**U.S.
SECURITIES AND EXCHANGE COMMISSION**
 **Washington,
D.C. 20549**
 
 
 **FORM
10-QSB**
 
 
 |X|
    Quarterly
      Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of
      1934 for the quarterly period ended March 31,
2005
 
 | 
       |
    Transition
      report under Section 13 or 15(d) of the Exchange Act for the transition
      period from ____________ to ____________
 
 Commission
file number: 000-23991
 
 **First
Capital Bancorp, Inc.**
 (Exact
name of small business issuer as specified in its charter)
 
 Georgia
    58-2362335(State
      of Incorporation)
    (I.R.S.
      Employer Identification No.)
 
 3320
Holcomb Bridge Road, N.W.
 Suite
A
 Norcross,
Georgia 30092
 (Address
of principal executive offices)
 
 (888)
921-2265
 (Issuer's
telephone number, including area code)
 
 Check
whether the issuer (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 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. Yes
|X| No |   |
 
 State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date:
 
 Class
    Outstanding
      at April 30, 2005Common
      Stock, $1.00 par value
    5,067,719
 
 Transitional
Small Business Disclosure Format: Yes |   | No |X|
  
  FIRST
CAPITAL BANCORP, INC.
 
 TABLEOF CONTENTS
 
 
 Page
      No.PART
      I.
    FINANCIAL INFORMATIONItem
      1. FINANCIAL STATEMENTSConsolidated
      Balance Sheets- March 31, 2005 (Unaudited)and
      December 31, 2004
    3Consolidated Statements of Income
      (Unaudited) -Three months ended March 31, 2005 and 2004
    4Consolidated Statements of Comprehensive Income
      (Unaudited) -Three months ended March 31, 2005 and
      2004
    5Consolidated Statements of Cash Flows (Unaudited) -Three months ended March 31, 2005 and
      2004
    6Notes to Consolidated Financial Statements
      (Unaudited)
    7-10Item
      2. Management’s Discussion and Analysis
    ofFinancial Condition and Results of
    Operations
    11-19Item
      3. Controls and Procedures
    20PART
      II.
    OTHER INFORMATIONItem
      2. Unregistered Sales of Equity Securities and Use
      of Proceeds
    21Item
      6. Exhibits
    22Signatures
    23
 
  
  2
 Table of Contents
  **PART
I. FINANCIALINFORMATION**
 
 **ITEM 1.FINANCIAL STATEMENTS.**
 **FIRST
CAPITAL BANCORP, INC.**
 **AND
SUBSIDIARIES**
 **CONSOLIDATED
BALANCESHEETS**
 March
      31,
      2005
      (Unaudited)
    
    
    December
      31,
      2004**ASSETS**
    
    ($
      in thousands)Cash
      and due from banks
    
    $
    19,001
    
    $
    13,753Interest-bearing
      deposits in banks
    
    
    1,368
    
    
    1,473Federal
      funds sold and overnight investments
    
    
    3,272
    
    
    375Cash
      and cash equivalents
    
    
    23,641
    
    
    15,601Investment
      securities:Securities
      available for sale, at fair value
    
    
    120,952
    
    
    130,640Securities
      held to maturity, at cost (fair values of
      $6,462
      and $6,975, respectively)
    
    
    6,382
    
    
    6,821Restricted
      equity securities, at cost
    
    
    6,979
    
    
    6,818Loans,
      net
    
    
    493,906
    
    
    478,570Premises
      and equipment, net
    
    
    1,155
    
    
    1,056Goodwill
    
    
    7,411
    
    
    6,681Core
      deposit intangible
    
    
    1,027
    
    
    1,101Other
      assets
    
    
    13,567
    
    
    10,947Total
      assets
    
    $
    675,020
    
    $
    658,235**LIABILITIES**Deposits:Non
      interest-bearing demand
    
    $
    100,945
    
    $
    77,341Interest-bearing
      demand and money market
    
    
    141,543
    
    
    132,515Savings
    
    
    96
    
    
    79Time
      deposits of $100,000 or more
    
    
    129,505
    
    
    134,762Other
      time deposits
    
    
    105,817
    
    
    113,974Total
      deposits
    
    
    477,906
    
    
    458,671Federal
      funds purchased and securities sold under
      repurchase
      agreements
    
    
    7,087
    
    
    11,210Other
      borrowings
    
    
    120,462
    
    
    120,488Other
      liabilities
    
    
    5,480
    
    
    4,660Subordinated
      debentures
    
    
    6,392
    
    
    6,392Total
      liabilities
    
    
    617,327
    
    
    601,421**STOCKHOLDERS'
      EQUITY**Preferred
      stock; no par value;10,000,000
      shares authorized; no shares issuedand
      outstanding
    
    
    -
    
    
    -Common
      stock; $1 par value;10,000,000
      shares authorized; 5,216,528 and
      5,170,000
      shares issued, respectively
    
    
    5,217
    
    
    5,170Surplus
    
    
    36,415
    
    
    35,902Treasury
      stock, 148,809 and 142,888 shares, respectively
    
    
    (1,243
    )
    
    (1,122
    )Unearned
      ESOP shares
    
    
    (240
    )
    
    (400
    )Retained
      earnings
    
    
    18,595
    
    
    17,285Accumulated
      other comprehensive loss
    
    
    (1,051
    )
    
    (21
    )Total
      stockholders’ equity
    
    
    57,693
    
    
    56,814Total
      liabilities and stockholders’ equity
    
    $
    675,020
    
    $
    658,235**See
      notes to the consolidated financial
statements.**
  3
 Table of Contents
  **FIRST
CAPITAL BANCORP, INC.**
 **AND
SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTSOF INCOME**
 (UNAUDITED)
 **FOR
      THE**
      **THREE-MONTH**
      **PERIOD
      ENDED**
      **MARCH
      31**,($
      in thousands except per share data)**2005**
    
    **2004**Interest
      Income:Loans
      and leases, including fees
    
    $
    7,948
    
    $
    4,278Investment
      securities:U.S.
      Treasury and government agencies
    
    
    366
    
    
    180Mortgage-backed
      securities
    
    
    920
    
    
    756Other
      investments
    
    
    190
    
    
    298Interest-bearing
      deposits in banks
    
    
    7
    
    
    2Federal
      funds sold and overnight investments
    
    
    9
    
    
    15Total
      interest income
    
    
    9,440
    
    
    5,529Interest
      expense:Interest-bearing
      demand, money market andsavings
    
    
    302
    
    
    148Time
      deposits of $100,000 or more
    
    
    824
    
    
    820Other
      time deposits
    
    
    756
    
    
    481Federal
      funds purchased, securities sold underrepurchase
      agreements and other borrowings
    
    
    1,229
    
    
    900Total
      interest expense
    
    
    3,111
    
    
    2,349Net
      interest income
    
    
    6,329
    
    
    3,180Provision
      for loan losses
    
    
    150
    
    
    50Net
      interest income after provision for loan losses
    
    
    6,179
    
    
    3,130Non
      interest income:Service
      charges on deposit accounts
    
    
    22
    
    
    15Loan
      servicing fee income
    
    
    157
    
    
    15Mortgage
      origination fees
    
    
    37
    
    
    -Gain
      on sale of loans, net
    
    
    60
    
    
    19Net
      gain on sale of securities available for sale
    
    
    5
    
    
    -Other
      income
    
    
    112
    
    
    41Total
      non interest income
    
    
    393
    
    
    90Non
      interest expense:Salaries
      and other compensation expense
    
    
    2,766
    
    
    1,283Net
      occupancy and equipment expense
    
    
    433
    
    
    163Other
      expense
    
    
    1,250
    
    
    685Total
      non interest expense
    
    
    4,449
    
    
    2,131Income
      before income taxes
    
    
    2,123
    
    
    1,089Income
      tax expense
    
    
    813
    
    
    386Net
      income
    
    $
    1,310
    
    $
    703Basic
      earnings per share
    
    $
    0.26
    
    $
    0.31Fully
      diluted earnings per share
    
    $
    0.25
    
    $
    0.28Cash
      dividends per common share
    
    $
    -
    
    $
    -**See
      notes to the consolidated financial
statements.**
 
  4
 Table of Contents
  **FIRST
CAPITAL BANCORP, INC.**
 **AND
SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTS OF COMPREHENSIVEINCOME**
 **(UNAUDITED)**
  **FOR
      THE**
      **THREE-MONTH**
      **PERIOD
      ENDED**
      **MARCH
      31**,2005
    
    
    2004Net
      income
    
    $
    1,310
    
    $
    703Other
      comprehensive income (loss):Unrealized
      holding gains (losses) arising during period,net
      of tax
    
    
    (1,065
    )
    
    499Reclassification
      adjustment for gains realized innet
      income, net of tax
    
    
    (3
    )
    
    -Unrealized
      gains on cash flow hedges,net
      of tax
    
    
    38
    
    
    -Other
      comprehensive income (loss)
    
    
    (1,030
    )
    
    499Comprehensive
      income
    
    $
    280
    
    $
    1,202**See
      notes to the consolidated financial
statements.**
 
 
 
 
 
 
 
 
 
 
  5
 Table of Contents
  **FIRST
CAPITAL BANCORP, INC.**
 **AND
SUBSIDIARIES**
 **CONSOLIDATEDSTATEMENTS OF CASH FLOWS**
 **(UNAUDITED)**
 **FOR
      THE**
      **THREE-MONTH**
      **PERIOD
      ENDED**
      **MARCH
      31,****2005**
    
    
    **2004****OPERATING
      ACTIVITIES:**Net
      income
    
    $
    1,310
    
    $
    703Adjustments
      to reconcile net income to net cash provided by operating
      activities:Net
      (accretion) amortization of securities
    
    
    (71
    )
    
    24Depreciation
      and amortization
    
    
    235
    
    
    56Net
      gain on sale of securities available for sale
    
    
    (5
    )
    
    -Net
      gain on sale of premises and equipment
    
    
    (8
    )
    
    -Provision
      for loan losses
    
    
    150
    
    
    50Net
      (increase) decrease in other assets
    
    
    (1,949
    )
    
    461Net
      increase (decrease) in other liabilities
    
    
    1,122
    
    
    181Net
      cash provided by operating activities
    
    
    784
    
    
    1,475**INVESTING
      ACTIVITIES:**Proceeds
      from calls and maturities of securities available for sale
    
    
    750
    
    
    771Principal
      repayments from mortgage-backed securities
    
    
    7,329
    
    
    5,480Purchases
      of securities available for sale
    
    
    (14
    )
    
    -Redemption
      (purchases) of restricted equity securities
    
    
    (161
    )
    
    638Proceeds
      from sale of securities available for sale
    
    
    505
    
    
    -Net
      increase in loans
    
    
    (16,124
    )
    
    (42,882
    )Purchases
      of premises and equipment
    
    
    (260
    )
    
    (123
    )Proceeds
      from sale of premises and equipment
    
    
    8
    
    
    -Net
      cash used in investing activities
    
    
    (7,967
    )
    
    (36,116
    )**FINANCING
      ACTIVITIES:**Net
      increase in deposits
    
    
    19,235
    
    
    48,326Net
      decrease in federal funds purchased and securities sold under repurchase
      agreements
    
    
    (4,123
    )
    
    (12,165
    )Net
      increase (decrease) in Federal Home Loan Bank advances
    
    
    (26
    )
    
    6,858Net
      increase in note payable
    
    
    -
    
    
    3,500Repurchase
      of treasury stock
    
    
    (121
    )
    
    -Proceeds
      from exercise of stock options
    
    
    258
    
    
    -Net
      cash provided by financing activities
    
    
    15,223
    
    
    46,519Net
      increase in cash and cash equivalents
    
    
    8,040
    
    
    11,878Cash
      and cash equivalents, beginning of year
    
    
    15,601
    
    
    12,098Cash
      and cash equivalents, end of year
    
    $
    23,641
    
    $
    23,976**See
      notes to the consolidated financial
statements.**
 
  6
 Table of Contents
  
 
 
 **FIRST
CAPITAL BANCORP, INC.**
 **AND
SUBSIDIARIES**
 **NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 **NOTE
1 - BASIS OF PRESENTATION**
 
 The
accompanying unaudited consolidated financial statements for First Capital
Bancorp, Inc. and subsidiaries (the “Company” or “First Capital”) have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-QSB. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 2005 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2005. These financial statements should be read in conjunction with the
consolidated financial statements and related notes included in the Company’s
Annual Report on Form 10-KSB for the year ended December 31, 2004.
 
 At March
31, 2005, the Company had one wholly-owned bank subsidiary, First Capital Bank,
and two wholly-owned non-bank subsidiaries, Capital Financial Software, LLC, a
limited liability company which markets and provides support of its software
used by bankruptcy trustees and First Capital Statutory Trust I, a grantor trust
formed to issue cumulative trust preferred securities.
 
 The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries, with all significant intercompany accounts and
transactions eliminated in consolidation.
 
 **NOTE
2 - MERGER WITH FIRST CAPITAL BANCORP, INC.**
 ****
 On May
28, 2004, CNB Holdings, Inc. acquired the former First Capital Bancorp, Inc.
(“old FCBI”) through the merger (the “Merger”) of old FCBI with and into CNB
Holdings, Inc. (“CNB”).
 
 As a
result of the merger, First Capital Bank and Capital Financial Software, LLC,
which were wholly owned subsidiaries of old FCBI, became wholly owned
subsidiaries of CNB. Additionally, as a result of the Merger, CNB assumed old
FCBI’s obligations under the First Capital Statutory Trust I, which was created
in connection with old FCBI’s issuance of trust preferred securities.
Chattahoochee National Bank also continued to be a wholly owned subsidiary of
CNB after the Merger. On November 15, 2004, CNB merged (the “Bank Merger”)
its two wholly owned banking subsidiaries, First Capital Bank and Chattahoochee
National Bank, with First Capital Bank surviving the Bank Merger. On December
31, 2004, CNB changed its name to First Capital Bancorp, Inc.
 
 For
accounting purposes, the acquisition has been treated as a recapitalization of
old FCBI with old FCBI as the acquirer (reverse acquisition). The historical
financial statements prior to May 28, 2004 are those of old FCBI. The results of
operations for the quarter ended March 31, 2005 include three months of
operations of the combined Company. The results of operations for the quarter
ended March 31, 2004 include only the operations of old FCBI and the two
non-bank subsidiaries.
 
 The
aggregate purchase price was $16,035,052 . The
purchase price was determined based on the average market price of CNB Holdings,
Inc.’s common stock over the two-day period before and after the terms of the
acquisition were agreed to and announced.
 
 The
$1,273,676 core deposit intangible asset has a weighted-average life of
approximately 4.3 years. The core deposit intangible asset is being amortized
over the weighted average life using the straight-line method, which is not
materially different than the interest method. Of t he
$7,356,090 of
goodwill that was assigned to CNB, none is expected to be deductible for income
tax purposes.
  7
 Table of Contents
  
 
 The
following table summarizes the estimated fair values of the assets acquired and
liabilities assumed at the date of acquisition. The Company obtained third-party
valuations of the core deposit intangible and other fair value adjustments.
Goodwill was increased by $730,000 in 2005 related to the May 28, 2004 merger.
The increase in goodwill was due to the final determination of deferred
compensation liability accelerated as a result of the change of control
provisions of the contracts.
 
 Cash,
      due from banks, Federal funds sold and overnight
    investments
    
    $
    6,526,621Securities
      available-for-sale
    
    
    36,872,956Restricted
      equity securities
    
    
    1,506,000Derivative
    
    
    31,986Loans
    
    
    102,995,192Premises
      and equipment
    
    
    124,085Core
      deposit intangible
    
    
    1,273,676Goodwill
    
    
    7,356,090Other
      assets
    
    
    8,068,128Total
      assets acquired
    
    $
    164,754,734Deposits
    
    
    116,397,828Other
      borrowings
    
    
    26,986,639Other
      liabilities
    
    
    5,335,215Total
      liabilities assumed
    
    $
    148,719,682Net
      assets acquired
    
    $
    16,035,052
 
 
 
 
  8
 Table of Contents
  **NOTE
3 - EARNINGS PER COMMON SHARE**
 
 Earnings
per share is computed by dividing net income available to common stockholders by
the weighted average number of shares outstanding during the period, which
totaled 5,008,755 for the three months ended March 31, 2005. The average number
of shares outstanding totaled 2,251,318 for the three months ended March 31,
2004.
 
 Presented
below is a summary of the components used to calculate basic and diluted
earnings per common share.
 
 **Three
      Months Ended**March
      31,******2005**
    
    
    **2004**Basic
      Earnings Per Share:Weighted
      average common shares outstanding
    
    
    5,008,755
    
    
    2,251,318Net
      income
    
    $
    1,309,528
    
    $
    703,324Basic
      earnings per share
    
    $
    0.26
    
    $
    0.31Diluted
      Earnings Per Share:Weighted
      average common shares outstanding
    
    
    5,008,755
    
    
    2,251,318Net
      effect of the assumed exercise of stock
      options
      based on the treasury stock method
      using
      average market prices for the year
    
    
    189,715
    
    
    54,632Shares
      held by rabbi trust
    
    
    17,999
    
    
    -Net
      effect of the assumed conversion of
      subordinated
      convertible debentures
    
    
    -
    
    
    332,224Total
      weighted average common shares and
      common
      stock equivalents outstanding
    
    
    5,216,469
    
    
    2,638,174Net
      income as reported
    
    $
    1,309,528
    
    $
    703,324Net
      effect of the assumed conversion of subordinated convertible debentures
    
    
    -
    
    
    26,307Net
      income adjusted for the effect of the assumed
      conversion
      of convertible subordinated debentures
    
    $
    1,309,528
    
    $
    729,631Diluted
      earnings per share
    
    $
    0.25
    
    $
    0.28
 
  9
 Table of Contents
  
 **NOTE
4 - STOCK COMPENSATION PLANS**
 
 The
Company has two stock-based employee compensation plans for granting options to
directors and employees. The Company accounts for those plans under the
recognition and measurement principles of APB Opinion No. 25, *Accounting
for Stock Issued to Employees* , and
related Interpretations. No stock-based employee compensation cost is reflected
in net income, as all options granted under those plans had an exercise price
equal to the market value of the underlying stock on the date of grant. The
following table illustrates the effect on net income and earnings per share if
the Company had applied the fair value recognition provisions of SFAS Statement
No. 123, *Accounting
for Stock-Based Compensation* , to
stock-based employee compensation.
 
 ****
 **Three
      Months Ended**
      **March
      31,****2005**
    
    **2004**Net
      income, as reported
    
    $
    1,309,528
    
    $
    703,324Deduct:
      Total stock-based employee
      compensation
      expense determined under
      fair
      value based method for all awards
    
    
    15,111
    
    
    15,111Pro
      forma net income
    
    $
    1,294,417
    
    $
    688,213Earnings
      per share:Basic
      - as reported
    
    $
    0.26
    
    $
    0.31Basic
      - pro forma
    
    
    0.26
    
    
    0.31Fully
      diluted - as reported
    
    
    0.25
    
    
    0.28Fully
      diluted - pro forma
    
    $
    0.25
    
    $
    0.27
 
 
 **NOTE
5 - RECENT ACCOUNTING STANDARDS**
 
 **Stock-Based
Compensation**
 
 In
December 2004, the Financial Accounting Standards Board (“FASB”) published FASB
Statement No. 123 (revised 2004), *Share-Based
Payment* (“FAS
123( R)” or
the “Statement”). FAS 123(R) requires that the compensation cost relating to
share-based payment transactions, including grants of employee stock options, be
recognized in financial statements. That cost will be measured based on the fair
value of the equity or liability instruments issued. FAS 123(R) covers a wide
range of share-based compensation arrangements including stock options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. FAS
123(R) is a replacement of FASB Statement No. 123, *Accounting
for Stock-Based Compensation* , and
supersedes APB Opinion No. 25, *Accounting
for Stock Issued to Employees* , and its
related interpretive guidance.
 
 The
effect of the Statement will be to require the Company to measure the cost of
employee services received in exchange for stock options based on the grant-date
fair value of the award, and to recognize the cost over the period the employee
is required to provide services for the award. FAS 123(R) permits entities to
use any option-pricing model that meets the fair value objective in the
Statement. The Company will be required to apply FAS 123(R) as of the beginning
of its first interim period that begins after December 15, 2005.
 
 The
Company has not yet completed its study of the transition methods or made any
decisions about how it will adopt FAS 123(R). The impact of this Statement on
the Company in fiscal 2005 and beyond will depend upon various factors, among
them being our future compensation strategy. The pro forma compensation costs
presented in the table above and in prior filings for the Company have been
calculated using a Black-Scholes option pricing model and may not be indicative
of amounts which should be expected in future years. No decisions have been made
as to which option-pricing model is most appropriate for the Company for future
awards.
 
  10
 Table of Contents
  
 
 **ITEM
2.**  **MANAGEMENT'SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.**
 
 
 **CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS**
 
 Certain
of the matters discussed in this Report and in documents incorporated by
reference herein, including matters discussed under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations," as
well as oral statements made by the Company or its officers, directors or
employees, may constitute forward-looking statements for the purposes of the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, and as such may involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. The words
"expect," "anticipated," "intend," "plan," "believe," "seek," "estimate," and
similar expressions are intended to identify such forward-looking statements.
The Company's actual results may differ materially from the results anticipated
in these forward-looking statements due to a variety of factors, including,
without limitation (a) the effects of future economic conditions on the Company
and its customers; (b) the costs and effects of litigation and of unexpected or
adverse outcomes in such litigation; (c) governmental monetary and fiscal
policies, as well as legislative and regulatory changes; (d) the effect of
changes in accounting policies and practices, as may be adopted by the
regulatory agencies, as well as the Financial Accounting Standards Board and
other accounting standard setters; (e) the risks of changes in interest rates on
the level and composition of deposits, loan demand, and the values of loan
collateral, securities and interest rate protection agreements, as well as
interest rate risks; (f) the effects of competition from other commercial banks,
thrifts, mortgage banking firms, consumer finance companies, credit unions,
securities brokerage firms, insurance companies, money market and other mutual
funds and other financial institutions operating in the Company's market area
and elsewhere, including institutions operating locally, regionally, nationally
and internationally, together with such competitors offering banking products
and services by mail, telephone, computer and the internet; (g) technological
changes; (h) acquisition and integration of acquired businesses; (i) the failure
of assumptions underlying the establishment of reserves for loan losses and
estimations of values of collateral in various financial assets and liabilities;
(j) acts of war or terrorism. All written or oral forward-looking statements
attributable to the Company are expressly qualified in their entirety by these
cautionary statements.
 
 **Critical
Accounting Estimates**
 
 We have
adopted various accounting policies that govern the application of accounting
principles generally accepted in the United States and general practices within
the banking industry in the preparation of our financial statements. Our
significant accounting policies are described in the notes to our audited
financial statements included in our Annual Report on Form 10-KSB as of December
31, 2004. Certain accounting policies require 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 reported
period. Actual results could differ from those estimates. Estimates and
assumptions are reviewed periodically and the effects of revisions are reflected
in the consolidated financial statements in the period they are determined to be
necessary.
 
 *Allowance
for Loan Losses.* The
allowance for loan losses is established through provisions for loan losses
charged to operations. The provision for loan losses charged to operations is
based upon management's judgment of the amount necessary to maintain the
allowance at a level adequate to absorb probable losses.  Loans are
charged against the allowance for loan losses when management believes that the
collection of principal is unlikely.  Subsequent
recoveries are added to the allowance. Management's evaluation of the adequacy
of the allowance for loan losses is based on a formal analysis which assesses
the risk within the loan portfolio. This analysis includes consideration of loan
concentrations, historical performance, level of non-performing loans, current
economic conditions, and review of certain individual loans. Since First
Capital's loan portfolio is mainly secured by real estate, management has
continued to augment the allowance for loan losses because of the cyclical
nature of the real estate market.
  11
 Table of Contents
  
 
 
 The
allowance for loan losses consists of two main components: the allocated and
unallocated allowances. Both components of the allowance are available to cover
inherent losses in the portfolio. The allocated component of the allowance is
determined using a loan loss allocation method used by regulators and industry
consultants.  First
Capital uses a risk rating system for its loans as shown below.
 
 **Risk**
      **Rating**
    
    **Definition****0**
    
    **Exceptional****1**
    
    **Above
      average****2**
    
    **Quality****3**
    
    **Satisfactory****4**
    
    **Acceptable
      - merits attention****5**
    
    **Watch
      - special mention****6**
    
    **Substandard****7**
    
    **Doubtful
      - collection questionable****8**
    
    **Loss**
 
 
 *Goodwill* .   
Our growth over the past year has been enhanced significantly by the May 28,
2004 merger. For purchase acquisitions, we are required to record the assets
acquired, including identified intangible assets, and liabilities assumed at
their fair value, which involves estimates based on third party valuations, such
as appraisals, or internal valuations based on discounted cash flow analyses or
other valuation techniques. The determination of the useful lives of intangible
assets is subjective as is the appropriate amortization period for such
intangible assets. In addition, purchase acquisitions typically result in
recording goodwill, which is subject to ongoing periodic impairment tests based
on the fair value of net assets acquired compared to the carrying value of
goodwill. If for any future period we determine that there has been impairment
in the carrying value of our goodwill balances, we will record a charge to our
earnings, which could have a material adverse effect on our net
income.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  12
 Table of Contents
  **FINANCIAL
CONDITION**
 
 Management
continuously monitors the financial condition of the Company in order to protect
depositors, increase retained earnings and protect current and future earnings.
Further discussion of significant items affecting the Company’s financial
condition is presented below.
 
 On March
31, 2005 total assets were $675.0 million, compared to $658.2 million on
December 31, 2004, an increase of $16.8 million, or 3%. Most of this growth
occurred in net loans, which increased $15.3 million, or 3% from $478.6 million
on December 31, 2004 to $493.9 million on March 31, 2005.  Goodwill
and core deposit intangibles were $7.4 million and $1.0 million, respectively,
on March 31, 2005, compared to $6.7 million and $1.1 million, respectively, on
December 31, 2004.
 
 On March
31, 2005 total liabilities were $617.3 million, compared to $601.4 million on
December 31, 2004, an increase of $15.9 million, or 3%.  Deposits
increased $19.2 million, or 4%, while federal funds purchased and securities
sold under repurchase agreements decreased $4.1 million, or 37%, from December
31, 2004 to March 31, 2005.  Non-interest
bearing demand deposits grew from $77.3 million, or 17% of total deposits on
December 31, 2004, to $100.9 million or 21% of total deposits on March 31,
2005.
 
 On March
31, 2005, total stockholders’ equity was $57.7 million, compared to $56.8
million on December 31, 2004, an increase of $0.9 million, or 2%.
 
 **Allowance
for Loan Losses**
 
 The
allowance for loan losses as of March 31, 2005  was $6.2
million . The
allowance for loan losses, as a percentage of total gross loans, at March 31,
2005  was 1.2%,
as compared to 1.2% at December 31, 2004.  Our
provision for loan losses increased by $100,000  during
the three months ended March 31, 2005 as compared to the same period in 2004.
This increase is attributable to the loan growth experienced in 2005. During the
fourth quarter of 2004, a review of the Company’s loan portfolio by an
independent firm was conducted. The purpose of this review, which is conducted
regularly, was to assess the risk in the loan portfolio and to determine the
adequacy of the allowance for loan losses. The review included analyses of
historical performance, the level of non-conforming and rated loans, loan volume
and activity, review of loan files and consideration of economic conditions and
other pertinent information. The Company plans to continue engaging, on an
annual basis, an independent firm to review the Company’s loan portfolio. In
addition to the independent reviews, the Company’s regulators also conduct
annual examinations of the loan portfolio. Upon completion, the regulator
presents its report of findings to the Company’s Board of Directors and
management. Information provided from these independent sources, together with
information provided by management and other information known to the Company’s
Board of Directors, is utilized by the Board of Directors to monitor, on a
quarterly basis, the loan portfolio. Specifically, the Company’s Board of
Directors attempts to identify risks inherent in the loan portfolio (e.g.,
problem loans, potential problem loans and loans to be charged off), assess the
overall quality and collectibility of the loan portfolio, and determine amounts
of the allowance for loan losses and the provision for loan losses to be
reported based on the results of their review.
 
 Management
considers the allowance for loan losses to be adequate; however, there can be no
assurance that charge-offs in future periods will not exceed the allowance for
loan losses or that additional provisions of the allowance will not be required.
 
 
  13
 Table of Contents
  
 
 The
following table summarizes the allowance for loan losses for the three-month
periods ended March 31, 2005 and 2004.
 
 **2005**
    
    **2004**(Dollars
      in thousands)**Average
      amount of loans outstanding**
    
    $
    501,044
    
    $
    325,894**Allowance
      for loan losses balance, beginning of period**
    
    $
    6,049
    
    $
    3,306**Less
      charge-offs**Commercial
      loans
    
    
    -
    
    
    **-**Real
      estate loans
    
    
    -
    
    
    -Consumer
      loans
    
    
    (10
    )
    
    -Total
      charge-offs
    
    
    (10
    )
    
    -**Plus
      recoveries**Commercial
      loans
    
    
    2
    
    
    -Real
      estate loans
    
    
    1
    
    
    -Consumer
      loans
    
    
    -
    
    
    -Total
      recoveries
    
    
    3
    
    
    -**Net
      charge-offs**
    
    
    (7
    )
    
    -**Plus
      provision for loan losses**
    
    
    150
    
    
    50**Allowance
      for loan losses balance, end of period**
    
    $
    6,192
    
    $
    3,356**Net
      charge-offs to average loans**
    
    
    0.0014
    %
    
    -
    %
  14
 Table of Contents
  The
following table is a summary of nonaccrual, past due and restructured debt.
 
 **March
      31, 2005**Past
      DueNonaccrual
    
    
    90
      Days
    
    
    RestructuredLoans
    
    
    Still
      Accruing
    
    
    Debt(Dollars
      in thousands)Real
      estate loans
    $
    164
    
    $
    -
    
    $
    -Commercial
      loans
    
    1,353
    
    
    -
    
    
    -Consumer
      loans
    
    -
    
    
    -
    
    
    -Total
    $
    1,517
    
    $
    -
    
    $
    -**March
      31, 2004**Past
      DueNonaccrual
    
    
    90
      Days
    
    
    RestructuredLoans
    
    
    Still
      Accruing
    
    
    Debt(Dollars
      in thousands)Real
      estate loans
    $
    154
    
    $
    -
    
    $
    -Commercial
      loans
    
    -
    
    
    -
    
    
    -Consumer
      loans
    
    -
    
    
    -
    
    
    -Total
    $
    154
    
    $
    -
    
    $
    -
 
 Accrual
of interest is discontinued on a loan when management determines, upon
consideration of economic and business factors affecting collection efforts,
that collection of interest is doubtful. The $1.5 million in nonaccrual loans at
March 31, 2005 included $1.4 million in SBA loans, of which SBA guaranteed $1.0
million, and $0.1 million in loans secured by real estate. Therefore, our
exposure to losses is considered minimal.
 
 Loans
classified for regulatory purposes as loss, doubtful, substandard, or special
mention that have not been included in the table above do not represent or
result from trends or uncertainties which management reasonably expects will
materially impact future operating results, liquidity or capital resources.
These classified loans do not represent material credits about which management
is aware of any information that causes management to have serious doubts as to
the ability of such borrowers to comply with their loan repayment terms, except
as noted above.
 
 **Liquidity
and Sources of Capital**
 
 Liquidity
involves the Company’s ability to maintain adequate cash flows to fund
operations and meet obligations and other commitments on a timely and
cost-effective basis. While the desired level of liquidity will vary depending
upon a variety of factors, management’s primary goal is to maintain a sufficient
level of liquidity in all expected economic environments. Daily monitoring of
the sources and uses of funds is necessary to maintain a position that meets
these requirements.
  15
 Table of Contents
  
 The
Company’s primary sources of liquidity are customer deposits, other borrowings,
loan repayments and securities available for sale. If additional funding sources
are needed, the Company has access to federal fund lines at correspondent banks
and borrowings from the Federal Reserve discount window. Additionally, First
Capital Bank is a member of the Federal Home Loan Bank of Atlanta, which
provides access to FHLB lending sources. Lines of credit with the FHLB totaling
$269.5 million were available on March 31, 2005, of which $120.0 million was
outstanding. The Company also had federal funds back-up lines of credit totaling
$37.5 million, of which $5.8 million was outstanding on March 31, 2005.
 
 As of
March 31, 2005, First Capital Bank was considered to be well capitalized as
defined in the Federal Deposit Insurance Corporation Improvement Act and based
on regulatory minimum capital requirements. The Company and its bank
subsidiary’s actual capital ratios are presented in the following
table.
 
 **ACTUAL**
    
    **FOR
      CAPITAL**
      **ADEQUACY**
      **PURPOSES**
    
    **TO
      BE**
      **WELL**
      **CAPITALIZED**As
      of March 31, 2005Total
      Capital to Risk Weighted Assets:Consolidated
    11.35%
    
    8%
    
    N/AFirst
      Capital Bank
    11.06%
    
    8%
    
    10%Tier
      I Capital to Risk Weighted Assets:Consolidated
    10.22%
    
    4%
    
    N/AFirst
      Capital Bank
    9.93%
    
    4%
    
    6%Tier
      I Capital to Average Assets:Consolidated
    8.46%
    
    4%
    
    N/AFirst
      Capital Bank
    8.23%
    
    4%
    
    5%
 
 
 We are
not aware of any other known trends, events or uncertainties, other than the
effect of events as described above, that will have or that are reasonably
likely to have a material effect on our liquidity, capital resources or
operations. We are not aware of any current recommendations by the regulatory
authorities, which, if they were implemented, would have such an effect, except
as noted above.
 
 **Off-Balance
Sheet Arrangements**
 
 The
Company's financial statements do not reflect various commitments and contingent
liabilities that arise in the normal course of business. These off-balance sheet
financial instruments include commitments to extend credit and standby letters
of credit. These financial instruments are included in the financial statements
when funds are distributed or the instruments become payable. We use the same credit policies in making commitments as we do for on-balance-sheet
instruments. Our
exposure to credit loss in the event of nonperformance by the other party to the
financial instrument for commitments to extend credit, standby letters of credit
and credit card commitments is represented by the contractual amount of those
instruments.  At March
31, 2005, we had outstanding commitments to extend credit of approximately
$151.9 million and outstanding standby letters of credit of approximately $4.4
million.
  16
 Table of Contents
  RESULTS
OF OPERATIONS
 
 **Three-Month
Period Ended March 31, 2005**
 
 Results
for 2005 are those of First Capital, formerly known as CNB Holdings, Inc., and
the old FCBI combined. Results for 2004 are those of the old FCBI only. Net
income for the three months ended March 31, 2005 totaled $1,310,000,
or  $.26 per
basic and $.25 per fully diluted share, compared to net income of
$703,000,  or $.31
per basic and $.28 per fully diluted share,  for the
same period in 2004.
 
 Net
interest income (the difference between the interest earned on interest-earning
assets and the interest paid on interest-bearing liabilities) is the single
largest component of First Capital's revenue. First Capital actively manages
this revenue source to provide an optimal level of revenue while balancing
interest rate, credit and liquidity risks. Since market forces and economic
conditions beyond First Capital's control determine interest rates, the ability
to generate net interest income depends upon First Capital's ability to maintain
an adequate spread between the rate paid on interest-bearing liabilities and the
rate earned on interest-earning assets. Net interest income totaled $6,329,000
for the three months ended March 31, 2005,  an
increase of $3,149,000, or 99%, over the same period in 2004.
 
 Presented
below are various components of assets and liabilities, interest income and
expense as well as their yield/cost for the three months ended March 31, 2005
and 2004.
 
 **Three-Month
      Period Ended March 31,****2005**
    
    
    
    
    
    
    
    
    **2004****Average**
      **Balances****(1)**
    
    
    **Income/
      Expense**
    
    
    **Yields/**
      **Rates**
    
    
    Average
      Balances (1)
    
    
    Income/
      Expense
    
    
    Yields/
      RatesFederal
      funds sold and interest-bearingdeposits
    
    **$**
    **2,767**
    ****
    **$**
    **16**
    ****
    ****
    **2.35**
    **%**
    $
    6,897
    
    $
    17
    
    
    0.99
    %Securities
      (2)
    
    
    **140,340**
    
    
    **1,476**
    
    
    **4.27**
    
    
    115,946
    
    
    1,234
    
    
    4.27Loans,
      net of deferred fees (3)(4)
    
    
    **501,044**
    
    
    **7,948**
    
    
    **6.43**
    
    
    325,894
    
    
    4,278
    
    
    5.27Total
      interest-earning assets
    
    
    **644,151**
    
    
    **9,440**
    
    
    **5.94**
    **%**
    
    448,737
    
    
    5,529
    
    
    4.94
    %Unrealized
      gains (losses) on securities
    
    
    **(307**
    **)**
    
    
    
    
    
    
    
    113Allowance
      for loan losses
    
    
    **(6,106**
    **)**
    
    
    
    
    
    
    
    (3,340
    )Cash
      and due from banks
    
    
    **14,708**
    
    
    
    
    
    
    
    
    7,889Other
      assets
    
    
    **19,902**
    
    
    
    
    
    
    
    
    4,844Total
    
    **$**
    **672,348**
    
    
    
    
    
    
    
    $
    458,243Transaction
      and money market deposits
    
    **$**
    **122,837**
    
    **$**
    **302**
    ****
    ****
    **1.00**
    **%**
    $
    80,949
    
    $
    148
    
    
    0.73
    %Time
      deposits
    
    
    **237,596**
    
    
    **1,580**
    
    
    **2.70**
    
    
    186,507
    
    
    1,301
    
    
    2.80Federal
      funds purchased and securitiessold
      under repurchase agreements
    
    
    **24,574**
    
    
    **161**
    
    
    **2.66**
    
    
    3,781
    
    
    11
    
    
    1.17Other
      borrowings
    
    
    **120,477**
    
    
    **924**
    
    
    **3.11**
    
    
    111,155
    
    
    745
    
    
    2.69Subordinated
      debentures
    
    
    **6,392**
    
    
    **144**
    
    
    **9.14**
    
    
    6,392
    
    
    144
    
    
    9.04Total
      interest-bearing liabilities
    
    
    **511,876**
    
    
    **3,111**
    
    
    **2.46**
    **%**
    
    388,784
    
    
    2,349
    
    
    2.42
    %Non
      interest-bearing demand deposits
    
    
    **99,028**
    
    
    
    
    
    
    
    
    46,846Other
      liabilities
    
    
    **3,595**
    
    
    
    
    
    
    
    
    1,428Stockholders’
      equity
    
    
    **57,849**
    
    
    
    
    
    
    
    
    21,185Total
    
    **$**
    **672,348**
    
    
    
    
    
    
    
    $
    458,243Net
      interest income
    
    
    
    
    $
    **6,329**
    
    
    
    
    
    
    
    $
    3,180Net
      interest spread
    
    
    
    
    
    
    
    
    **3.48**
    **%**
    
    
    
    
    
    
    
    2.52
    %Net
      interest margin
    
    
    
    
    
    
    
    
    **3.98**
    **%**
    
    
    
    
    
    
    
    2.84
    %(1)
      Average balances are daily averages.(2)
      Securities available for sale are reported at amortized cost.(3)
      Loans include nonaccrual loans and are net of deferred
    fees.(4)
      Interest and fees on loans includes fees of $529,000 and $200,000 for the
      periods ended March 31, 2005 and 2004,
respectively.
  17
 Table of Contents
  
 The
increase in net interest income was driven mainly by loan growth. Average loans
for the first quarter of 2005 increased $175.2 million, or 54% over the same
period in 2004.  The
significant growth in our loan portfolio includes the impact of the May 2004
merger and the purchase of a $20 million loan portfolio in March of
2004.
 
 For the
three months ended March 31, 2005 and 2004, the average yield on
interest-earning assets was 5.94% and 4.94%, respectively. Average
interest-earning assets grew $195.4 million, or 44%, quarter over quarter. In
addition to growth in the loan portfolio, investment securities increased $24.4
million, or 21%, quarter over quarter. Growth in investment securities was due
mainly to the impact of the May 2004 merger.  The 100
basis point improvement was mainly the result of Federal Reserve action to raise
short-term rates during 2005 and the second half of 2004.
 
 The
growth in interest-earning assets was funded by both interest-bearing and non
interest-bearing sources. Average interest-bearing liabilities for the first
quarter of 2005 increased $123.1 million, or 32%, over the same period in
2004.  $93.0
million of the growth in interest-bearing liabilities was attributable to
interest-bearing deposits and $30.1 million to other borrowings, which include
primarily FHLB advances. Average non interest-bearing demand deposits increased
$52.2 million, or 111%, from the first quarter of 2004 to the first quarter of
2005.  The
impact of the May 2004 merger is included in these growth figures. The rate
paid on average interest-bearing liabilities was 2.46% for the first quarter of
2005, compared to 2.42% for the same period in 2004.  We
benefited from increased funding by low cost interest-bearing sources including
transaction and money market deposits and federal funds purchased. Average
interest-bearing transaction and money market deposits grew $41.9 million or
52%, quarter over quarter, and provided 24% of total interest-bearing funding
during the first quarter of 2005, compared to 21% for the same period in 2004.
Use of federal funds purchased and securities sold under repurchase agreements
also increased, from 1% of total interest-bearing funding to 5%.
 
 As
reflected in the table above, the net interest margin was 3.98% for the first
quarter of 2005, compared to 2.84% for the same period in 2004.  This
improvement was the combined result of several factors: 1) increased volumes; 2)
a 100 basis point increase in the average yield on interest-earning assets
compared to only a four basis point increase in the average cost of
interest-bearing liabilities; and 3) substantial growth in non interest-bearing
funding sources. On
average, 15% of interest-earning assets were funded by non interest-bearing
sources for the first quarter of 2005, compared to 10% during the same period in
2004. Prime
rate increases of 125 basis points during 2004 and 50 basis points during the
first quarter of 2005 had a larger and more immediate impact on loans than
deposits.
 
 Total
other income for the quarter ended March 31, 2005 was $393,000, an increase of
$303,000 or 337% from the same period in 2004. Loan servicing fee income, other
income and gains on sales of loans were the biggest components of this $393,000,
representing $157,000, $112,000 and $60,000 of the total, respectively. Loan
servicing fees grew $142,000, from $15,000 for the first quarter of 2004. The
majority of loan servicing income was earned on the $20 million loan portfolio
purchased in March of 2004. Other income consisted primarily of license fee
income generated from the Company’s Capital Financial Software subsidiary. The
Company recognized $53,000 in license fee income during the three-month period
in 2005,  compared
to $42,000 during the same period in 2004, an increase of $11,000. The higher
license fee income was due to growth in deposits managed by bankruptcy trustees
who are the end users of this subsidiary’s software product. 2005 income from gains on
sales of loans was earned on the sale of four SBA loans.
 
 Total
other expenses increased $2,318,000 to $4,449,000 for the quarter ended March
31, 2005 compared to $2,131,000 for the same period in 2004.  Salaries
and other compensation expense, which is  the most
significant portion of other expense, also represented the most significant
increase, growing $1,483,000, or 116%, quarter over quarter.  Salaries
and other compensation expense increased as a result of the May 2004 merger and
from the addition of new employees in business development groups and support
functions.  Overall,
the number of full-time equivalent employees  grew  from 60
at March 31, 2004, to 109 at March 31, 2005.
 
 The
second major category of non interest expense, net occupancy and equipment,
increased $270,000, or 166%, quarter over quarter. During 2004, we leased
additional space in the Norcross office and opened two loan production offices.
Two additional locations were also added as part of the May 2004 merger.
  18
 Table of Contents
  
 The last
major category of non interest expense, other expense, increased $565,000, or
82%, quarter over quarter. Within the other expense category, the largest
increases occurred in data processing, ACH credit card processing and
amortization of the core deposit intangible. Data processing expense was
$137,000 for the first quarter of 2005, compared to $63,000 for the same period
in 2004, an increase of $74,000 or 117%. ACH credit card processing expense was
$113,000 for the first quarter of 2005, compared to $5,000 for the same period
in 2004, an increase of $108,000 or 2160%. Both data processing and ACH credit
card processing increased to support deposit gathering initiatives and because of the
greater number of accounts serviced and products offered following the May 2004
merger.  Core
deposit intangible amortization was $74,000 for the first quarter of 2005,
compared to none for the same period in 2004 and resulted from the May 2004
merger. Professional
fees, which include legal, accounting, consulting and loan review expenses, were
up $65,000, or 64%, to $167,000 for the first quarter of 2005 from $102,000 for
the same period in 2004. Legal fees for research and public filings accounted
for the majority of this increase. Business development expenses were $202,000
for the first quarter of 2005, compared to $139,000 for the same period in 2004,
an increase of $63,000 or 45%. The higher expenses were in support of deposit
gathering initiatives.
 
 The
effective tax rate was 38.3% for the three months ended March 31, 2005 and 35.5%
for the three months ended March 31, 2004.  Additional
accruals were made in 2005 for prior years’ income tax liability. Excluding
these adjustments, the effective tax rate for the first quarter of 2005 would be
35.9%.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  19
 Table of Contents
  
 **ITEM
3.**  **DISCLOSURECONTROLS AND PROCEDURES**
 
 As of the
end of the period covered by this Quarterly Report on Form 10-QSB, our principal
executive officer and principal financial officer have evaluated the
effectiveness of our “disclosure controls and procedures” (“Disclosure
Controls”). Disclosure Controls, as defined in Rule 13a-15(e) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), are procedures that are
designed with the objective of ensuring that information required to be
disclosed in our reports filed under the Exchange Act, such as this Quarterly
Report, is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission’s rules and forms.
Disclosure Controls are also designed with the objective of ensuring that such
information is accumulated and communicated to our management, including the CEO
and CFO, as appropriate to allow timely decisions regarding required disclosure.
 
 Our
management, including the CEO and CFO, does not expect that our Disclosure
Controls will prevent all error and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. The design of any
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.
 
 Based
upon their controls evaluation, our CEO and CFO have concluded that our
Disclosure Controls are effective at a reasonable assurance level.
 
 There
have been no changes in our internal controls over financial reporting during
our first fiscal quarter that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.
 
 
 
 
 
 
 
 
  20
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 **PART
II.   OTHERINFORMATION**
 
 
  **ITEM
2.** **UNREGISTEREDSALES OF THE COMPANY’S COMMON
STOCK**
  Under the
Company’s Director Fee Deferral Plan, deferred director fees are invested, at
the discretion of each director, in Company stock or other nonemployer
securities and placed in a rabbi trust. The accounts of the rabbi trust are
consolidated with the accounts of the Company in the consolidated financial
statements and shares of the Company’s common stock held by the rabbi trust are
included in treasury stock, and other nonemployer securities are included in
securities available for sale on the Company’s consolidated balance sheet.
During the quarter ended March 31, 2005, the Company sold an aggregate of 1,998
shares of its common stock to the rabbi trust at an aggregate purchase price of
$43,057. The sale was exempt from registration under Section 4(2) of the
Securities Act of 1933.
 
 **REPURCHASES
OF THE COMPANY’S COMMON STOCK**
 
 During
the quarter ended March 31, 2005, the Company repurchased the following shares
of common stock.
 
 Month
    Total
      Number of
      Shares
      Purchased
    Average
      Price
      Paid
      Per
      Share
    Total
      Number of
      Shares
      Purchased
      as
      Part of Publicly
      Announced
      Plans
      or
      Programs
    Maximum
      Number
      of
      Shares that May
      Yet
      Be Purchased
      Under
      the Plans or
      ProgramsJanuary
      2005
    5,921
    $20.48
    Not
      Applicable
    Not
      ApplicableFebruary
      2005
    1,319
    $21.75
    Not
      Applicable
    Not
      ApplicableMarch
      2005
    0
    0
    Not
      Applicable
    Not
      Applicable
 
 On
January 5, 2005, the Company repurchased 5,921 shares of common stock from the
Company’s 401K plan in order to provide the 401K plan funds to settle a cash
distribution to a former director.
 
 On
February 14, 2005, the Company repurchased 1,319 shares of common stock from the
rabbi trust, which was established in connection with the Company’s Director Fee
Deferral Plan. These shares were purchased by the Company from the rabbi trust
to provide the rabbi trust with funds to settle a cash distribution to a former
director.
 
 
 
 
  21
 Table of Contents
  
 
 
 **ITEM
      6.**
    **EXHIBITS**Exhibit
      No.
    Description3.2
    Bylaws,
      as amended (included as Exhibit 3.2 to the Registration Statement No.
      333-111358 on Form S-4, previously filed with the Commission and
      incorporated by reference herein)10.8.3
    First
      Amendment to the Amended and Restated 1998 Incentive Stock Option
      Plan dated March 16, 2005.10.9.4
    First
      Amendment to the Amended and Restated 1998 Non-Qualified Stock Option Plan
      dated March 16, 2005.31.1
    Certification
      by H.N. Padget, Jr., principal executive officer, pursuant to Section 302
      of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a)
      Certification).31.2
    Certification
      by William R. Blanton, principal financial officer, pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a)
      Certification).32.1
    Certification
      by H.N. Padget, Jr., principal executive officer, and William R. Blanton,
      principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002 (Section 1350 Certification).
 
 
 
 
  22
 Table of Contents
  **SIGNATURES**
 
 In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
   
 Date:
      May13,
      2005
    By:/s/
      H. N. Padget, Jr.H. N. Padget, Jr., President and Chief Executive Officer(principal executive officer)Date:
      May 13, 2005
    By:/s/
      William R. BlantonWilliam R. Blanton, Vice Chairman, Chief Operating and Financial
      Officer(principal financial and accounting
officer)
 
  23
 Table of Contents
  **EXHIBIT
INDEX**
 
 
 **Exhibit
      Number**
    **Description**3.2
    Bylaws,
      as amended (included as Exhibit 3.2 to the Registration Statement No.
      333-111358 on Form S-4, previously filed with the Commission and
      incorporated by reference herein)10.8.3
    First
      Amendment to the Amended and Restated 1998 Incentive Stock Option Plan
      dated March 16, 2005.10.9.4
    First
      Amendment to the Amended and Restated 1998 Non-Qualified Stock Option Plan
      dated March 16, 2005.31.1
    Certification
      by H.N. Padget, Jr., principal executive officer, pursuant to Section 302
      of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a)
      Certification).31.2
    Certification
      by William R. Blanton, principal financial officer, pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a)
      Certification).32.1
    Certification
      by H.N. Padget, Jr., principal executive officer, and William R. Blanton,
      principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002 (Section 1350 Certification).