The purpose of this discussion is to focus on important factors affecting the Company's financial condition and results of operations. The discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements.

This report contains forward-looking statements with respect to the financial condition, results of operations and business of the Company. There forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management of the Company and on information available at the time these statements and disclosures were prepared. Factors that may cause actual results to differ materially from those expected included the following:

• General economic conditions may deteriorate and negatively impact the ability of borrowers to repay loans and depositors to maintain balances.

• Changes in interest rates could reduce income.

• Competitive pressures among financial institutions may increase.

• The businesses that the Company is engaged in may be adversely affected by legislative or regulatory changes, including changes in accounting standards.

• New products developed or new methods of delivering products could result in a reduction in business and income for the Company.

• Adverse changes may occur in the securities market.

Earnings Summary

First Capital Bancorp, Inc. reported net income of $801,308 for the six months ending June 30, 2008, compared to $712,105 for the same period in 2007, an increase of $89,203 or 12.5%. Net income for the three months ended June 30, 2008 was $386,171, up $24,072 or 6.7% from $362,099 for the same period in 2007. Net interest income increased 23.6% or $522,868 during the second quarter of 2008, when compared to 2007 and 29.4% or $1,259,501 to $5,538,229 during the first six months of 2008, when compared to 2007. For the second quarter of 2008, noninterest income was $198,698, an increase of 4.9%. Noninterest income increased 4.1% to $370,938 during the six months ended June 30, 2008 when compared to $356,360 for the same period in 2007. Noninterest expenses totaled $2,027,685, an increase of $306,246, or 17.8% for the second quarter of 2008 compared to 2007, and $4,032,909, an increase of $740,226, or 22.5% for the first six months of 2008 compared to 2007. Basic and diluted earnings per share of common stock were $0.13 and $0.13 for the second three months of 2008 compared to $0.19 and $0.18 for 2006. For the first six months of 2008, basic and diluted earnings per share of common stock were $0.27 and $0.27 compared to $0.38 and $0.37 for 2007. The decrease in earnings per share was the result of the issuance of 1,020,000 shares of common stock as the result of a stock offering in 2007.

For the six months ended June 30, 2008, profitability as measured by the Company's annualized return on average assets (ROA) was 0.43% compared to 0.54% for the same period in 2007. For the second quarter of 2008 ROA was 0.40% compared to 0.53% in 2007. ROA decreased due to the continued rapid growth of the Company. Another measure of the Company's profitability, the annualized return on average equity (ROE) was 4.39% for the second quarter of 2008 compared to 7.88% for the same period in 2007. For the six months ended June 30, 2008 and 2007, ROE was 4.57% and 8.38%, respectively. ROE was negatively impacted by the public stock offering in 2007 in which $17,076,845 in additional capital was raised.

Net Interest Income

Net interest income represents a principal source of earnings for the Company. In 2008, increases in net interest income are attributable primarily to the overall growth of the Company, offset by drastic actions of the Federal Reserve Bank's Open Market Committee (FOMC). The FOMC cut the federal funds targeted rate and the associated prime rate of interest by 200 basis points during the first quarter of 2008 and an additional 25 basis points during the second quarter of 2008, resulting in a significant decline in the key rate that is tied to over 40% of the Company's loan portfolio having a daily rate change. Although the vast majority of our time deposits are set to reprice in the next twelve months and will lower funding costs, this rapid reduction in rates put pressure on our net interest margin.

Net interest margin decreased 40 basis points for the three months ended June 30, 2008 to 2.96% as compared to 3.36% for the quarter ended June 30, 2007. The yield on earning assets decreased from 7.32% for the quarter ended June 30, 2007 to 6.36% for the quarter ended June 30, 2008. The cost of interest bearing liabilities decreased 74 basis points to 4.01% for the quarter ended June 30, 2008 as compared to 4.75% for the same period in 2007. Net interest margin for the six months ended June 30, 2008 was 3.08%, down 28 basis points from 3.36% for the same period in 2007.

Total interest and fees on loans, the largest component of net interest income, increased 25.7%, or $1,102,721 to $5,394,470 during the second quarter of 2008 compared to $4,291,749 for the same period in 2007. Year-to-date 2008 interest and fees on loans totaled $10,874,456, an increase of 31.7% over the 2007 year-to-date total of $8,256,105.

Interest on investment securities increased 2.5% to $373,122 for the second quarter of 2008 compared to $364,110 for the same period of 2007. Year-to-date, interest on investment securities decreased to $756,154 from $797,511, or 5.2% for the same period of 2008. Interest on federal funds sold decreased $88,578 for the three months ended June 30, 2008 to $44,670 from $133,248 for the same period in 2007. For the six months ended June 30, 2008, interest on federal funds sold decreased $50,352 to $157,708 as compared to $208,060 for the same period in 2007. The reduction in the interest on federal funds sold was due to the reduction in the rate on federal funds sold during the periods.

Dividends on restricted equity securities totaled $57,784 compared to $32,141 in the second three months of 2008, as a result of higher balances in stock of the Federal Reserve and the Federal Home Loan Bank of Atlanta. For the six month period ended June 30, 2008, dividends on restricted equity stocks increased $42,512 to $105,254, a 67.8% increase over the 2007 six month total of $62,742.

Interest expense on deposits increased $362,081 or 16.5% for the second quarter of 2008 and $943,457 or 22.3% year-to date compared to 2007. The increase in deposit expense is due to the increase in average outstanding deposits, arising from the overall growth of the Company and offset by a decrease in the overall rates paid on deposits. Interest expense on borrowings totaled $575,608 for the second quarter of 2008 an increase of $163,849, or 39.8%, over the same period of 2007. Year-to-date, interest on borrowings increased $366,196 or 44.9% to $1,182,440 from $816,244 for the same period of 2007. Increased borrowing needs due to funding loan growth offset by lower rates contributed to the increase.

Average Balances, Income and Expenses, Yields and Rates

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 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

Earning assets consist primarily of loans, investment securities and other investments. Interest-bearing liabilities consist principally of deposits, Federal Home Loan Bank advances and other borrowings.

The following table illustrates average balances of total interest-earning assets and total interest-bearing liabilities for the periods indicated, showing the average distribution of assets, liabilities, shareholders' equity and related income, expense and corresponding weighted-average yields and rates. The average balances used in these tables were calculated using daily average balances.

                                                  Average Balances, Income and Expenses, Yields and Rates
                                                                Three Months Ended June 30,
                                                         2008                                   2007
                                           Average         Income/    Yields/      Average      Income/    Yields/
                                           Balance         Expense     Rates       Balance      Expense     Rates
                                                                  (Dollars in thousands)
Earning Assets:
Loans, net of unearned income:           $   326,787       $  5,394      6.64 %   $ 219,019     $  4,292      7.86 %
Investment securities:
U.S. Agencies                                 19,111            227      4.77 %      21,699          247      4.56 %
Mortgage backed securities                     7,504             82      4.37 %      10,213          107      4.21 %
Municipal securities                           1,761             16      3.73 %       1,010           10      4.07 %
Corporate notes                                3,380             48      5.78 %          -            -       0.00 %
Other investments                              3,715             58      6.26 %       2,119           32      6.08 %

Total investment securities                   35,471            431      4.89 %      35,041          396      4.54 %

Federal funds sold                             9,178             45      1.96 %      10,280          133      5.20 %

Total earning assets                         371,436          5,870      6.36 %     264,340        4,821      7.32 %

Cash and cash equivalents                      9,713                                  5,728
Allowance for loan losses                     (2,954 )                               (2,055 )
Other nonearning assets                        6,952                                  4,149

Total assets                             $   385,147                              $ 272,162

Interest bearing liabilities:
Interest checking                        $     8,861       $      8      0.39 %   $   7,882     $     21      1.06 %
Money market deposit accounts                 40,841            161      1.59 %      44,280          461      4.18 %
Statement savings                                594              1      0.46 %         745            3      1.52 %
Certificates of deposit                      203,364          2,387      4.72 %     132,861        1,710      5.16 %

Total interest-bearing deposits              253,660          2,557      4.05 %     185,768        2,195      4.74 %

Federal funds purchased                        1,088              6      2.40 %          -            -         -
Repurchase agreements                          2,326              8      1.47 %       1,992           22      4.51 %
Subordinated debt                              7,155             92      5.19 %       7,155          125      6.98 %
FHLB Advances                                 50,000            468      3.77 %      25,000          265      4.25 %

Total interest bearing liabilities           314,229          3,131      4.01 %     219,915        2,607      4.75 %

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits           32,128                                 31,078
Other noninterest-bearing liabilities          3,412                                  2,738
Shareholders' equity                          35,378                                 18,431

Total liabilities and shareholders'
equity                                   $   385,147                              $ 272,162

Net interest income / spread                                             2.35 %                               2.56 %

Impact of noninterest-bearing sources                                    0.61 %                               0.80 %

Net interest income / margin                               $  2,739      2.96 %                 $  2,214      3.36 %

Ratio of average interest earning
assets to average interest-bearing
liabilities                                                            118.21 %                             120.20 %

            Average Balances, Income and Expenses, Yields and Rates



                                                               Six Months Ended June 30,
                                                       2008                                 2007
                                          Average      Income/    Yields/      Average      Income/    Yields/
                                          Balance      Expense     Rates       Balance      Expense     Rates
                                                                (Dollars in thousands)
Assets:
Loans, net of unearned income:           $ 316,755     $ 10,874      6.94 %   $ 212,032     $  8,256      7.85 %
Investment securities:
U.S. Agencies                               18,504          470      5.14 %      23,346          553      4.78 %
Mortgage backed securities                   7,840          170      4.39 %      10,590          224      4.26 %
Corporate bonds                              3,009           86      5.78 %
Municipal securities                         1,586           30      3.80 %       1,011           20      4.10 %
Other investments                            3,580          105      5.94 %       2,108           63      6.00 %

Total investment securities                 34,519          861      5.05 %      37,055          860      4.68 %

Federal funds sold                          12,860          158      2.48 %       8,067          208      5.20 %

Total earning assets                       364,134       11,893      6.60 %     257,154        9,324      7.31 %

Cash and cash equivalents                    9,994                                5,479
Allowance for loan losses                   (2,797 )                             (1,984 )
Other nonearning assets                      6,582                                4,113

Total assets                             $ 377,913                            $ 264,762

Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest checking                        $   9,187     $     28      0.61 %   $   7,959     $     33      0.85 %
Money market deposit accounts               42,454          433      2.06 %      40,230          820      4.11 %
Statement savings                              637            2      0.77 %         934            7      1.52 %
Certificates of deposit                    195,984        4,710      4.86 %     132,249        3,369      5.14 %

Total interest-bearing deposits            248,262        5,173      4.21 %     181,372        4,229      4.70 %

Federal funds purchased                      1,689           32      3.88 %         268            7      5.30 %
Repurchase agreements                        2,228           19      1.74 %       1,826           41      4.57 %
Subordinated debt                            7,155          205      5.81 %       7,155          247      6.97 %
FHLB Advances                               48,764          926      3.84 %      24,983          521      4.20 %

Total interest bearing liabilities         308,098        6,355      4.17 %     215,604        5,045      4.72 %

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits         32,379                               29,352
Other noninterest bearing liabilities        2,201                                2,660
Shareholders' equity                        35,235                               17,146

Total liabilities and shareholders'
equity                                   $ 377,913                            $ 264,762

Net interest income / spread                                         2.43 %                               2.59 %

Impact of noninterest-bearing sources                                0.01 %                               0.76 %

Net interest income / margin                           $  5,538      3.08 %                 $  4,279      3.36 %

Ratio of average interest earning
assets to average interest-bearing
liabilities                                                        118.19 %                             119.27 %

Noninterest Income

Total noninterest income was $198,698 for the second quarter of 2008, compared to $189,448 for the same period of 2007. Noninterest income totaled $370,938 for the first six months of 2008 compared to $356,360 for the same period in 2007, a 4.1% increase. Fees on deposits increased $10,777, or a 21.7% increase to $60,472 for the second quarter of 2008 compared to the same period in 2007 and $25,047, a 25.2% to $124,373 year-to-date. This increase is attributable to increases in charges on deposit accounts of $10,777 for the second quarter of 2008 and for the year-to-date, fees on deposits accounts increased $17,970 and NSF and returned check charges increased $7,311. Other noninterest income decreased $1,527 and $10,469 for the second quarter and year-to-date, respectively. This decrease in other noninterest income is the result in decreases in mortgage loan production. Gains and fees on loans decreased $11,697 in the second quarter of 2008 as compared to the same period in 2007 and $45,700 year-to-date in 2008 as compared to the same period in 2007.

Noninterest Expense

Total noninterest expenses for the second quarter of 2008 totaled $2,027,685, an increase of $306,246, or 17.8%, compared to $1,721,439 for the same period in 2007. Noninterest expenses totaled $4,032,909 in the first six months of 2008 compared to $3,293,683 for the same period in 2007, an increase of 22.5% or $740,226. These increases are attributable to the following factors: 1) an increase in salaries and benefits of $100,806 for the quarter, $321,823 year-to-date, primarily arising from additional salaries due to a new banking office in Bon Air, higher employee benefit costs, additional retirement expense and additional administrative staff; 2) an increase of $25,988 for the quarter, and $47,129 year-to-date in occupancy costs related to the additional banking office and additional space leased at the corporate headquarters; 3) an 82.2% increase in the Virginia Franchise tax for the quarter and year-to-date as the result of the additional equity raised in 2007; 4) an increase in data processing expenses related to additional branches and services provided and 5) an increase in advertising and marketing costs as promotional and branding advertising are utilized in 2008.

Income Taxes

The income tax provision was $212,200 for the second quarter of 2008 and $439,950 year-to-date compared to $190,400 and $378,300, respectively for the prior year. The effective tax rate for the second quarter of 2008 was 35.5%, compared to 34.5% for the same period in 2007. Year-to-date 2008, the effective tax rate is 35.4% compared to 34.7% in 2007.

General

Total assets increased 12.7% to $396,462,082 at June 30, 2008 when compared to assets of $351,866,968 at December 31, 2007. On an annual basis total assets increased 38.1% when compared to assets of $286,990,135 at June 30, 2007. Total loans as of June 30, 2008 were $335,719,956, an increase of $38,814,966, or 13.1%, from $296,904,990 at year-end 2007. On an annual basis total loans increased $107,062,922 or 46.8%, from $228,657,922 in June 2007. Investment securities were $29,736,569 at June 30, 2008, compared to $32,824,537 at year-end 2007. On an annual basis, investment securities decreased $853,409, or 2.8% over June 2007. Cash and cash equivalents were $21,430,497, an increase of $4,650,959, or 27.7% from $16,779,538 at December 31, 2007.

Deposits increased $33,112,680, or 13.0%, during the six months ended June 30, 2008. On an annualized basis deposits increased $69,177,367 or 31.6%. Noninterest-bearing demand deposit accounts increased $1,478,026 to $38,019,594, a 4.0% increase over December 31, 2007 and $339,231 on an annual basis when compared to June 30, 2007. Interest-bearing deposits totaled $250,201,409 at June 30, 2008, compared to $218,566,755 at year-end 2007. Certificates of deposits are the major category of our interest-bearing deposits.

Stockholders' equity was $35,277,569 at June 30, 2008, compared to $34,859,058 at December 31, 2007. Components of the change in stockholders' equity include net income of $801,308, increases in net unrealized losses on available-for-sale securities totaling $461,895 and stock based compensation totaling $79,098.

Asset Quality

The Company's allowance for loan losses is an estimate of the amount needed to provide for possible losses in the loan portfolio. In determining adequacy of the allowance, management considers the Company's historical loss experience, the size and composition of the loan portfolio, specific impaired loans, the overall level of nonperforming loans, the value and adequacy of collateral and guarantors, experience and depth of lending staff, effects of credit concentrations and economic conditions. Because the risk of loan loss includes general economic trends as well as conditions affecting individual borrowers, the allowance for loan losses can only be an estimate.

While the Company believes it has sufficient allowance for its existing portfolio, there can be no assurances that an additional allowance for losses on existing loans may not be necessary in the future. The allowance for loan losses totaled $3,129,166 and $2,062,094 at June 30, 2008 and 2007, respectively. The ratio of the allowance for loan losses to total loans outstanding at June 30, 2008 and 2007 was 0.94% and 0.90%, respectively. There were no loans delinquent more than 30 days but less than 89 days at June 30, 2008. Non-performing assets totaled $81,105 and represented .02% of total assets as of June 30, 2008.

During the first six months of 2008 and 2007, the Company recorded $635,000 and $252,000 in provision expense, respectively. There were no loans charged-off during the first half of 2008 and two loans charged-off totaling $23,822 for the same period in 2007. Charge-offs are charged directly to the allowance when they occur. Recoveries in the first six months of 2008 and 2007 totaled $5,100 and $312, respectively. The increase in provision for loan losses over the last year is due to increases in impaired loans and growth in the loan portfolio. Impaired loans increased from $3.0 million at December 31, 2007 to $9.3 million at June 30, 2008. Of this increase, $3.8 million was related to 1 - 4 Family Residential Construction and Lot loans as the construction business has slowed appreciably in the first six months of 2008. In addition, impaired Commercial and Industrial loans increased from $789 thousand at December 31, 2007 to $1.6 million at June 30, 2008. These loans were also dependent (in various ways) on real estate or the real estate construction business. Net new loan growth for the six months ended June 30, 2008 was $38.8 million as compared to $27.0 million for the same period of 2007. The table below summarizes the activity in the allowance for loans losses for the three and six month periods ending June 30, 2008 and 2007.

Activity in the allowance for loan losses for the three and six month periods ended June 30, 2008 and 2007:

                                                 Three Months Ended                 Six Months Ended
                                                      June 30,                          June 30,
                                               2008             2007             2008             2007
Beginning balance                           $ 2,819,166      $ 1,955,874      $ 2,489,066      $ 1,833,604
Provision for loan losses                       310,000          130,000          635,000          252,000
Loans charge-offs                                    -            23,822               -            23,822
Recoveries                                           -                42            5,100              312

Ending balance                              $ 3,129,166      $ 2,062,094      $ 3,129,166      $ 2,062,094

Ratio of allowance for loan losses as a
percent of loans outstanding at the end
of the period.                                     0.94 %           0.90 %           0.94 %           0.90 %

Liquidity

Management monitors and plans the Company's liquidity position for future periods. Liquidity is provided from cash, interest-bearing deposits in other banks, repayments of loans, increases in deposits, lines of credit from two correspondent banks and federal agency bank and maturing investments. Management is committed to maintaining liquidity at a level sufficient to protect depositors, provide for reasonable growth, and fully comply with all regulatory requirements.

At June 30, 2008, cash and cash equivalents totaled $21,430,497. Investment securities available-for-sale and not pledged totaled $13,740,772, for a total of 8.9% of total assets, which management believe is adequate to meet short-term liquidity needs. Management also has alternative sources of funding available, including lines of credit, purchases of federal funds, term loans through the Federal Home Loan Bank and correspondent banks.

Off-Balance Sheet Arrangements

In the normal course of business there are outstanding commitments for the extension of credit which are not reflected in the financial statements. At June 30, 2008 and December 31, 2007, pre-approved but unused lines of credit for loans totaled approximately $96.9 million and $138.6 million, respectively. In addition, we had approximately $8.9 million in financial and performance standby letters of credit at June 30, 2008 and December 31, 2007, respectively. These commitments represent no more than the normal lending risk that we commit to borrowers. If these commitments are drawn, we will obtain collateral if it is deemed necessary based on our credit evaluation of the counterparty.

Capital Adequacy

The Company is subject to various regulatory capital requirements administered by the federal banking agencies. 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 assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Management reviews the adequacy of the Company's capital on an ongoing basis with reference to the size, composition, and quality of the Company's resources and compliance with regulatory requirements and industry standards. Management seeks to maintain a capital structure that will assure an adequate level of capital to support anticipated asset growth and absorb potential losses.

Federal regulatory risk-based capital ratio guidelines require percentages to be . . .