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 included elsewhere in this report.

This report contains forward-looking statements with respect to the financial condition, results of operations and business of the Company. These 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.

OVERVIEW

Continued volatility and uncertainty in the economic environment impacted second quarter 2009 results. Our results reflect the impact of this environment with large increases in average federal funds sold, a decline in loan growth, continued large additions to the loan loss provision, an increase in Other Real Estate Owned ("OREO") and OREO expenses, lower interest income as a result of the rapid rate declines in 2008 and increases in deposits as we restructure our balance sheet and investors look for safe havens to invest their cash. At June 30, 2009 the FDIC assessed a special charge for all member banks, in addition to the already increased quarterly fee.

Management announced on April 3, 2009, a definitive merger agreement with Eastern Virginia Bankshares, Inc. ("EVBS") in Tappahannock, Virginia. This will be a strategic alliance which will match up their strong retail experience with our strong commercial business. The merger is expected to close in late 2009. Under the purchase accounting for a combination, all merger related expenses are recognized as they occur, thereby resulting in lower earnings until the merger closes.

On April 3, 2009 First Capital Bancorp, Inc. issued 10,958 shares of preferred stock to the U. S. Treasury. The Company had applied for funds under the TARP Capital Purchase Plan ("CPP"). The agreement requires us to pay a 5%

dividend on the preferred stock for the first five years. The dividend increases to 9% for all periods after the first five years if we have not redeemed the preferred stock. In addition, we issued a warrant to the U. S. Treasury giving them the right to purchase 250,947 shares of our common stock at $6.55 per share for up to 10 years. These funds increased the capital ratios of an already well capitalized company.

The net loss for the second quarter of 2009 was $731 thousand, or $0.30 per diluted share, compared to net income of $386 thousand, or $0.13 per diluted share, in the second quarter of 2008. For the first six months of 2009, the net loss was $629 thousand, or $0.27 per diluted share compared to net income year to date in 2008 of $801 thousand, or $0.27 per diluted share. A number of factors contributed to the decrease in second quarter earnings and year-to-date earnings compared to the same period in the prior year:

• $220 thousand in merger costs incurred in the second quarter of 2009 in connection with the proposed merger with Eastern Virginia Bankshares, Inc.
("EVB"). The combined company (pending shareholder and regulatory approval) will have $1.6 billion in total assets and 32 branches in the central Virginia market.

• $429 thousand increase in the second quarter of 2009 and $491 thousand year-to-date increase in FDIC premiums including the special assessment in the second quarter of 2009 as compared to the comparable periods in 2008.

• $785 thousand increase in the loan loss provision in the second quarter of 2009 as compared to the second quarter of 2008. While nonperforming assets have increased since the first quarter and delinquencies have remained manageable, the economic recession has impacted our asset quality resulting in an addition to the allowance for loan losses.

• $74 thousand increase in the second quarter of 2009 and $132 thousand year-to-date increase in professional services as compared to the comparable periods in 2008. Increased legal fees are primarily related to the resolution of various problem loans.

Financial Condition

Total assets at June 30, 2009 were $492.3 million, up $60.7 million, or 14.1%, from $431.6 million at year-end and up $95.8 million or 24.2% from June 30, 2008, when total assets were $396.4 million. This increase is the result of strong deposit growth, particularly in the first quarter of 2009 and the addition of $11 million from the issuance of preferred stock. Loan growth through June 30, 2009 was $15.9 million, or 4.3% compared to the 2008 year-end balance. Actual loan growth in the second quarter was $10.1 million compared to $5.8 million in the first quarter of 2009. For the quarter, total average assets were $486.4 million, an increase of 26.3% compared to $385.1 million in the second quarter of 2008. For the quarter ending June 30, 2009, average total loans, net of unearned income, were $384.0 million, an increase of $57.2 million, or 17.5%, compared to $326.8 million in the second quarter of 2008.

At June 30, 2009, the Company's investment portfolio totaled $55.7 million, an increase of $26.0 million from $29.7 million at June 30, 2008 and an increase of $23.7 million from $32.0 million at year-end 2008. Interest rates during the first six months of 2009 were low compared to the same period in the prior year. Most of the funds that are invested in the Company's investment portfolio are part of management's effort to balance interest rate risk and to provide liquidity. Our participation in the TARP Capital Purchase Program was an effort to increase liquidity and capital, and to assist in our loan growth

Total deposits of $386.5 million at June 30, 2009 represent an increase of $52.2 million, or 15.6% from $334.3 million at year-end 2008 and an increase of $98.3 million, or 34.1%, from $288.2 million at June 30, 2008. The cost of deposits is projected to continue to decrease as large blocks of certificates of deposit reprice over the next six months. On an average basis, deposits increased $87.5 million from $253.7 million in the second quarter of 2008 to $341.2 million for the same period in 2009. The average increases in deposits were in interest-bearing deposits, primarily core money market ($37.2 million) and certificates of deposit ($47.6 million). Noninterest bearing demand accounts increased $4.7 million.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income represents a principal source of earnings for the Company. Changes in net interest income during 2009 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 has cut the federal funds targeted rate and the associated prime rate of interest by 400 basis points since January 1, 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 increased 13 basis points for the three months ended June 30, 2009 to 2.51% as compared to 2.38% for the first quarter of 2009, reflecting a decrease in average rate paid on interest-bearing deposits of 26 basis points from 3.58% for the first quarter of 2009 to 3.32% for the second quarter of 2009. This was offset by an 8 basis point decrease in the average yield on earning assets. The yield on loans, net of discount increased 10 basis points from 5.82% for the first quarter of 2009 to 5.92% for the quarter ended June 30, 2009. This increase was due to loan growth and the use of floors on renewed loans. The average yield on investments decreased from 4.90% for the first quarter of 2009 to 4.41% for the second quarter of 2009 as investments averages increased from $37.8 million for the first quarter of 2009 to $54.9 million for the second quarter of 2009 and shorter, lower yield investments were acquired.

Net interest margin is down 46 basis points for the three months ended June 30, 2009 as compared to the second quarter of 2008. The yield on earning assets decreased from 6.37% for the quarter ended June 30, 2008 to 5.38% for the quarter ended June 30, 2009. The cost of interest bearing liabilities decreased 63 basis points to 3.38% for the second quarter of 2009 as compared to 4.01% for the same period in 2008.

For the six months ended June 30, 2009, net interest income was down $95 thousand from $5.5 million in 2008 to $5.4 million in 2009. Of this decline, $263 thousand occurred in the first quarter of 2009. The yield on earning assets of 5.41% for the six months ended June 30, 2009 compared to 6.61% for the same period in 2008 and was down 5 basis points from the first quarter of 2009. The cost of interest-bearing liabilities was 3.47% for the first six months of 2009 compared to 4.17% for the same quarter in 2008 and was down 11 basis points from the first quarter of 2009.

Total interest and fees on loans, the largest component of net interest income, increased 5.0%, or $271 thousand to $5.7 million during the second quarter of 2009 compared to $5.4 million for the same period in 2008 due to the rapid decrease in interest rates during 2008.

Interest on investment securities increased 51.8% to $566 thousand for the second quarter of 2009 compared to $373 thousand for the same period of 2008 as average balances in investment securities increased to $54.9 million for the three months ended June 30, 2009 from $30.1 million for the comparable period in 2008. Interest on federal funds sold decreased $33 thousand for the second quarter of 2009 to $11 thousand from $45 thousand for the same period in 2008 as the yield of federal funds decreased from 1.96% for the second quarter of 2008 to .16% for the second quarter of 2009.

Dividends on restricted equity securities decreased $36 thousand to $22 thousand for the three months ended June 30, 2009 as compared to $58 thousand in the second quarter of 2008, as a result of the elimination of the dividend on Federal Home Loan Bank of Atlanta stock during the quarter and year-to-date.

Interest expense on deposits increased $263 thousand to $2.8 million, or 10.3% for the second quarter of 2009 compared to the comparable period of 2008. 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 $540 thousand for the second quarter of 2009 an decrease of $36 thousand, or 6.2%, over the same period of 2008. This reduction in borrowings expense is the result of decreases in the average cost of Trust Preferred securities, which are tied to the three month LIBOR, from an average of 4.73% for the second quarter of 2008 to an average of 2.95% for the second quarter of 2009.

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,
                                                      2009                                   2008
                                         Average       Income/    Yields/       Average       Income/    Yields/
                                         Balance       Expense     Rates        Balance       Expense     Rates
                                                                 (Dollars in thousands)
Assets:
Securities:
Taxable                                 $  48,445      $    495      4.10 %    $  29,995      $    357      4.77 %
Tax exempt (1)                              6,454           108      6.68 %        1,761            25      5.66 %

Total securities                           54,899           603      4.41 %       31,756           382      4.83 %
Federal funds sold                         28,005            11      0.16 %        9,178            45      1.96 %
FHLB & Federal Reserve Bank stock           4,069            22      2.14 %        3,715            58      6.26 %
Loans, net of unearned income (2)         384,015         5,665      5.92 %      326,787         5,394      6.64 %

Total earning assets                      470,988         6,301      5.38 %      371,436         5,879      6.37 %

Allowance for loan losses                  (5,081 )                               (2,954 )
Cash and cash equivalents                   5,777                                  9,713
OREO                                        3,467                                     -
Other nonearning assets                    11,204                                  6,952

Total assets                            $ 486,355                              $ 385,147

Liabilities & Stockholders' Equity:
Interest checking                       $   7,413      $      7      0.38 %    $   8,861      $      9      0.39 %
Money market deposit accounts              78,093           402      2.07 %       40,841           161      1.59 %
Statement savings                             688             1      0.47 %          594             1      0.46 %
Certificates of deposit                   255,017         2,410      3.80 %      203,364         2,387      4.72 %

Total interest-bearing deposits           341,211         2,820      3.32 %      253,660         2,558      4.05 %

Federal funds purchased                        -             -       0.00 %        1,088             6      2.40 %
Repurchase agreements                       1,571             2      0.49 %        2,326             9      1.47 %
Subordinated debt                           7,155            69      3.90 %        7,155            92      5.19 %
FHLB Advances                              50,000           469      3.77 %       50,000           468      3.77 %

Total interest bearing liabilities        399,937         3,360      3.38 %      314,229         3,133      4.01 %

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits        37,528                                 32,128
Other noninterest-bearing liabilities       3,129                                  3,412
Shareholders' equity                       45,761                                 35,378

Total liabilities and shareholders'
equity                                  $ 486,355                              $ 385,147


Net interest spread                                                  2.00 %                                 2.36 %

Impact of noninterest-bearing sources                                0.50 %                                 0.61 %

Net interest margin                                    $  2,941      2.51 %                   $  2,746      2.97 %


Ratio of average interest earning
assets to average interest-bearing
liabilities                                                        117.77 %                               118.21 %

(1) Income and yields are reported on a tax equivalent basis assuming a federal tax rate of 34%.

(2) Nonaccrual loans have been included in the computations of average loan balances

Average Balances, Income and Expenses, Yields and Rates



                                                               Six Months Ended June 30,
                                                      2009                                   2008
                                         Average       Income/    Yields/       Average       Income/    Yields/
                                         Balance       Expense     Rates        Balance       Expense     Rates
                                                                 (Dollars in thousands)
Assets:
Securities:
Taxable                                 $  41,280      $    896      4.38 %    $  29,352      $    726      4.99 %
Tax exempt (1)                              5,123           168      6.60 %        1,586            45      5.76 %

Total securities                           46,403         1,064      4.62 %       30,938           771      5.04 %
Federal funds sold                         23,032            19      0.17 %       12,860           158      2.48 %
FHLB & Federal Reserve Bank stock           3,964            27      1.36 %        3,580           105      5.94 %
Loans, net of unearned income (2)         380,909        11,087      5.87 %      316,755        10,874      6.94 %

Total earning assets                      454,308        12,197      5.41 %      364,133        11,908      6.61 %

Allowance for loan losses                  (5,099 )                               (2,796 )
Cash and cash equivalents                   5,720                                  9,994
OREO                                        3,198                                     -
Other nonearning assets                    10,838                                  6,582

Total assets                            $ 468,965                              $ 377,913

Liabilities & Stockholders' Equity:
Interest checking                       $   7,939      $     14      0.36 %    $   9,187      $     28      0.61 %
Money market deposit accounts              65,940           713      2.18 %       42,454           433      2.06 %
Statement savings                             685             2      0.47 %          637             2      0.77 %
Certificates of deposit                   255,758         4,886      3.85 %      195,984         4,710      4.86 %

Total interest-bearing deposits           330,322         5,615      3.43 %      248,262         5,173      4.21 %

Federal funds purchased                        -             -       0.00 %        1,689            32      3.88 %
Repurchase agreements                       1,712             3      0.40 %        2,227            19      1.74 %
Subordinated debt                           7,155           147      4.15 %        7,155           205      5.81 %
FHLB Advances                              50,000           932      3.76 %       48,764           926      3.84 %

Total interest bearing liabilities        389,189         6,697      3.47 %      308,097         6,355      4.17 %

Noninterest-bearing liabilities:
Noninterest-bearing demand deposits        37,059                                 32,379
Other noninterest-bearing liabilities       2,187                                  2,202
Shareholders' equity                       40,530                                 35,235

Total liabilities and shareholders'
equity                                  $ 468,965                              $ 377,913


Net interest spread                                                  1.94 %                                 2.43 %

Impact of noninterest-bearing sources                                0.51 %                                 0.65 %

Net interest margin                                    $  5,500      2.45 %                   $  5,553      3.08 %


Ratio of average interest earning
assets to average interest-bearing
liabilities                                                        116.73 %                               118.19 %

(1) Income and yields are reported on a tax equivalent basis assuming a federal tax rate of 34%.

(2) Nonaccrual loans have been included in the computations of average loan balances

Noninterest Income

Total noninterest income was $207 thousand for the second quarter of 2009, compared to $199 thousand for the same period of 2008. Fees on deposits increased 1.9% to $62 thousand for the first second of 2009 compared to the same period in 2008. Other noninterest income increased $7 thousand or 4.9% to $145 thousand for the second quarter of 2009 from $138 thousand for the second quarter of 2008.

For the six months ended June 30, 2009, noninterest income was $388 thousand compared to $371 thousand for the same period in 2008 an increase of 4.5%.

Noninterest Expense

This category includes all expenses other than interest paid on deposits and borrowings. Total noninterest expenses for the second quarter of 2009 totaled $3.0 million, an increase of $994 thousand, or 49.0%, compared to $2.0 million for the same period in 2008. The increase is the result of a $429 thousand increase in FDIC premiums and the $220 thousand in merger related expense taken in the second quarter of 2009. Merger expenses include legal, investment banking fees, marketing cost or other expenses related to the proposed transaction and are accumulated as a separate total in expenses. Salaries and employee benefits increase $105 thousand due to expansion of the Company and the addition of the Bon Air branch in 2008. Occupancy expense decreased $8 thousand as two leased branch locations were relocated to owned free standing branches. Professional services increased $74 thousand primarily as the result of legal fees in the resolution and restructuring of problem loans. Marketing expense decreased $64 thousand as advertising was reduced in the second quarter of 2009 due to the economic conditions. Virginia franchise tax increased $28 thousand as the result of the additional equity capital infusion in First Capital Bank in the third quarter of 2008. Depreciation expense increased $17 thousand due to the addition of the Bon Air branch in 2008 and the relocation of two leased branches to owned facilities in 2008 and 2009. Other expenses increased $173 thousand primarily due to OREO expenses of $80 thousand in the second quarter related to foreclosed properties.

For the six months ended June 30, 2009, total noninterest expense increased $1.3 million from $4.0 million in 2008 to $5.4 million in 2009. Again, $711 thousand of the increase is the result of a $491 thousand increase in FDIC premiums and $220 thousand in merger related expense. Salaries and employee benefits are up $250 thousand or 12.1 % due to the Bon Air branch in 2008 and the addition of key management in the fourth quarter of 2008. Professional services are up $132 thousand for the six months ended June 30, 2009 as the result of resolutions of problem loans. Other expenses are up $189 thousand for the period due to OREO expenses of $80 thousand and a $38 thousand loss on a real estate purchase contract not consummated.

Income Taxes

The income tax expense for the quarter ended June 30, 2009 was a benefit of $274 thousand compared to a charge of $212 thousand in the same quarter of the prior year, a $486 thousand decrease with the benefit resulting from the pretax loss of $1.0 million. Income tax expense for the six months ended June 30, 2009 was a benefit of $223 thousand compared to a $440 thousand expense in the same period in 2008, a decrease of $663 thousand. Again, the 2009 number resulted from a pretax loss of $852 thousand.

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.

Total nonperforming assets, which consist of nonaccrual loans, restructured loans, loans past due 90 days and still accruing interest and foreclosed properties, were $9.1 million at June 30, 2009, $8.2 million at March 31, 2009, $6.6 million at December 31, 2008 and $81 thousand at June 30, 2008. This increase is the result of a depressed economy and

a weak real estate market, which has slowed sales of homes. Nonperforming assets are composed largely of loans secured by real estate and repossessed properties in our OREO portfolio. At the end of the second quarter, OREO was $3.0 million compared to $4.3 million at the end of March 2009 and $2.2 million at year-end 2008 and $0 at June 30, 2008. At June 30, 2009, we had 2 homes and twenty developed lots in this portfolio.

Nonaccrual loans are $2.9 million at June 30, 2009, a decrease of $1.5 million from $4.4 million at year-end 2008. The decrease reflects the transfer of nonaccrual loans to OREO and the sale of a $2.7 million nonaccrual loan at December 31, 2008.

At June 30, 2009 the last component of our nonperforming loans, loans past due 90 days and accruing interest was $146 thousand, represented by one relationship. There were no loans past due 90 days and accruing interest at December 31, 2008 or June 30, 2008.

Loan charge-offs, less recoveries, amounted to $129 thousand for the second quarter of 2009 compared to $196 thousand in the first quarter of 2009. There were no charge-offs or recoveries in the second quarter in 2008 and for the first six months of 2008, no charge-offs and $5 thousand in recoveries. For the second quarter of 2009, the provision for loan losses was $1.1 million compared to $310 thousand in the comparable period of 2008. For the six months ended June 30, 2009, the provision was $1.3 million compared to $635 thousand for the comparable period in the prior year. With the high level of real estate secured . . .