by phrases such as we expect, we believe or words of similar import.

Such forward-looking statements involve known and unknown risks including, but not limited to, the following factors:



| |  |  | the ability to successfully manage our growth or implement our growth strategies if we are unable to identify attractive markets, locations or
opportunities to expand in the future;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to continue to attract low cost core deposits to fund asset growth;
| | - |  | -------------------------------------------------------------------------------



| |  |  | changes in interest rates and interest rate policies and the successful management of interest rate risk;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | maintaining cost controls and asset quality as we open or acquire new locations;
| | - |  | --------------------------------------------------------------------------------



| |  |  | maintaining capital levels adequate to support our growth and operations;
| | - |  | -------------------------------------------------------------------------



| |  |  | changes in general economic and business conditions in our market area;
| | - |  | -----------------------------------------------------------------------



| |  |  | reliance on our management team, including our ability to attract and retain key personnel;
| | - |  | -------------------------------------------------------------------------------------------



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| |  |  | risks inherent in making loans such as repayment risks and fluctuating collateral values;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | competition with other banks and financial institutions, and companies outside of the banking industry, including those companies that have
substantially greater access to capital and other resources;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | demand, development and acceptance of new products and services;
| | - |  | ----------------------------------------------------------------



| |  |  | problems with technology utilized by us;
| | - |  | ----------------------------------------



| |  |  | changing trends in customer profiles and behavior;
| | - |  | --------------------------------------------------



| |  |  | changes in banking and other laws and regulations applicable to us; and
| | - |  | -----------------------------------------------------------------------

Although we believe that our expectations with respect to the forward-looking statements are based upon reliable assumptions within the
bounds of our knowledge of our business and operations, there can be no assurance that our actual results, performance or achievements will not differ materially from any future results, performance or achievements expressed or implied by such
forward-looking statements.

ITEM 1. BUSINESS

General

First Capital
Bancorp, Inc. is a bank holding company that was incorporated under Virginia law in 2006. Pursuant to a statutory share exchange that was effective on September 8, 2006, we became a bank holding company. We conduct our primary operations
through our wholly owned subsidiary, First Capital Bank, which is chartered under Virginia law. We have one other wholly owned subsidiary, FCRV Statutory Trust 1, which is a Delaware Business Trust that we formed in connection with the issuance of
trust preferred debt in September, 2006.

Our principal executive offices are located at 4222 Cox Road, Glen Allen, Virginia
23060, and our telephone number is (804) 273-1160. We maintain a website at www.1capitalbank.com.

First Capital Bank, a
Virginia banking corporation headquartered in Glen Allen, Virginia, was incorporated under the laws of the Commonwealth of Virginia as a state-chartered bank in 1997. The bank is a member of the Federal Reserve System and began banking operations in
late 1998. The bank is a community oriented financial institution that offers a full range of banking and related financial services to small and medium-sized businesses, professionals and individuals located in its market area. This market area
consists of the Richmond, Virginia metropolitan area, with a current emphasis on western Henrico County, Chesterfield County, the City of Richmond, the Town of Ashland, and the surrounding vicinity. The banks goal is to provide its customers
with high quality, responsive and technologically advanced banking services. In addition, the bank strives to develop personal, knowledgeable relationships with its customers, while at the same time it offers products comparable to those offered by
larger banks in its market area. We believe that the marketing of customized banking services has enabled the bank to establish a niche in the financial services marketplace in the Richmond metropolitan area.

The bank currently conducts business from its executive offices and seven branch locations. See Item 2  Description of
Property.

Products and Services

We offer a full range of deposit services that are typically available in most banks including checking accounts, NOW accounts, savings accounts and other time deposits of various types, ranging



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from daily money market accounts to longer-term certificates of deposit. The transaction accounts and time certificates are tailored to our market area at rates competitive to those offered in
the area. In addition, we offer certain retirement account services, such as Individual Retirement Accounts (IRAs).

We also
offer a full range of short-to-medium term commercial and consumer loans. Commercial loans include both secured and unsecured loans for working capital (including inventory and receivables), business expansion (including acquisition of real estate
and improvements) and purchase of equipment and machinery. Consumer loans include secured (and unsecured loans) for financing automobiles, home improvements, education and personal investments. Additionally, we originate fixed and floating-rate
mortgage and real estate construction and acquisition loans.

Other services we offer include safe deposit boxes, certain cash
management services, travelers checks, direct deposit of payroll and social security checks and automatic drafts for various accounts, selected on-line banking services and a small and medium-sized businesses courier service. We also have
become associated with a shared network of automated teller machines (ATMs) that may be used by our customers throughout Virginia and other states located in the Mid-Atlantic region.

Our Market Area

Our primary market is the Richmond, Virginia metropolitan
area, which includes Chesterfield County, Henrico County, Hanover County, the Town of Ashland and the City of Richmond. Richmond is the capital of Virginia. All of our branches are located in the Richmond metropolitan area. The Richmond metropolitan
area is the third-largest metropolitan area in Virginia and is one of the states top growth markets based on population and median household income.

Our market area has been subject to large scale consolidation of local banks, primarily by larger, out-of-state financial institutions. We believe that there is a large customer base in our market area
that prefers doing business with a local institution. We seek to fill this banking need by offering timely personalized service, while making it more convenient by continuing to build our branch network throughout the Richmond metropolitan area
where our customers live and work. To that end, in 2002, we initiated a branching strategy to better ensure that our branch network covers more of the markets in which our customers live and conduct business. We have made significant investments in
our infrastructure and believe our current operating platform is sufficient to support a substantially larger banking institution without incurring meaningful additional expenses.

Employees

As of March 21, 2011, we had a total of 82 full time
equivalent employees. We consider relations with our employees to be excellent. Our employees are not represented by a collective bargaining unit.

Economy

The current economic recession, which economists suggest began in
late 2007, became a major recognizable force in the late summer or early fall of 2008 in the United States and locally. Since then, the stock markets have dropped sharply, foreclosures have increased dramatically, unemployment has risen
significantly, the capital and liquidity of financial institutions have been severely challenged and credit markets have been greatly reduced. In the U.S., the government has provided support for financial institutions in order to strengthen
capital, increase liquidity and ease the credit markets.



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Competition

We compete as a financial intermediary with other commercial banks, savings and loan associations, credit unions, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance
companies, money market mutual funds and other financial institutions operating in the Richmond metropolitan area and elsewhere. Many of our non-bank competitors are not subject to the same extensive federal regulations that govern federally-insured
banks and state regulations governing state chartered banks. As a result, such non-bank competitors may have certain advantages over us in providing certain services.

Our primary market area is a highly competitive, highly branched banking market. Competition in the market area for loans to small and medium-sized businesses and professionals is intense, and pricing is
important. Many of our competitors have substantially greater resources and lending limits than us and offer certain services, such as extensive and established branch networks, that we are not currently providing. Moreover, larger institutions
operating in the Richmond metropolitan area have access to borrowed funds at lower cost than the funds that are presently available to us. Deposit competition among institutions in the market area also is strong. Competition for depositors
funds comes from U.S. Government securities, private issuers of debt obligations and suppliers of other investment alternatives for depositors, among other sources.

Governmental Monetary Policies

Our earnings and growth are affected not
only by general economic conditions, but also by the monetary policies of various governmental regulatory authorities, particularly the Federal Reserve Bank (FRB). The FRB implements national monetary policy by its open market operations
in United States Government securities, control of the discount rate and establishment of reserve requirements against both member and nonmember financial institutions deposits. These actions have a significant effect on the overall growth and
distribution of loans, investments and deposits, as well as the rates earned on loans, or paid on deposits.

Our management is
unable to predict the effect of possible changes in monetary policies upon our future operating results.

Lending Activities

Credit Policies

The principal risk associated with each of the categories of loans in our portfolio is the creditworthiness of our borrowers. Within each category, such risk is increased or decreased, depending on
various factors. The risks associated with real estate mortgage loans, commercial loans and consumer loans vary based on employment levels, consumer confidence, fluctuations in the value of real estate and other conditions that affect the ability of
borrowers to repay indebtedness. The risk associated with real estate construction loans varies based on the supply and demand for the type of real estate under construction. In an effort to manage these risks, we have loan amount approval limits
for individual loan officers based on their position and level of experience.

We have written policies and procedures to help
manage credit risk. We use a loan review process that includes a portfolio management strategy, guidelines for underwriting standards and risk assessment, procedures for ongoing identification and management of credit deterioration, and annual
independent third party portfolio reviews to establish loss exposure and to monitor compliance with policies. Our loan approval process includes our Management Loan Committee, the Loan Committee of



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the Board of Directors and, for larger loans, the Board of Directors. Our Senior Credit Officer is responsible for reporting to the Directors monthly on the activities of the Management Loan
Committee and on the status of various delinquent and non-performing loans. The Loan Committee of the Board of Directors also reviews lending policies proposed by management. Our Board of Directors establishes our total lending limit and approves
proposed lending policies approved by the Loan Committee of the Board.

Loan Originations

Real estate loan originations come primarily through direct solicitations by our loan officers, continued business from current customers,
and through referrals. Construction loans are obtained by solicitations of our construction loan officers and continued business from current customers. Commercial real estate loan originations are obtained through broker referrals, direct
solicitation by our loan officers and continued business from current customers.

Our loan officers, as part of the
application process, review all loan applications. Information is obtained concerning the income, financial condition, employment and credit history of the applicant. If commercial real estate is involved, information is also obtained concerning
cash flow available for debt service. Loan quality is analyzed based on our experience and credit underwriting guidelines. Real estate collateral for loans in excess of $250 thousand are appraised by independent appraisers who have been pre-approved
by meeting the requirement of providing a current and valid license certification and based on the lenders experience with these appraisers. Evaluations for real estate collateral for loans less than $250 thousand are made by the loan officer.

In the normal course of business, we make various commitments and incur certain contingent liabilities that are disclosed but
not reflected in our annual financial statements including commitments to extend credit. At December 31, 2010, commitments to extend credit totaled $60.9 million.

Construction Lending

We make local construction and land acquisition and
development loans. Residential houses and commercial real estate under construction and the underlying land secure construction loans. At December 31, 2010, construction, land acquisition and land development loans outstanding were $81.9
million, or 20.6% of total loans. These loans are concentrated in our local markets. Lending activity in this area has been significantly curtailed in the last 18 months due to the overall economy. Because the interest rate charged on these loans
usually floats with the market, these loans assist us in managing our interest rate risk. Construction lending entails significant additional risks, compared to residential mortgage lending. Construction loans often involve larger loan balances
concentrated with single borrowers or groups of related borrowers. In addition, the value of the building under construction is only estimable when the loan funds are disbursed. Thus, it is more difficult to evaluate accurately the total loan funds
required to complete a project and related loan-to-value ratios. To mitigate the risks associated with construction lending, we generally limit loan amounts to 80% of appraised value in addition to analyzing the creditworthiness of the borrowers. We
also obtain a first lien on the property as security for construction loans and typically require personal guarantees from the borrowers principal owners.

Commercial Business Loans

Commercial business loans generally have a
higher degree of risk than loans secured by real property but have higher yields. To manage these risks, we generally obtain appropriate collateral and personal guarantees from the borrowers principal owners and monitor the financial condition
of its business borrowers. Residential mortgage loans generally are made on the basis of the borrowers ability to make repayment from employment and other income and are secured by real estate whose value tends



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to be readily ascertainable. In contrast, commercial business loans typically are made on the basis of the borrowers ability to make repayment from cash flow from its business and are
secured by business assets, such as commercial real estate, accounts receivable, equipment and inventory. As a result, the availability of funds for the repayment of commercial business loans is substantially dependent on the success of the business
itself. Furthermore, the collateral for commercial business loans may depreciate over time and generally cannot be appraised with as much precision as residential real estate. We have a loan review and monitoring process to regularly assess the
repayment ability of commercial borrowers. At December 31, 2010, commercial loans totaled $48.0 million, or 12.1% of the total loan portfolio.

Commercial Real Estate Lending

Commercial real estate loans are secured by
various types of commercial real estate in our market area including commercial buildings and offices, recreational facilities, small shopping centers, churches and hotels. At December 31, 2010, commercial real estate loans totaled $145.4
million, or 36.6% of our total loans. We may lend up to 80% of the secured propertys appraised value. Commercial real estate loans typically involve larger loan balances concentrated with single borrowers or groups of related borrowers.
Additionally, the payment experience on loans secured by income producing properties is typically dependent on the successful operation of a business or a real estate project and thus may be subject, to a greater extent, to adverse conditions in the
real estate market or in the economic environment. Our commercial real estate loan underwriting criteria requires an examination of debt service coverage ratios, the borrowers creditworthiness and prior credit history and reputation, and we
typically require personal guarantees or endorsements of the borrowers principal owners. In addition, we carefully evaluate the location of the security property.

Residential Real Estate Lending

Residential real estate loans at
December 31, 2010, accounted for $118.2 million, or 29.8% of our total loan portfolio. Residential first mortgage loans represent $81.8 million or 69.2% of total residential real estate loans and are primarily made up of investor loans to
qualified borrowers leasing property. Multifamily and home equity loans represent $9.9 million and $18.0 million, respectively, and junior liens account for $8.5 million of total residential real estate loans.

All residential mortgage loans originated by us contain a due-on-sale clause providing that we may declare the unpaid
principal balance due and payable upon sale or transfer of the mortgaged premises. In connection with residential real estate loans, we require title insurance, hazard insurance and if appropriate, flood insurance. We do not require escrows for real
estate taxes and insurance.

Consumer Lending

We offer various secured and unsecured consumer loans, including unsecured personal loans and lines of credit, automobile loans, boat loans, deposit account loans, installment and demand loans and credit
cards. At December 31, 2010, we had consumer loans of $3.7 million or 0.9% of total loans. Such loans are generally made to customers with whom we have a pre-existing relationship. We currently originate all of our consumer loans in our market
area.

Consumer loans may entail greater risk than residential mortgage loans, particularly in the case of consumer loans that
are unsecured, such as loans secured by rapidly depreciable assets such as automobiles. Any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment as a result of the greater likelihood of damage, loss or
depreciation. Due to the relatively small amounts involved, any remaining deficiency often does not warrant further substantial collection efforts against the borrower. In addition, consumer loan collections are dependent on the



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borrowers continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

The underwriting standards we employ to mitigate the risk for consumer loans include a determination of the applicants payment
history on other debts and an assessment of their ability to meet existing obligations and payments on the proposed loan. The stability of the applicants monthly income may be determined by verification of gross monthly income from primary
employment and from any verifiable secondary income. Although creditworthiness of the applicant is of primary consideration, the underwriting process also includes an analysis of the value of the security in relation to the proposed loan amount.

SUPERVISION AND REGULATION

General

As a bank holding company, we are subject to regulation under the
Bank Holding Company Act of 1956, as amended, and the examination and reporting requirements of the Board of Governors of the FRB. As a state-chartered commercial bank, First Capital Bank is subject to regulation, supervision and examination by the
Virginia State Corporation Commissions Bureau of Financial Institutions (the BFI). It is also subject to regulation, supervision and examination by the FRB. Other federal and state laws, including various consumer and compliance
laws, govern the activities of the bank, the investments that it makes and the aggregate amount of loans that it may grant to one borrower.

The following description summarizes the significant federal and state laws applicable to us and our subsidiary. To the extent that statutory or regulatory provisions are described, the description is
qualified in its entirety by reference to that particular statutory or regulatory provision.

First Capital Bancorp, Inc.

Bank Holding Company Act. As a bank holding company, we are subject to regulation under the Bank Holding Company Act of 1956, as
amended (BHC Act), and we are registered as such with, and are subject to examination by, the FRB. Pursuant to the BHC Act, we are subject to limitations on the kinds of business in which we can engage directly or through subsidiaries.
We are permitted to manage or control banks. Generally, however, we are prohibited, with certain exceptions, from acquiring direct or indirect ownership or control of more than five percent of any class of voting shares of an entity engaged in
non-banking activities, unless the FRB finds such activities to be so closely related to banking as to be deemed a proper incident thereto within the meaning of the BHC Act. Activities at the bank holding company level are
limited to:



| |  |  | banking, managing or controlling banks;
| | - |  | ---------------------------------------



| |  |  | furnishing services to or performing services for its subsidiaries; and
| | - |  | -----------------------------------------------------------------------



| |  |  | engaging in other activities that the FRB has determined by regulation or order to be so closely related to banking as to be a proper incident to these
activities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Bank acquisitions by bank holding companies are also regulated. A bank holding company may not
acquire more than five percent of the voting shares of another bank without prior approval of the FRB. The BHC Act subjects bank holding companies to minimum capital requirements. Regulations and policies of the FRB also require a bank holding
company to serve as a source of financial and managerial strength to its subsidiary banks. The FRBs policy is that a bank holding company should stand ready to use available resources for assisting a subsidiary bank. Under certain conditions,
the FRB may conclude that certain actions of a bank holding company, such as a payment of a cash dividend, would constitute an



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unsafe and unsound banking practice. Some of the activities that the FRB has determined by regulation to be proper incidents to the business of a bank holding company include making or servicing
loans and specific types of leases, performing specific data processing services and acting in some circumstances as a fiduciary or investment or financial adviser. The only activity in which we are engaged is the operation of First Capital Bank. We
have no present intention to engage in any other permitted activities. However, we may determine to engage in additional activities if it is deemed to be in our best interests.

With some limited exceptions, the BHC Act requires every bank holding company to obtain the prior approval of the FRB before:



| |  |  | acquiring substantially all the assets of any bank;
| | - |  | ---------------------------------------------------



| |  |  | acquiring direct or indirect ownership or control of any voting shares of any bank if after such acquisition it would own or control more than 5% of
the voting shares of such bank (unless it already owns or controls the majority of such shares); or
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | merging or consolidating with another bank holding company.
| | - |  | -----------------------------------------------------------

In addition, and subject to some exceptions, the BHC Act and the Change in Bank Control Act, together with their regulations, require FRB approval prior to any person or company acquiring
control of a bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Control is rebuttably presumed to exist if a
person acquires 10% or more, but less than 25%, of any class of voting securities and either has registered securities under Section 12 of the Securities Exchange Act of 1934 or no other person owns a greater percentage of that class of voting
securities immediately after the transaction. The regulations provide a procedure for challenging this rebuttable control presumption.

Financial Holding Companies and Financial Activities. The Gramm-Leach-Bliley Act established a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities
firms, and other financial service providers by revising and expanding the BHC Act framework to permit a holding company system to engage in a full range of financial activities through qualification as a new entity known as a financial holding
company. We have not determined whether to become a financial holding company, but we may consider such a conversion in the future if it appears to be in our best interest.

Dividends. No Virginia corporation may make any distribution to stockholders if, after giving it effect, (i) the corporation would not be able to pay its existing and reasonably foreseeable
debts, liabilities and obligations, whether or not liquidated, matured, asserted or contingent, as they become due in the usual course of business; or (ii) the corporations total assets would be less than the sum of its total liabilities
plus, the amount that would be needed if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the
distribution.

In a policy statement, the FRB has advised bank holding companies that it believes that payment of cash
dividends in excess of current earnings from operations is inappropriate and may be cause for supervisory action. As a result of this policy, banks and their holding companies may find it difficult to pay dividends out of retained earnings from
historical periods prior to the most recent fiscal year or to take advantage of earnings generated by extraordinary items such as sales of buildings or other large assets in order to generate profits to enable payment of future dividends.

The primary source of funds for payment of dividends by us to our stockholders will be the receipt of dividends and interest
from First Capital Bank. Our ability to receive dividends from First Capital Bank will be limited by applicable law. The power of the board of directors of an insured



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depository institution to declare a cash dividend or other distribution with respect to capital is subject to statutory and regulatory restrictions which limit the amount available for such
distribution, depending upon the earnings, financial condition and cash needs of the institution, as well as general business conditions. Federal law prohibits insured depository institutions from making capital distributions, including dividends,
if after such transaction, the institution would be undercapitalized. A bank is undercapitalized for this purpose if its leverage ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio are not at least 5%, 6% and 10%,
respectively. See Regulatory Capital Requirements below.

The FRB has authority to prohibit a bank holding company
from engaging in practices which are considered to be unsafe and unsound. Depending upon the financial condition of First Capital Bank and upon other factors, the FRB could determine that the payment of dividends or other payments by us or First
Capital Bank might constitute an unsafe or unsound practice. Finally, any dividend that would cause a bank to fall below required capital levels could also be prohibited.

Regulatory Capital Requirements. State banks and bank holding companies are required to maintain a minimum risk capital ratio of 10% (at least 5% in the form of Tier 1 capital) of risk-weighted
assets and off-balance sheets items. Tier 1 capital consists of common equity, noncumulative perpetual preferred stock and minority interest in the equity accounts of consolidated subsidiaries and excludes goodwill. Tier 2 capital consists of
cumulative perpetual preferred stock, limited-life preferred stock, mandatory convertible securities, subordinated debt and (subject to a limit of 1.25% of risk-weighted assets) general loan loss reserves. In calculating the relevant ratio, a
banks assets and off-balance sheet commitments are risk-weighted: thus, for example, most commercial loans are included at 100% of their book value while assets considered less risky are included at a percentage of their book value (e.g., 20%
for interbank obligations and 0% for vault cash and U.S. treasury securities).

We are subject to leverage ratio guidelines as
well. The leverage ratio guidelines require maintenance of a minimum ratio of 3% Tier 1 capital to total assets for the most highly rated organizations. Institutions that are less highly rated, anticipating significant growth or subject to other
significant risks will be required to maintain capital levels ranging from 1% to 2% above the 3% minimum.

Recent federal
regulation established five tiers of capital measurement ranging from well capitalized to critically undercapitalized. Federal bank regulatory authorities are required to take prompt corrective action with respect to
inadequately capitalized banks. If a bank does not meet the minimum capital requirement set by its regulators, the regulators are compelled to take certain actions, which may include prohibition on payment of dividends to its holding company or
requiring the adoption of a capital restoration plan which must be guaranteed by the banks holding company.

Cross-Institution Assessments. Any insured depository institution owned by us can be assessed for losses incurred by the FDIC in
connection with assistance provided to, or the failure of, any other depository institution owned by us.

First Capital Bank

First Capital Bank is subject to various state and federal banking laws and regulations that impose specific requirements
or restrictions on and provide for general regulatory oversight with respect to virtually all aspects of its operations. The following is a brief summary of the material provisions of certain statutes, rules and regulations that affect First Capital
Bank. This summary is qualified in its entirety by reference to the particular statutory and regulatory provisions referred to below.



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General. First Capital Bank is under the supervision of, and subject to regulation
and examination by, the BFI and FRB. As such, First Capital Bank is subject to various statutes and regulations administered by these agencies that govern, among other things, required reserves, investments, loans, lending limits, acquisitions of
fixed assets, interest rates payable on deposits, transactions among affiliates and First Capital Bank, the payment of dividends, mergers and consolidations, and establishment of branch offices. As noted previously, First Capital Bank is a member of
the Federal Reserve System. As such, the FRB, as the primary federal regulator of First Capital Bank, has the authority to impose penalties, initiate civil and administrative actions, and take other steps to prevent First Capital Bank from engaging
in unsafe and unsound practices.

Mergers and Acquisitions. Under federal law, previously existing restrictions on
interstate bank acquisitions were abolished effective September 29, 1995, and since such date bank holding companies from any state have been able to acquire banks and bank holding companies located in any other state. Effective June 1,
1997, the law allows banks to merge across state lines, subject to earlier opt-in or opt-out action by individual states. The law also allows interstate branch acquisitions and de novo branching if permitted by the host
state. Effective July 1, 1995, Virginia adopted early opt-in legislation which permits interstate bank mergers. Virginia law also permits interstate branch acquisitions and de novo branching if reciprocal treatment is accorded
Virginia banks in the state of the acquirer.

Although the above laws had the potential to have a significant impact on the
banking industry, it is not possible for our management to determine, with any degree of certainty, the impact such laws have had on First Capital Bank.

Financial Services Legislation. On November 1, 1999, then President Clinton signed into law the Gramm-Leach-Bliley Act of 1999 (the GLB Act). The GLB Act implemented fundamental
changes in the regulation of the financial services industry in the United States, further transforming the already converging banking, insurance and securities industries by permitting further mergers and affiliations which will combine commercial
banks, insurers and securities firms under one holding company. Many of these changes are discussed above.

The provisions of
the GLB Act have had a significant impact on the banking industry in general. However, it is not possible for us to determine, with any degree of certainty at this time, the impact that such provisions have had on First Capital Bank and its
operations.

Dividends. The amount of dividends payable by First Capital Bank depends upon its earnings and capital
position, and is limited by federal and state law, regulations and policy. In addition, Virginia law imposes restrictions on the ability of all banks chartered under Virginia law to pay dividends. Under such law, no dividend may be declared or paid
that would impair a banks paid-in capital. Each of the BFI and the FDIC have the general authority to limit dividends paid by First Capital Bank if such payments are deemed to constitute an unsafe and unsound practice. In particular,
Section 38 of the Federal Deposit Insurance Act (FDIA) would prohibit First Capital Bank from making a dividend if it were undercapitalized or if such dividend would result in the institution becoming
undercapitalized.

Under current supervisory practice, prior approval of the FRB is required if cash dividends
declared in any given year exceed the total of First Capital Banks net profits for such year, plus its retained profits for the preceding two years. In addition, First Capital Bank may not pay a dividend in an amount greater than its undivided
profits then on hand after deducting current losses and bad debts. Federal law further provides that no insured depository institution may make any capital distribution (which would include a cash dividend) if, after making the distribution, the
institution would not satisfy one or more of its minimum capital requirements.



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Insurance of Accounts, Assessments and Regulation by the FDIC

The deposits of the bank are insured by the FDIC up to the limits set forth under applicable law. The deposits of First Capital Bank are
subject to the deposit insurance assessments of the Deposit Insurance Fund of the FDIC.

The FDIC recently amended its
risk-based deposit assessment system for 2007 to implement authority granted by the Federal Deposit Insurance Reform Act of 2005. Under the revised system, insured institutions are assigned to one of four risk categories based on supervisory
evaluations, regulatory capital levels and certain other factors. An institutions assessment rate depends upon the category to which it is assigned. Assessment rates are determined by the FDIC and currently range from five to seven basis
points for the healthiest institutions (Risk Category I) to 43 basis points of assessable deposits for the riskiest (Risk Category IV). The FDIC may adjust rates uniformly from one quarter to the next, except that no single adjustment can exceed
three basis points.

The FDIC is authorized to prohibit any insured institution from engaging in any activity that the FDIC
determines by regulation or order to pose a serious threat to the Deposit Insurance Fund. Also, the FDIC may initiate enforcement actions against a bank, after first giving the institutions primary regulatory authority an opportunity to take
such action. The FDIC may terminate the deposit insurance of any depository institution if it determines, after a hearing, that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to
continue operations, or has violated any applicable law, regulation, order or any condition imposed in writing by the FDIC. It also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance, if
the institution has no tangible capital. If deposit insurance is terminated, the deposits at the institution at the time of termination, less subsequent withdrawals, shall continue to be insured for a period from six months to two years, as
determined by the FDIC. We are not aware of any existing circumstances that could result in termination of any of First Capital Banks deposit insurance.

Capital Requirements. The various federal bank regulatory agencies, including the FRB, have adopted risk-based capital requirements for assessing the capital adequacy of banks and bank holding
companies. Virginia chartered banks must also satisfy the capital requirements adopted by the BFI. The federal capital standards define capital and establish minimum capital requirements in relation to assets and off-balance sheet exposure, as
adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory capital requirements more sensitive to differences in risk profile among bank holding companies and banks, to account for off-balance
sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate risk weights. The resulting capital ratios represent capital as a percentage of
total risk-weighted assets and off-balance sheet items.

The minimum requirement for the ratio of total capital to
risk-weighted assets (including certain off-balance sheet obligations, such as stand-by letters of credit) is 8%. At least half of the risk-based capital must consist of common equity, retained earnings and qualifying perpetual preferred stock, less
deductions for goodwill and various other tangibles (Tier 1 capital). Tier 2 capital includes the hybrid capital instruments and other debt securities, preferred stock and a limited amount of the general valuation allowance for loan
losses. The sum of Tier 1 capital and Tier 2 capital is total risk-based capital.

The FRB also has adopted
regulations which supplement the risk-based guidelines to include a minimum leverage ratio of Tier 1 capital to quarterly average assets (Leverage Ratio) of 3%. The FRB has emphasized that the foregoing standards are supervisory minimums
and that a banking organization will be permitted to maintain such minimum levels of capital only if it receives the highest rating under the regulatory rating system and the banking organization is not experiencing or anticipating significant



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growth. All other banking organizations are required to maintain a Leverage Ratio of at least 4% to 5% of Tier 1 capital. These rules further provide that banking organizations experiencing
internal growth or making acquisitions will be expected to maintain capital positions substantially above the minimum supervisory levels and comparable to peer group averages, without significant reliance on intangible assets. The FRB continues to
consider tangible Tier 1 Leverage Ratio as the ratio of a banking organizations Tier 1 capital, less deductions for intangibles otherwise includable in Tier 1 capital, to total tangible assets.

Section 38 of the FDIA, as amended by the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA),
requires that the federal banking agencies establish five capital levels for insured depository institutions  well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized  and requires or permits such agencies to take certain supervisory actions as an insured institutions capital level falls.

As of December 31, 2010, we and First Capital Bank both exceeded all capital requirements under all applicable regulations.

Safety and Soundness. The federal banking agencies have broad powers under current federal law to take prompt
corrective action to resolve problems of insured depository institutions. The extent of these powers depends upon whether the institutions in question are well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, or critically undercapitalized, all such terms are defined under uniform regulations defining such capital levels issued by each of the federal banking agencies.

On December 19, 1991, FDICIA was enacted into law. FDICIA requires each federal banking regulatory agency to prescribe,
by regulation or guideline, standards for all insured depository institutions and depository institution holding companies relating to: (i) internal controls, information systems and audit systems; (ii) loan documentation;
(iii) credit underwriting; (iv) interest rate risk exposure; (v) asset growth; (vi) compensation, fees and benefits; and (vii) such other operational and managerial standards as the agency determines to be appropriate. On
July 10, 1995, the federal banking agencies, including the FRB, adopted final rules and proposed guidelines concerning standards for safety and soundness required to be prescribed by regulation pursuant to Section 39 of the FDIA. In
general, the standards relate to (1) operational and managerial matters; (2) asset quality and earnings; and (3) compensation. The operational and managerial standards cover (a) internal controls and information systems;
(b) internal audit systems; (c) loan documentation; (d) credit underwriting; (e) interest rate exposure; (f) asset growth; and (g) compensation, fees and benefits.

Activities and Investments of Insured State-Chartered Banks. The activities and equity investments of FDIC-insured,
state-chartered banks are generally limited to those that are permissible for national banks. Under regulations dealing with equity investments, an insured state bank generally may not directly or indirectly acquire or retain any equity investment
of a type, or in an amount, that is not permissible for a national bank. An insured state bank is not prohibited from, among other things, (i) acquiring or retaining a majority interest in a subsidiary; (ii) investing as a limited partner
in a partnership the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation or new construction of a qualified housing project, provided that such limited partnership investments may not exceed 2% of the
banks total assets; (iii) acquiring up to 10% of the voting stock of a company that solely provides or reinsures directors, trustees and officers liability insurance coverage or bankers blanket bond group insurance
coverage for insured depository institutions; and (iv) acquiring or retaining the voting shares of a depository institution if certain requirements are met. In addition, an insured state-chartered bank may not, directly, or indirectly through a
subsidiary, engage as principal in any activity that is not permissible for a national bank unless the FDIC has determined that such activities would pose



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no risk to the insurance fund of which it is a member and the bank is in compliance with applicable regulatory capital requirements. Any insured state-chartered bank directly or indirectly
engaged in any activity that is not permitted for a national bank must cease the impermissible activity. The scope of permissible activities available to FDIC-insured, state chartered banks may be expanded by the recently enacted financial services
legislation. See Supervision and Regulation  First Capital Bank  Financial Services Legislation.

Regulatory Enforcement Authority. Applicable banking laws include substantial enforcement powers available to federal banking
regulators. This enforcement authority includes, among other things, the ability to assess civil monetary penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions against banking organizations and
institution-affiliated parties, as defined. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action,
including misleading or untimely reports filed with regulatory authorities.

Monetary Policy

The commercial banking business is affected not only by general economic conditions but also by the monetary policies of the FRB. The
instruments of monetary policy employed by the FRB include open market operations in United States government securities, changes in the discount rate on member bank borrowing and changes in reserve requirements against deposits held by all
federally insured banks. The FRBs monetary policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. In view of changing conditions in the national and
international economy and in the money markets, as well as the effect of actions by monetary fiscal authorities, including the FRB, no prediction can be made as to possible future changes in interest rates, deposit levels, loan demand or the
business and earnings of the bank.

Federal Reserve System

In 1980, Congress enacted legislation that imposed reserve requirements on all depository institutions that maintain transaction accounts or non-personal time deposits. NOW accounts, money market deposit
accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to these reserve requirements which are subject to adjustment by the FRB. Because required
reserves must be maintained in the form of vault cash or in a non-interest-bearing account at, or on behalf of, a Federal Reserve Bank, the effect of the reserve requirement is to reduce the amount of the institutions interest-earning assets.

Transactions with Affiliates

Transactions between banks and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act. An affiliate of a bank is any bank or entity that controls, is controlled by or is under
common control with such bank. Generally, Sections 23A and 23B:



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| |  |  | limit the extent to which the bank or its subsidiaries may engage in covered transactions with any one affiliate to an amount equal to 10%
of such institutions capital stock and surplus, and maintain an aggregate limit on all such transactions with affiliates to an amount equal to 20% of such capital stock and surplus; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | require that all such transactions be on terms substantially the same, or at least as favorable, to the association or subsidiary as those provided to
a nonaffiliate.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

The term covered transaction includes the making of loans, purchase of assets,
issuance of a guarantee and other similar types of transactions.

Loans to Insiders

The Federal Reserve Act and related regulations impose specific restrictions on loans to directors, executive officers and principal
shareholders of banks. Under Section 22(h) of the Federal Reserve Act, loans to a director, an executive officer and to a principal shareholder of a bank, and some affiliated entities of any of the foregoing, may not exceed, together with all
other outstanding loans to such person and affiliated entities, the banks loan-to-one borrower limit. Loans in the aggregate to insiders and their related interests as a class may not exceed two times the banks unimpaired capital and
unimpaired surplus until the banks total assets equal or exceed $100,000,000, at which time the aggregate is limited to the banks unimpaired capital and unimpaired surplus. Section 22(h) also prohibits loans, above amounts
prescribed by the appropriate federal banking agency, to directors, executive officers and principal shareholders of a bank or bank holding company, and their respective affiliates, unless such loan is approved in advance by a majority of the board
of directors of the bank with any interested director not participating in the voting. The FDIC has prescribed the loan amount, which includes all other outstanding loans to such person, as to which such prior board of director approval
is required, as being the greater of $25,000 or 5% of capital and surplus (up to $500,000). Section 22(h) requires that loans to directors, executive officers and principal shareholders be made on terms and underwriting standards substantially
the same as offered in comparable transactions to other persons.

Community Reinvestment Act

Under the Community Reinvestment Act and related regulations, depository institutions have an affirmative obligation to assist in meeting
the credit needs of their market areas, including low and moderate-income areas, consistent with safe and sound banking practice. The Community Reinvestment Act requires the adoption by each institution of a Community Reinvestment Act statement for
each of its market areas describing the depository institutions efforts to assist in its communitys credit needs. Depository institutions are periodically examined for compliance with the Community Reinvestment Act and are assigned
ratings in this regard. Banking regulators consider a depository institutions Community Reinvestment Act rating when reviewing applications to establish new branches, undertake new lines of business, and/or acquire part or all of another
depository institution. An unsatisfactory rating can significantly delay or even prohibit regulatory approval of a proposed transaction by a bank holding company or its depository institution subsidiaries.

The GLB Act and federal bank regulators have made various changes to the Community Reinvestment Act. Among other changes, Community
Reinvestment Act agreements with private parties must be disclosed and annual reports must be made to a banks primary federal regulatory. A bank holding company will not be permitted to become a financial holding company and no new activities
authorized under the GLB Act may be commenced by a holding company or by a bank financial subsidiary if any of its bank subsidiaries received less than a satisfactory rating in its latest Community Reinvestment Act examination. First
Capital Bank received a satisfactory rating during its latest examination.



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Fair Lending; Consumer Laws

In addition to the Community Reinvestment Act, other federal and state laws regulate various lending and consumer aspects of the banking business. Governmental agencies, including the Department of
Housing and Urban Development, the Federal Trade Commission and the Department of Justice, have become concerned that prospective borrowers experience discrimination in their efforts to obtain loans from depository and other lending institutions.
These agencies have brought litigation against depository institutions alleging discrimination against borrowers. Many of these suits have been settled, in some cases for material sums, short of a full trial.

Recently, these governmental agencies have clarified what they consider to be lending discrimination and have specified various factors
that they will use to determine the existence of lending discrimination under the Equal Credit Opportunity Act and the Fair Housing Act, including evidence that a lender discriminated on a prohibited basis, evidence that a lender treated applicants
differently based on prohibited factors in the absence of evidence that the treatment was the result of prejudice or a conscious intention to discriminate, and evidence that a lender applied an otherwise neutral non-discriminatory policy uniformly
to all applicants, but the practice had a discriminatory effect, unless the practice could be justified as a business necessity.

Banks and other depository institutions also are subject to numerous consumer-oriented laws and regulations. These laws, which include the Truth in Lending Act, the Truth in Savings Act, the Real Estate
Settlement Procedures Act, the Electronic Funds Transfer Act, the Equal Credit Opportunity Act, and the Fair Housing Act, require compliance by depository institutions with various disclosure requirements and requirements regulating the availability
of funds after deposit or the making of some loans to customers.

USA Patriot Act of 2001

In October 2001, the USA Patriot Act of 2001 (Patriot Act) was enacted in response to the September 11, 2001 terrorist
attacks in New York, Pennsylvania and Northern Virginia. The Patriot Act is intended to strengthen U. S. law enforcement and the intelligence communities abilities to work cohesively to combat terrorism. The continuing impact on financial
institutions of the Patriot Act and related regulations and policies is significant and wide ranging. The Patriot Act contains sweeping anti-money laundering and financial transparency laws, and imposes various regulations, including standards for
verifying customer identification at account opening, and rules to promote cooperation among financial institutions, regulators and law enforcement entities to identify persons who may be involved in terrorism or money laundering.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act (SOX) was signed into law in 2002 and addresses accounting, corporate governance and disclosure issues. The impact of SOX is wide-ranging as it applies to all public
companies and imposes significant requirements for public company governance and disclosure requirements. In general, SOX established new corporate governance and financial reporting requirements intended to enhance the accuracy and transparency of
public companies reported financial results. It established new responsibilities for corporate chief executive officers, chief financial officers and audit committees in the financial reporting process and created a new regulatory body to
oversee auditors of public companies. It backed these requirements with new SEC enforcement tools, increased criminal penalties for federal mail, wire and securities fraud, and created new criminal penalties for



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document and record destruction in connection with federal investigations. It also increased the opportunity for more private litigation by strengthening the statute of limitations for securities
fraud claims and providing new federal corporate whistleblower protection. The economic and operational effects of SOX on public companies, including the Company, have been and will continue to be significant in terms of the time, resources and
costs associated with compliance with its requirements.

Recent Legislation

In response to the most recent financial crisis, Dodd-Frank was signed into law on July 21, 2010. The Dodd-Frank legislation centers around, among other things, deposit insurance, consumer financial
protection, interchange and debit card processing, and supervision and is further discussed below.

Deposit Insurance

On October 20, 2010, pursuant to Dodd-Frank, the FDIC has established 2.0% as the designated reserve ratio (DRR), that is, the ratio of
the DIF to insured deposits. The FDIC has adopted a plan under which it will meet the statutory minimum DRR of 1.35% by September 30, 2020, the deadline imposed by Dodd-Frank. Dodd-Frank requires the FDIC to offset the effect on institutions
with assets less than $10 billion of the increase in the statutory minimum DRR to 1.35% from the former statutory minimum of 1.15%. The final rule allows the FDIC to increase or decrease total base assessment rates by no more than 2 basis
points from one quarter to the next, and cumulative increases and decreases cannot be 2 basis points higher or lower than the total base assessment rates.

On November 9, 2010 and January 18, 2011, pursuant to Dodd-Frank, the FDIC adopted rules providing for unlimited deposit insurance for traditional noninterest-bearing transaction accounts and
Interest on Lawyers Trust Accounts for two years starting December 31, 2010. This coverage applies to all insured deposit institutions and there is no separate FDIC assessment for the insurance. This temporary unlimited
coverage is in addition to, and separate from, the coverage of at least $250,000 available to depositors under the FDICs general deposit insurance rules.

On February 7, 2011, the FDIC adopted a final rule, which redefines the deposit insurance assessment base as required by Dodd-Frank; makes changes to assessment rates; implements Dodd-Franks
DIF dividend provisions; and, revises the risk-based assessment system for all large insured depository institutions, generally, those institutions with at least $10 billion in total assets. It is expected that nearly all of the 7,600-plus
institutions with assets less than $10 billion will pay smaller assessments as a result of this final rule. For institutions less than $10 billion the following rules apply:



| |  |  | Redefines the deposit insurance assessment base as average consolidated total assets minus average tangible equity;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | Makes generally conforming changes to the unsecured debt and brokered deposit adjustments to assessment rates;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Creates a depository institution debt adjustment;
| | - |  | -------------------------------------------------



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| |  |  | Eliminates the secured liability adjustment; and
| | - |  | ------------------------------------------------



| |  |  | Adopts a new assessment rate schedule effective April 1, 2011, and, in lieu of dividends, other rate schedules when the reserve ratio reaches
certain levels.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

This final rule and its total impact on the Company remain unclear at this time. A school of thought
regarding the redefined deposit insurance assessment base calculation and the resulting lowered insurance assessments is that it may or may not offset the expected competition for deposits by larger banks, thereby increasing overall deposit
competition and increasing the cost of those funds in the marketplace. The Company cannot provide any assurance as to the effect of any proposed change in its deposit insurance premium rate, should such a change occur, as such changes are dependent
upon a variety of factors, some of which are beyond the Companys control. The final rule will take effect for the quarter beginning April 1, 2011, and will be reflected in the June 30, 2011 fund balance and the invoices for
assessments due September 30, 2011.

Consumer Financial Protection

Dodd-Frank established a new federal regulatory body named the Bureau of Consumer Financial Protection (BCFP), an independent entity within the Federal Reserve system that will assume
responsibility for most consumer protection laws. This body issues rules for federal protection laws for banks and non-banks engaged in financial services. The head of this organization is an independent director appointed by the President of the
United States and confirmed by the Senate with a dedicated budget paid by the Federal Reserve system. The BCFP will have the authority to supervise, examine, and take enforcement action with respect to institutions greater than $10 billion in
assets, nonbank mortgage entities, and other nonbank providers of consumer financial services. Financial institutions with less than $10 billion in assets, like the Company, still have prudential regulatory agencies (i.e. Federal Reserve and SCC) as
their lead supervisory bodies, however, the BCFP has the authority to include its examiners in examinations conducted by prudential regulatory agencies. The BCFP will create a national consumer complaint hotline so consumers will have, for the first
time, a single toll-free number to report problems with financial products and services. It is in the Companys best interest to have consumer protections that meet the needs of customers while ensuring that any new regulatory proposals and
rules are subjected to cost-benefit analysis and to ensure that other financial services not under the purview of the BCFP (i.e., securities and insurance) are afforded the same protection standards so as not to shift consumers to financial services
not subject to the BCFPs supervision and rules. The impact to the Company as a result of the creation of the BCFP is unknown at this time.

Interchange and debit card processing

Dodd-Frank amended the Electronic Funds Transfer Act
to, among other things, give the Federal Reserve the authority to establish rules regarding interchange fees charged for electronic debit transactions by payment card issuers. In December 2010, the Federal Reserve proposed a new regulation
that, in part, establishes standards for determining whether an interchange fee received or charged by an issuer with respect to an electronic debit transaction is reasonable and proportional to the cost incurred by the issuer with respect to the
transaction. These new standards would take effect on July 21, 2011 and would apply to companies having assets greater than $10 billion. It is possible that despite the Companys having fewer assets than $10 billion, the overall market
will move to lower pricing due to this mandated pricing and the Company may be negatively impacted. The Federal Reserve is requesting comments on two alternative interchange fee standards that would apply to all covered issuers. One alternative
would be based on each companys costs, with a safe harbor (initially set at 7 cents per transaction) and a cap (initially set at 12 cents per transaction); and the other a stand-alone cap (initially set at
12 cents per transaction). The Federal Reserve believes that if either of these proposed standards becomes the final



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rule, the maximum allowable interchange fee received by covered issuers for debit card transactions would be more than 70 percent lower than the 2009 average, once the new rule takes effect on
July 21, 2011. Under both alternatives, circumvention or evasion of the interchange fee limitations would be prohibited. Estimates of the impact to the Company could be material and if under the stand-alone cap in the current year net income
would have been lower by more than 20%. Because of the uncertainty as to the final outcome of the Federal Reserves rulemaking process, the Company cannot provide any assurance as to the ultimate impact of the alternative proposals.

Supervision

Dodd-Frank restructures the
supervision of holding companies and depository institutions in several ways. It requires (subject to certain exceptions) that capital requirements for holding companies be at least as strict as capital requirements for depository
institutions. This is the so-called Collins amendment that, in part, grandfathers existing issues of trust preferred securities but eliminates them as regulatory capital for larger holding companies five and one half years after
enactment. Holding companies, like the Company, with less than $15 billion in consolidated assets, are not subject to this new restriction, but new issuances of trust preferred securities do not count as Tier 1 capital. It also enhances the
authority of the Federal Reserve to examine non-bank subsidiaries, such as mortgage affiliates, and gives other bank regulators the opportunity to examine and take enforcement action against such entities. Lastly, it establishes a statutory source
of strength requirement for both bank and savings and loan holding companies.

Beginning in the third quarter of 2010, a new rule (i.e., a
revision to Regulation E) issued by the Federal Reserve prohibits financial institutions from charging consumers fees for paying overdrafts on ATMs and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft
service for those types of transactions. Consumers must be provided a notice that explains the financial institutions overdraft services, including the fees associated with the service, and the consumers choices. The Company cannot
provide any definitive assurance as to the ultimate impact of this rule on the amount of overdraft/insufficient funds charges reported in future periods. An assessment by management of the fourth quarter activity of 2010 estimated minimal exposure
as a result of this new regulation. Even though this rule went into full effect on August 15, 2010, the Companys net overdraft income was flat from the third quarter to the fourth quarter of 2010. As the Company adds to the existing
customer base for these types of products, it is anticipated that any adverse impact would be negligible, if any, in 2011 and beyond.

New
regulations and statutes are regularly proposed that contain wide-ranging proposals that may or will alter the structures, regulations, and competitive relationships of the nations financial institutions. The Company cannot predict whether or
in what form any proposed regulation or statute will be adopted or the extent to which the Companys business may be affected by any new regulation or statute.

Other Safety and Soundness Regulations

The federal banking agencies have broad powers
under current federal law to make prompt corrective action to resolve problems of insured depository institutions. The extent of these powers depends upon whether the institutions in question are well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, or critically undercapitalized. All such terms are defined under uniform regulations issued by each of the federal banking agencies. The Bank
meets the definition of being well capitalized as of December 31, 2010.



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Future Regulatory Uncertainty

Because federal regulation of financial institutions changes regularly and is the subject of constant legislative debate, we cannot
forecast how federal regulation of financial institutions may change in the future and impact our operations. Although Congress in recent years has sought to reduce the regulatory burden on financial institutions with respect to the approval of
specific transactions, we fully expect that the financial institution industry will remain heavily regulated in the near future and that additional laws or regulations may be adopted further regulating specific banking practices.

Filings with the SEC

The Company files annual, quarterly, and other reports under the Securities Exchange Act of 1934 with the SEC. These reports and this Form
10-K are posted and available at no cost on the Companys investor relations website, http://www.1capitalbank.com, as soon as reasonably practicable after the Company files such documents with the SEC. The information contained on the
Companys website is not a part of this Form 10-K. The Companys filings are also available through the SECs website at www.sec.gov.

ITEM 2. PROPERTIES

Our banking
offices are listed below. We conduct our business from the properties listed below. Except for our Ashland, WestMark and Staples Mill Road office, which we own, we lease our other offices under long term lease arrangements. All of such leases are at
market rental rates and they are all with unrelated parties having no relationship or affiliation with us.



|                                                                                      |  |            |      | 
|------------------------------------------------------------------------------------- |  | ---------- | ---- | 
|Office Location                                                                       |  | DateOpened |     
|WestMark Office (1)
11001 West Broad Street
Glen Allen, Virginia 23060                |  |            | 1998 | 
|                                                                                      | 
|Ashland Office
409 South Washington Highway
Ashland, Virginia 23005                   |  |            | 2000 | 
|                                                                                      | 
|Chesterfield Towne Center Office
1580 Koger Center Boulevard
Richmond, Virginia 23235 |  |            | 2003 | 
|                                                                                      | 
|Staples Mill Road Office
1776 Staples Mill Road
Richmond, Virginia 23230              |  |            | 2003 | 
|                                                                                      | 
|Bon Air Office
2810 Buford Road Richmond, Virginia 23235                              |  |            | 2008 | 



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|                                                                                   |  |  |      | 
|---------------------------------------------------------------------------------- |  |  | ---- | 
|Three Chopt Office (2)
7100 Three Chopt Road
Richmond, Virginia 23229              |  |  | 2006 | 
|                                                                                   | 
|James Center Office
One James Center 901 East Cary Street Richmond, Virginia
23219 |  |  | 2007 | 



|(1) | Relocation of our Innsbrook leased office to an owned free standing site across the street in September 2008.
|--- | -------------------------------------------------------------------------------------------------------------

|(2) | Relocated from 1504 Santa Rosa Road, Richmond, Virginia in February 2009 to an owned free standing site.
|--- | --------------------------------------------------------------------------------------------------------

Our corporate office, which we opened in 2003 and purchased in 2010, is located at 4222 Cox Road, Glen Allen, Virginia 23060.

All of our properties are in good operating condition and are adequate for our present and anticipated future needs.

ITEM 3. LEGAL PROCEEDINGS

We are not involved in any pending legal proceedings other than legal proceedings occurring in the ordinary course of business. Our
management does not believe that such legal proceedings, individually or in the aggregate, are likely to have a material adverse effect on our results of operations or financial condition.

ITEM 4. REMOVED AND RESERVED

PART
II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock was approved for listing on the Nasdaq Capital Markets as of June 7, 2007 under the symbol FCVA. Trading
under that symbol began June 14, 2007.

The following table shows high and low sale prices for our common stock, as
reported to us, for the periods indicated.



|            |  |      |      |  |     |   |      | 
|----------- |  | ---- | ---- |  | --- | - | ---- | 
|2010        |  | High |      |  | Low |  
|1st Quarter |  | $    | 8.50 |  |     | $ | 4.85 | 
|2nd Quarter |  |      | 9.25 |  |     |   | 6.35 | 
|3rd Quarter |  |      | 7.45 |  |     |   | 2.95 | 
|4th Quarter |  |      | 3.73 |  |     |   | 2.90 | 



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|            |  |   |      |  |  |   |      | 
|----------- |  | - | ---- |  |  | - | ---- | 
|2009        |  |   |      |  |  |  
|1st Quarter |  | $ | 8.66 |  |  | $ | 4.50 | 
|2nd Quarter |  |   | 8.71 |  |  |   | 5.70 | 
|3rd Quarter |  |   | 8.61 |  |  |   | 6.65 | 
|4th Quarter |  |   | 7.55 |  |  |   | 4.17 | 

The foregoing
transactions may not be representative of all transactions during the indicated periods or of the actual fair market value of our common stock at the time of such transaction due to the infrequency of trades and the limited market for our common
stock.

First Capital Bancorp, Inc. does not pay a cash dividend and does not have the intention to pay a cash dividend in the
foreseeable future.

There were 2,971,171 shares of the Companys common stock outstanding at the close of business on
December 31, 2010. As of March 
29, 2011, there were approximately 625 shareholders of record of our common stock.

ITEM 6. SELECTED FINANCIAL
INFORMATION

The following consolidated summary sets forth our selected financial data for the periods and at the dates
indicated. The selected financial data for fiscal years have been derived from our audited financial statements for each of the five years that ended December 31, 2010, 2009, 2008, 2007 and 2006. You also should read the detailed information
and the financial statements for all of such periods included elsewhere in this Report on Form 10-K.



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|                                                                |  |                                                     |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|--------------------------------------------------------------- |  | --------------------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                |  | At or for the Fiscal Years Ended December 31,       |        
|                                                                |  | 2010                                                |         |   | 2009 |   |         | 2008 |  |   | 2007    |   |  | 2006 |        
|                                                                |  | (In thousands, except ratios and per share amounts) |        
|Income Statement Data:                                          |  |                                                     |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Interest income                                                 |  | $                                                   | 26,430  |   |      | $ | 25,401  |      |  | $ | 24,044  |   |  | $    | 20,356  |   |  | $ | 15,263  |  
|Interest expense                                                |  |                                                     | 10,217  |   |      |   | 12,810  |      |  |   | 12,996  |   |  |      | 10,563  |   |  |   | 7,691   |  
|                                                                |  |                                                     |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net interest income                                             |  |                                                     | 16,213  |   |      |   | 12,591  |      |  |   | 11,048  |   |  |      | 9,793   |   |  |   | 7,572   |  
|Provision for loan losses                                       |  |                                                     | 8,221   |   |      |   | 2,285   |      |  |   | 2,924   |   |  |      | 676     |   |  |   | 404     |  
|                                                                |  |                                                     |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net interest income after provision for loan losses             |  |                                                     | 7,992   |   |      |   | 10,306  |      |  |   | 8,124   |   |  |      | 9,117   |   |  |   | 7,168   |  
|Noninterest income                                              |  |                                                     | 1,050   |   |      |   | 747     |      |  |   | 744     |   |  |      | 809     |   |  |   | 465     |  
|Noninterest expense                                             |  |                                                     | 12,550  |   |      |   | 10,628  |      |  |   | 8,560   |   |  |      | 7,259   |   |  |   | 5,261   |  
|                                                                |  |                                                     |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Income before income taxes                                      |  |                                                     | (3,508  | ) |      |   | 425     |      |  |   | 308     |   |  |      | 2,667   |   |  |   | 2,372   |  
|Income tax expense (benefit)                                    |  |                                                     | (1,336  | ) |      |   | 117     |      |  |   | 138     |   |  |      | 925     |   |  |   | 801     |  
|                                                                |  |                                                     |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income                                                      |  |                                                     | ($2,172 | ) |      | $ | 308     |      |  | $ | 170     |   |  | $    | 1,742   |   |  | $ | 1,571   |  
|                                                                |  |                                                     |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Effective dividend on preferred stock                           |  | $                                                   | 678     |   |      | $ | 503     |      |  | $ | 0       |   |  | $    | 0       |   |  | $ | 0       |  
|                                                                |  |                                                     |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income (loss) available to common shareholders              |  |                                                     | ($2,850 | ) |      |   | ($195   | )    |  | $ | 170     |   |  | $    | 1,742   |   |  | $ | 1,571   |  
|                                                                |  |                                                     |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Per Share Data: (1)                                             |  |                                                     |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Basic earnings per share                                        |  |                                                     | ($0.96  | ) |      |   | ($0.07  | )    |  | $ | 0.06    |   |  | $    | 0.72    |   |  | $ | 0.87    |  
|Diluted earnings per share                                      |  |                                                     | ($0.96  | ) |      |   | ($0.07  | )    |  | $ | 0.06    |   |  | $    | 0.71    |   |  | $ | 0.83    |  
|Book value per share                                            |  | $                                                   | 11.16   |   |      | $ | 12.14   |      |  | $ | 11.92   |   |  | $    | 11.73   |   |  | $ | 8.72    |  
|Balance Sheet Data:                                             |  |                                                     |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Assets                                                          |  | $                                                   | 536,025 |   |      | $ | 530,396 |      |  | $ | 431,553 |   |  | $    | 351,867 |   |  | $ | 257,241 |  
|Gross loans, net of unearned income                             |  | $                                                   | 397,245 |   |      | $ | 403,720 |      |  | $ | 372,500 |   |  | $    | 296,723 |   |  | $ | 201,585 |  
|Deposits                                                        |  | $                                                   | 426,871 |   |      | $ | 422,134 |      |  | $ | 334,300 |   |  | $    | 255,108 |   |  | $ | 194,302 |  
|Shareholders equity                                            |  | $                                                   | 43,675  |   |      | $ | 46,458  |      |  | $ | 35,420  |   |  | $    | 34,859  |   |  | $ | 15,659  |  
|Average shares outstanding, basic                               |  |                                                     | 2,971   |   |      |   | 2,971   |      |  |   | 2,971   |   |  |      | 2,414   |   |  |   | 1,796   |  
|Average shares outstanding, diluted                             |  |                                                     | 2,971   |   |      |   | 2,971   |      |  |   | 2,984   |   |  |      | 2,469   |   |  |   | 1,889   |  
|Selected Performance Ratios                                     |  |                                                     |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Return on average assets                                        |  |                                                     | -0.41   | % |      |   | 0.06    | %    |  |   | 0.04    | % |  |      | 0.61    | % |  |   | 0.69    | %
|Return on average equity                                        |  |                                                     | -4.74   | % |      |   | 0.71    | %    |  |   | 0.49    | % |  |      | 6.80    | % |  |   | 10.74   | %
|Efficiency ratio                                                |  |                                                     | 72.70   | % |      |   | 79.68   | %    |  |   | 72.60   | % |  |      | 68.47   | % |  |   | 65.46   | %
|Net interest margin                                             |  |                                                     | 3.20    | % |      |   | 2.69    | %    |  |   | 2.89    | % |  |      | 3.54    | % |  |   | 3.41    | %
|Equity to assets                                                |  |                                                     | 8.15    | % |      |   | 8.76    | %    |  |   | 8.21    | % |  |      | 9.91    | % |  |   | 6.09    | %
|Tier 1 risk-based capital ratio                                 |  |                                                     | 12.08   | % |      |   | 12.36   | %    |  |   | 10.62   | % |  |      | 12.98   | % |  |   | 10.39   | %
|Total risk-based capital ratio                                  |  |                                                     | 13.74   | % |      |   | 14.09   | %    |  |   | 12.41   | % |  |      | 14.44   | % |  |   | 12.28   | %
|Leverage ratio                                                  |  |                                                     | 9.04    | % |      |   | 10.01   | %    |  |   | 9.62    | % |  |      | 12.50   | % |  |   | 8.80    | %
|Asset Quality Ratios:                                           |  |                                                     |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Non-performing loans to period-end loans                        |  |                                                     | 6.82    | % |      |   | 2.57    | %    |  |   | 1.18    | % |  |      | 0.02    | % |  |   | 0.06    | %
|Non-performing assets to total assets                           |  |                                                     | 5.54    | % |      |   | 1.96    | %    |  |   | 1.52    | % |  |      | 0.01    | % |  |   | 0.05    | %
|Net loan charge-offs (recoveries) to average loans              |  |                                                     | 0.92    | % |      |   | 0.19    | %    |  |   | 0.10    | % |  |      | 0.01    | % |  |   | 0.02    | %
|Allowance for loan losses to loans outstanding at end of period |  |                                                     | 2.78    | % |      |   | 1.64    | %    |  |   | 1.36    | % |  |      | 0.84    | % |  |   | 0.91    | %



|(1) | Amounts have been adjusted to reflect a three for two stock split effective December 20, 2005.
|--- | ----------------------------------------------------------------------------------------------



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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion provides information about the results of operations and financial condition, liquidity
and capital resources. This discussion should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements.

Overview

The Company is a bank holding company which owns 100% of the stock of First
Capital Bank (the Bank). We are headquartered in Glen Allen, Virginia and conduct our primary operations through our wholly owned subsidiary. Through its seven full service branch offices and courier service, the bank serves the greater
Richmond metropolitan area which includes the counties of Henrico, Chesterfield and Hanover, the Town of Ashland and the City of Richmond, Virginia. We target small to medium-sized businesses and consumers in our market area and emerging suburbs
outside of the greater Richmond metropolitan area. In addition, we strive to develop personal, knowledgeable relationships with our customers, while at the same time offering products comparable to statewide regional banks located in its market
area. We believe that the marketing of customized banking services has enabled it to establish a niche in the financial services marketplace in the Richmond metropolitan area.

The difficult economic environment during 2010 and 2009 negatively impacted our financial performance as we realized a net loss of $2.2 million for the year ended December 31, 2010 compared to $308
thousand profit for the year ended December 31, 2009. Net loss available to common shareholders, which deducts from net income the dividends and discount accretion on preferred stock, was a loss of $2.8 million for the year ended
December 31, 2010 compared to a loss of $195 thousand a year ago. The key factor affecting the full year 2010 results was an $8.2 million provision to loans losses due to an unstable economic environment resulting in increased charge-offs and
nonperforming assets during the year. Return on average common equity for the year ended December 31, 2010 was -4.74%, while return on average assets was -0.41%, compared to 0.71% and 0.06%, respectively, for the year ended 2009.

For the year ended December 31, 2010, assets grew $5.6 million to $536.0 million or 1.06% from $530.4 million at December 31, 2009. Total net
loans at December 31, 2010 were $386.2 million, a decrease of $10.9 million, or 2.8%, from the December 31, 2009 amount of $397.1 million. Deposits increased $4.7 million to $426.9 million, or 1.1% from the December 31, 2009 amount of
$422.1 million.

We remain well capitalized with capital ratios above the regulatory minimums.

Critical Accounting Policies

The
financial condition and results of operations presented in the consolidated financial statements, the accompanying notes to the consolidated financial statements and this section are, to a large degree, dependent upon our accounting policies. The
selection and applications of these accounting policies involve judgments, estimates, and uncertainties that are susceptible to change.

First
Capital Banks critical accounting policy relates to the evaluation of the allowance for loan losses which is based on managements opinion of an amount that is adequate to absorb probable losses inherent in the Banks existing
portfolio. The allowance for loan losses is an estimate of the losses that may be sustained in the loan portfolio. The allowance is based on two basic principles of accounting: (i) ASC 450 Contingencies, which requires that losses be accrued
when occurrence is probable and can be reasonably estimated, and (ii) ASC 310 Receivables, which requires that losses be accrued based on the differences



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between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.

The Companys allowance for loan losses is the accumulation of various components that are calculated based on independent methodologies. All
components of the allowance represent an estimation performed pursuant to applicable GAAP. Managements estimate of each homogenous pool component is based on certain observable data that management believes are most reflective of the
underlying credit losses being estimated. This evaluation includes credit quality trends; collateral values; loan volumes; geographic, borrower and industry concentrations; seasoning of the loan portfolio; the findings of internal credit quality
assessments and results from external bank regulatory examinations. These factors, as well as historical losses and current economic and business conditions, are used in developing estimated loss factors used in the calculations.

Applicable GAAP requires that the impairment of loans that have been separately identified for evaluation are measured based on the present value of
expected future cash flows or, alternatively, the observable market price of the loans or the fair value of the collateral. However, for those loans that are collateral dependent (that is, if repayment of those loans is expected to be provided
solely by the underlying collateral) and for which management has determined foreclosure is probable, the measure of impairment is to be based on the net realizable value of the collateral. This statement also requires certain disclosures about
investments in impaired loans and the allowance for loan losses and interest income recognized on impaired loans.

Reserves for commercial
loans are determined by applying estimated loss factors to the portfolio based on historical loss experience and managements evaluation and risk grading of the commercial loan portfolio. Reserves are provided for noncommercial loan
categories using historical loss factors applied to the total outstanding loan balance of each loan category. Additionally, environmental factors based on national and local economic conditions, as well as portfolio-specific attributes, are
considered in estimating the allowance for loan losses.

While management uses the best information available to establish the allowance for
loan losses, future adjustments to the allowance may be necessary if future economic conditions differ substantially from the assumptions used in making the valuations or, if required by regulators, based upon information available to them at the
time of their examinations. Such adjustments to original estimates, as necessary, are made in the period in which these factors and other relevant considerations indicate that loss levels may vary from previous estimates.

Results of Operations

Net Interest
Income

We generate a significant amount of our income from the net interest income earned by the Bank. Net interest income is the
difference between interest income and interest expense. Interest income depends on the amount of interest-earning assets outstanding during the period and the interest rates earned thereon. Interest expense is a function of the average amount of
deposits and borrowed money outstanding during the period and the interest rates paid thereon. The quality of the assets further influences the amount of interest income lost on non-accrual loans and the amount of additions to the allowance for loan
losses.

Net interest income represents our principal source of earnings. Net interest income is the amount by which interest generated from
earning assets exceeds the expense of funding those assets. Changes in



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volume and mix of interest-earning assets and interest-bearing liabilities, as well as their respective yields and rates, have a significant impact on the level of net interest income.

The following table reflects an analysis of our net interest income using the daily average balance of our assets and liabilities as of the
periods indicated.



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|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|-------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | -------------- | - | ------ | ---------- |  |  | -------------- | - |  | -------------- | ------- | - | ---------- | - | ------ |  |  |  | ------ | -
|                                                                                 |  | Year Ended December 31, |        
|                                                                                 |  | 2010                    |         |   | 2009           |  
|                                                                                 |  | AverageBalance          |         |   | Income/Expense |   |        | Yield/Rate |  |  | AverageBalance |   |  | Income/Expense |         |   | Yield/Rate |  
|                                                                                 |  | (Dollars in thousands)  |        
|Assets:                                                                          |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Loans, net of unearned income (1)                                                |  | $                       | 409,765 |   |                | $ | 23,308 |            |  |  | 5.69           | % |  | $              | 389,364 |   |            | $ | 22,925 |  |  |  | 5.89   | %
|Investment securities:                                                           |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|U.S. Agencies                                                                    |  |                         | 14,691  |   |                |   | 580    |            |  |  | 3.94           | % |  |                | 18,172  |   |            |   | 807    |  |  |  | 4.44   | %
|Mortgage backed securities                                                       |  |                         | 11,751  |   |                |   | 388    |            |  |  | 3.30           | % |  |                | 11,520  |   |            |   | 409    |  |  |  | 3.55   | %
|CMO                                                                              |  |                         | 28,397  |   |                |   | 828    |            |  |  | 2.92           | % |  |                | 13,898  |   |            |   | 478    |  |  |  | 3.44   | %
|Municipal securities (2)                                                         |  |                         | 13,139  |   |                |   | 815    |            |  |  | 6.20           | % |  |                | 6,741   |   |            |   | 437    |  |  |  | 6.48   | %
|Corporate bonds                                                                  |  |                         | 4,658   |   |                |   | 224    |            |  |  | 4.81           | % |  |                | 3,398   |   |            |   | 194    |  |  |  | 5.71   | %
|Taxable municipal securities                                                     |  |                         | 7,979   |   |                |   | 403    |            |  |  | 5.05           | % |  |                | 3,310   |   |            |   | 184    |  |  |  | 5.57   | %
|SBA                                                                              |  |                         | 1,223   |   |                |   | 23     |            |  |  | 1.87           | % |  |                | 0       |   |            |   | 0      |  |  |  | 0.00   | %
|Other investments                                                                |  |                         | 4,535   |   |                |   | 90     |            |  |  | 1.99           | % |  |                | 4,017   |   |            |   | 68     |  |  |  | 1.68   | %
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Total investment securities                                                      |  |                         | 86,373  |   |                |   | 3,351  |            |  |  | 4.22           | % |  |                | 61,056  |   |            |   | 2,577  |  |  |  | 4.22   | %
|Federal funds sold & interest bearing deposits                                   |  |                         | 19,696  |   |                |   | 45     |            |  |  | 0.23           | % |  |                | 24,425  |   |            |   | 48     |  |  |  | 0.20   | %
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Total earning assets                                                             |  | $                       | 515,834 |   |                | $ | 26,704 |            |  |  | 5.18           | % |  | $              | 474,845 |   |            | $ | 25,550 |  |  |  | 5.38   | %
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Cash and cash equivalents                                                        |  |                         | 6,187   |   |                |   |        |            |  |  |                |   |  |                | 5,992   |   |            |   |        |  |  |  |        |  
|Allowance for loan losses                                                        |  |                         | (8,913  | ) |                |   |        |            |  |  |                |   |  |                | (5,695  | ) |            |   |        |  |  |  |        |  
|Other assets                                                                     |  |                         | 23,196  |   |                |   |        |            |  |  |                |   |  |                | 14,394  |   |            |   |        |  |  |  |        |  
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Total assets                                                                     |  | $                       | 536,304 |   |                |   |        |            |  |  |                |   |  | $              | 489,536 |   |            |   |        |  |  |  |        |  
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Liabilities & Stockholders Equity:                                              |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Interest checking                                                                |  | $                       | 9,239   |   |                | $ | 34     |            |  |  | 0.36           | % |  | $              | 7,973   |   |            | $ | 30     |  |  |  | 0.37   | %
|Money market deposit accounts                                                    |  |                         | 146,788 |   |                |   | 1,783  |            |  |  | 1.21           | % |  |                | 93,177  |   |            |   | 1,742  |  |  |  | 1.87   | %
|Statement savings                                                                |  |                         | 718     |   |                |   | 3      |            |  |  | 0.47           | % |  |                | 699     |   |            |   | 3      |  |  |  | 0.47   | %
|Certificates of deposit                                                          |  |                         | 229,496 |   |                |   | 6,322  |            |  |  | 2.75           | % |  |                | 246,291 |   |            |   | 8,885  |  |  |  | 3.61   | %
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Total interest-bearing deposits                                                  |  |                         | 386,241 |   |                |   | 8,142  |            |  |  | 2.11           | % |  |                | 348,140 |   |            |   | 10,660 |  |  |  | 3.06   | %
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Fed funds purchased                                                              |  |                         |        |   |                |   |       |            |  |  | 0.00           | % |  |                |        |   |            |   |       |  |  |  | 0.00   | %
|Repurchase agreements                                                            |  |                         | 1,361   |   |                |   | 6      |            |  |  | 0.48           | % |  |                | 1,365   |   |            |   | 6      |  |  |  | 0.44   | %
|Subordinated debt                                                                |  |                         | 7,155   |   |                |   | 230    |            |  |  | 3.21           | % |  |                | 7,155   |   |            |   | 266    |  |  |  | 3.72   | %
|FHLB advances                                                                    |  |                         | 54,191  |   |                |   | 1,840  |            |  |  | 3.39           | % |  |                | 50,000  |   |            |   | 1,879  |  |  |  | 3.76   | %
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Total interest-bearing liabilities                                               |  |                         | 448,948 |   |                |   | 10,218 |            |  |  | 2.28           | % |  |                | 406,660 |   |            |   | 12,811 |  |  |  | 3.15   | %
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Noninterest-bearing liabilities:                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Noninterest-bearing deposits                                                     |  |                         | 39,564  |   |                |   |        |            |  |  |                |   |  |                | 37,583  |   |            |   |        |  |  |  |        |  
|Other liabilities                                                                |  |                         | 1,925   |   |                |   |        |            |  |  |                |   |  |                | 2,025   |   |            |   |        |  |  |  |        |  
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Total liabilities                                                                |  |                         | 41,489  |   |                |   |        |            |  |  |                |   |  |                | 39,608  |   |            |   |        |  |  |  |        |  
|Shareholders equity                                                             |  |                         | 45,867  |   |                |   |        |            |  |  |                |   |  |                | 43,268  |   |            |   |        |  |  |  |        |  
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Total liabilities and shareholders equity                                       |  | $                       | 536,304 |   |                |   |        |            |  |  |                |   |  | $              | 489,536 |   |            |   |        |  |  |  |        |  
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Net interest income                                                              |  |                         |         |   |                | $ | 16,486 |            |  |  |                |   |  |                |         |   |            | $ | 12,739 |  |  |  |        |  
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Interest rate spread                                                             |  |                         |         |   |                |   |        |            |  |  | 2.90           | % |  |                |         |   |            |   |        |  |  |  | 2.23   | %
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Net interest margin                                                              |  |                         |         |   |                |   |        |            |  |  | 3.20           | % |  |                |         |   |            |   |        |  |  |  | 2.68   | %
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  
|Ratio of average interest earning assets to average interest-bearing liabilities |  |                         |         |   |                |   |        |            |  |  | 114.90         | % |  |                |         |   |            |   |        |  |  |  | 116.77 | %
|                                                                                 |  |                         |         |   |                |   |        |            |  |  |                |   |  |                |         |   |            |   |        |  |  |  |        |  



|(1) | Includes nonaccrual loans
|--- | -------------------------

|(2) | Income and yields are reported on a taxable equivlent basis using a 34% tax rate.
|--- | ---------------------------------------------------------------------------------



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Year ended December 31, 2010 compared to year ended December 31, 2009

The decline in the general level of interest rates over the last three years has placed downward pressure on the Companys yield on earning assets
and related interest income. The decline in earning asset yields, however, has been offset principally by repricing of money market accounts and certificates of deposit. The Company also expects net interest margin to be relatively stable over the
next several quarters.

Net interest income for the year ended December 31, 2010 increased 28.8% to $16.2 million from $12.6 million for
the year ended December 31, 2009. Net interest income increased due to a 55 basis point increase in the net interest margin from 2.68% for the year ended December 31, 2009 to 3.20% for the comparable period of 2010.

Average earning assets increased $41.0 million, or 8.61%, to $515.8 million for 2010 from $474.8 million for 2009. While net loans outstanding decreased
$10.9 million, average loans, net of unearned income increased $20.4 million, or 5.2% for 2010 to $409.8 million. The average rate earned on net loans, decreased 20 basis points to 5.69% from 5.89% for the year ended December 31, 2009. The
average balance in our securities portfolio increased $25.3 million in 2010 to $86.4 million from $61.1 million in 2009. We used liquidity generated by deposits and TARP funds to mitigate interest rate risk and pick up spreads over the Federal funds
rate. Due to rather stable investment rates during the period, the yield on the investment portfolio remained unchanged at 4.22% for 2010 and 2009 resulting in investment income, on a tax equivalent basis, increasing to $3.3 million for 2010 from
$2.6 million for 2009. Interest on Federal funds sold decreased from $48 thousand for 2009 to $45 thousand for 2010 as the average balance sold decreased from $24.4 million in 2009 to $19.7 million in 2010. As a result of these changes, the yield on
earning assets decreased 20 basis points to 5.18% for 2010 from 5.38% for 2009.

Average deposits increased $38.1 million or 10.9% to $386.2
million for 2010 from $348.1 million for 2009. Interest expense on deposits decreased $2.5 million for 2010 compared to 2009. The average cost of interest-bearing deposits decreased 95 basis points from 3.06% for 2009 to 2.11% for 2010. The decrease
in cost of interest-bearing deposits is the result of declining interest rates and change in the mix of deposits. The cost of certificates of deposit decreased 86 basis points from 3.06% for 2009 to 2.11% for 2010. Money market accounts increased on
average $53.6 million for 2010 compared to 2009 as the cost decreased from 1.87% to 1.21% for 2010. We expect deposit costs continue to decrease in early 2011 as certificates of deposit reprice and the rate on money market accounts decreased.

Other borrowed money decreased 37 basis points from 3.68% to 3.31% for 2010 primarily due to the restructure of $20.0 million in FHLB
advances which reduced the average borrowing cost of $55.0 million in advances from 3.49% to 3.01%.

Year ended December 31, 2009
compared to year ended December 31, 2008

Net interest income for the year ended December 31, 2009 increased 14.0% to $12.6
million from $11.0 million for the year ended December 31, 2008. Net interest income increased despite a 21 basis point decrease in the net interest margin from 2.89% for the year ended December 31, 2008 to 2.68% for the comparable period
of 2009.

Average earning assets increased $92.3 million, or 24.1%, to $474.8 million for 2009 from $382.6 million for 2008. Average loans,
net of unearned income increased $52.2 million, or 15.5% for 2009 to $389.4 million. Actual loan balances increased $33.2 million in 2009 compared to $78.3 million in 2008. The average rate earned on net loans, decreased 68 basis points to 5.89%
from 6.57% for the year ended December 31, 2008. The decrease in the average rate earned on net loans was the result of the decrease of 400 basis points in the prime rate during 2008. The prime rate remained unchanged at 3.25% for the



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entire year of 2009. The average balance in our securities portfolio increased $26.1 million in 2009 to $61.1 million from $35.0 million in 2008. We used liquidity generated by deposits and TARP
funds to mitigate interest rate risk and pick up spreads over the Federal funds rate. Other investments yield, which include FHLB Stock and Federal Reserve Stock, decreased 260 basis points as the FHLB eliminated the dividend on its stock in 2009.
Due to continued low interest rates, the yield on the investment portfolio decreased from 4.87% for 2008 to 4.22% for 2009. Interest on Federal funds sold decreased from $214 thousand for 2008 to $48 thousand for 2009 as the average balance sold
increased from $10.4 million in 2008 to $24.4 million in 2009. During most of 2009 the FOMC was pricing Federal funds between 0% and 0.25%. As a result of these changes, the yield on earning assets decreased 91 basis points to 5.38% for 2009 from
6.29% for 2008.

Average deposits increased $80.1 million or 29.9% to $348.1 million for 2009 from $268.1 million for 2008. Interest expense
on deposits decreased $11 thousand for 2009 compared to 2008. The average cost of interest-bearing deposits decreased 92 basis points from 3.98% for 2008 to 3.06% for 2009. The decrease in cost of interest-bearing deposits is the result of declining
interest rates and change in the mix of deposits. We made a concerted effort to reduce the dependency for funding away from certificates of deposit to other products which more closely matched our assets repricing. As of December 31, 2009,
certificates of deposit comprise 57.1% of our deposit base as compared to 75.4% at December 31, 2008. The cost of certificates of deposit decreased 91 basis points from 4.52% for 2008 to 3.61% for 2009. Money market accounts increased on
average $54.6 million for 2009 compared to 2008 as the cost increased from 1.84% to 1.87% for 2009. We expect deposit costs continue to decrease in early 2010 as certificates of deposit reprice and the rate on money market accounts decreased.

Other borrowed money decreased 20 basis points from 3.88% to 3.68% for 2009 primarily due to the $5.3 million in Trust Preferred Capital
Notes which are 1.70% over the three month LIBOR. At December 31, 2009, the rate on the Trust Preferred Capital Notes was down 175 basis points to 1.95% from 3.70% at December 31, 2008.

The following table analysis changes in net interest income attributable to changes in the volume of interest-earning assets and interest bearing
liabilities compared to changes in interest rates.



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|                                   |  |                                                    |       |   |                                                    |   |        |       |  |   |        |   |  |      |       |   |       |  |         |   |  |   |        |  
|---------------------------------- |  | -------------------------------------------------- | ----- | - | -------------------------------------------------- | - | ------ | ----- |  | - | ------ | - |  | ---- | ----- | - | ----- |  | ------- | - |  | - | ------ | -
|                                   |  | 2010 vs. 2009Increase (Decrease)Due to Changes in: |       |   | 2009 vs. 2008Increase (Decrease)Due to Changes in: |  
|                                   |  | Volume                                             |       |   | Rate                                               |   |        | Total |  |   | Volume |   |  | Rate |       |   | Total | 
|                                   |  | (Dollars in thousands)                             |      
|Earning Assets:                    |  |                                                    |       |   |                                                    |   |        |       |  |   |        |   |  |      |       |   |       |  |         |   |  |   |        |  
|Loans, net of unearned income      |  | $                                                  | 1,202 |   |                                                    |   | ($820  | )     |  | $ | 382    |   |  | $    | 3,431 |   |       |  | ($2,659 | ) |  | $ | 772    |  
|Investment securities:             |  |                                                    | 1,108 |   |                                                    |   | (334   | )     |  |   | 774    |   |  |      | 453   |   |       |  | 422     |   |  |   | 874    |  
|Federal funds sold                 |  |                                                    | (9    | ) |                                                    |   | 6      |       |  |   | (4     | ) |  |      | 281   |   |       |  | (452    | ) |  |   | (172   | )
|                                   |  |                                                    |       |   |                                                    |   |        |       |  |   |        |   |  |      |       |   |       |  |         |   |  |   |        |  
|Total earning assets               |  |                                                    | 2,301 |   |                                                    |   | (1,148 | )     |  |   | 1,152  |   |  |      | 4,165 |   |       |  | (2,689  | ) |  |   | 1,474  |  
|                                   |  |                                                    |       |   |                                                    |   |        |       |  |   |        |   |  |      |       |   |       |  |         |   |  |   |        |  
|Interest-Bearing Liabilities:      |  |                                                    |       |   |                                                    |   |        |       |  |   |        |   |  |      |       |   |       |  |         |   |  |   |        |  
|Interest checking                  |  |                                                    | 6     |   |                                                    |   | (1     | )     |  |   | 5      |   |  |      | (5    | ) |       |  | (10     | ) |  |   | (15    | )
|Money market deposit accounts      |  |                                                    | 1,001 |   |                                                    |   | (969   | )     |  |   | 32     |   |  |      | 1,006 |   |       |  | 25      |   |  |   | 1,031  |  
|Statement savings                  |  |                                                    |      |   |                                                    |   |       |       |  |   | 0      |   |  |      | (1    | ) |       |  | (1      | ) |  |   | (2     | )
|Certilficates of deposit           |  |                                                    | (606  | ) |                                                    |   | (1,974 | )     |  |   | (2,580 | ) |  |      | 1,211 |   |       |  | (2,236  | ) |  |   | (1,025 | )
|Fed funds purchased                |  |                                                    |      |   |                                                    |   |       |       |  |   | 0      |   |  |      | (35   | ) |       |  |        |   |  |   | (35    | )
|Repurchase agreements              |  |                                                    |      |   |                                                    |   | 1      |       |  |   | 1      |   |  |      | (15   | ) |       |  | (11     | ) |  |   | (26    | )
|Subordinated debt                  |  |                                                    |      |   |                                                    |   | (37    | )     |  |   | (37    | ) |  |      |      |   |       |  | (120    | ) |  |   | (120   | )
|FHLB advances                      |  |                                                    | 158   |   |                                                    |   | (201   | )     |  |   | (43    | ) |  |      | 23    |   |       |  | (16     | ) |  |   | 7      |  
|                                   |  |                                                    |       |   |                                                    |   |        |       |  |   |        |   |  |      |       |   |       |  |         |   |  |   |        |  
|Total interest-bearing liabilities |  |                                                    | 559   |   |                                                    |   | (3,181 | )     |  |   | (2,622 | ) |  |      | 2,184 |   |       |  | (2,369  | ) |  |   | (185   | )
|                                   |  |                                                    |       |   |                                                    |   |        |       |  |   |        |   |  |      |       |   |       |  |         |   |  |   |        |  
|Change in net interest income      |  | $                                                  | 1,742 |   |                                                    | $ | 2,033  |       |  | $ | 3,774  |   |  | $    | 1,981 |   |       |  | ($320   | ) |  | $ | 1,659  |  
|                                   |  |                                                    |       |   |                                                    |   |        |       |  |   |        |   |  |      |       |   |       |  |         |   |  |   |        |  

Provision for Loan Losses

The provision for loan losses is based upon managements estimate of the amount required to maintain an adequate allowance for loan losses as discussed within the Critical Accounting Policies section
above. The provision for loan losses for the year ended December 31, 2010 was $8.2 million compared to $2.3 million for the year ended December 31, 2009. Changes in the amount of provision for loan losses during each period reflect the
results of the Banks analysis used to determine the adequacy of the allowance for loan losses. We are committed to making loan loss provisions that maintain an allowance that adequately reflects the risk inherent in our loan portfolio. This
commitment is more fully discussed in the Asset Quality section below.

Non-Interest Income

Year ended December 31, 2010 compared to year ended December 31, 2009

Non-interest income has been and will continue to be an important factor for increasing profitability. Management continues to consider areas where non-interest income can be increased.

Non-interest income increased $303 thousand to $1.0 million for the year ended December 31, 2010 compared to $747 thousand for the same period in
2009.

The primary cause of the increase in non-interest income was the sale of securities resulting in a gain of $281 thousand as compared to
no gain in 2009. Fees on deposits increased $20 thousand to $277 thousand for the 2010 year compared to $257 for the 2009 year.



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Year ended December 31, 2009 compared to year ended December 31, 2008

Non-interest income increased $3 thousand to $747 thousand for the year ended December 31, 2009 compared to $744 thousand for the same period in
2008.

Fees on deposits increased $9 thousand to $257 thousand for the 2009 year compared to $248 for the 2008 year. Other non-interest income
decreased $6 thousand for the year 2009 compared to 2008. Components of the decrease are: document prep fees of $19 thousand as a result of decreased loan volume and decrease in gains and fees on sale of mortgages of $28 thousand due to decreases in
mortgage loans originated. These reductions were offset by a $31 thousand increase in investment services offered to our customers and $22 thousand increase in fees on letters of credit.

Non-Interest Expense

Year ended December 31, 2010 compared to year ended
December 31, 2009

Total noninterest expense increased 18.1% or $1.9 million to $12.5 million for 2010 as compared to $10.6 million
for the year 2009. Noninterest expense was 2.6% of average assets for the year ended December 31, 2010.

Salaries and employee benefits
increased 21.0% to $5.8 million for the year 2010 as compared to $4.8 million for 2009. Salaries and benefits increased due to key additions to the lending and management team and infrastructure during 2009 and the first quarter of 2010.

Occupancy costs decreased $81 thousand as the result of purchasing the corporate headquarters in 2010, thus eliminating rent expense for most of 2010.
This was offset by increases in depreciation of the building acquired as depreciation expense increased 17.1% to $490 thousand for the year ended December 31, 2010 as compared to $419 thousand for 2009

Professional fees increased $296 thousand for the year 2010 to $683 thousand from $387 thousand in 2009. This was primarily the result of increasing
legal fees associated with a higher volume of customer work out agreements, foreclosures and settlements in 2010.

Advertising and marketing
costs increased $80 thousand to $177 thousand in 2010 from $97 thousand in 2009, as additional marketing and name branding were used in 2010.

Virginia capital stock tax decreased $33 thousand, or 6.38%, to $492 thousand during 2010 from $525 thousand for 2009. The decrease was due to loss in
equity of the Bank during the year.

OREO expenses related to revaluation of existing OREO values totaled $674 thousand in 2010 as compared to
$0 thousand in 2009 as values in the real estate market continued to deteriorate in 2010.

Other expenses increased $262 thousand to $1.8
million in 2010 from $1.5 million in 2009.

Year ended December 31, 2009 compared to year ended December 31, 2008

Total noninterest expense increased 24.2% or $2.1 million to $10.6 million for 2009 as compared to $8.6 million for the year 2008. Noninterest expense was
2.2% of average assets for the year ended December 31, 2009.



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Salaries and employee benefits increased 11.8% to $4.8 million for the year 2009 as compared to $4.3 million
for 2008. A full years salary related to the staffing for the opening of the Bon Air Branch in 2008, the hiring of the Managing Director and CEO of the Company in late 2008, and hiring a senior loan officer and a loan analyst in 2009
contributed to the increase.

Merger costs totaled $285 thousand for the year ended December 31, 2009. These costs were legal, accounting
and investment advisors cost associated with a transaction that was subsequently terminated.

Occupancy costs decreased $53 thousand as the
result of relocating the rented Innsbrook office to an owned location in WestMark, saving $123 thousand in rent. This was offset by a $47 thousand increase in renting the James Center office and the Bon Air office for all of 2009 as compared to a
partial year in 2008.

Professional fees increased 43.6% to $386 thousand for the year 2009 from $269 thousand in 2008. This was primarily the
result of increasing legal fees associated with a higher volume of customer work out agreements, foreclosures and settlements in 2009.

Advertising and marketing costs decreased $153 thousand or 61.2% to $97 thousand in 2009 from $250 thousand in 2008. The branding campaign started in
2008 was suspended due to poor economic conditions.

FDIC assessments increased considerably during 2009 to $1.1 million compared to $215
thousand in 2009 due to increases in the fee assessment rates during 2009 and a special assessment applied to all insured institutions as of June 30, 2009.

Virginia capital stock tax increased $144 thousand, or 37.8%, to $525 thousand during 2009 from $381 thousand for 2008. Infusion of an additional $8.8 million of capital in the subsidiary bank in 2009
resulted in the increase in the capital stock tax. The Company received $10.9 million from the U.S. Treasury Department under the TARP Capital Purchase Program, of which $8.8 million was infused in the subsidiary Bank.

Depreciation expense increased $43 thousand or 11.4% to $419 thousand in 2009 from $376 thousand in 2008. The primary cause of this increase is the
construction of the free standing branch in WestMark in 2008 and relocation of the Forest Office Park Branch to an owned, free standing location at 7100 Three Chopt Road.

Other expenses increased 21.4% or $271 thousand to $1.5 million in 2009 from $1.3 million in 2008. OREO expenses totaled $141 thousand in 2009 as compared to $0 in 2008.

Income Taxes

Our reported income tax
benefit was $1.3 million for 2010 and income tax expense was $117 thousand for 2009. Note 11 of our consolidated financial statements provides a reconciliation between the amount of income tax expense computed using the federal statutory rate and
our actual income tax expense. Also included in Note 11 to the consolidated financial statements is information regarding the principal items giving rise to deferred taxes for the two years ended December 31, 2010 and 2009.



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Financial Condition

Assets

Total assets increased to $536.0 million at December 31, 2010, compared to
$530.4 million at December 31, 2009 representing an increase of $5.6 million or 1.1%. Average assets increased 9.6% from $489.5 million for the year ended December 31, 2009 to $536.3 million for the year ended December 31, 2010.
Average stockholders equity increased 6.0% to $45.9 million for the year ended December 31, 2010 as compared to $43.3 million for the same period in 2009

Loans

Our loan portfolio is the largest component of our earning assets. Total loans,
which exclude the allowance for loan losses and deferred loan fees and costs, at December 31, 2010, were $397.2 million, a decrease of $6.4 million from $403.7 million at December 31, 2009. Commercial real estate increased $20.0 million or
15.9% to $145.4 million and represented 36.6% of the portfolio. Real estate construction, land development and other land loans decreased $26.7 million, or 24.6%, to $81.9 million from $108.7 million and represented 20.6% of the portfolio, down from
26.9% at December 31, 2009. Concerted effort continued to be made to lessen our percentage of real estate construction, development and other land loans as a percentage of the total portfolio. The allowance for loan losses was $11.0 million, up
67.2% or 2.78% of total loans outstanding at December 31, 2010 up from 1.64% at December 31, 2009.

Major classifications of loans
are as follows:



|                                                                |  |                        |         |   |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|--------------------------------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  |  | - | ------- | 
|                                                                |  | 2010                   |         |   | 2009 |   |         | 2008 |  |   | 2007    |  |  | 2006 |        
|                                                                |  | (Dollars in thousands) |        
|Commercial                                                      |  | $                      | 48,004  |   |      | $ | 54,590  |      |  | $ | 51,138  |  |  | $    | 44,367  |  |  | $ | 22,619  | 
|Real estate - Construction, land development & other land loans |  |                        | 81,893  |   |      |   | 108,650 |      |  |   | 111,753 |  |  |      | 97,104  |  |  |   | 58,608  | 
|Real estate - Multifamily                                       |  |                        | 9,884   |   |      |   | 9,164   |      |  |   | 6,192   |  |  |      | 4,076   |  |  |   | 5,935   | 
|Real estate - commercial                                        |  |                        | 145,399 |   |      |   | 125,445 |      |  |   | 106,796 |  |  |      | 86,301  |  |  |   | 63,062  | 
|Real estate - 1-4 Residential residential                       |  |                        | 108,325 |   |      |   | 101,273 |      |  |   | 91,122  |  |  |      | 60,951  |  |  |   | 49,073  | 
|Consumer                                                        |  |                        | 3,693   |   |      |   | 4,542   |      |  |   | 5,584   |  |  |      | 4,106   |  |  |   | 2,387   | 
|                                                                |  |                        |         |   |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|Total loans                                                     |  |                        | 397,198 |   |      |   | 403,664 |      |  |   | 372,585 |  |  |      | 296,905 |  |  |   | 201,684 | 
|                                                                |  |                        |         |   |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|Less:                                                           |  |                        |         |   |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|Allowance for loan losses                                       |  |                        | 11,036  |   |      |   | 6,600   |      |  |   | 5,060   |  |  |      | 2,489   |  |  |   | 1,834   | 
|Net deferred fees (costs)                                       |  |                        | (47     | ) |      |   | (56     | )    |  |   | 85      |  |  |      | 182     |  |  |   | 99      | 
|                                                                |  |                        |         |   |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|Loans, net                                                      |  | $                      | 386,209 |   |      | $ | 397,120 |      |  | $ | 367,440 |  |  | $    | 294,234 |  |  | $ | 199,751 | 
|                                                                |  |                        |         |   |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 

Our average net loan portfolio totaled 79.4% of average earning assets in 2010, down from 82.0% in 2009. Because of the
nature of our market, loan collateral is predominantly real estate. At December 31, 2010, the Company had approximately $345.6 million in loans secured by real estate which represents 87.0% of our total loans outstanding as of that date. At
December 31, 2010, we had no concentration of loans in any one industry exceeding 10%.



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The following table reflects the amount of loans for Commercial loans and Real estate construction as to
fixed and variable and repricing or maturity:



|                         |  |                        |        |  |                                 |   |        |                 |  |   |       |  |  |   |        | 
|------------------------ |  | ---------------------- | ------ |  | ------------------------------- | - | ------ | --------------- |  | - | ----- |  |  | - | ------ | 
|                         |  | December 31, 2010      |       
|                         |  | One Year orLess        |        |  | After One YearThroughFive
Years |   |        | AfterFive Years |  |   | Total | 
|                         |  | (Dollars in thousands) |       
|Commercial               |  | $                      | 25,113 |  |                                 | $ | 22,662 |                 |  | $ | 229   |  |  | $ | 48,004 | 
|Real estate construction |  |                        | 15,772 |  |                                 |   | 80     |                 |  |   |      |  |  |   | 15,852 | 
|                         |  |                        |        |  |                                 |   |        |                 |  |   |       |  |  |   |        | 
|Total                    |  | $                      | 40,885 |  |                                 | $ | 22,742 |                 |  | $ | 229   |  |  | $ | 63,856 | 
|                         |  |                        |        |  |                                 |   |        |                 |  |   |       |  |  |   |        | 
|Loans with:              |  |                        |        |  |                                 |   |        |                 |  |   |       |  |  |   |        | 
|Fixed Rates              |  | $                      | 9,940  |  |                                 | $ | 20,523 |                 |  | $ | 229   |  |  | $ | 30,692 | 
|Variable Rates           |  |                        | 30,945 |  |                                 |   | 2,219  |                 |  |   |      |  |  |   | 33,164 | 
|                         |  |                        |        |  |                                 |   |        |                 |  |   |       |  |  |   |        | 
|                         |  | $                      | 40,885 |  |                                 | $ | 22,742 |                 |  | $ | 229   |  |  | $ | 63,856 | 
|                         |  |                        |        |  |                                 |   |        |                 |  |   |       |  |  |   |        | 

Asset Quality

The Company continued to experience deterioration in asset quality during 2010, principally within the builder residential real estate portfolio and the land development portfolio, as the housing market
remained soft. While economic indicators suggest the recession has technically ended and there are some signs of increased economic activity, the signals are somewhat mixed and there could be additional deterioration in asset quality in the near
term. The magnitude of any such softening is largely dependent upon any lagging impact on commercial real estate, the recovery of residential housing, and the pace at which the economies in the markets we serve recover. The Company does not
originate or purchase loans from foreign entities or loans classified by regulators as highly leveraged transactions. The Companys loan portfolio does not include exposure to option adjustable rate mortgage products, high loan-to-value ratio
mortgages, interest only mortgage loans, subprime mortgage loans or mortgage loans with initial teaser rates. The Company does have junior lien mortgages (second mortgages), primarily home equity loans. The Companys second mortgage
portfolio is originated within the Companys footprint and represented approximately 2.1% of the total loan portfolio at December 31, 2010. The Company has low loss experience within this portfolio and is prompted to perform updated
valuations upon identification of a borrower weakness. The sources of valuations are appraisals, broker price opinions, and automated valuation models.

While the level of nonperforming assets increased at the end of 2010, the levels are considered manageable by the Company. Resources continue to be devoted specifically to the ongoing review of the loan
portfolio and the workouts of problem assets to minimize any losses to the Company. The Company has in place a special assets loan committee, which includes the Companys Chief Lending Officer, Chief Credit Officer, and other senior lenders and
credit officers. This committee formulates strategies, develops action plans, and approves all credit actions taken on significant problem loans. Management continues to monitor delinquencies, risk rating changes, charge-offs, market trends and
other indicators of risk in the Companys portfolio, particularly those tied to residential and commercial real estate, and adjusts the allowance for loan losses accordingly. Historically, and particularly in the current economic environment,
the Company seeks to work with its customers on loan collection matters while taking appropriate actions to improve the Companys position and minimize any losses. These loans are closely managed and evaluated for collection with appropriate
loss reserves established whenever necessary.



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##### Table of Contents

Net charge-offs for 2010 were $3.8 million, or 0.92%, of average loans outstanding. Net charge-offs included
commercial loans of $303 thousand, construction loans of $2.1 million, commercial real estate loans of $530 thousand, and residential real estate $900 thousand. At December 31, 2010, total past due loans were $25.1 million, or 6.3%, of total
loans.

At December 31, 2010, non-performing assets increased $22.7 million to $29.7 million at December 31, 2010. The ratio of
nonperforming assets to total assets was 5.54% compared to 1.32% at year end 2009. Non-performing assets consists of nonaccrual loans totaling $22.4 million, other impaired loans totaling $3.1 million, 90 days past due and still accruing of $1.6
million and OREO of $2.6 million which are represented by twenty building lots, one house under construction and two parcels of land.

Non-performing Assets

We place loans on
a non-accrual when the collection of principal and interest is doubtful, generally when a loan becomes 90 days past due. There are three negative implications for earnings when we place a loan on non-accrual status. First, all interest accrued but
unpaid at the date that the loan is placed on non-accrual status is either deducted from interest income or written off as a loss. Second, accruals on interest are discontinued until it becomes certain that both principal and interest can be repaid.
Finally, there may be actual losses that require additional provisions for loan losses to be charged against earnings.



|                                         |  |                        |        |   |      |   |       |      |  |   |       |   |  |      |      |   |  |   |      |  
|---------------------------------------- |  | ---------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ---- | - |  | - | ---- | -
|                                         |  | December 31,           |       
|                                         |  | 2010                   |        |   | 2009 |   |       | 2008 |  |   | 2007  |   |  | 2006 |     
|                                         |  | (Dollars in thousands) |       
|Non-performing loans                     |  | $                      | 27,097 |   |      | $ | 3,607 |      |  | $ | 4,411 |   |  | $    | 50   |   |  | $ | 120  |  
|Non-performing assets                    |  | $                      | 2,615  |   |      | $ | 3,388 |      |  | $ | 2,158 |   |  | $    |     |   |  | $ |     |  
|Non-performing loans to period end loans |  |                        | 6.82   | % |      |   | 0.89  | %    |  |   | 1.18  | % |  |      | 0.02 | % |  |   | 0.06 | %
|Non-performing assets to total assets    |  |                        | 5.54   | % |      |   | 1.32  | %    |  |   | 1.52  | % |  |      | 0.02 | % |  |   | 0.06 | %

The following provides a roll-forward of
the OREO activity from the end of 2009 to the end of 2010 (dollars in thousands):



|                                    |  |         |        |  
|----------------------------------- |  | ------- | ------ | -
|                                    |  | Amounts |       
|Balance, beginning of year          |  | $       | 3,388  |  
|Additions                           |  |         | 1,246  |  
|Capitalized Improvements            |  |         | 23     |  
|Valuation Adjustments               |  |         | (674   | )
|Loss on sale                        |  |         | (40    | )
|Proceeds from sales                 |  |         | (1,328 | )
|                                    |  |         |        |  
|Ending balance, - December 31, 2010 |  | $       | 2,615  |  
|                                    |  |         |        |  

Allowance for Loan Losses

For a discussion of our accounting policies with respect to the allowance for loan losses, see Critical Accounting Policies  Allowance for Loan Losses above.



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##### Table of Contents

The following table depicts the transactions, in summary form, that occurred to the allowance for loan
losses in each year presented:



|                                                                                     |  |                        |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|------------------------------------------------------------------------------------ |  | ---------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - |  | - | ----- | -
|                                                                                     |  | December 31,           |       
|                                                                                     |  | 2010                   |        |   | 2009 |   |       | 2008 |  |   | 2007  |   |  | 2006 |      
|                                                                                     |  | (Dollars in thousands) |       
|Balance, beginning of year                                                           |  | $                      | 6,600  |   |      | $ | 5,060 |      |  | $ | 2,489 |   |  | $    | 1,834 |   |  | $ | 1,460 |  
|Loans charge-offs                                                                    |  |                        |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Commercial                                                                           |  |                        | 530    |   |      |   | 340   |      |  |   | 24    |   |  |      | 20    |   |  |   | 21    |  
|Real estate - residential                                                            |  |                        | 900    |   |      |   | 8     |      |  |   | 58    |   |  |      |      |   |  |   |      |  
|Real estate - commercial                                                             |  |                        | 303    |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |      |  
|Real estate - construction                                                           |  |                        | 2,083  |   |      |   | 402   |      |  |   | 273   |   |  |      |      |   |  |   | 10    |  
|Consumer                                                                             |  |                        |       |   |      |   | 5     |      |  |   | 4     |   |  |      | 4     |   |  |   |      |  
|                                                                                     |  |                        |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Total loans charged off                                                              |  | $                      | 3,816  |   |      | $ | 755   |      |  | $ | 359   |   |  | $    | 24    |   |  | $ | 31    |  
|                                                                                     |  |                        |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Recoveries                                                                           |  |                        |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Commercial                                                                           |  |                        | 13     |   |      |   | 2     |      |  |   | 5     |   |  |      |      |   |  |   | 1     |  
|Real estate - residential                                                            |  |                        | 16     |   |      |   | 7     |      |  |   |      |   |  |      |      |   |  |   |      |  
|Real estate - commercial                                                             |  |                        | 2      |   |      |   |      |      |  |   |      |   |  |      |      |   |  |   |      |  
|Real estate - construction                                                           |  |                        |       |   |      |   | 1     |      |  |   |      |   |  |      |      |   |  |   |      |  
|Consumer                                                                             |  |                        |       |   |      |   |      |      |  |   | 1     |   |  |      | 3     |   |  |   |      |  
|                                                                                     |  |                        |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Total recoveries                                                                     |  | $                      | 31     |   |      | $ | 10    |      |  | $ | 6     |   |  | $    | 3     |   |  | $ | 1     |  
|                                                                                     |  |                        |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Net charge-offs                                                                      |  |                        | 3,785  |   |      |   | 745   |      |  |   | 353   |   |  |      | 21    |   |  |   | 30    |  
|Additions charge to operations                                                       |  |                        | 8,221  |   |      |   | 2,285 |      |  |   | 2,924 |   |  |      | 676   |   |  |   | 404   |  
|                                                                                     |  |                        |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Balance, end of year                                                                 |  | $                      | 11,036 |   |      | $ | 6,600 |      |  | $ | 5,060 |   |  | $    | 2,489 |   |  | $ | 1,834 |  
|                                                                                     |  |                        |        |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |       |  
|Ratio of allowance for loan losses to loans outstanding at end of period             |  |                        | 2.78   | % |      |   | 1.64  | %    |  |   | 1.36  | % |  |      | 0.84  | % |  |   | 0.91  | %
|Ratio of new charge-offs (recoveries) to average loans outstanding during the period |  |                        | 0.92   | % |      |   | 0.19  | %    |  |   | 0.10  | % |  |      | 0.01  | % |  |   | 0.02  | %

The allowance for loan losses at
December 31, 2010 was $11.0 million compared to $6.6 million at December 31, 2009. The allowance for loan losses was 2.78% of total loans outstanding at December 31, 2010 compared to 1.64% at December 31, 2009. The provision for
loan losses was $8.2 million for 2010 compared to $2.3 million for 2009. Net charge-offs were $3.8 million for the year ended December 31, 2010 compared to $745 thousand for the year ended December 31, 2009. The portfolio continues to show
stress as the economic environment and the real estate market continue to deteriorate and additional provision for loan losses may be required if the downward trend in conditions persists. We have no exposure to sub-prime loans in the portfolio.

The following table shows the balance and percentage of our allowance for loan losses allocated to each major category of loan:



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##### Table of Contents

|     |  |                         |       |  |                                         |  |       |                          |  |   |                                         |  |  |                           |       |   |                                         |   |       |                      |  |  |                                         |   |  |   |    |  |  |  |      |   |  |   |        | 
|---- |  | ----------------------- | ----- |  | --------------------------------------- |  | ----- | ------------------------ |  | - | --------------------------------------- |  |  | ------------------------- | ----- | - | --------------------------------------- | - | ----- | -------------------- |  |  | --------------------------------------- | - |  | - | -- |  |  |  | ---- | - |  | - | ------ | 
|     |  | Commercial & Industrial |       |  | Real Estate Residential                 |  |       | Real Estate Construction |  |   | Consumer                                |  |  | TotalAllowanceforLoanLoss |      
|     |  | AllowanceforLoanLoss    |       |  | Percent ofLoan inCategory toTotal Loans |  |       | AllowanceforLoanLoss     |  |   | Percent ofLoan inCategory toTotal Loans |  |  | AllowanceforLoanLoss      |       |   | Percent ofLoan inCategory toTotal Loans |   |       | AllowanceforLoanLoss |  |  | Percent ofLoan inCategory toTotal Loans |   | 
|     |  | (Dollars in thousands)  |       |  |                                         | 
|2010 |  | $                       | 2,256 |  |                                         |  | 12.09 | %                        |  | $ | 5,864                                   |  |  |                           | 73.28 | % |                                         | $ | 2,902 |                      |  |  | 13.71                                   | % |  | $ | 14 |  |  |  | 0.93 | % |  | $ | 11,036 | 
|2009 |  |                         | 365   |  |                                         |  | 13.52 | %                        |  |   | 3,488                                   |  |  |                           | 65.26 | % |                                         |   | 2,738 |                      |  |  | 20.09                                   | % |  |   | 9  |  |  |  | 1.13 | % |  |   | 6,600  | 
|2008 |  |                         | 1,075 |  |                                         |  | 13.73 | %                        |  |   | 3,026                                   |  |  |                           | 61.56 | % |                                         |   | 942   |                      |  |  | 23.22                                   | % |  |   | 17 |  |  |  | 1.50 | % |  |   | 5,060  | 
|2007 |  |                         | 960   |  |                                         |  | 14.94 | %                        |  |   | 937                                     |  |  |                           | 57.03 | % |                                         |   | 591   |                      |  |  | 26.64                                   | % |  |   | 1  |  |  |  | 1.38 | % |  |   | 2,489  | 
|2006 |  |                         | 762   |  |                                         |  | 11.22 | %                        |  |   | 633                                     |  |  |                           | 62.09 | % |                                         |   | 437   |                      |  |  | 25.51                                   | % |  |   | 2  |  |  |  | 1.18 | % |  |   | 1,834  | 

Securities

We have designated most securities in the investment portfolio as available for sale as further defined in Note 3 to our consolidated
financial statements. In 2008, we designated certain security purchases as held-to-maturity as defined in Note 3 to our consolidated financial statements. Available for sale securities are required to be carried on the financial
statements at fair value. The unrealized gains or losses, net of deferred income taxes, are reflected in stockholders equity. Held-to-maturity securities are carried on our books at amortized cost.

The market value of the available for sale securities at December 31, 2010 and 2009 was $86.8 million and $77.1 million, respectively. The net
unrealized gain after tax on the available for sale securities was $91 thousand at December 31, 2010 as compared to $370 thousand December 31, 2009.

The carrying values of securities available for sale at the dates indicated were as follows:



|                                                         |  |                        |        |  |      |   |        |      |  |   |        | 
|-------------------------------------------------------- |  | ---------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                                         |  | December 31,           |       
|                                                         |  | 2010                   |        |  | 2009 |   |        | 2008 | 
|                                                         |  | (Dollars in thousands) |       
|Available for Sale                                       |  |                        |        |  |      |   |        |      |  |   |        | 
|U.S. Government securities                               |  | $                      | 6,581  |  |      | $ | 23,467 |      |  | $ | 17,122 | 
|Mortgage-backed and CMO securities                       |  |                        | 15,022 |  |      |   | 12,062 |      |  |   | 6,377  | 
|CMO securities                                           |  |                        | 31,044 |  |      |   | 22,940 |      |  |   | 2,027  | 
|State and political subdivision obligations - tax exempt |  |                        | 11,992 |  |      |   | 9,364  |      |  |   | 1,729  | 
|State and political subdivision obligations - taxable    |  |                        | 12,007 |  |      |   | 5,797  |      |  |   |       | 
|Corporate bonds                                          |  |                        | 6,401  |  |      |   | 3,488  |      |  |   | 3,269  | 
|SBA securities                                           |  |                        | 3,740  |  |      |   |       |      |  |   |       | 
|                                                         |  |                        |        |  |      |   |        |      |  |   |        | 
|                                                         |  | $                      | 86,787 |  |      | $ | 77,118 |      |  | $ | 30,524 | 
|                                                         |  |                        |        |  |      |   |        |      |  |   |        | 
|Held to Maturity                                         |  |                        |        |  |      |   |        |      |  |   |        | 
|State and political subdivision obligations - tax exempt |  | $                      | 2,389  |  |      | $ | 1,453  |      |  | $ | 1,471  | 
|                                                         |  |                        |        |  |      |   |        |      |  |   |        | 
|                                                         |  | $                      | 2,389  |  |      | $ | 1,453  |      |  | $ | 1,471  | 
|                                                         |  |                        |        |  |      |   |        |      |  |   |        | 

Restricted equity securities consist primarily of Federal Reserve Bank stock, Federal Home Loan Bank of Atlanta stock and
Community Bankers Bank Stock.



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##### Table of Contents

Deposits

The following table is a summary of average deposits and average rates paid on those deposits for the periods presented:



|                             |  |                                 |         |  |             |  |      |        |  |   |             |  |  |        |      |   |             |   |         |  |  |  |      |  
|---------------------------- |  | ------------------------------- | ------- |  | ----------- |  | ---- | ------ |  | - | ----------- |  |  | ------ | ---- | - | ----------- | - | ------- |  |  |  | ---- | -
|                             |  | Average Deposits and Rates Paid |        
|                             |  | 2010                            |         |  | 2009        |  |      | 2008   | 
|                             |  | Amount                          |         |  | AverageRate |  |      | Amount |  |   | AverageRate |  |  | Amount |      |   | AverageRate |  
|                             |  | (Dollars in thousands)          |        
|Noninterest-bearing deposits |  |                                 |         |  |             |  |      |        |  |   |             |  |  |        |      |   |             |   |         |  |  |  |      |  
|Demand deposits              |  | $                               | 39,564  |  |             |  | 0.00 | %      |  | $ | 37,583      |  |  |        | 0.00 | % |             | $ | 32,672  |  |  |  | 0.00 | %
|Interest-bearing deposits    |  |                                 |         |  |             |  |      |        |  |   |             |  |  |        |      |   |             |   |         |  |  |  |      |  
|Interest checking            |  |                                 | 9,239   |  |             |  | 0.36 | %      |  |   | 7,973       |  |  |        | 0.37 | % |             |   | 9,213   |  |  |  | 0.49 | %
|Savings                      |  |                                 | 718     |  |             |  | 0.47 | %      |  |   | 699         |  |  |        | 0.47 | % |             |   | 792     |  |  |  | 0.57 | %
|Money market accounts        |  |                                 | 146,788 |  |             |  | 1.21 | %      |  |   | 93,177      |  |  |        | 1.87 | % |             |   | 38,586  |  |  |  | 1.84 | %
|Certificates of deposit      |  |                                 | 229,496 |  |             |  | 2.75 | %      |  |   | 246,291     |  |  |        | 3.61 | % |             |   | 219,480 |  |  |  | 4.52 | %
|                             |  |                                 |         |  |             |  |      |        |  |   |             |  |  |        |      |   |             |   |         |  |  |  |      |  
|                             |  | $                               | 425,805 |  |             |  |      |        |  | $ | 385,723     |  |  |        |      |   |             | $ | 300,743 |  |  |  |      |  
|                             |  |                                 |         |  |             |  |      |        |  |   |             |  |  |        |      |   |             |   |         |  |  |  |      |  

As of December 31, 2010, deposits were $426.9 million, a $4.7 million increase over December 31, 2009
deposits of $422.1 million. Average deposits increased 10.4% or $40.1 million compared to average deposits for the year ended December 31, 2009. Average money market accounts increased 15.9% or $53.6 million to $146.8 million from $93.2 million
for the comparable period in 2009. Average certificates of deposit decreased $16.8 million for the year to $229.5 million. Included in the certificates of deposit are $29.2 million (6.8% of total deposits) in brokered deposits at an average cost of
2.17%. We used brokered deposits to extend the maturity of our certificates of deposit to assist in our interest rate risk management.

As of
December 31, 2009, deposits were $422.1 million, an $87.8 million increase over December 31, 2008 deposits of $334.3 million. Average deposits increased 29.9% or $80.1 million compared to average deposits for the year ended
December 31, 2008. Average money market accounts increased 141.5% or $54.6 million to $93.2 million from $38.6 million for the comparable period in 2008. Average certificates of deposit grew $26.8 million for the year to $246.3 million.
Included in the certificates of deposit are $34.8 million (8.2% of total deposits) in brokered deposits at an average cost of 2.09%.

The
following table is a summary of the maturity distribution of certificates of deposit equal to or greater than $100,000 as of December 31, 2009:



|                     |  |                                                                |        |  |                      |   |        |             |  |   |        |  |  |                         |         |  |  |  |      |  
|-------------------- |  | -------------------------------------------------------------- | ------ |  | -------------------- | - | ------ | ----------- |  | - | ------ |  |  | ----------------------- | ------- |  |  |  | ---- | -
|                     |  | Maturities of Certificates of Deposit of $100,000 and 
Greater |       
|                     |  | WithinThreeMonths                                              |        |  | Three toTwelveMonths |   |        | OverOneYear |  |   | Total  |  |  | Percentof TotalDeposits |        
|                     |  | (Dollars in thousands)                                         |        |  |                      |  
|At December 31, 2010 |  | $                                                              | 11,258 |  |                      | $ | 61,815 |             |  | $ | 66,354 |  |  | $                       | 139,427 |  |  |  | 32.7 | %



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##### Table of Contents

Borrowings

At December 31, 2010, 2009 and 2008, our borrowings and the related weighted average interest rate were as follows:



|                                |  |                        |        |  |                      |  |      |        |  |   |                      |  |  |        |      |   |                      |   |        |  |  |  |      |  
|------------------------------- |  | ---------------------- | ------ |  | -------------------- |  | ---- | ------ |  | - | -------------------- |  |  | ------ | ---- | - | -------------------- | - | ------ |  |  |  | ---- | -
|                                |  | 2010                   |        |  | 2009                 |  |      | 2008   | 
|                                |  | Amount                 |        |  | Weighted-AverageRate |  |      | Amount |  |   | Weighted-AverageRate |  |  | Amount |      |   | Weighted-AverageRate |  
|                                |  | (Dollars in thousands) |       
|Federal funds purchased         |  | $                      |       |  |                      |  | 0.00 | %      |  | $ |                     |  |  |        | 0.00 | % |                      | $ | 952    |  |  |  | 3.66 | %
|Repurchase agreements           |  |                        | 1,077  |  |                      |  | 0.50 | %      |  |   | 1,365                |  |  |        | 0.44 | % |                      |   | 2,482  |  |  |  | 1.31 | %
|Federal Home Loan Bank advances |  |                        | 55,000 |  |                      |  | 3.01 | %      |  |   | 50,000               |  |  |        | 3.76 | % |                      |   | 49,385 |  |  |  | 3.79 | %
|Subordinated debt               |  |                        | 7,155  |  |                      |  | 1.91 | %      |  |   | 7,155                |  |  |        | 3.72 | % |                      |   | 7,155  |  |  |  | 5.38 | %
|                                |  |                        |        |  |                      |  |      |        |  |   |                      |  |  |        |      |   |                      |   |        |  |  |  |      |  
|                                |  | $                      | 63,232 |  |                      |  |      |        |  | $ | 58,520               |  |  |        |      |   |                      | $ | 59,974 |  |  |  |      |  
|                                |  |                        |        |  |                      |  |      |        |  |   |                      |  |  |        |      |   |                      |   |        |  |  |  |      |  

We have various lines of credit available from certain of our correspondent banks in the aggregate amount of $29.5
million. These lines of credit, which bear interest at prevailing market rates, permit us to borrow funds in the overnight market, and are renewable annually.

Interest Rate Sensitivity

The most important element of asset/liability management is the
monitoring of the Companys sensitivity to interest rate movements. The income stream of the Company is subject to risk resulting from interest rate fluctuations to the extent there is a difference between the amount of the Companys
interest earning assets and the amount of interest bearing liabilities that are prepaid, mature or repriced in specific periods. Our goal is to maximize net interest income within acceptable levels of risk to changes in interest rates. We seek to
meet this goal by influencing the maturity and re-pricing characteristics of the various lending and deposit taking lines of business and by managing discretionary balance sheet asset and liability portfolios.

We monitor interest rate levels on a daily basis at meetings of the Asset/Liability Sub-Committee. The following reports and/or tools are used to assess
the current interest rate environment and its impact on our earnings and liquidity: monthly and year to date net interest margin and spread calculations, monthly and year to date balance sheet and income statements versus budget, quarterly net
portfolio value analysis, a weekly survey of rates offered by other local competitive institutions and GAP analysis (matching maturities or repricing dates of interest sensitive assets to those of interest sensitive liabilities by periods) and a
Risk Manager model used to measure earnings at risk and economic value of equity at risk.

The data in the following table reflects repricing
or expected maturities of various assets and liabilities. The gap analysis represents the difference between interest-sensitive assets and liabilities in a specific time interval. Interest sensitivity gap analysis presents a position that existed at
one particular point in time, and assumes that assets and liabilities with similar repricing characteristics will reprice at the same time and to the same degree.



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|                                                                                    |  |                        |         |   |                  |    |         |             |  |    |             |   |  |             |         |   |             |    |         |       |  |    |         |   |  |   |         | 
|----------------------------------------------------------------------------------- |  | ---------------------- | ------- | - | ---------------- | -- | ------- | ----------- |  | -- | ----------- | - |  | ----------- | ------- | - | ----------- | -- | ------- | ----- |  | -- | ------- | - |  | - | ------- | 
|                                                                                    |  | December 31, 2010      |        
|                                                                                    |  | 1 to 90Days            |         |   | 90 Days to1 Year |    |         | Total1 Year |  |    | 1 to3 Years |   |  | 3 to5 Years |         |   | Over 5Years |    |         | Total | 
|                                                                                    |  | (Dollars in thousands) |        
|Earning Assets:                                                                     |  |                        |         |   |                  |    |         |             |  |    |             |   |  |             |         |   |             |    |         |       |  |    |         |   |  |   |         | 
|Total Loans Excluding Nonaccrual                                                    |  | $                      | 86,048  |   |                  | $  | 60,229  |             |  | $  | 146,277     |   |  | $           | 90,078  |   |             | $  | 103,871 |       |  | $  | 40,463  |   |  | $ | 380,689 | 
|Investment securities                                                               |  |                        | 2,455   |   |                  |    | 2,493   |             |  |    | 4,948       |   |  |             | 17,839  |   |             |    | 18,270  |       |  |    | 48,098  |   |  |   | 89,155  | 
|Federal funds sold                                                                  |  |                        | 26,002  |   |                  |    |        |             |  |    | 26,002      |   |  |             |        |   |             |    |        |       |  |    |        |   |  |   | 26,002  | 
|                                                                                    |  |                        |         |   |                  |    |         |             |  |    |             |   |  |             |         |   |             |    |         |       |  |    |         |   |  |   |         | 
|Total rate sensitive assets                                                         |  | $                      | 114,505 |   |                  | $  | 62,722  |             |  | $  | 177,227     |   |  | $           | 107,917 |   |             | $  | 122,141 |       |  | $  | 88,561  |   |  | $ | 495,846 | 
|                                                                                    |  |                        |         |   |                  |    |         |             |  |    |             |   |  |             |         |   |             |    |         |       |  |    |         |   |  |   |         | 
|Cumulative totals                                                                   |  |                        | 114,505 |   |                  |    | 177,227 |             |  |    | 177,227     |   |  |             | 285,144 |   |             |    | 407,285 |       |  |    | 495,846 |   |  |   |         | 
|                                                                                    |  |                        |         |   |                  |    |         |             |  |    |             |   |  |             |         |   |             |    |         |       |  |    |         |   |  |   |         | 
|Interest-Bearing Liabilities:                                                       |  |                        |         |   |                  |    |         |             |  |    |             |   |  |             |         |   |             |    |         |       |  |    |         |   |  |   |         | 
|Interest checking                                                                   |  | $                      | 9,826   |   |                  | $  |        |             |  | $  | 9,826       |   |  | $           |        |   |             | $  |        |       |  | $  |        |   |  | $ | 9,826   | 
|Money market accounts                                                               |  |                        | 145,281 |   |                  |    |        |             |  |    | 145,281     |   |  |             |        |   |             |    |        |       |  |    |        |   |  |   | 145,281 | 
|Savings deposits                                                                    |  |                        | 796     |   |                  |    |        |             |  |    | 796         |   |  |             |        |   |             |    |        |       |  |    |        |   |  |   | 796     | 
|Certificates of deposit:                                                            |  |                        | 26,639  |   |                  |    | 64,833  |             |  |    | 91,472      |   |  |             | 72,126  |   |             |    | 66,990  |       |  |    |        |   |  |   | 230,588 | 
|Federal funds purchased                                                             |  |                        |        |   |                  |    |        |             |  |    |            |   |  |             |        |   |             |    |        |       |  |    |        |   |  |   |        | 
|FHLB borrowing                                                                      |  |                        |        |   |                  |    | 5,000   |             |  |    | 5,000       |   |  |             | 25,000  |   |             |    | 15,000  |       |  |    | 10,000  |   |  |   | 55,000  | 
|Sub Debt                                                                            |  |                        |        |   |                  |    |        |             |  |    |            |   |  |             |        |   |             |    | 2,000   |       |  |    |        |   |  |   | 2,000   | 
|Trust preferred                                                                     |  |                        | 5,155   |   |                  |    |        |             |  |    | 5,155       |   |  |             |        |   |             |    |        |       |  |    |        |   |  |   | 5,155   | 
|Other liabilities                                                                   |  |                        | 1,077   |   |                  |    |        |             |  |    | 1,077       |   |  |             |        |   |             |    |        |       |  |    |        |   |  |   | 1,077   | 
|                                                                                    |  |                        |         |   |                  |    |         |             |  |    |             |   |  |             |         |   |             |    |         |       |  |    |         |   |  |   |         | 
|Total rate sensitive liabilities                                                    |  |                        | 188,774 |   |                  |    | 74,833  |             |  |    | 253,781     |   |  |             | 122,126 |   |             |    | 98,990  |       |  |    | 20,000  |   |  |   | 494,897 | 
|                                                                                    |  |                        |         |   |                  |    |         |             |  |    |             |   |  |             |         |   |             |    |         |       |  |    |         |   |  |   |         | 
|Cumulative totals                                                                   |  | $                      | 188,774 |   |                  | $  | 263,607 |             |  | $  | 263,607     |   |  | $           | 385,733 |   |             | $  | 484,723 |       |  | $  | 504,723 |   |  |   |         | 
|                                                                                    |  |                        |         |   |                  |    |         |             |  |    |             |   |  |             |         |   |             |    |         |       |  |    |         |   |  |   |         | 
|Interest sensitivity gap                                                            |  | ($                     | 74,269  | ) |                  | ($ | 12,111  | )           |  | ($ | 76,554      | ) |  | ($          | 14,209  | ) |             | $  | 23,151  |       |  | $  | 68,561  |   |  |   |         | 
|                                                                                    |  |                        |         |   |                  |    |         |             |  |    |             |   |  |             |         |   |             |    |         |       |  |    |         |   |  |   |         | 
|Cumulative interest sensitivity gap                                                 |  | ($                     | 74,269  | ) |                  | ($ | 86,380  | )           |  | ($ | 86,380      | ) |  | ($          | 100,589 | ) |             | ($ | 77,438  | )     |  | -$ | 8,877   |   |  |   |         | 
|                                                                                    |  |                        |         |   |                  |    |         |             |  |    |             |   |  |             |         |   |             |    |         |       |  |    |         |   |  |   |         | 
|Cumulative interest sensitive gap as a percentage of earning assets                 |  |                        | -15.0   | % |                  |    | -17.4   | %           |  |    | -17.4       | % |  |             | -20.3   | % |             |    | -15.6   | %     |  |    | -1.8    | % |  |   |         | 
|                                                                                    |  |                        |         |   |                  |    |         |             |  |    |             |   |  |             |         |   |             |    |         |       |  |    |         |   |  |   |         | 
|Ratio of cumulative rate sensitive assets to cummulative rate sensitive liabilities |  |                        | 60.7    | % |                  |    | 67.2    | %           |  |    | 67.2        | % |  |             | 73.9    | % |             |    | 84.0    | %     |  |    | 98.2    | % |  |   |         | 
|                                                                                    |  |                        |         |   |                  |    |         |             |  |    |             |   |  |             |         |   |             |    |         |       |  |    |         |   |  |   |         | 

Capital Resources and Dividends

We have an ongoing strategic objective of maintaining a capital base that supports the pursuit of profitable business opportunities, provides resources to absorb risk inherent in our activities and meets
or exceeds all regulatory requirements.

The Federal Reserve Board has established minimum regulatory capital standards for bank holding
companies and state member banks. The regulatory capital standards categorize assets and off-balance sheet items into four categories that weight balance sheet assets according to risk, requiring more capital for holding higher risk assets. At
December 31, 2010 and 2009, our Tier 1 leverage ratio (Tier 1 capital to average total assets) was 9.04% and 10.01% respectively with the minimum regulatory ratio to be well capitalized at 5.00%. Tier 1 risk based capital ratios at
December 31, 2010 and 2009 were 12.08% and 12.36% respectively with the minimum regulatory ratio to be well capitalized at 6.00%. Total risk based



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capital to risk weighted assets at December 31, 2010 and 2009 were 13.74% and 14.09% respectively with the minimum regulatory ratio to be well capitalized at 10.00%. Our capital structure
exceeds regulatory guidelines established for well capitalized institutions, which affords us the opportunity to take advantage of business opportunities while ensuring that we have the resources to protect against risk inherent in our business.



|                          |  |                        |         |   |      |   |         |      |  |   |         |  
|------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                          |  | December 31,           |        
|                          |  | 2010                   |         |   | 2009 |   |         | 2008 | 
|                          |  | (Dollars in thousands) |        
|Tier 1 capital:           |  |                        |         |   |      |   |         |      |  |   |         |  
|Common stock              |  | $                      | 11,885  |   |      | $ | 11,885  |      |  | $ | 11,885  |  
|Retained earnings         |  |                        | 20,469  |   |      |   | 23,275  |      |  |   | 23,339  |  
|                          |  |                        |         |   |      |   |         |      |  |   |         |  
|Total equity              |  |                        | 32,354  |   |      |   | 35,160  |      |  |   | 35,224  |  
|Trust preferred stock     |  |                        | 10,523  |   |      |   | 10,394  |      |  |   |        |  
|Warrants                  |  |                        | 661     |   |      |   | 661     |      |  |   |        |  
|Trust preferred debt      |  |                        | 5,155   |   |      |   | 5,155   |      |  |   | 5,155   |  
|                          |  |                        |         |   |      |   |         |      |  |   |         |  
|Total Tier 1 capital      |  |                        | 48,693  |   |      |   | 51,370  |      |  |   | 40,379  |  
|                          |  |                        |         |   |      |   |         |      |  |   |         |  
|Tier 2 capital:           |  |                        |         |   |      |   |         |      |  |   |         |  
|Allowance for loan losses |  |                        | 5,114   |   |      |   | 5,192   |      |  |   | 4,797   |  
|Subordinated debt         |  |                        | 1,600   |   |      |   | 2,000   |      |  |   | 2,000   |  
|                          |  |                        |         |   |      |   |         |      |  |   |         |  
|Total Tier 2 capital      |  |                        | 6,714   |   |      |   | 7,192   |      |  |   | 6,797   |  
|                          |  |                        |         |   |      |   |         |      |  |   |         |  
|Total risk-based capital  |  |                        | 55,407  |   |      | $ | 58,562  |      |  | $ | 47,176  |  
|                          |  |                        |         |   |      |   |         |      |  |   |         |  
|Risk-weighted assets      |  | $                      | 403,203 |   |      | $ | 415,747 |      |  | $ | 380,070 |  
|                          |  |                        |         |   |      |   |         |      |  |   |         |  
|Capital ratios:           |  |                        |         |   |      |   |         |      |  |   |         |  
|Tier 1 leverage ratio     |  |                        | 9.04    | % |      |   | 10.01   | %    |  |   | 9.62    | %
|Tier 1 risk based capital |  |                        | 12.08   |   |      |   | 12.36   |      |  |   | 10.62   |  
|Total risk based capital  |  |                        | 13.74   |   |      |   | 14.09   |      |  |   | 12.41   |  
|Tangible equity to assets |  |                        | 6.20    |   |      |   | 6.80    |      |  |   | 8.16    |  

Liquidity

Liquidity represents an institutions ability to meet present and future financial obligations through either the sale or maturity of existing assets
or the acquisition of additional funds through liability management. Liquid assets include cash, interest-bearing deposits with banks, federal funds sold, short-term investments, securities classified as available for sale as well as loans and
securities maturing within one year. As a result of our management of liquid assets and the ability to generate liquidity through liability funding, management believes we maintain overall liquidity sufficient to satisfy our depositors
requirements and meet our clients credit needs.

We also maintain additional sources of liquidity through a variety of borrowing
arrangements. The Bank maintains federal funds lines with a large regional money-center banking institution and a local community bankers bank. These available lines currently total approximately $29.5 million, of which there were no outstanding
draws at December 31, 2010.



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We have a credit line at the Federal Home Loan Bank of Atlanta in the amount of approximately $67.0 million
which may be utilized for short and/or long-term borrowing. Advances from the Federal Home Loan Bank totaled $55.0 million at December 31, 2010.

At December 31, 2010, cash, federal funds sold, short-term investments, securities available for pledge or sale and available lines were 36.1% of total deposits.

ITEM 8. FINANCIAL STATEMENTS

The following 2010 Financial Statements of First Capital Bancorp, Inc. are included after the signature pages to this Report on Form 10-K:



|                                                                                                                        |  |  |  | 
|----------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Report of Independent Registered Public Accounting Firm                                                                 |  |  |  | 
|Consolidated Statements of Financial Condition December 31, 2010 and 2009                                               |  |  |  | 
|Consolidated Statements of Income for the Years Ended December 31, 2010 and 2009                                        |  |  |  | 
|Consolidated Statements of Stockholders Equity and Comprehensive Income for the Years Ended December 31, 2010 and 2009 |  |  |  | 
|Consolidated Statements of Cash Flows for the Years ended December 31, 2010 and 2009                                    |  |  |  | 
|Notes to Consolidated Financial Statements                                                                              |  |  |  | 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There were no changes in or disagreements with accountants on accounting and financial disclosure
during the last fiscal year.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The
Company, under the supervision and with the participation of management, including the Companys Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and
procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures were
effective as of December 31, 2010 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms.

Internal Control over Financial Reporting

Management is also responsible for establishing and maintaining adequate internal control over the Companys financial reporting (as defined in Rule
13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended). Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, management has conducted an assessment of the design and effectiveness of its internal controls over
financial reporting based on criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). There were no changes in the Companys internal
control over financial reporting during the Companys quarter ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting. Management
assessed the effectiveness of the Companys internal control over financial reporting as of December 31, 2010. Based on our assessment, we believe that, as of



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December 31, 2010, the Companys internal control over financial reporting was effective based on those criteria.

This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting. Managements report was not
subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only managements report in this annual report.

ITEM 9B. OTHER INFORMATION

None

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Audit Committee Financial Expert.The applicable information contained in the section captioned Proposal No. 1  Election of
Directors  Audit Committee in the definitive proxy statement for the Annual Meeting of Stockholders to be held on May 18, 2011 (the Proxy Statement) is incorporated herein by reference.

Code of Ethics.The Bank has adopted (i) A Bankers Professional Code of Ethics, and (ii) a Code of Conduct and Conflict of
Interest, both of which are applicable to its principal executive officer, principal financial officer and principal accounting officer or controller. The codes are filed as exhibits to this Report on Form 10-K.

The information contained under the section captioned Proposal No. 1 Election of Directors in the Proxy Statement
is incorporated herein by reference.

Additional information concerning executive officers is included in the Proxy Statement
in the section captioned Proposal No. 1  Election of Directors - Section 16(a) Beneficial Ownership Reporting Compliance.

ITEM 11. EXECUTIVE COMPENSATION.

The
information contained in the section captioned Proposal No. 1  Election of Directors  Executive Compensation in the Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.



| | (a) | Security Ownership of Certain Beneficial Owners
| | --- | -----------------------------------------------

Information required by this item is incorporated herein by reference to the section captioned Voting Securities and Principal Stockholders in the Proxy Statement.



| | (b) | Security Ownership of Management
| | --- | --------------------------------



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Information required by this item is incorporated herein by reference to the chart in the
section captioned Voting Securities and Principal Stockholders in the Proxy Statement.



| | (c) | Management of First Capital Bancorp, Inc. knows of no arrangements, including any pledge by any person of securities of the First Capital Bancorp, Inc., the operation
of which may at a subsequent date result in a change in control of First Capital Bancorp, Inc.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this item is incorporated herein by reference to the section captioned Proposal No. 1 - Election of
Directors  Certain Relationships and Related Transactions in the Proxy Statement.

ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information contained in the sections captioned 2010 Audit
Committee Report and Proposal No. 3  Appointment of Independent Registered Public Accounting Firm in the Proxy Statement is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS.

The following exhibits are filed as part of this Form 10-K



|    |  |                                                                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No. |  | Description                                                                                                                                                                                                                            
|    | 
|2.1 |  | Agreement and Plan of Reorganization dated as of September 5, 2006, by and between First Capital Bancorp, Inc. and First Capital Bank (incorporated by reference to Exhibit 2.1 of
Form 8-K 12 g-3 filed on September 12, 2006).       
|    | 
|3.1 |  | Articles of Incorporation of First Capital Bancorp, Inc. (incorporated by reference to Exhibit 3.1 of Form 10-QSB filed on November 13, 2006).                                                                                         
|    | 
|3.2 |  | Amended and Restated bylaws of First Capital Bancorp, Inc. (incorporated by reference to Exhibit 3.2 of Form 8-K filed on May 22, 2007).                                                                                               
|    | 
|3.4 |  | Articles of Amendment to the Companys Articles of Incorporation, increasing the number of authorized shares of Common Stock to 30,000,000 (incorporated by reference to Exhibit
3.1 of Form 8-K filed on June 3,2010).                
|    | 
|3.3 |  | Articles of Amendment to the Companys Articles of Incorporation, designating the terms of the Fixed Rate Cumulative Perpetual Preferred Stock, Series A (incorporated by
reference to Exhibit 3.1 of Form 8-K filed on April 6, 2009).
|    | 
|4.1 |  | Specimen Common Stock Certificate of First Capital Bancorp, Inc. (incorporated by reference to Exhibit 4.1 of Form SB-2 filed on March 16, 2007.                                                                                       



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|      |  |                                                                                                                                                                                                                                                                                                
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|4.2   |  | Form of Certificate for Fixed Rate Cumulative Perpetual Preferred Stock, Series A (incorporated by reference to Exhibit 4.1 of Form 8-K filed on April 6,
2009).                                                                                                                               
|      | 
|4.3   |  | Warrant to Purchase Shares of Common Stock (incorporated by reference to Exhibit 4.2 of Form 8-K filed on April 6, 2009).                                                                                                                                                                      
|      | 
|10.1  |  | 2000 Stock Option Plan (formerly First Capital Bank 2000 Stock Option Plan) (incorporated by reference to Exhibit 10.1 to Amendment No.1 to Form SB-2 filed on April 26, 2007).
*                                                                                                              
|      | 
|10.2  |  | Amended and Restated Employment Agreement dated December 31, 2008, between First Capital Bank and Robert G. Watts, Jr. (incorporated by reference to Exhibit 10.2 of Form 10-K filed
on March 31, 2009).*                                                                                      
|      | 
|10.3  |  | Amended and Restated Change in Control Agreement dated September 15, 2006, between First Capital Bank and William W. Ranson (incorporated by reference to Exhibit 10.3 of Amendment
No.1 to Form SB-2 filed on April 26, 2007).*                                                               
|      | 
|10.4  |  | Employment Agreement dated December 31, 2008, between First Capital Bancorp. Inc. and John M. Presley (incorporated by reference to Exhibit 10.4 of Form 10-K filed on March 31,
2009).*                                                                                                       
|      | 
|10.5  |  | Change in Control Agreement dated April 14, 2009, between First Capital Bank and K. Bradley Hildebrandt (incorporated by reference to Exhibit 10.4 of Form 8-K filed on April 16,
2009).*                                                                                                      
|      | 
|10.6  |  | Form of Change in Control Agreement dated April 1, 2009, between First Capital Bank and each of William D. Bein, Katherine K. Wagner, Richard McNeil, Ralph Ward, Jr., James E.
Sedlar and Barry P. Almond (incorporated by reference to Exhibit 10.6 of Form 10-Q filed on August 14, 2009). *
|      | 
|10.7  |  | Letter Agreement, dated as of April 3, 2009, by and between First Capital Bancorp, Inc., and the U.S. Department of Treasury (incorporated by reference to Exhibit 10.1 in Form 8-K
filed on April 6, 2009).                                                                                   
|      | 
|10.8  |  | Side Letter Agreement dated April 3, 2009, by and between First Capital Bancorp, Inc. and the U.S. Department of Treasury (incorporated by reference to Exhibit 10.2 of Form 8-K
filed on April 6, 2009).                                                                                      
|      | 
|10.9  |  | Form of Waiver (incorporated by reference to Exhibit 10.3 of Form 8-K filed on April 6, 2009).                                                                                                                                                                                                 
|      | 
|10.10 |  | Form of Waiver (incorporated by reference to Exhibit 10.4 of Form 8-K filed on April 6, 2009).                                                                                                                                                                                                 
|      | 
|10.11 |  | 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of Form S-8 filed on September 3, 2010).                                                                                                                                                                                  
|      | 
|10.12 |  | Split Dollar Life Insurance Agreement dated as of February 1, 2011, by and between First Capital Bancorp, Inc. and Gary A. Armstrong*                                                                                                                                                          
|      | 
|10.13 |  | Supplemental Executive Retirement Plan Agreement dated as of February 1, 2011, by and between First Capital Bancorp, Inc. and Gary A. Armstrong*                                                                                                                                               
|      | 
|21.1  |  | List of Subsidiaries (incorporated by reference to Exhibit 21.1 of Form SB-2 filed on March 16, 2007).                                                                                                                                                                                         



46



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##### Table of Contents

|     |  |                                                                                                                                                                   
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|23.1 |  | Consent of Cherry Bekaert & Holland, L.L.P., independent registered public accounting firm.                                                                       
|     | 
|24   |  | Power of Attorney (included on signature page).                                                                                                                   
|     | 
|31.1 |  | Certification of John M. Presley, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated March 31, 2010.                                                
|     | 
|31.2 |  | Certification of William W. Ranson, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated March 31, 2010.                                              
|     | 
|32.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                           
|     | 
|99.1 |  | A Bankers Professional Code of Ethics as adopted by First Capital Bank (incorporated by reference to Exhibit 99.1 of Form 10-KSB/A filed on June 13, 2007).      
|     | 
|99.2 |  | Code of Conduct and Conflict of Interest as adopted by First Capital Bank (incorporated by reference to Exhibit 99.2 of Form 10-KSB/A filed on June 13, 2007).    
|     | 
|99.3 |  | Certification of John M. Presley Pursuant to the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009.  
|     | 
|99.4 |  | Certification of William W. Ranson Pursuant to the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of
2009.



|* | Management contract or compensation plan or arrangement.
|- | --------------------------------------------------------

Exhibits to Form 10-K; Financial Information

A copy of any of the exhibits
to this Report on Form 10-K and copies of any published annual or quarterly reports will be furnished without charge to the stockholders as of the record date, upon written request to William W. Ranson, Senior Vice President & Chief
Financial Officer, 4222 Cox Road, Glen Allen, Virginia 23060.

Annual Stockholders Meeting

The Annual Meeting of stockholders will be held at 4:30 p.m. on Wednesday, May 18, 2011 at Hilton Richmond Hotel & SPA/Short
Pump, 12042 West Broad Street, Richmond, Virginia.



47



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##### Table of Contents

SIGNATURE

The undersigned hereby appoint John M. Presley and William W. Ranson and each of them, as attorneys and agents for the undersigned, with
full power of substitution, for and in the name, place and stead of the undersigned, to sign and file with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, any and all exhibits and amendments to this
10-K, and any and all instruments and other documents to be filed with the Securities and Exchange Commission pertaining to this 10-K, with full power and authority to do and perform any and all acts and things whatsoever requisite or desirable.



|                     |  |  |  |                             |  |                     |  |                                              
|-------------------- |  |  |  | --------------------------- |  | ------------------- |  | ---------------------------------------------
|                     |  |  |  | FIRST CAPITAL BANCORP, INC.
|                     |  |  | 
|Date: March 31, 2011 |  |  |  | By:                         |  | /s/ John M. Presley
|                     |  |  |  |                             |  |                     |  | John M. Presley.                             
|                     |  |  |  |                             |  |                     |  | Managing Director and Chief Executive Officer

Pursuant to the requirements of Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant, in the capacities and on the dates
indicated.



|                     |  |  |  |  |  |                          |  |                                                                           
|-------------------- |  |  |  |  |  | ------------------------ |  | --------------------------------------------------------------------------
|Date: March 31, 2011 |  |  |  |  |  | /s/ John M. Presley     
|                     |  |  |  |  |  |                          |  | John M. Presley.                                                          
|                     |  |  |  |  |  |                          |  | Managing Director and Chief Executive Officer and Director                
|                     |  |  | 
|Date: March 31, 2011 |  |  |  |  |  | /s/ Robert G. Watts, Jr.
|                     |  |  |  |  |  |                          |  | Robert G. Watts, Jr.                                                      
|                     |  |  |  |  |  |                          |  | President and Director                                                    
|                     |  |  | 
|Date: March 31, 2011 |  |  |  |  |  | /s/ William W. Ranson   
|                     |  |  |  |  |  |                          |  | William W. Ranson                                                         
|                     |  |  |  |  |  |                          |  | Senior Vice President and CFO
(Principal Accounting and Financial
Officer)



---

##### Table of Contents

|                     |  |  |  |                                
|-------------------- |  |  |  | -------------------------------
|                     |  | 
|Date: March 31, 2011 |  |  |  | /s/ Gerald Blake               
|                     |  |  |  | Gerald Blake, Director         
|                     |  | 
|Date: March 31, 2011 |  |  |  | /s/ Grant S. Grayson           
|                     |  |  |  | Grant S. Grayson, Director     
|                     |  | 
|Date: March 31, 2011 |  |  |  | /s/ Yancey S. Jones            
|                     |  |  |  | Yancey S. Jones, Director      
|                     |  | 
|Date: March 31, 2011 |  |  |  | /s/ Joseph C. Stiles, Jr.      
|                     |  |  |  | Joseph C. Stiles, Jr., Director
|                     |  | 
|Date: March 31, 2011 |  |  |  | /s/ Richard W. Wright          
|                     |  |  |  | Richard W. Wright, Director    
|                     |  | 
|Date: March 31, 2011 |  |  |  | /s/ Gerald H. Yospin           
|                     |  |  |  | Gerald H. Yospin, Director     
|                     |  | 
|Date: March 31, 2011 |  |  |  | /s/ Debra L. Richardson        
|                     |  |  |  | Debra L. Richardson, Director  



---

##### Table of Contents

FIRST CAPITAL BANCORP, INC. AND SUBSIDIARY

Consolidated Financial Statements

For the Years Ended

December 31, 2010 and 2009



---

##### Table of Contents

FIRST CAPITAL BANCORP, INC. AND SUBSIDIARY

Contents



|                                                                                                                                |  |      |     | 
|------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                |  | Page |    
|Report of Independent Registered Public Accounting Firm                                                                         |  |      | F-2 | 
|                                                                                                                                | 
|Consolidated Financial Statements                                                                                               |  |      |     | 
|                                                                                                                                | 
|Consolidated Statements of Financial Condition December 31, 2010 and 2009                                                       |  |      | F-3 | 
|                                                                                                                                | 
|Consolidated Statements of Operations For the Years Ended December 31, 2010 and
2009                                            |  |      | F-4 | 
|                                                                                                                                | 
|Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss) For the Years Ended December 31,
 2010 and 2009 |  |      | F-5 | 
|                                                                                                                                | 
|Consolidated Statements of Cash Flows For the Years Ended December 31, 2010 and
2009                                            |  |      | F-6 | 
|                                                                                                                                | 
|Notes to Consolidated Financial Statements                                                                                      |  |      | F-7 | 



---

##### Table of Contents

LOGO

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

And Stockholders

First Capital Bancorp, Inc.

Richmond, Virginia

We have audited the
accompanying consolidated statements of financial condition of First Capital Bancorp, Inc. and subsidiary (the Company) as of December 31, 2010 and 2009 and the related consolidated statements of operations, stockholders
equity and comprehensive income (loss), and cash flows for each of the years then ended. The Companys management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the financial position of First Capital Bancorp, Inc. and subsidiary as of December 31, 2010 and 2009 and the results of their operations and their cash flows for each of the years
then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Cherry,
Bekaert & Holland, L.L.P.

Richmond, Virginia

March 30, 2011



F-2



---

##### Table of Contents

PART 1 - FINANCIAL INFORMATION

Item 1 - Financial Statements

First
Capital Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition



|                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                                                                                                    |  | December 31,2010 |             |   | December 31,2009 |  
|ASSETS                                                                                                                                                                              |  |                  |             |   |                  |   |             |  
|Cash and due from banks                                                                                                                                                             |  | $                | 6,210,383   |   |                  | $ | 7,919,612   |  
|Interest-bearing deposits in other banks                                                                                                                                            |  |                  | 26,157,038  |   |                  |   | 22,747,000  |  
|Federal funds sold                                                                                                                                                                  |  |                  |            |   |                  |   | 1,000,000   |  
|Investment securities:                                                                                                                                                              |  |                  |             |   |                  |   |             |  
|Available for sale, at fair value                                                                                                                                                   |  |                  | 86,786,676  |   |                  |   | 77,118,370  |  
|Held to maturity, at cost                                                                                                                                                           |  |                  | 2,389,391   |   |                  |   | 1,452,947   |  
|Restricted, at cost                                                                                                                                                                 |  |                  | 4,668,789   |   |                  |   | 4,158,289   |  
|Loans, net of allowance for losses                                                                                                                                                  |  |                  | 386,208,792 |   |                  |   | 397,120,098 |  
|Other real estate owned                                                                                                                                                             |  |                  | 2,614,828   |   |                  |   | 3,387,712   |  
|Premises and equipment, net                                                                                                                                                         |  |                  | 11,400,268  |   |                  |   | 7,118,591   |  
|Accrued interest receivable                                                                                                                                                         |  |                  | 2,061,532   |   |                  |   | 2,292,742   |  
|Deferred tax asset                                                                                                                                                                  |  |                  | 3,530,265   |   |                  |   | 1,435,267   |  
|Prepaid FDIC premiums                                                                                                                                                               |  |                  | 2,206,038   |   |                  |   | 3,135,649   |  
|Other assets                                                                                                                                                                        |  |                  | 1,791,035   |   |                  |   | 1,509,486   |  
|                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|Total assets                                                                                                                                                                        |  | $                | 536,025,035 |   |                  |   | 530,395,763 |  
|                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|LIABILITIES                                                                                                                                                                         |  |                  |             |   |                  |   |             |  
|Deposits                                                                                                                                                                            |  |                  |             |   |                  |   |             |  
|Noninterest-bearing                                                                                                                                                                 |  | $                | 40,379,369  |   |                  | $ | 37,554,667  |  
|Interest-bearing                                                                                                                                                                    |  |                  | 386,491,424 |   |                  |   | 384,579,427 |  
|                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|Total deposits                                                                                                                                                                      |  |                  | 426,870,793 |   |                  |   | 422,134,094 |  
|                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|Accrued expenses and other liabilities                                                                                                                                              |  |                  | 2,248,185   |   |                  |   | 3,413,338   |  
|Securities sold under repurchase agreements                                                                                                                                         |  |                  | 1,076,521   |   |                  |   | 1,234,901   |  
|Subordinated debt                                                                                                                                                                   |  |                  | 7,155,000   |   |                  |   | 7,155,000   |  
|Federal Home Loan Bank advances                                                                                                                                                     |  |                  | 55,000,000  |   |                  |   | 50,000,000  |  
|                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|Total liabilities                                                                                                                                                                   |  |                  | 492,350,499 |   |                  |   | 483,937,333 |  
|                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|STOCKHOLDERS EQUITY                                                                                                                                                                |  |                  |             |   |                  |   |             |  
|Preferred stock, $4.00 par value (2,000,000 authorized shares; 10,958 issued and outstanding: Series A: $1,000 Stated Value Fixed
Rate Cumulative Perpetual Preferred, respectively |  |                  | 43,832      |   |                  |   | 43,832      |  
|Common stock, $4.00 par value (5,000,000 authorized shares; 2,971,171 issued and outstanding, respectively                                                                          |  |                  | 11,884,684  |   |                  |   | 11,884,684  |  
|Additional paid-in capital                                                                                                                                                          |  |                  | 29,739,129  |   |                  |   | 29,696,114  |  
|Retained earnings                                                                                                                                                                   |  |                  | 1,643,335   |   |                  |   | 4,493,471   |  
|Warrants                                                                                                                                                                            |  |                  | 660,769     |   |                  |   | 660,769     |  
|Discount on preferred stock                                                                                                                                                         |  |                  | (434,494    | ) |                  |   | (564,395    | )
|Accumulated other comprehensive income, net of tax                                                                                                                                  |  |                  | 137,281     |   |                  |   | 243,955     |  
|                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|Total stockholders equity                                                                                                                                                          |  |                  | 43,674,536  |   |                  |   | 46,458,430  |  
|                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  
|Total liabilities and stockholders equity                                                                                                                                          |  | $                | 536,025,035 |   |                  | $ | 530,395,763 |  
|                                                                                                                                                                                    |  |                  |             |   |                  |   |             |  

See notes to consolidated financial statements.



F-3



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Consolidated Statements of Operations

Years Ended December 31, 2010 and 2009



|                                                    |  |              |            |   |      |    |            |  
|--------------------------------------------------- |  | ------------ | ---------- | - | ---- | -- | ---------- | -
|                                                    |  | December 31, |           
|                                                    |  | 2010         |            |   | 2009 |   
|Interest income                                     |  |              |            |   |      |    |            |  
|Loans                                               |  | $            | 23,308,551 |   |      | $  | 22,925,135 |  
|Investments:                                        |  |              |            |   |      |    |            |  
|Taxable interest income                             |  |              | 2,444,836  |   |      |    | 2,072,139  |  
|Tax exempt interest income                          |  |              | 537,931    |   |      |    | 288,446    |  
|Dividends                                           |  |              | 93,425     |   |      |    | 67,420     |  
|Federal funds sold and interest bearing deposits    |  |              | 45,206     |   |      |    | 48,354     |  
|                                                    |  |              |            |   |      |    |            |  
|Total interest income                               |  |              | 26,429,949 |   |      |    | 25,401,494 |  
|                                                    |  |              |            |   |      |    |            |  
|Interest expense                                    |  |              |            |   |      |    |            |  
|Deposits                                            |  |              | 8,141,541  |   |      |    | 10,665,696 |  
|FHLB advances                                       |  |              | 1,839,682  |   |      |    | 1,878,559  |  
|Subordinated debt and other borrowed money          |  |              | 236,133    |   |      |    | 266,441    |  
|                                                    |  |              |            |   |      |    |            |  
|Total interest expense                              |  |              | 10,217,356 |   |      |    | 12,810,696 |  
|                                                    |  |              |            |   |      |    |            |  
|Net interest income                                 |  |              | 16,212,593 |   |      |    | 12,590,798 |  
|Provision for loan loss                             |  |              | 8,220,920  |   |      |    | 2,285,000  |  
|                                                    |  |              |            |   |      |    |            |  
|Net interest income after provision for loan loss   |  |              | 7,991,673  |   |      |    | 10,305,798 |  
|                                                    |  |              |            |   |      |    |            |  
|Noninterest income                                  |  |              |            |   |      |    |            |  
|Fees on deposits                                    |  |              | 277,114    |   |      |    | 257,311    |  
|Gain on sale of securities                          |  |              | 280,931    |   |      |    |           |  
|Other                                               |  |              | 491,742    |   |      |    | 489,648    |  
|                                                    |  |              |            |   |      |    |            |  
|Total noninterest income                            |  |              | 1,049,787  |   |      |    | 746,959    |  
|                                                    |  |              |            |   |      |    |            |  
|Noninterest expenses                                |  |              |            |   |      |    |            |  
|Salaries and employee benefits                      |  |              | 5,777,380  |   |      |    | 4,773,711  |  
|Merger costs                                        |  |              |           |   |      |    | 284,542    |  
|Occupancy expense                                   |  |              | 717,964    |   |      |    | 799,043    |  
|Data processing                                     |  |              | 735,423    |   |      |    | 703,060    |  
|Professional services                               |  |              | 683,280    |   |      |    | 386,815    |  
|Advertising and marketing                           |  |              | 176,711    |   |      |    | 97,054     |  
|FDIC assessment                                     |  |              | 1,000,380  |   |      |    | 1,099,092  |  
|Virginia franchise tax                              |  |              | 492,000    |   |      |    | 525,000    |  
|Write-down of OREO                                  |  |              | 674,000    |   |      |    |           |  
|Depreciation                                        |  |              | 489,892    |   |      |    | 418,511    |  
|Other expenses                                      |  |              | 1,802,765  |   |      |    | 1,541,164  |  
|                                                    |  |              |            |   |      |    |            |  
|Total noninterest expense                           |  |              | 12,549,795 |   |      |    | 10,627,992 |  
|                                                    |  |              |            |   |      |    |            |  
|Net income (loss) before provision for income taxes |  |              | (3,508,335 | ) |      |    | 424,765    |  
|Income tax (benefit) expense                        |  |              | (1,336,000 | ) |      |    | 117,200    |  
|                                                    |  |              |            |   |      |    |            |  
|Net income (loss)                                   |  | ($           | 2,172,335  | ) |      | $  | 307,565    |  
|                                                    |  |              |            |   |      |    |            |  
|Effective dividend on preferred stock               |  |              | 677,801    |   |      |    | 502,733    |  
|Net income (loss) available to common shareholders  |  | ($           | 2,850,136  | ) |      | ($ | 195,168    | )
|                                                    |  |              |            |   |      |    |            |  
|Basic loss per common share                         |  | $            | (0.96      | ) |      | $  | (0.07      | )
|                                                    |  |              |            |   |      |    |            |  
|Diluted loss per common share                       |  | $            | (0.96      | ) |      | $  | (0.07      | )
|                                                    |  |              |            |   |      |    |            |  

See notes to consolidated financial statements.



F-4



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss)

Years Ended December 31, 2010 and 2009



|                                                                     |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          |            |   |                           |   |         |                                               |  |    |          |   |  |    |            |   |  |   |            |  
|-------------------------------------------------------------------- |  | -------------- | ------ |  | ------------ | - | ---------- | ------------------------- |  | - | ---------------- | - |  | -------- | ---------- | - | ------------------------- | - | ------- | --------------------------------------------- |  | -- | -------- | - |  | -- | ---------- | - |  | - | ---------- | -
|                                                                     |  | PreferredStock |        |  | Common Stock |   |            | AdditionalPaid-in Capital |  |   | RetainedEarnings |   |  | Warrants |            |   | Discounton PreferredStock |   |         | Accumu-lated OtherCompre-hensive Income(Loss) |  |    | Total    |  
|Balance January 1, 2009                                              |  | $              |       |  |              | $ | 11,884,684 |                           |  | $ | 18,650,379       |   |  | $        | 4,688,639  |   |                           | $ |        |                                               |  | $  |         |   |  | $  | 195,870    |   |  | $ | 35,419,572 |  
|Net income                                                           |  |                |       |  |              |   |           |                           |  |   |                 |   |  |          | 307,565    |   |                           |   |        |                                               |  |    |         |   |  |    | 307,565    |   |  |   | 307,565    |  
|Other comprehensive income                                           |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          |            |   |                           |   |         |                                               |  |    |          |   |  |    |            |   |  |   |            |  
|Unrealized holding gain arising during period, (net of tax, $24,771) |  |                |       |  |              |   |           |                           |  |   |                 |   |  |          |           |   |                           |   |        |                                               |  |    |         |   |  |    | 48,085     |   |  |   | 48,085     |  
|                                                                     |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          |            |   |                           |   |         |                                               |  |    |          |   |  |    |            |   |  |   |            |  
|Total comprehensive income                                           |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          |            |   |                           |   |         |                                               |  |    |          |   |  | $  | 355,650    |   |  |   |            |  
|                                                                     |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          |            |   |                           |   |         |                                               |  |    |          |   |  |    |            |   |  |   |            |  
|Issuance of preferred stock                                          |  |                | 43,832 |  |              |   |            |                           |  |   | 10,914,168       |   |  |          |            |   |                           |   | 660,769 |                                               |  |    | (660,769 | ) |  |    |            |   |  |   | 10,958,000 |  
|Cost associated with preferred stock                                 |  |                |        |  |              |   |            |                           |  |   | (24,272          | ) |  |          |            |   |                           |   |         |                                               |  |    |          |   |  |    |            |   |  |   | (24,272    | )
|Preferred stock dividend                                             |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          | (406,359   | ) |                           |   |         |                                               |  |    |          |   |  |    |            |   |  |   | (406,359   | )
|Accretion of discount on preferred stock                             |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          | (96,374    | ) |                           |   |         |                                               |  |    | 96,374   |   |  |    |            |   |  |   |           |  
|Stock based compensation                                             |  |                |       |  |              |   |           |                           |  |   | 155,839          |   |  |          |           |   |                           |   |        |                                               |  |    |         |   |  |    |            |   |  |   | 155,839    |  
|                                                                     |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          |            |   |                           |   |         |                                               |  |    |          |   |  |    |            |   |  |   |            |  
|Balance December 31, 2009                                            |  | $              | 43,832 |  |              | $ | 11,884,684 |                           |  | $ | 29,696,114       |   |  | $        | 4,493,471  |   |                           | $ | 660,769 |                                               |  | ($ | 564,395  | ) |  | $  | 243,955    |   |  | $ | 46,458,430 |  
|                                                                     |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          |            |   |                           |   |         |                                               |  |    |          |   |  |    |            |   |  |   |            |  
|Balance January 1, 2010                                              |  | $              | 43,832 |  |              | $ | 11,884,684 |                           |  | $ | 29,696,114       |   |  | $        | 4,493,471  |   |                           | $ | 660,769 |                                               |  | ($ | 564,395  | ) |  | $  | 243,955    |   |  | $ | 46,458,430 |  
|Net (loss)                                                           |  |                |       |  |              |   |           |                           |  |   |                 |   |  |          | (2,172,335 | ) |                           |   |        |                                               |  |    |         |   |  |    | (2,172,335 | ) |  |   | (2,172,335 | )
|Other comprehensive loss                                             |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          |            |   |                           |   |         |                                               |  |    |          |   |  |    |            |   |  |   |            |  
|Unrealized holding loss arising during period, (net of tax, $54,953) |  |                |       |  |              |   |           |                           |  |   |                 |   |  |          |           |   |                           |   |        |                                               |  |    |         |   |  |    | (106,674   | ) |  |   | (106,674   | )
|                                                                     |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          |            |   |                           |   |         |                                               |  |    |          |   |  |    |            |   |  |   |            |  
|Total comprehensive loss                                             |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          |            |   |                           |   |         |                                               |  |    |          |   |  | ($ | 2,279,009  | ) |  |   |            |  
|                                                                     |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          |            |   |                           |   |         |                                               |  |    |          |   |  |    |            |   |  |   |            |  
|Preferred stock dividend                                             |  |                |       |  |              |   |           |                           |  |   |                 |   |  |          | (547,900   | ) |                           |   |        |                                               |  |    |         |   |  |    |            |   |  |   | (547,900   | )
|Accretion of discount on preferred stock                             |  |                |       |  |              |   |           |                           |  |   |                 |   |  |          | (129,901   | ) |                           |   |        |                                               |  |    | 129,901  |   |  |    |            |   |  |   |           |  
|Stock based compensation                                             |  |                |       |  |              |   |           |                           |  |   | 43,015           |   |  |          |           |   |                           |   |        |                                               |  |    |         |   |  |    |            |   |  |   | 43,015     |  
|                                                                     |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          |            |   |                           |   |         |                                               |  |    |          |   |  |    |            |   |  |   |            |  
|Balance December 31, 2010                                            |  | $              | 43,832 |  |              | $ | 11,884,684 |                           |  | $ | 29,739,129       |   |  | $        | 1,643,335  |   |                           | $ | 660,769 |                                               |  | ($ | 434,494  | ) |  | $  | 137,281    |   |  | $ | 43,674,536 |  
|                                                                     |  |                |        |  |              |   |            |                           |  |   |                  |   |  |          |            |   |                           |   |         |                                               |  |    |          |   |  |    |            |   |  |   |            |  

See notes to consolidated financial statements.



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows

Year Ended December 31, 2010 and 2009



|                                                                                            |  |      |             |   |      |   |             |  
|------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                            |  | 2010 |             |   | 2009 |  
|Cash flows from operating activities                                                        |  |      |             |   |      |   |             |  
|Net loss                                                                                    |  | $    | (2,172,335  | ) |      | $ | 307,565     |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |      |             |   |      |   |             |  
|Provision for loan losses                                                                   |  |      | 8,220,920   |   |      |   | 2,285,000   |  
|Write-down of OREO                                                                          |  |      | 674,000     |   |      |   |            |  
|Depreciation of premises and equipment                                                      |  |      | 489,892     |   |      |   | 418,511     |  
|Stock based compensation expense                                                            |  |      | 43,015      |   |      |   | 155,839     |  
|Deferred income taxes                                                                       |  |      | (2,040,045  | ) |      |   | (507,485    | )
|Gain on sale of securities                                                                  |  |      | (280,931    | ) |      |   |            |  
|Loss on sale of OREO                                                                        |  |      | 40,000      |   |      |   |            |  
|Net amortization of bond premiums/discounts                                                 |  |      | 674,560     |   |      |   | 356,589     |  
|Increase (decrease) in other assets                                                         |  |      | 648,062     |   |      |   | (3,797,424  | )
|Decrease (increase) in accrued interest receivable                                          |  |      | 231,210     |   |      |   | (487,937    | )
|Increase (decrease) in accrued expenses and other liabilities                               |  |      | (1,165,153  | ) |      |   | 887,382     |  
|                                                                                            |  |      |             |   |      |   |             |  
|Net cash provided by (used in) operating activities                                         |  |      | 5,363,195   |   |      |   | (381,960    | )
|                                                                                            |  |      |             |   |      |   |             |  
|Cash flows from investing activities                                                        |  |      |             |   |      |   |             |  
|Proceeds from maturities and calls of securities                                            |  |      | 16,450,000  |   |      |   | 5,700,000   |  
|Proceeds from paydowns of securities available-for-sale                                     |  |      | 13,559,161  |   |      |   | 7,611,946   |  
|Purchase of securities available-for-sale                                                   |  |      | (50,858,997 | ) |      |   | (60,190,099 | )
|Sale of securities available-for-sale                                                       |  |      | 9,689,830   |   |      |   |            |  
|Sale of OREO                                                                                |  |      | 1,328,000   |   |      |   |            |  
|Improvements in OREO                                                                        |  |      | (23,116     | ) |      |   |            |  
|Purchase of FHLB Stock                                                                      |  |      | (242,800    | ) |      |   | (143,800    | )
|Purchase of Federal Reserve Stock                                                           |  |      | (267,700    | ) |      |   | (210,450    | )
|Purchases of premises and equipment                                                         |  |      | (4,771,569  | ) |      |   | (322,442    | )
|Net decrease (increase) in loans                                                            |  |      | 1,444,386   |   |      |   | (33,194,613 | )
|                                                                                            |  |      |             |   |      |   |             |  
|Net cash used in investing activities                                                       |  |      | (13,692,805 | ) |      |   | (80,749,458 | )
|                                                                                            |  |      |             |   |      |   |             |  
|Cash flows from financing activities                                                        |  |      |             |   |      |   |             |  
|Net increase in demand, savings and money market accounts                                   |  |      | 15,179,330  |   |      |   | 98,929,243  |  
|Advances from FHLB                                                                          |  |      | 5,000,000   |   |      |   |            |  
|Issuance of preferred stock to U.S. Treasury, net of related expenses                       |  |      |            |   |      |   | 10,933,728  |  
|Dividends on preferred stock                                                                |  |      | (547,900    | ) |      |   | (406,359    | )
|Net decrease in certificates of deposit                                                     |  |      | (10,442,631 | ) |      |   | (11,095,189 | )
|Net increase (decrease) in repurchase agreements                                            |  |      | (158,380    | ) |      |   | (917,727    | )
|                                                                                            |  |      |             |   |      |   |             |  
|Net cash provided by financing activities                                                   |  |      | 9,030,419   |   |      |   | 97,443,696  |  
|                                                                                            |  |      |             |   |      |   |             |  
|Net increase in cash and cash equivalents                                                   |  |      | 700,809     |   |      |   | 16,312,278  |  
|Cash and cash equivalents, beginning of period                                              |  |      | 31,666,612  |   |      |   | 15,354,334  |  
|                                                                                            |  |      |             |   |      |   |             |  
|Cash and cash equivalents, end of period                                                    |  | $    | 32,367,421  |   |      | $ | 31,666,612  |  
|                                                                                            |  |      |             |   |      |   |             |  
|Supplemental disclosure of cash flow information                                            |  |      |             |   |      |   |             |  
|Interest paid during the period                                                             |  | $    | 10,263,130  |   |      | $ | 12,774,959  |  
|                                                                                            |  |      |             |   |      |   |             |  
|Taxes paid during the period                                                                |  | $    | 825,000     |   |      | $ | 724,283     |  
|                                                                                            |  |      |             |   |      |   |             |  
|Supplemental schedule of noncash investing and financing activities                         |  |      |             |   |      |   |             |  
|Transfer of loans to other real estate owned                                                |  | $    | 1,246,000   |   |      | $ | 1,416,852   |  
|                                                                                            |  |      |             |   |      |   |             |  
|Unrealized gain on securities available for sale                                            |  | $    | 161,627     |   |      | $ | 369,629     |  
|                                                                                            |  |      |             |   |      |   |             |  

See notes to consolidated financial statements.



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009

Note 1 - Summary of significant accounting
policies

First Capital Bancorp, Inc. (the Company) is the holding company of and successor to First Capital Bank (the
Bank). Effective September 8, 2006, the Company acquired all of the outstanding stock of the Bank in a statutory share exchange transaction (the Share Exchange) pursuant to an Agreement and Plan of Reorganization dated
September 5, 2006, between the Company and the Bank (the Agreement). The Agreement was approved by the shareholders of the Bank at the annual meeting of shareholders held on May 16, 2006. Under the terms of the Agreement, the
shares of the Banks common stock were exchanged for shares of the Companys common stock, par value $4.00 per share, on a one-for-one basis. As a result, the Bank became a wholly owned subsidiary of the Company, the Company became the
holding company of the Bank and the shareholders of the Bank became shareholders of the Company. All references to the Company in this annual report for dates or periods prior to September 8, 2006 are references to the Bank.

The Company conducts all of its business activities through the branch offices of its wholly owned subsidiary bank, First Capital Bank. First Capital
Bank created RE1, LLC, a wholly owned Virginia limited liability company in December 2008 for the sole purpose of taking title to property acquired in lieu of foreclosure. RE1, LLC has been consolidated with First Capital Bank. The Company exists
primarily for the purpose of holding the stock of its subsidiary, the Bank, and such other subsidiaries as it may acquire or establish.

The
Company has one other wholly owned subsidiary, FCRV Statutory Trust 1 (the Trust), a Delaware Business Trust that was formed in connection with the issuance of trust preferred debt in September, 2006. Pursuant to current accounting
standards, the Company does not consolidate the Trust.

The accounting and reporting policies of the Company and its wholly owned subsidiary
conform to accounting principles generally accepted in the United States of America and general practices within the financial services industry. The following is a summary of the more significant of these policies.

Consolidation  The consolidated financial statements include the accounts of First Capital Bancorp, Inc. and its wholly owned subsidiary.
All material intercompany balances and transactions have been eliminated.

Use of estimates  The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses. The estimation process may include management obtaining independent
appraisals for significant collateral properties, but the ultimate collectibility and recovery of carrying amounts are susceptible to changes in the local real estate market and other local economic conditions.

Management uses available information to recognize losses on loans; future additions to the allowances may be necessary based on changes in local
economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Banks allowance for losses on loans. Such agencies may require the Bank to recognize additions to the allowances
based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the allowance for losses on loans may change in the near term.

Cash equivalents  Cash equivalents include short-term highly liquid investments with maturities of three months or less at the date of
purchase, including Federal funds sold.

Investment Securities  Investment in debt securities classified as held-to-maturity are
stated at cost, adjusted for amortization or premiums and accretion of discounts using the interest method. Management has a positive intent and ability to hold these



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



securities to maturity and, accordingly, adjustments are not made for temporary declines in their fair value below amortized cost. Investment not classified as held-to-maturity are classified as
available-for-sale. Debt securities classified as available-for-sale are stated at fair value with unrealized holding gains and losses excluded from earnings and reported, net of deferred tax, as a component of other comprehensive income until
realized.

The Company as a matter of policy does not trade securities and therefore does not classify any of its securities as such. Realized
gains and losses on the sale of available-for-sale securities are determined using the specific-identification method and recognized on a trade-date basis. Other-than-temporary declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost, if any, are included in earnings as realized losses.

Due to the nature of, and restrictions
placed upon the Companys common stock investment in the Federal Reserve Bank, Federal Home Loan Bank of Atlanta and Community Bankers Bank, these securities have been classified as restricted equity securities and carried at cost. These
restricted securities are not subject to the investment security classifications.

Loans and allowances for loan losses  Loans
are concentrated to borrowers in the Richmond metropolitan area and are stated at the amount of unpaid principal reduced by an allowance for loan losses. Interest on loans is calculated by using the simple interest method on daily balances on the
principal amount outstanding. The accrual of interest on loans is discontinued when, in the opinion of management, there is an indication that the borrower may be unable to meet payments as they become due. The Company defers loan origination and
commitment fees, net of certain direct loan origination costs, and the net deferred fees are amortized into interest income over the lives of the related loans as yield adjustments.

Loans that are 90 days or more past due are individually reviewed for ultimate collectibility. Interest determined to be uncollectible on loans that are contractually past due is charged off, or an
allowance is established based on managements periodic evaluation. The allowance is established by a charge to interest income equal to all interest previously accrued, and income is subsequently recognized only to the extent that cash
payments are received until, in managements judgment, the borrowers ability to make periodic interest and principal payments is returned to normal, in which case the loan is returned to accrual status.

The allowance for loan losses is maintained at a level considered by management to be adequate to absorb known and expected loan losses currently
inherent in the loan portfolio. Managements assessment of the adequacy of the allowance is based upon type and volume of the loan portfolio, existing and anticipated economic conditions, and other factors which deserve current recognition in
estimating loan losses. The allowance is increased by a provision for loan losses, which is charged to expense, and reduced by charge-offs, net of recoveries. Managements assessment of the adequacy of the allowance is subject to evaluation and
adjustment by the Banks regulators.

A loan is defined as impaired when, based on current information and events, it is probable that
the creditor will be unable to collect all amounts of principal and interest due according to the contractual terms of the loan agreement. Impairment is measured either by discounting the expected future cash flows at the loans effective
interest rate, based on the net realizable value of the collateral or based upon an observable market price where applicable. Charges on impaired loans are recognized as a component of the allowance for loans losses.

Other real estate owned  Other real estate owned is comprised of real estate properties acquired in partial or total
satisfaction of problem loans. The properties are recorded at the lower of cost or fair value less estimated costs to sell at the date acquired. Losses arising at the time of acquisition of such properties are charged against the allowance
for loan losses. Subsequent write-downs that may be required to the carrying value of these properties are charged to current operations. Gains and losses realized from the sale of other real estate owned are included in current
operations.

Bank premises and equipment  Company premises and equipment are stated at cost, less accumulated
depreciation. Depreciation of Company premises and equipment is computed on the straight-line method over estimated useful lives of 10 to



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



50 years for premises and 5 to 20 years for equipment, furniture and fixtures. Maintenance and repairs are charged to expense as incurred and major improvements are capitalized. Upon sale or
retirement of depreciable properties, the cost and related accumulated depreciation are netted against the proceeds and any resulting gain or loss is included in the determination of income.

Impairment or Disposal of Long-Lived Assets  The Companys long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used, such as bank premises and equipment, is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceed the fair value of the asset. Assets to be disposed of, such as foreclosed
properties, are reported at the lower of the carrying amount or fair value less costs to sell.

Bank-owned life insurance  During
2010, the Bank purchased life insurance on a key employee in the face amount of $1,000,000. This policy is recorded at its cash surrender value and reported in other assets on the balance sheet. The cash surrender value at December 31, 2010 was
$448,006. Income generated from this policy is recorded as noninterest income

Income taxes  Income taxes are accounted for under
the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income tax expense in the period that includes the enactment date.

Advertising costs 
Advertising costs are expensed in the period they are incurred and amounted to $176,711 and $97,054 for December 31, 2010 and 2009, respectively.

Stock Based Compensation Effective January 1, 2006, the Company adopted ASC 718 (formerly SFAS No. 123R) Stock Compensation. This statement requires the costs resulting from all
share-based payments to employees, including grants of employee stock options, be recognized as compensation in the financial statements.

Note 2  Restrictions of cash

To
comply with Federal Reserve regulations, the Company is required to maintain certain average cash reserve balances. The daily average cash reserve requirements were approximately $352,000 for the week including December 31, 2010 and $255,000
for the week including December 31, 2009.

Note 3  Investment Securities

The amortized costs, gross unrealized gains, gross unrealized losses and fair values for securities are as follows:



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



|                                              |  |                   |            |  |                  |        |           |            |  |   |         |  |  |   |            | 
|--------------------------------------------- |  | ----------------- | ---------- |  | ---------------- | ------ | --------- | ---------- |  | - | ------- |  |  | - | ---------- | 
|                                              |  | December 31, 2010 |           
|                                              |  | AmortizedCosts    |            |  | Gross Unrealized |        |           | FairValues | 
|                                              |  |                   | Gains      |  |                  | Losses |           |           
|Available-for-sale                            |  |                   |            |  |                  |        |           |            |  |   |         |  |  |   |            | 
|U.S. Government agencies                      |  | $                 | 6,532,851  |  |                  | $      | 48,439    |            |  | $ |        |  |  | $ | 6,581,290  | 
|Mortgage-backed securities                    |  |                   | 14,834,604 |  |                  |        | 346,624   |            |  |   | 159,511 |  |  |   | 15,021,717 | 
|Corporate bonds                               |  |                   | 6,411,962  |  |                  |        | 20,519    |            |  |   | 31,318  |  |  |   | 6,401,163  | 
|CMO securities                                |  |                   | 30,586,678 |  |                  |        | 567,898   |            |  |   | 110,961 |  |  |   | 31,043,615 | 
|State and political subdivisions - taxable    |  |                   | 12,319,449 |  |                  |        | 105,896   |            |  |   | 418,673 |  |  |   | 12,006,672 | 
|State and political subdivisions - tax exempt |  |                   | 12,149,884 |  |                  |        | 88,256    |            |  |   | 245,851 |  |  |   | 11,992,289 | 
|SBA - Guarantee portion                       |  |                   | 3,742,730  |  |                  |        | 12,204    |            |  |   | 15,004  |  |  |   | 3,739,930  | 
|                                              |  |                   |            |  |                  |        |           |            |  |   |         |  |  |   |            | 
|                                              |  | $                 | 86,578,158 |  |                  | $      | 1,189,836 |            |  | $ | 981,318 |  |  | $ | 86,786,676 | 
|                                              |  |                   |            |  |                  |        |           |            |  |   |         |  |  |   |            | 
|                                              | 
|                                              |  | December 31, 2009 |           
|                                              |  | AmortizedCosts    |            |  | Gross Unrealized |        |           | FairValues | 
|                                              |  |                   | Gains      |  |                  | Losses |           |           
|Available-for-sale                            |  |                   |            |  |                  |        |           |            |  |   |         |  |  |   |            | 
|U.S. Government agencies                      |  | $                 | 23,610,035 |  |                  | $      | 132,274   |            |  | $ | 274,915 |  |  | $ | 23,467,394 | 
|Mortgage-backed securities                    |  |                   | 11,820,972 |  |                  |        | 276,457   |            |  |   | 35,382  |  |  |   | 12,062,047 | 
|Corporate bonds                               |  |                   | 3,406,512  |  |                  |        | 112,519   |            |  |   | 31,416  |  |  |   | 3,487,615  | 
|CMO securities                                |  |                   | 22,699,676 |  |                  |        | 284,645   |            |  |   | 44,299  |  |  |   | 22,940,022 | 
|State and political subdivisions - taxable    |  |                   | 5,936,082  |  |                  |        | 50,463    |            |  |   | 189,465 |  |  |   | 5,797,080  | 
|State and political subdivisions - tax exempt |  |                   | 9,274,947  |  |                  |        | 147,675   |            |  |   | 58,410  |  |  |   | 9,364,212  | 
|                                              |  |                   |            |  |                  |        |           |            |  |   |         |  |  |   |            | 
|                                              |  | $                 | 76,748,224 |  |                  | $      | 1,004,033 |            |  | $ | 633,887 |  |  | $ | 77,118,370 | 
|                                              |  |                   |            |  |                  |        |           |            |  |   |         |  |  |   |            | 
|                                              | 
|                                              |  | December 31, 2010 |           
|                                              |  | AmortizedCosts    |            |  | Gross Unrealized |        |           | FairValues | 
|                                              |  |                   | Gains      |  |                  | Losses |           |           
|Held-to-maturity                              |  |                   |            |  |                  |        |           |            |  |   |         |  |  |   |            | 
|Tax-exempt municipal bonds                    |  | $                 | 2,389,391  |  |                  | $      | 53,444    |            |  | $ | 80,888  |  |  | $ | 2,361,947  | 
|                                              |  |                   |            |  |                  |        |           |            |  |   |         |  |  |   |            | 
|                                              |  | $                 | 2,389,391  |  |                  | $      | 53,444    |            |  | $ | 80,888  |  |  | $ | 2,361,947  | 
|                                              |  |                   |            |  |                  |        |           |            |  |   |         |  |  |   |            | 
|                                              | 
|                                              |  | December 31, 2009 |           
|                                              |  | AmortizedCosts    |            |  | Gross Unrealized |        |           | FairValues | 
|                                              |  |                   | Gains      |  |                  | Losses |           |           
|Held-to-maturity                              |  |                   |            |  |                  |        |           |            |  |   |         |  |  |   |            | 
|Tax-exempt municipal bonds                    |  | $                 | 1,452,947  |  |                  | $      | 84,507    |            |  | $ |        |  |  | $ | 1,537,454  | 
|                                              |  |                   |            |  |                  |        |           |            |  |   |         |  |  |   |            | 
|                                              |  | $                 | 1,452,947  |  |                  | $      | 84,507    |            |  | $ |        |  |  | $ | 1,537,454  | 
|                                              |  |                   |            |  |                  |        |           |            |  |   |         |  |  |   |            | 

The amortized cost, weighted average yield and estimated fair value of debt securities at December 31, 2010, by
contractual maturity, were as follows:



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



|                                      |  |               |            |  |                                    |  |      |            |  |   |            | 
|------------------------------------- |  | ------------- | ---------- |  | ---------------------------------- |  | ---- | ---------- |  | - | ---------- | 
|                                      |  | AmortizedCost |            |  | WeightedAverage TaxEquivalentYield |  |      | Fair Value | 
|Available-for-sale                    |  |               |            |  |                                    |  |      |            |  |   |            | 
|Due in one year or less               |  | $             |           |  |                                    |  |      |            |  | $ |           | 
|Due after one year through five years |  |               | 4,387,130  |  |                                    |  | 3.60 | %          |  |   | 4,399,329  | 
|Due after five through ten years      |  |               | 17,923,900 |  |                                    |  | 4.31 | %          |  |   | 18,073,572 | 
|Due after ten years                   |  |               | 64,267,128 |  |                                    |  | 3.91 | %          |  |   | 64,313,775 | 
|                                      |  |               |            |  |                                    |  |      |            |  |   |            | 
|Total                                 |  | $             | 86,578,158 |  |                                    |  | 3.98 | %          |  | $ | 86,786,676 | 
|                                      |  |               |            |  |                                    |  |      |            |  |   |            | 
|Held-to-maturity                      |  |               |            |  |                                    |  |      |            |  |   |            | 
|Due after ten years                   |  | $             | 2,389,391  |  |                                    |  | 7.00 | %          |  | $ | 2,361,947  | 
|                                      |  |               |            |  |                                    |  |      |            |  |   |            | 
|Total                                 |  | $             | 88,967,549 |  |                                    |  | 4.06 | %          |  | $ | 89,148,623 | 
|                                      |  |               |            |  |                                    |  |      |            |  |   |            | 

The following table details unrealized losses and related fair values in the Companys available-for-sale investment
securities portfolios. All unrealized losses on investment securities are a result of volatility in the market during 2010 and 2009. At December 31, 2010 there was 49 out of 131 securities with fair values less than amortized cost primarily in
municipal securities and corporate bonds. All unrealized losses are considered by management to be temporary given investment security credit ratings, the short duration of the unrealized losses and the intent and ability to retain these securities
for a period of time sufficient to recover all unrealized losses. This information is aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2010
and 2009:



|                                          |  |                     |            |  |                   |   |           |           |  |   |                  |  |  |           |   |  |                  |   |            |  |  |   |           | 
|----------------------------------------- |  | ------------------- | ---------- |  | ----------------- | - | --------- | --------- |  | - | ---------------- |  |  | --------- | - |  | ---------------- | - | ---------- |  |  | - | --------- | 
|                                          |  | December 31, 2010   |           
|                                          |  | Less than 12 Months |            |  | 12 Months or More |   |           | Total     | 
|                                          |  | FairValue           |            |  | UnrealizedLosses  |   |           | FairValue |  |   | UnrealizedLosses |  |  | FairValue |   |  | UnrealizedLosses |  
|Assets:                                   |  |                     |            |  |                   |   |           |           |  |   |                  |  |  |           |   |  |                  |   |            |  |  |   |           | 
|Mortgage-backed securities                |  | $                   | 6,050,579  |  |                   | $ | 159,511   |           |  | $ |                 |  |  |           |  |  |                  | $ | 6,050,579  |  |  | $ | 159,511   | 
|Corporate bonds                           |  |                     | 5,336,726  |  |                   |   | 31,318    |           |  |   |                 |  |  |           |  |  |                  |   | 5,336,726  |  |  |   | 31,318    | 
|CMO securities                            |  |                     | 6,545,351  |  |                   |   | 110,961   |           |  |   |                 |  |  |           |  |  |                  |   | 6,545,351  |  |  |   | 110,961   | 
|State & political subdivisions-taxable    |  |                     | 10,010,637 |  |                   |   | 418,673   |           |  |   |                 |  |  |           |  |  |                  |   | 10,010,637 |  |  |   | 418,673   | 
|State & political subdivisions-tax exempt |  |                     | 8,918,277  |  |                   |   | 326,739   |           |  |   |                  |  |  |           |   |  |                  |   | 8,918,277  |  |  |   | 326,739   | 
|SBA                                       |  |                     | 2,073,125  |  |                   |   | 15,004    |           |  |   |                 |  |  |           |  |  |                  |   | 2,073,125  |  |  |   | 15,004    | 
|                                          |  |                     |            |  |                   |   |           |           |  |   |                  |  |  |           |   |  |                  |   |            |  |  |   |           | 
|All securities                            |  | $                   | 38,934,695 |  |                   | $ | 1,062,206 |           |  | $ |                 |  |  | $         |  |  |                  | $ | 38,934,695 |  |  | $ | 1,062,206 | 
|                                          |  |                     |            |  |                   |   |           |           |  |   |                  |  |  |           |   |  |                  |   |            |  |  |   |           | 



F-11



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



|                                          |  |                     |            |  |                   |   |         |           |  |   |                  |  |  |           |         |  |                  |   |            |  |  |   |         | 
|----------------------------------------- |  | ------------------- | ---------- |  | ----------------- | - | ------- | --------- |  | - | ---------------- |  |  | --------- | ------- |  | ---------------- | - | ---------- |  |  | - | ------- | 
|                                          |  | December 31, 2009   |           
|                                          |  | Less than 12 Months |            |  | 12 Months or More |   |         | Total     | 
|                                          |  | FairValue           |            |  | UnrealizedLosses  |   |         | FairValue |  |   | UnrealizedLosses |  |  | FairValue |         |  | UnrealizedLosses |  
|Assets:                                   |  |                     |            |  |                   |   |         |           |  |   |                  |  |  |           |         |  |                  |   |            |  |  |   |         | 
|U.S. Government agencies                  |  | $                   | 10,419,951 |  |                   | $ | 189,472 |           |  | $ | 2,906,250        |  |  | $         | 85,443  |  |                  | $ | 13,326,201 |  |  | $ | 274,915 | 
|Mortgage-backed securities                |  |                     | 1,470,442  |  |                   |   | 35,382  |           |  |   |                 |  |  |           |        |  |                  |   | 1,470,442  |  |  |   | 35,382  | 
|Corporate bonds                           |  |                     | 968,432    |  |                   |   | 5,592   |           |  |   | 448,900          |  |  |           | 25,824  |  |                  |   | 1,417,332  |  |  |   | 31,416  | 
|CMO securities                            |  |                     | 4,562,551  |  |                   |   | 44,299  |           |  |   |                 |  |  |           |        |  |                  |   | 4,562,551  |  |  |   | 44,299  | 
|State & political subdivisions-taxable    |  |                     | 4,229,179  |  |                   |   | 189,465 |           |  |   |                 |  |  |           |        |  |                  |   | 4,229,179  |  |  |   | 189,465 | 
|State & political subdivisions-tax exempt |  |                     | 4,272,085  |  |                   |   | 58,410  |           |  |   |                 |  |  |           |        |  |                  |   | 4,272,085  |  |  |   | 58,410  | 
|                                          |  |                     |            |  |                   |   |         |           |  |   |                  |  |  |           |         |  |                  |   |            |  |  |   |         | 
|All securities                            |  | $                   | 25,922,640 |  |                   | $ | 522,620 |           |  | $ | 3,355,150        |  |  | $         | 111,267 |  |                  | $ | 29,277,790 |  |  | $ | 633,887 | 
|                                          |  |                     |            |  |                   |   |         |           |  |   |                  |  |  |           |         |  |                  |   |            |  |  |   |         | 

Restricted equity securities consist of Federal Reserve Bank stock in the amount of $1,309,750 and $1,042,050, Federal Home
Loan Bank of Atlanta stock in the amount of $3,269,700 and $3,026,900, Community Bankers Bank stock in the amount of $62,750 and $62,750, and an equity investment in Infinex in the amount of $9,500 as of December 31, 2010 and 2009. Restricted
equity securities are carried at cost. The Federal Home Loan Bank requires the Bank to maintain stock in an amount equal to 4.5% of outstanding borrowings and a specific percentage of the members total assets. The Federal Reserve Bank of
Richmond requires the Company to maintain stock with a par value equal to 3% of its outstanding capital.

The remainder of restricted
securities consists of investments in a Limited Liability Company that provides title insurance services to the Banks customers. Investment in this Limited Liability Company was $17,089 as of December 31, 2010 and 2009, respectively.

Securities with a market value of approximately $4,934,000 and $5,177,000 were pledged as collateral at December 31, 2010 and 2009,
respectively to secure purchases of federal funds, repurchase agreements, collateral for customers deposits and collateral to secure public deposits.



F-12



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



Note 4  Loans

Major classifications of loans are as follows:



|                            |  |              |             |  |        |   |             | 
|--------------------------- |  | ------------ | ----------- |  | ------ | - | ----------- | 
|                            |  | December 31, |            
|                            |  | 2010         |             |  | 2009   |  
|                            |  | Amount       |             |  | Amount |  
|Commercial                  |  | $            | 48,004,443  |  |        | $ | 54,590,024  | 
|Real estate - residential   |  |              | 145,661,487 |  |        |   | 137,981,388 | 
|Real estate - commercial    |  |              | 145,399,093 |  |        |   | 125,444,710 | 
|Real estate - construction  |  |              | 54,440,560  |  |        |   | 81,106,396  | 
|Consumer                    |  |              | 3,692,687   |  |        |   | 4,541,791   | 
|                            |  |              |             |  |        |   |             | 
|Total loans                 |  |              | 397,198,270 |  |        |   | 403,664,309 | 
|Less:                       |  |              |             |  |        |   |             | 
|Allowance for loan losses   |  |              | 11,036,134  |  |        |   | 6,600,360   | 
|Net deferred (income) costs |  |              | 46,656      |  |        |   | 56,149      | 
|                            |  |              |             |  |        |   |             | 
|Loans, net                  |  | $            | 386,208,792 |  |        | $ | 397,120,098 | 
|                            |  |              |             |  |        |   |             | 

The following table shows the Companys class types that are past due, current and greater than 90 days and still
accruing at December 31, 2010:



|             |  |                        |       |  |                  |   |       |                 |  |   |              |  |  |       |         |  |  |   |         | 
|------------ |  | ---------------------- | ----- |  | ---------------- | - | ----- | --------------- |  | - | ------------ |  |  | ----- | ------- |  |  | - | ------- | 
|             |  | 30 - 89 DaysPast
Due   |       |  | 90+ DaysPast Due |   |       | NonaccrualLoans |  |   | CurrentLoans |  |  | Total |        
|             |  | (Dollars in thousands) |      
|Commercial   |  | $                      |      |  |                  | $ | 993   |                 |  | $ | 5,615        |  |  | $     | 41,396  |  |  | $ | 48,004  | 
|Real Estate  |  |                        |       |  |                  |   |       |                 |  |   |              |  |  |       |         |  |  |   |         | 
|Residential  |  |                        | 735   |  |                  |   | 564   |                 |  |   | 11,972       |  |  |       | 132,390 |  |  |   | 145,661 | 
|Commercial   |  |                        |      |  |                  |   |      |                 |  |   | 355          |  |  |       | 145,044 |  |  |   | 145,399 | 
|Construction |  |                        | 492   |  |                  |   |      |                 |  |   | 4,413        |  |  |       | 49,536  |  |  |   | 54,441  | 
|Consumer     |  |                        | 10    |  |                  |   |      |                 |  |   |             |  |  |       | 3,683   |  |  |   | 3,693   | 
|             |  |                        |       |  |                  |   |       |                 |  |   |              |  |  |       |         |  |  |   |         | 
|Total        |  | $                      | 1,237 |  |                  | $ | 1,557 |                 |  | $ | 22,355       |  |  | $     | 372,049 |  |  | $ | 397,198 | 
|             |  |                        |       |  |                  |   |       |                 |  |   |              |  |  |       |         |  |  |   |         | 



F-13



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



The following table provides details of the Companys loan portfolio internally assigned grade at
December 31, 2010:



|             |  |                        |         |  |                |   |        |             |  |   |          |  |  |      |    |  |       |   |   |  |  |   |         | 
|------------ |  | ---------------------- | ------- |  | -------------- | - | ------ | ----------- |  | - | -------- |  |  | ---- | -- |  | ----- | - | - |  |  | - | ------- | 
|             |  | Pass                   |         |  | SpecialMention |   |        | Substandard |  |   | Doubtful |  |  | Loss |    |  | Total |  
|             |  | (Dollars in thousands) |        
|Commercial   |  | $                      | 36,318  |  |                | $ | 3,884  |             |  | $ | 7,802    |  |  | $    |   |  |       | $ |  |  |  | $ | 48,004  | 
|Real Estate  |  |                        |         |  |                |   |        |             |  |   |          |  |  |      |    |  |       |   |   |  |  |   |         | 
|Residential  |  |                        | 109,950 |  |                |   | 13,226 |             |  |   | 22,440   |  |  |      | 45 |  |       |   |  |  |  |   | 145,661 | 
|Commercial   |  |                        | 132,060 |  |                |   | 12,180 |             |  |   | 1,159    |  |  |      |   |  |       |   |  |  |  |   | 145,399 | 
|Construction |  |                        | 19,394  |  |                |   | 19,884 |             |  |   | 15,163   |  |  |      |   |  |       |   |  |  |  |   | 54,441  | 
|Consumer     |  |                        | 3,415   |  |                |   | 188    |             |  |   | 90       |  |  |      |   |  |       |   |  |  |  |   | 3,693   | 
|             |  |                        |         |  |                |   |        |             |  |   |          |  |  |      |    |  |       |   |   |  |  |   |         | 
|             |  | $                      | 301,137 |  |                | $ | 49,362 |             |  | $ | 46,654   |  |  | $    | 45 |  |       | $ |  |  |  | $ | 397,198 | 
|             |  |                        |         |  |                |   |        |             |  |   |          |  |  |      |    |  |       |   |   |  |  |   |         | 

These credit quality indicators are defined as follows:

Pass  A pass rated asset is not adversely classified because it does not display any of the characteristics for adverse
classification.

Special mention  A special mention asset has potential weaknesses that deserve managements close
attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse
classification.

Substandard  A substandard asset is inadequately protected by the current net worth and paying capacity
of the obligor or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct possibility of
loss if the deficiencies are not corrected.

Doubtful  An asset classified doubtful has all the weaknesses inherent in
an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions, and values.

Loss  Assets classified loss are considered uncollectible and of such little value that their continuing to be carried as an asset
is not warranted. This classification is not necessarily equivalent to no potential for recovery or salvage value, but rather that it is not appropriate to defer a full write-off even though partial recovery may be effected in the future.



F-14



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



The following table provides details regarding impaired loans by segment and class at December 31,
2010:



|                           |  |                                 |        |  |                                          |   |        |                  |  |   |       | 
|-------------------------- |  | ------------------------------- | ------ |  | ---------------------------------------- | - | ------ | ---------------- |  | - | ----- | 
|                           |  | RecordedBalance inImpairedLoans |        |  | Unpaid PrincipalBalance ofImpaired Loans |   |        | RelatedAllowance | 
|                           |  | (Dollars in thousands)          |       
|With no related allowance: |  |                                 |        |  |                                          |   |        |                  |  |   |       | 
|Commercial                 |  | $                               | 543    |  |                                          | $ | 544    |                  |  | $ |      | 
|Real Estate                |  |                                 |        |  |                                          |   |        |                  |  |   |       | 
|Residential                |  |                                 | 4,183  |  |                                          |   | 4,263  |                  |  |   |      | 
|Commercial                 |  |                                 |       |  |                                          |   |       |                  |  |   |      | 
|Construction               |  |                                 | 1,576  |  |                                          |   | 2,669  |                  |  |   |      | 
|Consumer                   |  |                                 |       |  |                                          |   |       |                  |  |   |      | 
|                           |  |                                 |        |  |                                          |   |        |                  |  |   |       | 
|Total                      |  | $                               | 6,302  |  |                                          | $ | 7,476  |                  |  | $ |      | 
|                           |  |                                 |        |  |                                          |   |        |                  |  |   |       | 
|With an allowance:         |  |                                 |        |  |                                          |   |        |                  |  |   |       | 
|Commercial                 |  | $                               | 5,072  |  |                                          | $ | 5,088  |                  |  | $ | 1,912 | 
|Real Estate                |  |                                 |        |  |                                          |   |        |                  |  |   |       | 
|Residential                |  |                                 | 8,945  |  |                                          |   | 8,965  |                  |  |   | 2,927 | 
|Commercial                 |  |                                 | 355    |  |                                          |   | 367    |                  |  |   | 138   | 
|Construction               |  |                                 | 4,866  |  |                                          |   | 4,881  |                  |  |   | 741   | 
|Consumer                   |  |                                 |       |  |                                          |   |       |                  |  |   |      | 
|                           |  |                                 |        |  |                                          |   |        |                  |  |   |       | 
|Total                      |  | $                               | 19,238 |  |                                          | $ | 19,301 |                  |  | $ | 5,718 | 
|                           |  |                                 |        |  |                                          |   |        |                  |  |   |       | 
|Total:                     |  |                                 |        |  |                                          |   |        |                  |  |   |       | 
|Commercial                 |  | $                               | 5,615  |  |                                          | $ | 5,632  |                  |  | $ | 1,912 | 
|Real Estate                |  |                                 |        |  |                                          |   |        |                  |  |   |       | 
|Residential                |  |                                 | 13,128 |  |                                          |   | 13,228 |                  |  |   | 2,927 | 
|Commercial                 |  |                                 | 355    |  |                                          |   | 367    |                  |  |   | 138   | 
|Construction               |  |                                 | 6,442  |  |                                          |   | 7,550  |                  |  |   | 741   | 
|Consumer                   |  |                                 |       |  |                                          |   |       |                  |  |   |      | 
|                           |  |                                 |        |  |                                          |   |        |                  |  |   |       | 
|Total                      |  | $                               | 25,540 |  |                                          | $ | 26,777 |                  |  | $ | 5,718 | 
|                           |  |                                 |        |  |                                          |   |        |                  |  |   |       | 

A summary of the transactions affecting the allowance for loan losses follows:



|                           |  |      |            |   |      |   |           |  
|-------------------------- |  | ---- | ---------- | - | ---- | - | --------- | -
|                           |  | 2010 |            |   | 2009 |  
|Balance, beginning of year |  | $    | 6,600,360  |   |      | $ | 5,060,433 |  
|Provision for loan losses  |  |      | 8,220,920  |   |      |   | 2,285,000 |  
|Recoveries                 |  |      | 31,074     |   |      |   | 9,961     |  
|Charge-offs                |  |      | (3,816,220 | ) |      |   | (755,034  | )
|                           |  |      |            |   |      |   |           |  
|Balance, end of year       |  | $    | 11,036,134 |   |      | $ | 6,600,360 |  
|                           |  |      |            |   |      |   |           |  



F-15



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



The following is a summary of information pertaining to impaired loans:



|                                                           |  |      |            |  |      |   |            | 
|---------------------------------------------------------- |  | ---- | ---------- |  | ---- | - | ---------- | 
|                                                           |  | 2010 |            |  | 2009 |  
|Impaired loans with related allowance                      |  | $    | 19,237,897 |  |      | $ | 12,279,027 | 
|                                                           |  |      |            |  |      |   |            | 
|Allowance on impaired loans                                |  | $    | 5,717,999  |  |      | $ | 1,969,728  | 
|                                                           |  |      |            |  |      |   |            | 
|Average balance of impaired loans                          |  | $    | 12,591,130 |  |      | $ | 8,670,057  | 
|                                                           |  |      |            |  |      |   |            | 
|Interest income recognized and collected on impaired loans |  | $    | 94,587     |  |      | $ | 553,248    | 
|                                                           |  |      |            |  |      |   |            | 

No additional funds are committed to be advanced in connection with impaired loans. Nonaccrual loans amounted to $22,354,760
and $3,606,897 at December 31, 2010 and 2009. The allowance for nonaccrual loans amounted to $4,969,999 and $1,408,005 at December 31, 2010 and 2009. If interest on these loans had been accrued such income would have approximated $872,767
and $308,326, respectively. Excluding the nonaccrual loans, there was $1,556,845 in loans past due 90 days or more and still accruing at December 31, 2010. No loans were past due 90 days or more at December 31, 2009 and still accruing. At
December 31, 2010 and 2009, there were $3,390,174 and $3,390,201 of troubled debt restructurings, respectively, with specific valuation allowances of such loans in the amounts of $1,122,000 and $747,301, respectively.

Note 5 - Premises and equipment

Major
classifications of these assets are summarized as follows:



|                              |  |              |            |  |      |   |           | 
|----------------------------- |  | ------------ | ---------- |  | ---- | - | --------- | 
|                              |  | December 31, |           
|                              |  | 2010         |            |  | 2009 |  
|Land                          |  | $            | 4,378,000  |  |      | $ | 3,470,036 | 
|Building                      |  |              | 5,060,730  |  |      |   | 2,435,364 | 
|Furniture and equipment       |  |              | 2,781,221  |  |      |   | 2,419,428 | 
|Leasehold improvements        |  |              | 1,723,071  |  |      |   | 846,627   | 
|                              |  |              |            |  |      |   |           | 
|                              |  |              | 13,943,022 |  |      |   | 9,171,455 | 
|Less acculumated depreciation |  |              | 2,542,754  |  |      |   | 2,052,864 | 
|                              |  |              |            |  |      |   |           | 
|Premises and equipment, net   |  | $            | 11,400,268 |  |      | $ | 7,118,591 | 
|                              |  |              |            |  |      |   |           | 

Accumulated depreciation and amortization at December 31 was as follows:



|                        |  |      |           |  |      |   |           | 
|----------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                        |  | 2010 |           |  | 2009 |  
|Building                |  | $    | 244,516   |  |      | $ | 131,635   | 
|Furniture and equipment |  |      | 1,715,672 |  |      |   | 1,446,026 | 
|Leasehold improvements  |  |      | 582,566   |  |      |   | 475,203   | 
|                        |  |      |           |  |      |   |           | 
|                        |  | $    | 2,542,754 |  |      | $ | 2,052,864 | 
|                        |  |      |           |  |      |   |           | 

Certain Company premises and equipment are leased under various operating leases. Rental expense was $441,142 and $623,136
in 2010 and 2009, respectively.



F-16



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



Future minimum payments, by year and in the aggregate for operating leases with initial or remaining
terms in excess of one year as of December 31, 2010 are as follows:



|           |  |   |         | 
|---------- |  | - | ------- | 
|2011       |  | $ | 303,421 | 
|2012       |  |   | 164,337 | 
|2013       |  |   | 85,546  | 
|2014       |  |   | 86,829  | 
|2015       |  |   | 88,132  | 
|Thereafter |  |   | 225,984 | 
|           |  |   |         | 
|           |  | $ | 954,249 | 
|           |  |   |         | 

Note 6 - Deposits

Major categories of deposits at December 31, 2010 and 2009 follow:



|                              |  |        |             |  |              |  |      |        |  |   |              |  |  |  |      |  
|----------------------------- |  | ------ | ----------- |  | ------------ |  | ---- | ------ |  | - | ------------ |  |  |  | ---- | -
|                              |  | 2010   |             |  | 2009         | 
|                              |  | Amount |             |  | Average Rate |  |      | Amount |  |   | Average Rate | 
|Noninterest-bearing deposits  |  |        |             |  |              |  |      |        |  |   |              |  |  |  |      |  
|Demand deposits               |  | $      | 40,379,370  |  |              |  | 0.00 | %      |  | $ | 37,554,667   |  |  |  | 0.00 | %
|Interest-bearing deposits     |  |        |             |  |              |  |      |        |  |   |              |  |  |  |      |  
|Money market and NOW accounts |  |        | 155,903,882 |  |              |  | 0.86 | %      |  |   | 143,549,255  |  |  |  | 1.56 | %
|Certificates of deposit       |  |        |             |  |              |  |      |        |  |   |              |  |  |  |      |  
|Less than $100,000            |  |        | 91,160,677  |  |              |  | 2.48 | %      |  |   | 108,072,019  |  |  |  | 3.01 | %
|Greater than $100,000         |  |        | 139,426,864 |  |              |  | 2.77 | %      |  |   | 132,958,153  |  |  |  | 2.90 | %
|                              |  |        |             |  |              |  |      |        |  |   |              |  |  |  |      |  
|                              |  | $      | 426,870,793 |  |              |  |      |        |  | $ | 422,134,094  |  |  |  |      |  
|                              |  |        |             |  |              |  |      |        |  |   |              |  |  |  |      |  

Time deposits will mature as follows:



|     |  |   |             | 
|---- |  | - | ----------- | 
|2011 |  | $ | 91,471,846  | 
|2012 |  |   | 47,728,870  | 
|2013 |  |   | 24,396,777  | 
|2014 |  |   | 32,046,932  | 
|2015 |  |   | 34,943,116  | 
|     |  |   |             | 
|     |  | $ | 230,587,541 | 
|     |  |   |             | 

The aggregate amount of deposits exceeding $100,000 was $275,647,181 and $252,969,000 at December 31, 2010 and 2009,
respectively.

The Company classifies deposit overdrafts as other consumer loans which totaled $67 thousand at December 31, 2010 and $17
thousand at December 31, 2009.

In the normal course of business, the Company has received deposits from directors and executive
officers. At December 31,



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



2010 and 2009, deposits from directors and executive officers were approximately $4.4 million and $14.7 million. All such deposits were received in the ordinary course of business on
substantially the same terms and conditions, including interest rates, as those prevailing at the same time for comparable transactions with unrelated persons.

Note 7  FHLB advances, securities sold under repurchase agreements and federal funds purchased

The Company uses both short-term and long-term borrowings to supplement deposits when they are available at a lower overall cost to the Company, they can be invested at a positive rate of return or are
used to minimize interest rate risk.

As a member of the Federal Home Loan Bank of Atlanta, the Company is required to own capital stock in
the FHLB and is authorized to apply for advances from the FHLB. Each FHLB credit program has its own interest rate, which may be fixed or variable, and range of maturities. The FHLB advances are secured by the pledge of FHLB stock and a blanket lien
on qualified 1 to 4 family residential real estate loans and a blanket lien on qualified commercial mortgages.

Advances from the FHLB at
December 31, 2010 consist of the following:



|              |            |  |              |  |      |          |  |  |           |  |  |  |           | 
|------------- | ---------- |  | ------------ |  | ---- | -------- |  |  | --------- |  |  |  | --------- | 
|AdvanceAmount |            |  | InterestRate |  |      | Maturity |  |  | Callable  | 
|$             | 5,000,000  |  |              |  | 0.79 | %        |  |  | 9/1/2011  |  |  |  |          | 
|              | 5,000,000  |  |              |  | 2.35 | %        |  |  | 2/1/2013  |  |  |  | Quarterly | 
|              | 5,000,000  |  |              |  | 2.68 | %        |  |  | 9/23/2013 |  |  |  |          | 
|              | 5,000,000  |  |              |  | 3.03 | %        |  |  | 9/23/2013 |  |  |  |          | 
|              | 5,000,000  |  |              |  | 3.17 | %        |  |  | 9/23/2014 |  |  |  |          | 
|              | 5,000,000  |  |              |  | 3.15 | %        |  |  | 9/23/2014 |  |  |  |          | 
|              | 5,000,000  |  |              |  | 2.60 | %        |  |  | 2/2/2015  |  |  |  | Quarterly | 
|              | 5,000,000  |  |              |  | 3.95 | %        |  |  | 4/13/2015 |  |  |  | Quarterly | 
|              | 5,000,000  |  |              |  | 3.71 | %        |  |  | 6/24/2015 |  |  |  |          | 
|              | 5,000,000  |  |              |  | 4.27 | %        |  |  | 1/27/2016 |  |  |  |          | 
|              | 5,000,000  |  |              |  | 2.95 | %        |  |  | 12/6/2017 |  |  |  | Quarterly | 
|              |            |  |              |  |      |          |  |  |           |  |  |  |           | 
|$             | 55,000,000 |  |              |  | 3.01 | %        |  |  |           |  |  |  |           | 
|              |            |  |              |  |      |          |  |  |           |  |  |  |           | 

Aggregate annual maturities of FHLB advances (based on final maturity dates) are as follows:



|     |  |   |            | 
|---- |  | - | ---------- | 
|2011 |  | $ | 5,000,000  | 
|2012 |  |   |           | 
|2013 |  |   | 15,000,000 | 
|2014 |  |   | 10,000,000 | 
|2015 |  |   | 15,000,000 | 
|2016 |  |   | 5,000,000  | 
|2017 |  |   | 5,000,000  | 
|     |  |   |            | 
|     |  | $ | 55,000,000 | 
|     |  |   |            | 

During September 2010, the Company restructured $20.0 million in FHLB advances in which the interest rate was reduced from
an average of 4.37% to 3.05% on the $20.0 million in advances. The maturities were extended by on average,



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



approximately 1 year and ten months.

The Company has outstanding securities sold under
repurchase agreements. These agreements are generally corporate cash management accounts for the Companys larger corporate depositors. These agreements are settled on a daily basis and the securities underlying the agreements remain under the
Companys control.

The Company uses federal funds purchased for short-term borrowing needs. Federal funds purchased represent unsecured
borrowings from other banks and generally mature daily.



|                                           |  |      |            |   |      |   |            |  
|------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                           |  | 2010 |            |   | 2009 |  
|Maximum outstanding during the year        |  |      |            |   |      |   |            |  
|FHLB advances                              |  | $    | 55,000,000 |   |      | $ | 50,000,000 |  
|Federal funds purchased                    |  |      |           |   |      |   |           |  
|Repurchase agreements                      |  |      | 2,979,263  |   |      |   | 3,403,247  |  
|Balance outstanding at end of year         |  |      |            |   |      |   |            |  
|FHLB advances                              |  |      | 55,000,000 |   |      |   | 50,000,000 |  
|Federal funds purchased                    |  |      |           |   |      |   |           |  
|Repurchase agreements                      |  |      | 1,076,521  |   |      |   | 1,234,901  |  
|Average amount outstanding during the year |  |      |            |   |      |   |            |  
|FHLB advances                              |  |      | 54,191,781 |   |      |   | 50,000,000 |  
|Federal funds purchased                    |  |      |           |   |      |   |           |  
|Repurchase agreements                      |  |      | 1,360,785  |   |      |   | 1,365,487  |  
|Average interest rate during the year      |  |      |            |   |      |   |            |  
|FHLB advances                              |  |      | 3.39       | % |      |   | 3.76       | %
|Federal funds purchased                    |  |      |           |   |      |   |           |  
|Repurchase agreements                      |  |      | 0.48       | % |      |   | 0.44       | %
|Average interest rate at end of year       |  |      |            |   |      |   |            |  
|FHLB advances                              |  |      | 3.01       | % |      |   | 3.71       | %
|Federal funds purchased                    |  |      |           |   |      |   |           |  
|Repurchase agreements                      |  |      | 0.50       | % |      |   | 0.50       | %

Note 8  Subordinated debt

On December 15, 2005, $2.0 million of subordinated debt was issued through a pooled underwriting. The securities have a fixed rate
for five years, converting to three month LIBOR plus 1.37% effective December 13, 2010, and is payable quarterly. The interest rate at December 31, 2010 was 1.67%. The securities may be redeemed at par beginning December 2010 and each
quarter after such date until the securities mature on December 31, 2015.

The subordinated debt may be included in Tier 2 capital for
regulatory capital adequacy determination purposes up to 50% of Tier 1 capital.

Note 9  Cumulative Perpetual Preferred Stock

Under the United States Treasurys Capital Purchase (CCP), the Company issued $10,958,000 in Cumulative Perpetual Preferred Stock,
Series A, in April 2009. In addition, the Company provided warrants to the Treasury to purchase 250,947 shares of the Companys common stock at an exercise price of $6.55 per share. These warrants are immediately exercisable



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



and expire ten years from the date of issuance. The preferred stock is non-voting, other than having class voting rights on certain matters, and pays cumulative dividends quarterly at a rate of
5% per annum for the first five years and 9% per annum thereafter. The preferred shares are redeemable at the option of the Company subject to regulatory approval.

Based on Black-Scholes options pricing model, the common stock warrants have been assigned a fair value of $2.27 per share or $660,769 in the aggregate as of April 2009. As a result, $660,769 has been
recorded as the discount on the preferred stock and will be accreted as a reduction in net income available for common shareholders over the next five years at approximately $130,000 per year. Correspondingly, $10,297,000 has been assigned to the
preferred stock. Through the discount accretion over the next five years, the preferred stock will be accreted up to the redemption amount of $10,958,000. For purposes of these calculations, the fair value of the common warrants as of April 2009 was
estimated using the Black-Scholes option pricing model and the following assumptions:



|                          |  |        
|------------------------- |  | -------
|Risk-free interest rate   |  | 2.34%  
|Expected life of warrants |  | 5 years
|Expected divident yield   |  | 0%     
|Expected volatility       |  | 35%    

The Companys computation of
expected volatility is based on weekly historical volatility since April 2003. The risk-free interest rate is based on the market yield for five year U.S. Treasury securities as of April 2009.

Note 10  Trust Preferred Securities

On September 9, 2006, FCRV Statutory Trust I (the Trust), a wholly-owned subsidiary of the Company, was formed for the purpose of issuing
redeemable capital securities. On September 21, 2006, $5,155,000 of Trust Preferred Capital Notes were issued through a pooled underwriting. The Trust issued $155,000 in common equity to the Company. The securities have a LIBOR-indexed floating
rate of interest (three-month LIBOR plus 1.70%) which adjusts, and is payable quarterly. The interest rate at December 31, 2010 was 2.00%. The securities may be redeemed at par beginning on September 15, 2011 and each quarter after such
date until the securities mature on September 15, 2036. The principal asset of the Trust is $5,155,000 of the Companys junior subordinated debt securities with like maturities and like interest rates to the Trust Preferred Capital Notes.

The trust preferred securities issued by the Company may be included in Tier 1 capital for regulatory adequacy determination purposes up to
25% of Tier 1 capital after its inclusion. The portion of the trust preferred securities, not considered as Tier 1 capital, may be included in Tier 2 capital.

The obligations of the Company with respect to the issuance of the Trust Preferred Capital Notes constitute a full and unconditional guarantee by the Company of the Trusts obligations with respect
to the Trust Preferred Capital Notes. Subject to certain exceptions and limitations, the Company may elect from time to time to defer interest payments on the junior subordinated debt securities, which would result in a deferral of distribution
payments on the related Trust Preferred Capital Notes and require a deferral of common dividends.

Pursuant to current accounting standards,
the Company does not consolidate the Trust.

Note 11 - Income taxes

Current accounting standards provides a comprehensive model for how we should recognize, measure, present, and disclose uncertain tax positions in our financial statements that we have taken or expect to
take on our tax return. The Company does not have any unrecognized tax benefits as defined by accounting standards and therefore there was not effect on our financial position or results of operations as a result of implementing the standard. If
they were to arise, interest and penalties associated with unrecognized tax positions will be classified as additional income taxes in the statement of income. Tax returns for all years 2007 and thereafter are subject to possible future examinations
by tax authorities.



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



Deferred income taxes reflect the net tax effects of temporary differences between the carrying value of
assets and liabilities for financial reporting purposes and the amounts reported for income tax purposes. Significant components of the Companys deferred income tax liabilities and assets are as follows:



|                                                         |  |      |           |  |      |   |           | 
|-------------------------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                                                         |  | 2010 |           |  | 2009 |  
|Deferred tax assets:                                     |  |      |           |  |      |   |           | 
|Allowance for Loan Losses                                |  | $    | 3,622,555 |  |      | $ | 2,106,394 | 
|Stock based compensation                                 |  |      | 88,119    |  |      |   | 73,494    | 
|OREO impairment                                          |  |      | 168,945   |  |      |   |          | 
|Nonaccrual loans                                         |  |      | 366,084   |  |      |   |          | 
|                                                         |  |      |           |  |      |   |           | 
|                                                         |  |      | 4,245,703 |  |      |   | 2,179,888 | 
|                                                         |  |      |           |  |      |   |           | 
|Deferred tax liabilities:                                |  |      |           |  |      |   |           | 
|Depreciation                                             |  |      | 250,054   |  |      |   | 205,365   | 
|Unrealized holding gain on available-for-sale securities |  |      | 71,236    |  |      |   | 126,189   | 
|Deferred loan costs                                      |  |      | 324,062   |  |      |   | 335,574   | 
|Prepaids                                                 |  |      | 21,683    |  |      |   | 27,473    | 
|Other                                                    |  |      | 48,403    |  |      |   | 50,020    | 
|                                                         |  |      |           |  |      |   |           | 
|                                                         |  |      | 715,438   |  |      |   | 744,621   | 
|                                                         |  |      |           |  |      |   |           | 
|Net deferred tax asset                                   |  | $    | 3,530,265 |  |      | $ | 1,435,267 | 
|                                                         |  |      |           |  |      |   |           | 

A reconciliation of the federal taxes at statutory rates to the tax provision for the year ended December 31, 2010 and
2009 is as follows:



|                                   |  |      |           |   |      |   |         |  
|---------------------------------- |  | ---- | --------- | - | ---- | - | ------- | -
|                                   |  | 2010 |           |   | 2009 |  
|Federal statutory rate             |  | ($   | 1,192,834 | ) |      | $ | 144,420 |  
|Tax-exempt interest income         |  |      | (166,437  | ) |      |   | (86,075 | )
|Nondeductible expenses             |  |      | 16,331    |   |      |   | 15,499  |  
|Stock based compensation           |  |      |          |   |      |   | 24,282  |  
|BOLI cash surrender value          |  |      | (4,762    | ) |      |   |        |  
|Miscellaneous                      |  |      | 11,702    |   |      |   | 19,074  |  
|                                   |  |      |           |   |      |   |         |  
|Provision for income taxes expense |  | ($   | 1,336,000 | ) |      | $ | 117,200 |  
|                                   |  |      |           |   |      |   |         |  

Income tax attributable to income before income tax expense is summarized as follows:



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



|                                    |  |      |            |   |      |   |          |  
|----------------------------------- |  | ---- | ---------- | - | ---- | - | -------- | -
|                                    |  | 2010 |            |   | 2009 |  
|Current federal income tax expense  |  | $    | 701,824    |   |      | $ | 642,627  |  
|Deferred federal income tax expense |  |      | (2,037,824 | ) |      |   | (525,427 | )
|                                    |  |      |            |   |      |   |          |  
|Total                               |  | ($   | 1,336,000  | ) |      | $ | 117,200  |  
|                                    |  |      |            |   |      |   |          |  

Note 12 - Related party transactions

In the normal course of business, the Company has made loans to its officers and directors. Total loans at December 31, 2010 amounted to approximately $10,989,000 (including a $50,000 loan made to an
officer prior to becoming an employee in 2005 and excluding $1,839,000 in loans to a Director that retired in 2010) of which approximately $1,601,000 represents unused lines of credit. Total loans to these persons at December 31, 2009 amounted
to $12,672,000 of which $1,028,000 represented unused lines of credit. During 2010, new loans to officers and directors amounted to $569,000 and repayments amounted to $986,000. In the opinion of management, such loans are consistent with sound
banking practices and are within applicable regulatory bank lending limitations.

During the years ended December 31, 2010 and 2009, the
Company utilized the services of a law firm for advice on various legal matters. The Chairman of the Board of Directors is also a principal in this law firm. The law firm was approved to provide various legal services to the Company at a cost of
$346,511 and $331,968 for the years ended December 31, 2010 and 2009, respectively. During 2009, $103,597 of the $331,968 in legal fees were associated with merger activities.

The Company also utilized services of other businesses to acquire furniture and office supplies and the purchase of a replacement vehicle for the corporate runner. Several Board members are involved with
the daily activity of these businesses. Total purchases for the years ended December 31, 2010 and 2009 were $61,904 and $33,233, respectively.

Note 13 - Regulatory requirements and restrictions

The Company is subject to various
federal and state regulatory requirements, including regulatory capital requirements administered by the federal banking agencies to ensure capital adequacy. Failure to meet minimum capital requirements can initiate certain mandatory and possibly
additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Companys financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the
Company must meet specific capital guidelines that involve quantitative measures of the Companys assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Companys capital amounts
and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The most
recent notification from the regulatory agencies categorized the Companys and the Banks capital position as well-capitalized, under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Company
and the Bank must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed this category.



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



The Companys actual capital amounts and ratios are also presented in the table.



|                                          |  |                        |        |  |                           |  |       |                                                                      |  |   |        |  |  |        |      |   |       |   |        |  |  |  |       |  
|----------------------------------------- |  | ---------------------- | ------ |  | ------------------------- |  | ----- | -------------------------------------------------------------------- |  | - | ------ |  |  | ------ | ---- | - | ----- | - | ------ |  |  |  | ----- | -
|                                          |  | Actual                 |        |  | MinimumCapitalRequirement |  |       | Minimum To Be WellCapitalized UnderPrompt CorrectiveAction Provision | 
|                                          |  | Amount                 |        |  | Ratio                     |  |       | Amount                                                               |  |   | Ratio  |  |  | Amount |      |   | Ratio |  
|                                          |  | (dollars in thousands) |       
|As of December 31, 2010                   |  |                        |        |  |                           |  |       |                                                                      |  |   |        |  |  |        |      |   |       |   |        |  |  |  |       |  
|Total capital to risk weighted assets     |  |                        |        |  |                           |  |       |                                                                      |  |   |        |  |  |        |      |   |       |   |        |  |  |  |       |  
|Consolidated                              |  | $                      | 55,422 |  |                           |  | 13.74 | %                                                                    |  | $ | 32,375 |  |  |        | 8.00 | % |       | $ | 40,469 |  |  |  | 10.00 | %
|First Capital Bank                        |  | $                      | 53,869 |  |                           |  | 13.38 | %                                                                    |  | $ | 32,240 |  |  |        | 8.00 | % |       | $ | 40,300 |  |  |  | 10.00 | %
|Tier 1 capital to risk weighted assets    |  |                        |        |  |                           |  |       |                                                                      |  |   |        |  |  |        |      |   |       |   |        |  |  |  |       |  
|Consolidated                              |  | $                      | 48,693 |  |                           |  | 12.08 | %                                                                    |  | $ | 16,188 |  |  |        | 4.00 | % |       | $ | 24,282 |  |  |  | 6.00  | %
|First Capital Bank                        |  | $                      | 47,161 |  |                           |  | 11.71 | %                                                                    |  | $ | 16,120 |  |  |        | 4.00 | % |       | $ | 24,180 |  |  |  | 6.00  | %
|Tier 1 capital to average adjusted assets |  |                        |        |  |                           |  |       |                                                                      |  |   |        |  |  |        |      |   |       |   |        |  |  |  |       |  
|Consolidated                              |  | $                      | 48,693 |  |                           |  | 9.04  | %                                                                    |  | $ | 21,548 |  |  |        | 4.00 | % |       | $ | 26,935 |  |  |  | 5.00  | %
|First Capital Bank                        |  | $                      | 47,161 |  |                           |  | 8.76  | %                                                                    |  | $ | 21,535 |  |  |        | 4.00 | % |       | $ | 26,918 |  |  |  | 5.00  | %



|                                          |  |                        |        |  |                           |  |       |                                                                      |  |   |        |  |  |        |      |   |       |   |        |  |  |  |       |  
|----------------------------------------- |  | ---------------------- | ------ |  | ------------------------- |  | ----- | -------------------------------------------------------------------- |  | - | ------ |  |  | ------ | ---- | - | ----- | - | ------ |  |  |  | ----- | -
|                                          |  | Actual                 |        |  | MinimumCapitalRequirement |  |       | Minimum To Be WellCapitalized UnderPrompt CorrectiveAction Provision | 
|                                          |  | Amount                 |        |  | Ratio                     |  |       | Amount                                                               |  |   | Ratio  |  |  | Amount |      |   | Ratio |  
|                                          |  | (dollars in thousands) |       
|As of December 31, 2009                   |  |                        |        |  |                           |  |       |                                                                      |  |   |        |  |  |        |      |   |       |   |        |  |  |  |       |  
|Total capital to risk weighted assets     |  |                        |        |  |                           |  |       |                                                                      |  |   |        |  |  |        |      |   |       |   |        |  |  |  |       |  
|Consolidated                              |  | $                      | 58,562 |  |                           |  | 14.09 | %                                                                    |  | $ | 33,260 |  |  |        | 8.00 | % |       | $ | 41,575 |  |  |  | 10.00 | %
|First Capital Bank                        |  | $                      | 56,381 |  |                           |  | 13.57 | %                                                                    |  | $ | 33,230 |  |  |        | 8.00 | % |       | $ | 41,538 |  |  |  | 10.00 | %
|Tier 1 capital to risk weighted assets    |  |                        |        |  |                           |  |       |                                                                      |  |   |        |  |  |        |      |   |       |   |        |  |  |  |       |  
|Consolidated                              |  | $                      | 51,370 |  |                           |  | 12.36 | %                                                                    |  | $ | 16,630 |  |  |        | 4.00 | % |       | $ | 24,945 |  |  |  | 6.00  | %
|First Capital Bank                        |  | $                      | 49,174 |  |                           |  | 11.84 | %                                                                    |  | $ | 16,615 |  |  |        | 4.00 | % |       | $ | 24,923 |  |  |  | 6.00  | %
|Tier 1 capital to average adjusted assets |  |                        |        |  |                           |  |       |                                                                      |  |   |        |  |  |        |      |   |       |   |        |  |  |  |       |  
|Consolidated                              |  | $                      | 51,370 |  |                           |  | 10.01 | %                                                                    |  | $ | 20,532 |  |  |        | 4.00 | % |       | $ | 25,665 |  |  |  | 5.00  | %
|First Capital Bank                        |  | $                      | 49,174 |  |                           |  | 9.59  | %                                                                    |  | $ | 20,521 |  |  |        | 4.00 | % |       | $ | 25,651 |  |  |  | 5.00  | %

The amount of dividends payable by the
Company depends upon its earnings and capital position, and is limited by federal and state law, regulations and policy. In addition, Virginia law imposes restrictions on the ability of all banks chartered under Virginia law to pay dividends. Under
such law, no dividend may be declared or paid that would impair a banks paid-in capital. Each of the Commission and the FDIC has the general authority to limit dividends paid by the Bank if such payments are deemed to constitute an unsafe and
unsound practice.

Note 14 - Commitments and contingent liabilities

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



financing needs of its customers in the Richmond metropolitan area. These financial instruments include unused lines of credit. These instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized on the statement of financial condition. Financial instruments with off-balance-sheet risk are summarized as follows:



|                                                                    |  |      |            |  |      |   |            | 
|------------------------------------------------------------------- |  | ---- | ---------- |  | ---- | - | ---------- | 
|                                                                    |  | 2010 |            |  | 2009 |  
|Financial instruments whose contract amounts represent credit risk: |  |      |            |  |      |   |            | 
|Unused commercial lines of credit                                   |  | $    | 39,737,000 |  |      | $ | 51,166,000 | 
|Unused consumer lines of credit                                     |  |      | 12,162,000 |  |      |   | 13,007,000 | 
|Standby and Performance Letters of Credit                           |  |      | 6,796,000  |  |      |   | 7,674,000  | 
|Loan commitments                                                    |  |      | 2,191,000  |  |      |   | 3,395,500  | 
|                                                                    |  |      |            |  |      |   |            | 
|                                                                    |  | $    | 60,886,000 |  |      | $ | 75,242,500 | 
|                                                                    |  |      |            |  |      |   |            | 

The Companys exposure to credit loss in the event of nonperformance by the other party to the financial instrument for
unused lines of credit is represented by the contractual notional amount of those instruments.

The Company uses the same credit policies in
making commitments and conditional obligations as it does for on-balance-sheet instruments.

Unused lines of credit are agreements to lend to
a customer as long as there is no violation of any condition established in the contract. The Company evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon
extension of credit, is based on managements credit evaluation of the counterparty. Collateral held varies but may include personal property, commercial property, residential property, land, and accounts receivable.

Note 15 - Concentration of credit risk

The Company has a diversified loan portfolio consisting of commercial, real estate and consumer (installment) loans. Substantially all of the
Companys customers are residents or operate business ventures in its market area consisting primarily of the Richmond metropolitan area. Therefore, a substantial portion of its debtors ability to honor their contracts and the
Companys ability to realize the value of any underlying collateral, if needed, is influenced by the economic conditions in this market area.

At times, cash balances at financial institutions are in excess of FDIC insurance coverage. The Bank believes no significant risk of loss exists with respect to those balances.

Note 16  Fair Value Disclosures

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In
accordance with the Fair Value Measurements and Disclosures topic ASC, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer the liability in an orderly transaction between market
participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Companys various financial instruments. In cases where quoted market
prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.
Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The recent fair value guidance
provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple
valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use
of significant judgment. The fair value of a reasonable point within the range this is most representative of fair value under current market conditions.

Fair Value Hierarchy

In accordance with this guidance, we group financial assets and
financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine the fair value.



| |  |  | Level 1  Valuation is based on quoted prices in active markets for identical assets or liabilities in active markets at the measurement date.
Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or
liabilities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2  Valuation is based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market date for
substantially the full term of the asset or liability.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3  Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value
of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flows methodologies, or similar techniques, as well as instruments for which determination of
fair value requires significant management judgment or estimation.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Following is a description of the valuation
methodologies used for instruments measured as fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Securities available for sale: Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). In
quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data.
Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that considers observable market data (Level 2). We obtain a single quote for all securities. Quotes
for all of our securities are provided by our securities accounting and safekeeping correspondent bank. We perform a review of pricing data by comparing prices received from third party vendors to the previous months quote for the same
security and evaluate any substantial changes.

The following tables present the balances of financial assets and liabilities measured at fair
value on a recurring basis as of December 31, 2010 and 2009. Securities identified in Note 3 as restricted securities including stock in the Federal Home Loan Bank of Atlanta and the Federal Reserve Bank are excluded from the table below since
there is not ability to sell these securities except when the FHLB or FRB require redemption based on either our borrowings at the FHLB, or in the case of the FRB changes in certain portions of our capital.



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First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



|                              |  |                              |   |  |            |   |            |         |  |   |   |  |  |   |            | 
|----------------------------- |  | ---------------------------- | - |  | ---------- | - | ---------- | ------- |  | - | - |  |  | - | ---------- | 
|                              |  | December 31, 2010            |  
|                              |  | Fair Value Measurments Using |   |  | FairValues |  
|                              |  | Level 1                      |   |  | Level 2    |   |            | Level 3 |  |  
|Assets:                       |  |                              |   |  |            |   |            |         |  |   |   |  |  |   |            | 
|                              |  |                              |   |  |            |   |            |         |  |   |   |  |  |   |            | 
|Available-for-sale securities |  | $                            |  |  |            | $ | 86,786,676 |         |  | $ |  |  |  | $ | 86,786,676 | 
|                              |  |                              |   |  |            |   |            |         |  |   |   |  |  |   |            | 



|                              |  |                              |   |  |            |   |            |         |  |   |   |  |  |   |            | 
|----------------------------- |  | ---------------------------- | - |  | ---------- | - | ---------- | ------- |  | - | - |  |  | - | ---------- | 
|                              |  | December 31, 2009            |  
|                              |  | Fair Value Measurments Using |   |  | FairValues |  
|                              |  | Level 1                      |   |  | Level 2    |   |            | Level 3 |  |  
|Assets:                       |  |                              |   |  |            |   |            |         |  |   |   |  |  |   |            | 
|                              |  |                              |   |  |            |   |            |         |  |   |   |  |  |   |            | 
|Available-for-sale securities |  | $                            |  |  |            | $ | 77,118,370 |         |  | $ |  |  |  | $ | 77,118,370 | 
|                              |  |                              |   |  |            |   |            |         |  |   |   |  |  |   |            | 

Certain assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of
these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual loans.

The following
describes the valuation techniques used to measure certain assets recorded at fair value on a nonrecurring basis in the financial statements.

Impaired Loans: Loans are designed as impaired when, in the judgment of management, based on current information and events, it is probable that
all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the
collateral. Fair value is measured based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and account receivable. The vast majority of the collateral
is real estate. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed external appraiser using observable market date (Level 2). However, if the
collateral is a house or building in the process of construction or if a appraisal of the real estate property is over two years old, then the fair value is considered Level 3. If a real estate becomes a nonperforming loan, if the valuation is over
one year old, either an evaluation by an officer of the bank or an outside vendor, or an appraisal is performed to determine current market value. We consider the value of a partially completed project for our loan analysis. For nonperforming
construction loans, we obtain a valuation of each partially completed project as is from a third party appraiser. We use this third party valuation to determine if any charge-offs are necessary.

The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business
financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivable collateral are based on financial statement balances or aging reports (Level 3). Impaired loans allocated to the
Allowance for Loan Losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.

Other Real Estate Owned: Certain assets such as other real estate owned (OREO) are measured at fair value less cost to sell. We
believe the fair value component in our valuation of OREO follows the provisions of accounting standards.

The following tables summarize our
financial assets that were measured at fair value on a nonrecurring basis during the



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



periods.



|                        |  |                              |   |  |            |   |   |         |  |   |            |  |  |   |            | 
|----------------------- |  | ---------------------------- | - |  | ---------- | - | - | ------- |  | - | ---------- |  |  | - | ---------- | 
|                        |  | December 31, 2010            |  
|                        |  | Fair Value Measurments Using |   |  | FairValues |  
|                        |  | Level 1                      |   |  | Level 2    |   |   | Level 3 |  |  
|Impaired loans          |  | $                            |  |  |            | $ |  |         |  | $ | 14,486,618 |  |  | $ | 14,486,618 | 
|Other real estate owned |  |                              |  |  |            |   |  |         |  |   | 2,614,828  |  |  |   | 2,614,828  | 
|                        |  |                              |   |  |            |   |   |         |  |   |            |  |  |   |            | 
|Total                   |  | $                            |  |  |            | $ |  |         |  | $ | 17,101,446 |  |  | $ | 17,101,446 | 
|                        |  |                              |   |  |            |   |   |         |  |   |            |  |  |   |            | 



|                        |  |                              |   |  |            |   |   |         |  |   |            |  |  |   |            | 
|----------------------- |  | ---------------------------- | - |  | ---------- | - | - | ------- |  | - | ---------- |  |  | - | ---------- | 
|                        |  | December 31, 2009            |  
|                        |  | Fair Value Measurments Using |   |  | FairValues |  
|                        |  | Level 1                      |   |  | Level 2    |   |   | Level 3 |  |  
|Impaired loans          |  | $                            |  |  |            | $ |  |         |  | $ | 12,279,027 |  |  | $ | 12,279,027 | 
|Other real estate owned |  |                              |  |  |            |   |  |         |  |   | 3,387,712  |  |  |   | 3,387,712  | 
|                        |  |                              |   |  |            |   |   |         |  |   |            |  |  |   |            | 
|Total                   |  | $                            |  |  |            | $ |  |         |  | $ | 15,666,739 |  |  | $ | 15,666,739 | 
|                        |  |                              |   |  |            |   |   |         |  |   |            |  |  |   |            | 

The following methods and assumptions were used by the Company in estimating fair values of financial instruments as
disclosed herein:

Cash and due from banks  The carrying amounts of cash and due from banks approximate their fair value.

Available-for-sale and held-to-maturity securities  Fair values measurement is based upon quoted market prices, when available
(Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable
market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that considers observable market data (Level 2). If the inputs used to provide the
evaluation for certain securities are unobservable and/or there is little, if any, market activity (Level 3). The carrying value of restricted Federal Reserve Bank and Federal Home Loan Bank stock approximates fair value based on the redemption
provisions of each entity and is therefore excluded from the following table.

Loans receivable  Fair values are based on
carrying values for variable-rate loans that reprice frequently and have no significant change in credit risk. Fair values for certain mortgage loans (for example, one-to-four family residential) and other consumer loans are based on quoted market
prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. Fair values for commercial real estate and commercial loans are estimated using discounted cash flow analyses and
interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The interest rates on loans at December 31, 2010 and 2009 are current market rates for their respective terms and associated credit
risk.

Deposit liabilities  The fair values disclosed for demand deposits are, by definition, equal to the amount payable on
demand at the reporting date (that is, their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts approximate their fair values at the reporting date. Fair values for fixed-rate CDs are estimated using a
discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Accrued interest  The carrying amounts of accrued interest approximate their fair values.



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First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



Advances from Federal Home Loan BankThe carrying value of advances from the
Federal Home Loan Bank due within ninety days from the balance sheet date approximate fair value. Fair values for convertible advances are estimated using a discounted cash flow calculation that applies interest rates currently being offered on
convertible advances with similar remaining maturities.

Federal Funds purchased and repurchase agreements The carrying value of
federal funds purchased and repurchase agreements due within ninety days from the balance sheet date approximate fair value.

Off-balance-sheet instruments  Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreements and counterparties credit standings. These are not deemed to be material at December 31, 2010 and 2009.

The estimated fair values of the Companys financial instruments as of December 31, 2010 and 2009 are as follows:



|                                   |  |                        |         |  |           |   |         |                |  |   |           |  |  |   |         | 
|---------------------------------- |  | ---------------------- | ------- |  | --------- | - | ------- | -------------- |  | - | --------- |  |  | - | ------- | 
|                                   |  | 2010                   |         |  | 2009      |  
|                                   |  | CarryingAmount         |         |  | FairValue |   |         | CarryingAmount |  |   | FairValue | 
|                                   |  | (Dollars in thousands) |        
|Financial assets                   |  |                        |         |  |           |   |         |                |  |   |           |  |  |   |         | 
|Cash and cash equivalents          |  | $                      | 32,367  |  |           | $ | 32,367  |                |  | $ | 31,667    |  |  | $ | 31,667  | 
|Investment securities              |  |                        | 89,176  |  |           |   | 89,149  |                |  |   | 78,571    |  |  |   | 78,655  | 
|Loans receivable, net              |  |                        | 386,209 |  |           |   | 394,489 |                |  |   | 397,120   |  |  |   | 402,367 | 
|Accrued interest                   |  |                        | 2,062   |  |           |   | 2,062   |                |  |   | 2,293     |  |  |   | 2,293   | 
|Financial liabilities              |  |                        |         |  |           |   |         |                |  |   |           |  |  |   |         | 
|Deposits                           |  | $                      | 426,871 |  |           | $ | 429,597 |                |  | $ | 422,134   |  |  | $ | 425,636 | 
|FHLB advances                      |  |                        | 55,000  |  |           |   | 57,766  |                |  |   | 50,000    |  |  |   | 52,177  | 
|Federal funds purchased            |  |                        |        |  |           |   |        |                |  |   |          |  |  |   |        | 
|Subordinated debt                  |  |                        | 7,155   |  |           |   | 3,455   |                |  |   | 7,155     |  |  |   | 3,623   | 
|Repurchase agreements              |  |                        | 1,077   |  |           |   | 1,077   |                |  |   | 1,235     |  |  |   | 1,235   | 
|Unrecognized financial instruments |  |                        |         |  |           |   |         |                |  |   |           |  |  |   |         | 
|Standby letters of credit issued   |  | $                      |        |  |           | $ |        |                |  | $ |          |  |  | $ |        | 

We assume interest rate risk (the
risk that general interest rate levels will change) as a result of our normal operations. As a result, the fair values of our financial instruments will change when interest rates levels change and that change may be either favorable or unfavorable
to us. We attempt to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely to repay in a rising rate environment. Conversely,
depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. We monitor rates and maturities of assets and liabilities and attempt to
minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate our overall interest rate risk.

Note 17  Stock option plan

The Company has a First Capital Bancorp, Inc. 2000 Stock
Option Plan (the Plan) pursuant to which options may be granted to Directors, officers and key employees. The Plan authorizes grants of options to purchase up to 338,484 shares of the Companys authorized, but unissued common stock. All stock
options have been granted with an exercise price equal to the stocks fair market value at the date of grant. Stock options generally have 10-year terms, vest at the rate of 50 percent per year for Directors and 33 1/3 percent per year for
employees.

A summary of the status of the Companys unvested stock options as of December 31, 2010 and changes during the year then



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First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



ended is presented below:



|                              |  |        |        |  |                                     |   |      | 
|----------------------------- |  | ------ | ------ |  | ----------------------------------- | - | ---- | 
|Unvested Stock Options        |  | Shares |        |  | WeightedAverageGrant DateFair Value |  
|Unvested at December 31, 2009 |  |        | 38,382 |  |                                     | $ | 2.01 | 
|Granted                       |  |        | 2,000  |  |                                     |   | 2.28 | 
|Vested                        |  |        | 17,182 |  |                                     |   | 2.41 | 
|Forfeitures                   |  |        |       |  |                                     |   |     | 
|                              |  |        |        |  |                                     |   |      | 
|Unvested at December 31, 2010 |  |        | 23,200 |  |                                     | $ | 1.88 | 
|                              |  |        |        |  |                                     |   |      | 

As of December 31, 2010, there was $37,461 of total unrecognized compensation costs related to unvested stock options.
That cost is expected to be recognized over a period of 2.0 years.

The weighted-average option price and weighted-average remaining term of
stock options awarded and not exercised were as follows as of December 31:



|                                 |  |      |      |  |      |   |      | 
|-------------------------------- |  | ---- | ---- |  | ---- | - | ---- | 
|                                 |  | 2010 |      |  | 2009 |  
|Weighted-average price           |  | $    | 9.70 |  |      | $ | 9.48 | 
|Weighted-average term (in years) |  |      | 4.46 |  |      |   | 5.18 | 

A summary of the stock option
activity is as follows:



|                                      |  |         |         |  |                                |   |       | 
|------------------------------------- |  | ------- | ------- |  | ------------------------------ | - | ----- | 
|                                      |  | Options |         |  | Weighted-AverageExercise Price |  
|Options outstanding December 31, 2008 |  |         | 293,275 |  |                                | $ | 10.00 | 
|Granted                               |  |         | 33,550  |  |                                |   | 4.56  | 
|Expired                               |  |         | 9,225   |  |                                |   | 8.15  | 
|                                      |  |         |         |  |                                |   |       | 
|Options outstanding December 31, 2009 |  |         | 317,600 |  |                                | $ | 9.48  | 
|Granted                               |  |         | 2,000   |  |                                |   | 4.85  | 
|Expired                               |  |         | 18,000  |  |                                |   | 5.32  | 
|                                      |  |         |         |  |                                |   |       | 
|Options outstanding December 31, 2010 |  |         | 301,600 |  |                                | $ | 9.70  | 
|                                      |  |         |         |  |                                |   |       | 



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First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



The following table summarizes information about stock options outstanding as December 31, 2010:



|                 |  |                                                      |         |  |                                           |  |           |                                |  |   |       | 
|---------------- |  | ---------------------------------------------------- | ------- |  | ----------------------------------------- |  | --------- | ------------------------------ |  | - | ----- | 
|                 |  | Options Outstanding and Exercisable                  |        
|Exercise Prices  |  | NumberOutstanding andExercisable atDecember 31, 2010 |         |  | Weighted-AverageRemainingContractual Life |  |           | Weighted-AverageExercise Price | 
|$4.50 to $7.00   |  |                                                      | 97,050  |  |                                           |  | 3.6 years |                                |  | $ | 5.75  | 
|$7.07 to $10.00  |  |                                                      | 100,025 |  |                                           |  | 3.8 years |                                |  | $ | 9.38  | 
|$10.57 to $17.67 |  |                                                      | 104,525 |  |                                           |  | 5.9 years |                                |  | $ | 13.68 | 
|                 |  |                                                      |         |  |                                           |  |           |                                |  |   |       | 
|                 |  |                                                      | 301,600 |  |                                           |  |           |                                |  |   |       | 
|                 |  |                                                      |         |  |                                           |  |           |                                |  |   |       | 

At December 31, 2010, the fair value of the quoted stock was less than the exercise price of all options
outstanding.

The Company estimates the fair value of each option grant on the date of the grant using the Black-Scholes option-pricing model.
Additional valuation and related assumption information for the Companys stock option plan is presented below:



|                                                 |  |                         |  |        
|------------------------------------------------ |  | ----------------------- |  | -------
|                                                 |  | Year Ended December 31,
|                                                 |  | 2010                    |  | 2009   
|Weighted average per share fair value of options |  |                         |  |        
|granted during the year                          |  | $2.28                   |  | $1.15  
|Dividend yield                                   |  | 0.00%                   |  | 0.00%  
|Expected life                                    |  | 6 years                 |  | 6 years
|Expected volatility                              |  | 46.80%                  |  | 20.50% 
|Average Risk-free interest rate                  |  | 2.12%                   |  | 2.11%  

On March 17, 2010, the
Companys Board of Directors adopted the First Capital Bancorp, Inc. 2010 Equity Incentive Plan (the 2010 Plan), which was approved by the stockholders of the Company at the annual meeting of stockholders held on May 19, 2010.
The 2010 Plan makes available up to 150,000 shares of the Companys common stock for issuance upon the grant or exercise of restricted stock, stock options or other equity-based awards as permitted under the 2010 Plan. Each employee and
director of the Company and its affiliates may participate in the 2010 Plan. Unless sooner terminated, the 2010 Plan will terminate on May 19, 2020. No awards were granted under this plan as of December 31,2010.

Note 18  Other employee benefit plans

During April 1999, the Company instituted a contributory thrift plan through the Virginia Bankers Association, covering all eligible employees. Participants may make contributions to the plan during the
year, with certain limitations. During 2010 and 2009, the Company contributed to the plan an amount equal to seventy-five percent of the first six percent contributed. The participants are 100% vested upon three years of service to the Company.
Expenses amounted to $190,338 and $166,825 in 2010 and 2009, respectively.



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



Note 19  Earnings per share

BasicEPS excludes dilution and is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period. DilutedEPS
reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, or resulted in the issuance of common stock that then shared in the earnings of the entity.

The basic and diluted earnings per share calculations are as follows:



|                                              |  |                        |            |   |      |    |           |  
|--------------------------------------------- |  | ---------------------- | ---------- | - | ---- | -- | --------- | -
|                                              |  | Year EndedDecember 31, |           
|                                              |  | 2010                   |            |   | 2009 |   
|Net (loss) available to common shareholders   |  | $                      | (2,850,136 | ) |      | $  | (195,168  | )
|Weighted average number of shares outstanding |  |                        | 2,971,171  |   |      |    | 2,971,171 |  
|                                              |  |                        |            |   |      |    |           |  
|(Loss) per common share - basic               |  | ($                     | 0.96       | ) |      | ($ | 0.07      | )
|                                              |  |                        |            |   |      |    |           |  
|Effect of dilutive securities:                |  |                        |            |   |      |    |           |  
|Weighted average number of shares outstanding |  |                        | 2,971,171  |   |      |    | 2,971,171 |  
|Effect of stock options                       |  |                        |           |   |      |    |          |  
|                                              |  |                        |            |   |      |    |           |  
|Diluted average shares outstanding            |  |                        | 2,971,172  |   |      |    | 2,971,171 |  
|                                              |  |                        |            |   |      |    |           |  
|(Loss) per common share - assuming dilution   |  | ($                     | 0.96       | ) |      | ($ | 0.07      | )
|                                              |  |                        |            |   |      |    |           |  

Note 20  Impact of Recently Issued Accounting Standards

In June 2009, the Financial Accounting Standards Board (FASB) issued new guidance relating to the accounting for transfers of financial
assets. The new guidance, which was issued as Statement of Financial Accounting Standards (SFAS) No. 166, Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140, was adopted into the ASC in
December 2009 through the issuance of Accounting Standards Update (ASU) 2009-16 (ASU 2009-16). The new standard provides guidance to improve the relevance, representational faithfulness, and comparability of the
information that an entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferors continuing involvement, if any,
in transferred financial assets. ASU 2009-16 was effective for transfers on or after January 1, 2010. The adoption of the new guidance did not have a material impact on the Companys consolidated financial statements.

In January 2010, the FASB issued ASU 2010-04, Accounting for Various TopicsTechnical Corrections to SEC Paragraphs (ASU
2010-04). This update makes technical corrections to existing Securities and Exchange Commission (the SEC) guidance including the following topics: accounting for subsequent investments, termination of an interest rate swap,
issuance of financial statementssubsequent events, use of residual method to value acquired assets other than goodwill, adjustments in assets and liabilities for holding gains and losses, and selections of discount rate used for measuring
defined benefit obligation. The adoption of this new guidance did not have a material impact on the Companys consolidated financial statements.



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First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820):
Improving Disclosures about Fair Value Measurements(ASU 2010-06). ASU 2010-06 amends Subtopic 820-10 to clarify existing disclosures, requires new disclosures, and includes conforming amendments to guidance on employers
disclosures about postretirement benefit plan assets. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements in the roll forward of
activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The adoption of this new guidance did not have a material impact
on the Companys consolidated financial statements.

In February 2010, the FASB issued ASU 2010-08, Technical Corrections to Various
Topics (ASU 2010-08). ASU 2010-08 clarifies guidance on embedded derivatives and hedging. ASU 2010-08 is effective for interim and annual periods beginning after December 15, 2009. The adoption of this new guidance did not have
a material impact on the Companys consolidated financial statements.

In February 2010, the FASB issued ASU 2010-09, Subsequent
Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements (ASU 2010-09). ASU 2010-09 addresses both the interaction of the requirements of Topic 855 with the SECs reporting requirements and
the intended breadth of the reissuance disclosure provisions related to subsequent events. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. ASU 2010-09 was effective
immediately. The adoption of the new guidance did not have a material impact on the Companys consolidated financial statements.

In July
2010, the FASB issued ASU 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses(ASU 2010-20). The new disclosure guidance will significantly expand the existing
requirements and leads to greater transparency into a companys exposure to credit losses from lending arrangements. The extensive new disclosures of information as of the end of a reporting period will become effective for both interim
and annual reporting periods ending after December 15, 2010. Specific items regarding activity that occurred before the issuance of the ASU, such as the allowance roll-forward and modification disclosures, will be required for periods
beginning after December 15, 2010. The Company has included the required disclosures in the Companys consolidated financial statements.

On September 17, 2010, the SEC issued Release No. 33-9144, Commission Guidance on Presentation of Liquidity and Capital Resources Disclosures in Managements Discussion and Analysis.
This interpretive release is intended to improve discussion of liquidity and capital resources in Managements Discussion and Analysis of Financial Condition and Results of Operations in order to facilitate understanding by investors of the
liquidity and funding risks facing the Company. This release was issued in conjunction with a proposed rule, Short-Term Borrowings Disclosures, that would require public companies to disclose additional information to investors about
their short-term borrowing arrangements. Release No. 33-9144 was effective on September 28, 2010. If the proposed rule, as currently written is made final, the adoption of this new rule is not expected to have a material impact on the
Companys consolidated financial statements.

In January 2011, the FASB issued ASU 2011-01, Deferral of the Effective Date of
Disclosures about Troubled Debt Restructurings in Update No. 2010-20 (ASU 2010-20). The amendments in this ASU temporarily delay the effective date of the disclosures about troubled debt restructurings in ASU 2010-20 for public
entities. The delay is intended to allow the FASB time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance
for determining what constitutes a troubled debt restructuring will then be coordinated. Currently, that guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011.

The SEC has issued Final Rule No. 33-9002, Interactive Data to Improve Financial Reporting, which requires companies to submit financial
statements in extensible business reporting language (XBRL) format with their SEC filings on a phased-in schedule. Large accelerated filers and foreign large accelerated filers using GAAP were required to provide interactive data reports
starting with their first quarterly report for fiscal periods ending on or after June 15, 2010. All remaining filers are



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



required to provide interactive data reports starting with their first quarterly report for fiscal periods ending on or after June 15, 2011.

Note 21  Condensed Financial Information  Parent Company Only

FIRST CAPITAL BANCORP, INC.

(Parent Corporation Only)

Statements of Financial Condition

December 31, 2010 and 2009



|                                                     |  |      |            |   |      |   |            |  
|---------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                     |  | 2010 |            |   | 2009 |  
|Assets                                               |  |      |            |   |      |   |            |  
|Cash on deposit with subsidiary bank                 |  | $    | 1,224,833  |   |      | $ | 1,854,985  |  
|Investment is subsidiary                             |  |      | 47,298,446 |   |      |   | 49,418,325 |  
|Investment is special purpose subsidiary             |  |      | 155,000    |   |      |   | 155,000    |  
|Other assets                                         |  |      | 224,623    |   |      |   | 258,084    |  
|                                                     |  |      |            |   |      |   |            |  
|                                                     |  | $    | 48,902,902 |   |      | $ | 51,686,394 |  
|                                                     |  |      |            |   |      |   |            |  
|Liabilities and Stockholders Equity                 |  |      |            |   |      |   |            |  
|Trust preferred debt                                 |  | $    | 5,155,000  |   |      | $ | 5,155,000  |  
|Other liabilities                                    |  |      | 73,366     |   |      |   | 72,964     |  
|                                                     |  |      |            |   |      |   |            |  
|Total liabilities                                    |  |      | 5,228,366  |   |      |   | 5,227,964  |  
|                                                     |  |      |            |   |      |   |            |  
|Stockholders Equity                                 |  |      |            |   |      |   |            |  
|Preferred stock                                      |  |      | 43,832     |   |      |   | 43,832     |  
|Common stock                                         |  |      | 11,884,684 |   |      |   | 11,884,684 |  
|Additional paid-in capital                           |  |      | 29,739,129 |   |      |   | 29,696,114 |  
|Retained earnings                                    |  |      | 1,643,335  |   |      |   | 4,493,471  |  
|Warrants                                             |  |      | 660,769    |   |      |   | 660,769    |  
|Discount on preferred stock                          |  |      | (434,494   | ) |      |   | (564,395   | )
|Accumulated other comprehensive income, net of taxes |  |      | 137,281    |   |      |   | 243,955    |  
|                                                     |  |      |            |   |      |   |            |  
|Total stockholders equity                           |  |      | 43,674,536 |   |      |   | 46,458,430 |  
|                                                     |  |      |            |   |      |   |            |  
|                                                     |  | $    | 48,902,902 |   |      | $ | 51,686,394 |  
|                                                     |  |      |            |   |      |   |            |  



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



FIRST CAPITAL BANCORP, INC.

(Parent Corporation Only)

Statement of Income

Year Ended December 31, 2010 and 2009



|                                                   |  |      |            |   |      |   |          |  
|-------------------------------------------------- |  | ---- | ---------- | - | ---- | - | -------- | -
|                                                   |  | 2010 |            |   | 2009 |  
|Income                                             |  |      |            |   |      |   |          |  
|Interest income                                    |  | $    | 19,987     |   |      | $ | 98,944   |  
|Dividends                                          |  |      | 3,211      |   |      |   | 4,201    |  
|                                                   |  |      |            |   |      |   |          |  
|Total Income                                       |  |      | 23,198     |   |      |   | 103,145  |  
|Expenses                                           |  |      |            |   |      |   |          |  
|Interest                                           |  |      | 106,791    |   |      |   | 139,731  |  
|Merger costs                                       |  |      |           |   |      |   | 284,542  |  
|Other expenses                                     |  |      | 91,872     |   |      |   | 92       |  
|                                                   |  |      |            |   |      |   |          |  
|Total Expenses                                     |  |      | 198,663    |   |      |   | 424,365  |  
|                                                   |  |      |            |   |      |   |          |  
|Net income before tax benefit                      |  |      | (175,465   | ) |      |   | (321,220 | )
|Income tax benefit                                 |  |      | (59,350    | ) |      |   | (108,800 | )
|                                                   |  |      |            |   |      |   |          |  
|Net loss before undistributed equity in subsidiary |  |      | (116,115   | ) |      |   | (212,420 | )
|Undistributed equity in subsidiary                 |  |      | (2,056,220 | ) |      |   | 519,985  |  
|                                                   |  |      |            |   |      |   |          |  
|Net (loss) income                                  |  | ($   | 2,172,335  | ) |      | $ | 307,565  |  
|                                                   |  |      |            |   |      |   |          |  



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##### Table of Contents

First Capital Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2010 and 2009



FIRST CAPITAL BANCORP, INC.

(Parent Corporation Only)

Statement of Cash Flows

Year Ended December 31, 2010 and 2009



|                                                                                        |  |      |           |   |      |   |            |  
|--------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | ---------- | -
|                                                                                        |  | 2010 |           |   | 2009 |  
|Cash Flows from Operating Activities                                                    |  |      |           |   |      |   |            |  
|Net (loss) income                                                                       |  | ($   | 2,172,335 | ) |      | $ | 307,565    |  
|Adjustments to reconcile net (loss) income to net cash provided by operating activities |  |      |           |   |      |   |            |  
|Undistributed (earnings) loss of subsidiary                                             |  |      | 2,056,220 |   |      |   | (519,985   | )
|(Increase) in other assets                                                              |  |      | 33,461    |   |      |   | (248,664   | )
|Increase (decrease) in other liabilities                                                |  |      | 402       |   |      |   | 63,967     |  
|                                                                                        |  |      |           |   |      |   |            |  
|Net cash used in operations                                                             |  |      | (82,252   | ) |      |   | (397,117   | )
|                                                                                        |  |      |           |   |      |   |            |  
|Cash Flows from Investing Activities                                                    |  |      |           |   |      |   |            |  
|Capital contribution to subsidiary                                                      |  |      |          |   |      |   | (8,800,000 | )
|                                                                                        |  |      |           |   |      |   |            |  
|Net cash from (used) in investing activities                                            |  |      |          |   |      |   | (8,800,000 | )
|                                                                                        |  |      |           |   |      |   |            |  
|Cash Flows from Financing Activities                                                    |  |      |           |   |      |   |            |  
|Issurance of preferred stock to U.S. Treasury, net of related expenses                  |  |      |          |   |      |   | 10,933,728 |  
|Dividends on preferred stock                                                            |  |      | (547,900  | ) |      |   | (406,359   | )
|                                                                                        |  |      |           |   |      |   |            |  
|Net cash provided by financing activities                                               |  |      | (547,900  | ) |      |   | 10,527,369 |  
|                                                                                        |  |      |           |   |      |   |            |  
|Net (decrease) increase in cash                                                         |  |      | (630,152  | ) |      |   | 1,330,252  |  
|Cash and cash equivalents, beginning of year                                            |  |      | 1,854,985 |   |      |   | 524,733    |  
|                                                                                        |  |      |           |   |      |   |            |  
|Cash and cash equivalents, end of year                                                  |  | $    | 1,224,833 |   |      | $ | 1,854,985  |  
|                                                                                        |  |      |           |   |      |   |            |  



F-35