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

Nationwide, concerns over asset quality, precipitated by issues related to slowing real estate activity, declining real estate values, turbulence in the financial sector, the current regulatory environment and general economic conditions, continued to increase in the banking industry during the third quarter. The impact of these concerns is reflected in the economic markets in which the Company operates, principally through slowing real estate activity. Residential acquisition and development lending and builder/construction lending have been significantly scaled back as housing activity across our markets has declined. As a result, the Company significantly increased its provision for loan losses by $1.4 million for the three months ended September 30, 2008 compared to $186 thousand for the same period in 2007. The provision for loan losses totals $2.0 million for the first nine months of 2008 compared to $438 thousand for the same period last year. The allowance for loan losses increased to $4.4 million as of September 30, 2008 or 1.25 % of total loans compared to .93% at the end of June, 2008 and .88% at the end of the same period last year.

Due primarily to the significant increase in the allowance for loan losses, First Capital Bancorp, Inc. reported net income of $338,232 for the nine months ending September 30, 2008, compared to $1,213,174 for the same period in 2007, a decrease of $874,942 or 72.1%. Net loss for the three months ended September 30, 2008 was $463,076, down $964,145 from $501,069 for the same period in 2007. Net interest income increased 7.00% or $186,019 during the third quarter of 2008, when compared to 2007 and 20.9%, or $1,445,520 to $8,372,307 during the first nine months of 2008, when compared to 2007. For the third quarter of 2008, noninterest income was $60,032, an increase of 3.0% as compared to the same period in 2007. Noninterest income increased 17.0% to $184,405 when compared to $157,562 for the same period in 2007. Noninterest expenses totaled $2,299,795, an increase of $432,960, or 23.2% for the third quarter of 2008 compared to 2007, and $6,332,704, an increase of $1,173,186, or 22.7% for the first nine months of 2008 compared to 2007. Basic and diluted loss per share of common stock were $0.16 for the third three months of 2008 compared to basic and diluted income per share of $0.17 for 2006. For the first nine months of 2008, basic and diluted earnings per share of common stock were $0.11 compared to $0.54 and $0.53 for 2007.

For the nine months ended September 30, 2008, profitability as measured by the Company's annualized return on average assets (ROA) was 0.12% compared to 0.59% for the same period in 2007. For the third quarter of 2008 ROA declined to a 0.45% loss compared to 0.69% in 2007. Another measure of the Company's profitability, the annualized return on average equity (ROE) declined to a 5.22% loss for the third quarter of 2008 compared to 5.93% for the same period in 2007. For the nine months ended September 30, 2008 and 2007, ROE was 1.25% and 8.38%, respectively.

Net Interest Income

Net interest income represents a principal source of earnings for the Company. Changes in net interest income during 2008 to date 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 86 basis points for the three months ended September 30, 2008 to 2.87% as compared to 3.73% for the quarter ended September 30, 2007. Net interest margin is down 9 basis points for the three months ended September 30, 2008 as compared to the second quarter of 2008. The yield on earning assets decreased from 7.44% for the quarter ended September 30, 2007 to 6.19% for the quarter ended September 30, 2008. The cost of interest bearing liabilities decreased 84 basis points to 3.88% for the quarter ended September 30, 2008 as compared to 4.72% for the same period in 2007. Net interest margin for the nine months ended September 30, 2008 was 2.99%, down 50 basis points from 3.49% for the same period in 2007.

Total interest and fees on loans, the largest component of net interest income, increased 17.8%, or $852,957 to $5,652,541 during the third quarter of 2008 compared to $4,799,584 for the same period in 2007. Year-to-date 2008 interest and fees on loans totaled $16,526,997, an increase of 26.6% over the 2007 year-to-date total of $13,055,689.

Interest on investment securities decreased 5.2% to $374,250 for the third quarter of 2008 compared to $394,675 for the same period of 2007 as average balances in investment securities decreased to $31.6 million for the three months ended September 30, 2008 from $35.6 million for the comparable period in 2007. Year-to-date, interest on investment securities decreased to $1,130,404 from $1,192,186, or 5.2% for the same period of 2008. Interest on federal funds sold decreased $3,723 for the three months ended September 30, 2008 to $45,853 from $49,576 for the same period in 2007. For the nine months ended September 30, 2008, interest on federal funds sold decreased $54,075 to $203,561 as compared to $257,561 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 and a decrease in the average balance sold during the periods.

Dividends on restricted equity securities decreased $5,018 to $30,454 for the three months ended September 30, 2008 as compared to $35,472 in the third quarter of 2008, as a result of higher balances in stock of the Federal Reserve and the Federal Home Loan Bank of Atlanta offset by a significant decrease in the dividend rate during the quarter. For the nine month period ended September 30, 2008, dividends on restricted equity stocks increased $37,494 to $135,708, a 38.2% increase over the 2007 nine month total of $98,214.

Interest expense on deposits increased $503,733 to $2,693,071, or 23.0% for the third quarter of 2008 and $1,447,190, to $7,865,974, or 22.6% 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 $575,949 for the third quarter of 2008 an increase of $134,039, or 30.3%, over the same period of 2007. Year-to-date, interest on borrowings increased $500,235 or 39.8% to $1,758,389 from $1,258,154 for the same period of 2007. Increased borrowing from the FHLB of Atlanta offset by lower interest 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 September 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:           $ 347,489     $  5,653      6.47 %   $ 239,731     $  4,800      7.94 %
Investment securities:
U.S. Agencies                               19,445          232      4.75 %      25,139          282      4.45 %
Mortgage backed securities                   6,989           77      4.38 %       9,434          102      4.30 %
Municipal securities                         1,759           17      3.97 %       1,010           10      3.70 %
Corporate notes                              3,384           49      5.71 %          -            -       0.00 %
Other investments                            3,715           30      3.26 %       2,365           35      5.95 %

Total investment securities                 35,292          405      4.56 %      37,948          429      4.50 %

Federal funds sold                           9,587           46      1.90 %       3,967           50      4.96 %

Total earning assets                       392,368        6,104      6.19 %     281,646        5,279      7.44 %

Cash and cash equivalents                    7,753                                5,915
Allowance for loan losses                   (3,289 )                             (2,168 )
Other nonearning assets                      8,444                                4,294

Total assets                             $ 405,276                            $ 289,687

Interest bearing liabilities:
Interest checking                        $   9,801     $      9      0.37 %   $   8,689     $     30      1.37 %
Money market deposit accounts               35,171          129      1.46 %      49,229          527      4.25 %
Statement savings                              924            1      0.44 %         834            3      1.52 %
Certificates of deposit                    229,014        2,554      4.44 %     125,837        1,629      5.14 %

Total interest-bearing deposits            274,910        2,693      3.90 %     184,589        2,189      4.71 %

Federal funds purchased                        298            2      2.39 %         438            5         5
Repurchase agreements                        2,891           11      1.46 %       2,029           22      4.24 %
Subordinated debt                            7,155           90      5.01 %       7,155          125      6.95 %
FHLB Advances                               50,000          474      3.77 %      27,065          290      4.25 %

Total interest bearing liabilities         335,254        3,270      3.88 %     221,276        2,631      4.72 %

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits         32,627                               32,072
Other noninterest-bearing liabilities        2,091                                2,843
Shareholders' equity                        35,304                               33,496

Total liabilities and shareholders'
equity                                   $ 405,276                            $ 289,687

Net interest income / spread                                         2.31 %                               2.72 %

Impact of noninterest-bearing sources                                0.56 %                               1.01 %

Net interest income / margin                           $  2,834      2.87 %                 $  2,648      3.73 %

Ratio of average interest earning
assets to average interest-bearing
liabilities                                                        117.04 %                             127.28 %

            Average Balances, Income and Expenses, Yields and Rates



                                                           Nine Months Ended September 30,
                                                      2008                                 2007
                                         Average      Income/    Yields/      Average      Income/    Yields/
                                         Balance      Expense     Rates       Balance      Expense     Rates
                                                               (Dollars in thousands)
Assets:
Loans, net of unearned income:          $ 327,074     $ 16,527      6.75 %   $ 221,400     $ 13,056      7.88 %
Investment securities:
U.S. Agencies                              18,820          703      4.99 %      23,950          835      4.66 %
Mortgage backed securities                  7,554          247      4.37 %      10,201          326      4.27 %
Corporate bonds                             3,135          134      5.73 %           0            0      0.00 %
Municipal securities                        1,644           46      3.75 %       1,010           31      4.05 %
Other investments                           3,626          136      5.00 %       2,195           98      5.98 %

Total investment securities                34,779        1,266      4.86 %      37,356        1,290      4.62 %

Federal funds sold                         11,916          203      2.28 %       6,685          257      5.16 %

Total earning assets                      373,769       17,996      6.43 %     265,441       14,603      7.36 %

Cash and cash equivalents                   9,086                                5,625
Allowance for loan losses                  (2,962 )                             (2,046 )
Other nonearning assets                     7,207                                4,142

Total assets                            $ 387,100                            $ 273,162

Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest checking                       $   9,393     $     37      0.52 %   $   8,205     $     63      1.03 %
Money market deposit accounts              40,008          562      1.88 %      43,263        1,348      4.17 %
Statement savings                             734            3      0.63 %         900           10      1.53 %
Certificates of deposit                   207,074        7,264      4.69 %     130,088        4,998      5.14 %

Total interest-bearing deposits           257,209        7,866      4.09 %     182,456        6,419      4.70 %

Federal funds purchased                     1,222           34      3.74 %         325           12      4.99 %
Repurchase agreements                       2,450           30      1.63 %       1,895           63      4.45 %
Subordinated debt                           7,155          295      5.52 %       7,155          373      6.96 %
FHLB Advances                              49,179        1,399      3.80 %      25,685          810      4.22 %

Total interest bearing liabilities        317,215        9,624      4.08 %     217,516        7,677      4.72 %

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits        32,462                               30,268
Other noninterest bearing liabilities       2,165                                2,722
Shareholders' equity                       35,258                               22,656

Total liabilities and shareholders'
equity                                  $ 387,100                            $ 273,162

Net interest income / spread                                        2.38 %                               2.64 %

Impact of noninterest-bearing sources                               0.61 %                               0.85 %

Net interest income / margin                          $  8,372      2.99 %                 $  6,926      3.49 %

Ratio of average interest earning
assets to average interest-bearing
liabilities                                                       117.83 %                             122.03 %

Noninterest Income

Total noninterest income was $183,581 for the third quarter of 2008, compared to $174,545 for the same period of 2007. Noninterest income totaled $554,519 for the first nine months of 2008 compared to $530,905 for the same period in 2007, a 4.5% increase. Fees on deposits increased 3.1% to $60,032 for the third quarter of 2008 compared to the same period in 2007 and $26,843, a 17.0% to $184,405 year-to-date. This quarterly increase is attributable to increases in charges on deposit accounts of $7,413 and a $5,330 decrease in NSF charges. Year-to-date, fees on deposits accounts increased $22,383 and NSF and returned check charges increased $1,981. Other noninterest income increased $7,240 and decreased $3,229 for the third quarter and year-to-date, respectively. This change in other noninterest income is the result in decreases in mortgage loan production. Gains and fees on loans decreased $15,579 in the third quarter of 2008 as compared to the same period in 2007 and $61,715 year-to-date in 2008 as compared to the same period in 2007. This year-to-date reduction was offset by increases in late charges on loans and fees on letters of credit.

Noninterest Expense

Total noninterest expenses for the third quarter of 2008 totaled $2,299,795, an increase of $432,960, or 23.2%, compared to $1,866,835 for the same period in 2007. Noninterest expenses totaled $6,332,704 in the first nine months of 2008 compared to $5,159,518 for the same period in 2007, an increase of 22.7% or $1,173,186. These increases are attributable to the following factors: 1) an increase in salaries and benefits of $118,338 for the quarter, $440,161 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 $36,407 for the quarter, and $83,536 year-to-date in occupancy costs related to the additional banking office, additional space leased at the corporate headquarters and costs associated with the relocation of the Innsbrook Branch in the third quarter; 3) an 39.2% increase in the Virginia Franchise tax 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 for the quarter and year-to-date as promotional and branding advertising are utilized in 2008.

Income Taxes

The income tax benefit was $225,700 for the third quarter of 2008 and a $214,250 expense year-to-date compared to an expense of $269,000 and $647,300, respectively for the prior year. The income tax benefit in the third quarter was the result of the net pre-tax loss of $688,776.

General

Total assets increased 19.3% to $419,644,745 at September 30, 2008 when compared to assets of $351,866,968 at December 31, 2007. On an annual basis total assets increased 34.9% when compared to assets of $311,055,687 at September 30, 2007. Gross loans as of September 30, 2008 were $352,155,709, an increase of $55,250,990, or 18.6%, from $296,904,990 at year-end 2007. On an annual basis total loans increased $97,915,000 or 38.5%, from $254,241,000 at September 30, 2007. Investment securities were $32,031,973 at September 30, 2008, compared to $32,824,537 at year-end 2007. On an annual basis, investment securities decreased $2,282,317, or 6.7% over September 2007. Cash and cash equivalents were $26,244,591, an increase of $9,465,053, or 56.47% from $16,779,538 at December 31, 2007.

Deposits increased $67,755,224, or 26.6%, during the nine months ended September 30, 2008. On an annualized basis deposits increased $98,957,052 or 44.2%. Noninterest-bearing demand deposit accounts increased $1,399,861 to $37,941,429, a 3.8% increase over December 31, 2007 and $2,640,592 on an annual basis when compared to September 30, 2007. Interest-bearing deposits totaled $284,922,118 at September 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 $34,662,811 at September 30, 2008, compared to $34,859,058 at December 31, 2007. Components of the change in stockholders' equity include net income of $338,232, increases in net unrealized losses on available-for-sale securities totaling $650,835 and stock based compensation totaling $116,356.

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 a number of factors, including, 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 $4,401,947 and $2,248,194 at September 30, 2008 and 2007, respectively. The ratio of the allowance for loan losses to total loans outstanding at September 30, 2008 and 2007 was 1.25% and 0.88%, respectively. There were two loans delinquent more than 30 days but less than 89 days at September 30, 2008 totaling $111,522. No loans were past due 90 days or more and still accruing. Non-performing assets, represented by three relationships, totaled $2,064,399 and represented .49% of total assets as of September 30, 2008.

During the first nine months of 2008 and 2007, the Company recorded $2,041,684 and $437,700 in provision expense, respectively. There were four loans charged-off during the first nine months of 2008 totaling $135,081 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 nine months of 2008 and 2007 totaled $6,322 and $712, respectively. Net new loan growth for the nine months ended September 30, 2008 was $55.5 million as compared to $52.5 million for the same period of 2007. The table below summarizes the activity in the allowance for loans losses for the three and nine month periods ending September 30, 2008 and 2007.

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

                                                 Three Months Ended                Nine Months Ended
                                                   September 30,                     September 30,
                                               2008             2007             2008             2007
Beginning balance                           $ 3,129,166      $ 2,062,094      $ 2,489,066      $ 1,833,604
Provision for loan losses                     1,406,640          185,700        2,041,640          437,700
Loans charge-offs                              (135,081 )             -          (135,081 )        (23,822 )
Recoveries                                        1,222              400            6,322              712

Ending balance                              $ 4,401,947      $ 2,248,194      $ 4,401,947      $ 2,248,194

Ratio of allowance for loan losses as a
percent of loans outstanding at the end
of the period.                                     1.25 %           0.88 %           1.25 %           0.88 %

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, federal funds facility from two correspondent banks, term loans from a 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 September 30, 2008, cash and cash equivalents totaled $26.2 million. Investment securities available-for-sale and not pledged totaled $14.4 million, for a total of 9.7% of total assets, which management believe is adequate to meet short-term liquidity needs. Management also has alternative sources of funding available, including unused unsecured federal funds facility with two banks totaling $19.5 million, unused secured federal funds facility totaling $2.7 million and unused available term loans through the Federal Home Loan Bank totaling $23.6 million.

Total liquidity and other alternative sources of liquidity total $86.9 million at September 30, 2008 if fully utilized, which represents 20.6% of assets and 26.8% of deposits.

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 September 30, 2008, pre-approved but unused lines of credit for loans totaled approximately $93.1 million. In addition, we had approximately $7.8 million in financial and performance standby letters of credit at September 30, 2008. 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.