UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended June 30, 2008
TRANSITION REPORT UNDER SECTION 13 OR 15(D)
OF THE EXCHANGE ACT
For the transition period from
to
FIRST CAPITAL BANCORP, INC.
(Name of Small Business Issuer in its charter)
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Virginia
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001-33543
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11-3782033
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(State or other jurisdiction of
Incorporation or organization)
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(Commission File Number)
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(I.R.S. Employer
Identification No.)
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4222 Cox Road, Suite 200, Glen Allen, Virginia 23060
(Address of principal executive offices)
804-273-1160
(Issuers telephone number)
Indicate by check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 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
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer
or a smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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x
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Indicate by check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
¨
No
x
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuers classes of common
equity, as of the latest practicable date:
2,971,171 shares of Common Stock, par value $4.00 per share, were outstanding at August 8, 2008.
TABLE OF CONTENTS
2
PART 1 FINANCIAL INFORMATION
ITEM 1 Financial Statements
First Capital Bancorp, Inc. and Subsidiary
Consolidated Statements of
Financial Condition
June 30, 2008 and December 31, 2007
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2008
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2007
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(Unaudited)
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ASSETS
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Cash and due from banks
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$
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11,430,761
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$
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16,779,538
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Short term debt securities
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9,999,736
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Total cash and cash equivalents
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21,430,497
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16,779,538
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Investment securities:
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Available for sale, at fair value
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29,736,569
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32,824,537
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Restricted, at cost
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3,804,040
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3,183,739
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Loans, net of allowance for losses
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332,409,166
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294,234,285
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Loans held for sale
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299,000
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Premises and equipment, net
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5,647,461
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2,077,820
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Accrued interest receivable
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1,776,752
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1,807,939
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Deferred tax asset
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770,043
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319,097
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Other assets
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588,554
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640,013
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Total assets
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$
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396,462,082
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$
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351,866,968
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LIABILITIES
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Deposits
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Noninterest-bearing
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$
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38,019,594
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$
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36,541,568
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Interest-bearing
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250,201,409
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218,566,755
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Total deposits
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288,221,003
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255,108,323
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Accrued expenses and other liabilities
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2,635,019
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3,380,648
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Securities sold under repurchase agreements
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2,270,491
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2,102,939
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Federal funds purchased
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10,903,000
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9,261,000
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Subordinated debt
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7,155,000
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7,155,000
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Federal Home Loan Bank advances
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50,000,000
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40,000,000
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Total liabilities
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361,184,513
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317,007,910
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STOCKHOLDERS EQUITY
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Common stock, $4.00 par value (authorized 5,000,000 shares; shares issued and outstanding, 2,971,171 at June 30, 2008 and December 31,
2007)
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11,884,684
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11,884,684
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Additional paid-in capital
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18,571,626
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18,492,528
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Retained earnings
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5,319,586
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4,518,278
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Accumulated other comprehensive income (loss), net of tax
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(498,327
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)
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(36,432
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)
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Total stockholders equity
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35,277,569
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34,859,058
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Total liabilities and stockholders equity
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$
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396,462,082
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$
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351,866,968
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See notes to unaudited consolidated financial statements.
3
First Capital Bancorp Inc. and Subsidiary
Consolidated Statements of Income
Unaudited
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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2008
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2007
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2008
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2007
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Interest income
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Loans
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$
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5,394,470
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$
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4,291,749
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$
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10,874,456
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$
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8,256,105
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Investments:
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Taxable interest income
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356,780
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353,846
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726,339
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776,983
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Tax exempt interest income
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16,342
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10,264
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29,815
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20,528
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Dividends
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57,784
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32,141
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105,254
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62,742
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Federal funds sold
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44,670
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133,248
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157,708
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208,060
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Total interest income
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5,870,046
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4,821,248
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11,893,572
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9,324,418
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Interest expense
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Deposits
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2,557,080
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2,194,999
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5,172,903
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4,229,446
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FHLB advances
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468,353
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264,785
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925,418
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520,609
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Federal funds purchased
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6,500
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32,402
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7,023
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Subordinated debt and other borrowed money
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100,755
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146,974
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224,620
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288,612
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Total interest expense
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3,132,688
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2,606,758
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6,355,343
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5,045,690
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Net interest income
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2,737,358
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2,214,490
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5,538,229
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4,278,728
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Provision for loan loss
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310,000
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130,000
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635,000
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252,000
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Net interest income after provision for loan loss
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2,427,358
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2,084,490
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4,903,229
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4,026,728
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Noninterest income
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Fees on deposits
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60,472
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49,695
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124,373
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99,326
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Other
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138,226
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139,753
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246,565
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257,034
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Total noninterest income
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198,698
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189,448
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370,938
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356,360
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Noninterest expenses
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Salaries and employee benefits
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1,036,924
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936,118
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2,076,546
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1,754,723
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Occupancy expense
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213,790
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187,802
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419,069
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371,940
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Data processing
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156,417
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135,020
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294,544
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259,218
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Professional services
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40,899
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28,181
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109,361
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81,256
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Advertising and marketing
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69,841
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15,645
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113,493
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43,650
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FDIC assessment
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51,000
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40,767
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102,000
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61,638
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Virginia franchise tax
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82,000
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45,000
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164,000
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|
90,000
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Depreciation
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87,493
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83,914
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|
|
173,324
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|
169,476
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Other expenses
|
|
|
289,321
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|
|
248,992
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|
580,572
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|
|
460,782
|
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Total noninterest expense
|
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2,027,685
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|
1,721,439
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4,032,909
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3,292,683
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Net income before provision for income taxes
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|
598,371
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552,499
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|
1,241,258
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|
1,090,405
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Income tax expense
|
|
|
212,200
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|
|
190,400
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|
439,950
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|
378,300
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Net income
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$
|
386,171
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$
|
362,099
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$
|
801,308
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$
|
712,105
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Basic income per share
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$
|
0.13
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$
|
0.19
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$
|
0.27
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$
|
0.38
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Diluted income per share
|
|
$
|
0.13
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$
|
0.18
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$
|
0.27
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$
|
0.37
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|
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|
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|
See notes to unaudited consolidated financial statements.
4
First Capital Bancorp, Inc. and Subsidiary
Consolidated Statements of Stockholders Equity and Comprehensive Income
Six Months Ended June 30, 2008 and 2007
(Unaudited)
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Common
Stock
|
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Additional
Paid-in
Capital
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Retained
Earnings
|
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Accumulated
Other
Comprehensive
Income (Loss)
|
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Total
Stockholders
Equity
|
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Balance January 1, 2007
|
|
$
|
7,184,084
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$
|
6,010,352
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$
|
2,776,277
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|
$
|
(311,598
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)
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|
$
|
15,659,115
|
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Stock offering
|
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|
4,080,000
|
|
|
11,985,000
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|
|
|
|
|
|
|
|
|
16,065,000
|
|
Cost associated with stock offering
|
|
|
|
|
|
(1,071,592
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)
|
|
|
|
|
|
|
|
|
|
(1,071,592
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
712,105
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|
|
712,105
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|
|
|
712,105
|
|
Other comprehensive loss
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain arising during period, (net of tax, $31,230)
|
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|
|
|
|
|
|
|
|
|
|
|
(91,217
|
)
|
|
|
(91,217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
$
|
620,888
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation expense
|
|
|
|
|
|
25,069
|
|
|
|
|
|
|
|
|
|
|
25,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2007
|
|
$
|
11,264,084
|
|
$
|
16,948,829
|
|
|
$
|
3,488,382
|
|
$
|
(402,815
|
)
|
|
$
|
31,298,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2008
|
|
$
|
11,884,684
|
|
$
|
18,492,528
|
|
|
$
|
4,518,278
|
|
$
|
(36,432
|
)
|
|
$
|
34,859,058
|
|
Net income
|
|
|
|
|
|
|
|
|
|
801,308
|
|
|
801,308
|
|
|
|
801,308
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain arising during period, (net of tax, $237,946)
|
|
|
|
|
|
|
|
|
|
|
|
|
(461,895
|
)
|
|
|
(461,895
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
$
|
339,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation expense
|
|
|
|
|
|
79,098
|
|
|
|
|
|
|
|
|
|
|
79,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
$
|
11,884,684
|
|
$
|
18,571,626
|
|
|
$
|
5,319,586
|
|
$
|
(498,327
|
)
|
|
$
|
35,277,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited consolidated financial statements.
5
First Capital Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2008 and 2007
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
801,308
|
|
|
$
|
712,105
|
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
635,000
|
|
|
|
252,000
|
|
Depreciation of premises and equipment
|
|
|
173,324
|
|
|
|
169,476
|
|
Stock based compensation expense
|
|
|
79,098
|
|
|
|
25,069
|
|
Deferred income taxes
|
|
|
(213,000
|
)
|
|
|
|
|
Net accretion of bond premiums/discounts
|
|
|
(37,099
|
)
|
|
|
(1,472
|
)
|
Increase in loans held for sale
|
|
|
(299,000
|
)
|
|
|
|
|
Decrease (increase) in other assets
|
|
|
51,459
|
|
|
|
(329,763
|
)
|
Decrease in accrued interest receivable
|
|
|
31,187
|
|
|
|
27,358
|
|
Decrease in accrued expenses and other liabilities
|
|
|
(745,629
|
)
|
|
|
(48,300
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
476,648
|
|
|
|
806,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Proceeds from maturities and calls of securities
|
|
|
19,500,000
|
|
|
|
8,000,000
|
|
Proceeds from paydowns of securities available-for-sale
|
|
|
1,318,123
|
|
|
|
1,501,262
|
|
Purchase of securities available-for-sale
|
|
|
(18,392,898
|
)
|
|
|
(1,497,000
|
)
|
Redemption (purchase) of restricted investment securities
|
|
|
(620,300
|
)
|
|
|
181,150
|
|
Purchases of property and equipment
|
|
|
(167,151
|
)
|
|
|
(197,632
|
)
|
Purchase of land and building
|
|
|
(2,301,794
|
)
|
|
|
|
|
Construction in process
|
|
|
(1,274,020
|
)
|
|
|
|
|
Net increase in loans
|
|
|
(38,809,881
|
)
|
|
|
(27,007,103
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(40,747,921
|
)
|
|
|
(19,019,323
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Net (decrease) increase in demand, savings and money market accounts
|
|
|
(10,812,634
|
)
|
|
|
20,999,615
|
|
Net increase in certificates of deposit
|
|
|
43,925,314
|
|
|
|
3,741,586
|
|
Stock offering proceeds, net of related expenses
|
|
|
|
|
|
|
14,993,408
|
|
Advances from FHLB
|
|
|
10,000,000
|
|
|
|
5,000,000
|
|
FHLB advances called
|
|
|
|
|
|
|
(10,000,000
|
)
|
Increase (decrease) in Federal funds purchased
|
|
|
1,642,000
|
|
|
|
(6,026,000
|
)
|
Net increase in repurchase agreements
|
|
|
167,552
|
|
|
|
443,224
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
44,922,232
|
|
|
|
29,151,833
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
4,650,959
|
|
|
|
10,938,983
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
16,779,538
|
|
|
|
12,032,026
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
21,430,497
|
|
|
$
|
22,971,009
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Interest paid during the period
|
|
$
|
6,318,398
|
|
|
$
|
5,090,090
|
|
|
|
|
|
|
|
|
|
|
Taxes paid during the period
|
|
$
|
740,000
|
|
|
$
|
713,533
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited consolidated financial statements.
6
First Capital Bancorp, Inc. and Subsidiary
Notes to Unaudited Consolidated Financial Statements
Note 1 Basis of
Presentation
First Capital Bancorp, Inc. (the Company) is the holding company of and successor to First Capital Bank (the Bank).
Effective September 8, 2006, the Company acquired all of the outstanding stock of the Bank in a statutory share exchange transaction (the Share Exchange) pursuant to an Agreement and Plan of Reorganization dated September 5,
2006, between the Company and the Bank (the Agreement). The Agreement was approved by the shareholders of the Bank at the annual meeting of shareholders held on May 16, 2006. Under the terms of the Agreement, the shares of the
Banks common stock were exchanged for shares of the Companys common stock, par value $4.00 per share, on a one-for-one basis. As a result, the Bank became a wholly owned subsidiary of the Company, the Company became the holding company
of the Bank and the shareholders of the Bank became shareholders of the Company.
In managements opinion the accompanying consolidated financial
statements, reflect all adjustments, consisting solely of normal recurring accruals, necessary for a fair presentation of the financial information as of June 30, 2008 and December 31, 2007 and for the three months ended June 30, 2008
and 2007, in conformity with accounting principles generally accepted in the United States of America. Results for the six month period ended June 30, 2008 are not necessarily indicative of the results that may be expected for the full year
ending December 31, 2008.
The organization and business of the Company, accounting policies followed, and other related information are contained in
the notes to the financial statements of the Company as of and for the year ended December 31, 2007 filed as part of the Companys annual report on Form 10-KSB. These interim financial statements should be read in conjunction with the
annual financial statements.
First Capital Bancorp, Inc.s critical accounting policy relates to the evaluation of the allowance for loan losses
which is based on managements opinion of an amount that is adequate to absorb losses in the Companys existing portfolio. The allowance for loan losses is established through a provision for loan loss based on available information
including the composition of the loan portfolio, historical loan losses (to the extent available due to limited history), specific impaired loans, availability and quality of the collateral, age of the various portfolios, changes in local economic
conditions, and loan performance and quality of the portfolio. Different assumptions used in evaluating the adequacy of the Companys allowance for loan losses could result in material changes in its financial condition and results of
operations. The Companys policies with respect to the methodology for determining the allowance for loan losses involve a high degree of complexity and require management to make subjective judgments that often require assumptions or estimates
about certain matters. This critical policy and its assumptions are periodically reviewed with the Companys Board of Directors.
Note 2 Use of
Estimates
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America
which require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
Note 3 Earnings per share
Basic
EPS excludes dilution and is
computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period.
Diluted
EPS reflects the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock, or resulted in the issuance of common stock that then shared in the earnings of the entity.
7
The basic and diluted earnings per share calculations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
Net income (numerator, basic and diluted)
|
|
$
|
386,171
|
|
$
|
362,099
|
|
$
|
801,308
|
|
$
|
712,105
|
Weighted average number of shares outstanding (denominator)
|
|
|
2,971,171
|
|
|
1,919,318
|
|
|
2,971,171
|
|
|
1,858,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common sharebasic
|
|
$
|
0.13
|
|
$
|
0.19
|
|
$
|
0.27
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
2,971,171
|
|
|
1,919,318
|
|
|
2,971,171
|
|
|
1,858,010
|
Effect of stock options
|
|
|
19,738
|
|
|
81,275
|
|
|
27,207
|
|
|
86,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted average shares outstanding (denominator)
|
|
|
2,990,910
|
|
|
2,000,593
|
|
|
2,998,378
|
|
|
1,944,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common shareassuming dilution
|
|
$
|
0.13
|
|
$
|
0.18
|
|
$
|
0.27
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 4 Stock Options
Effective January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payment, using the modified prospective method and, accordingly, did not restate the consolidated statements of operations for periods prior to
January 1, 2006. This pronouncement amended SFAS No. 123, Accounting for Stock-Based Compensation, and superseded Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. Under SFAS No. 123(R),
the Company measures compensation cost for all stock-based awards at fair value on the date of grant and recognizes compensation expense in the consolidated statements of income over the service period that the awards are expected to vest.
In January 2008, 5,000 options were granted at an exercise price equal to 100% of the fair market value of the common stock on the date of grant. These
options vest over three years. The stock based compensation expensed during the quarter was $40,024 and is included in salaries and employee benefits.
Note 5 Investment Securities
The amortized costs, gross unrealized gains, gross unrealized losses and fair values for securities as of
June 30, 2008 and December 31, 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
Amortized
Costs
|
|
Gross Unrealized
|
|
Fair
Values
|
|
|
|
Gains
|
|
Losses
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
$
|
18,185,009
|
|
$
|
12,796
|
|
$
|
383,078
|
|
$
|
17,814,727
|
Mortgage-backed securities
|
|
|
7,164,415
|
|
|
6,711
|
|
|
130,003
|
|
|
7,041,123
|
Corporate bonds
|
|
|
3,382,289
|
|
|
|
|
|
233,021
|
|
|
3,149,268
|
Tax-exempt municipal bonds
|
|
|
1,759,382
|
|
|
|
|
|
27,931
|
|
|
1,731,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,491,095
|
|
$
|
19,507
|
|
$
|
774,033
|
|
$
|
29,736,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
Amortized
Costs
|
|
Gross Unrealized
|
|
Fair
Values
|
|
|
|
Gains
|
|
Losses
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
$
|
21,455,876
|
|
$
|
50,543
|
|
$
|
5,590
|
|
$
|
21,500,829
|
Mortgage-backed securities
|
|
|
8,493,006
|
|
|
27,725
|
|
|
102,396
|
|
|
8,418,335
|
Corporate bonds
|
|
|
1,921,847
|
|
|
|
|
|
26,722
|
|
|
1,895,125
|
Tax-exempt municipal bonds
|
|
|
1,008,492
|
|
|
3,495
|
|
|
1,739
|
|
|
1,010,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
32,879,221
|
|
$
|
81,763
|
|
$
|
136,447
|
|
$
|
32,824,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized losses in the portfolio as of June 30, 2008 are considered temporary and are a result of the
current interest rate environment and not increased credit risk. The Company has the ability and intent to hold debt securities in an unrealized loss position for the foreseeable future.
Note 6 Loans
Major classifications of loans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2008
|
|
|
December 31,
2007
|
|
|
|
Amount
|
|
Percentages
|
|
|
Amount
|
|
Percentages
|
|
Commercial
|
|
$
|
46,792,129
|
|
13.94
|
%
|
|
$
|
44,366,926
|
|
14.94
|
%
|
Real estateresidential
|
|
|
94,417,033
|
|
28.12
|
%
|
|
|
83,035,119
|
|
27.97
|
%
|
Real estatecommercial
|
|
|
99,547,787
|
|
29.65
|
%
|
|
|
86,301,455
|
|
29.07
|
%
|
Real estateconstruction
|
|
|
88,715,358
|
|
26.43
|
%
|
|
|
79,095,777
|
|
26.64
|
%
|
Consumer
|
|
|
6,247,649
|
|
1.86
|
%
|
|
|
4,105,713
|
|
1.38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
335,719,956
|
|
100.00
|
%
|
|
$
|
296,904,990
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
3,129,166
|
|
|
|
|
|
2,489,066
|
|
|
|
Net deferred fees
|
|
|
181,624
|
|
|
|
|
|
181,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
$
|
332,409,166
|
|
|
|
|
$
|
294,234,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the transactions affecting the allowance for loan losses follows:
9
Activity in the allowance for loan losses for the three and six month periods ended June 30, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
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
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 7 Premises and equipment
Major classifications of these assets are summarized as follows:
|
|
|
|
|
|
|
|
|
June 30,
2008
|
|
December 31,
2007
|
Land
|
|
$
|
2,216,554
|
|
$
|
228,005
|
Building
|
|
|
1,032,679
|
|
|
719,434
|
Furniture and equipment
|
|
|
1,993,377
|
|
|
1,832,126
|
Leasehold improvements
|
|
|
717,497
|
|
|
711,598
|
Construction in progress
|
|
|
1,274,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,234,127
|
|
|
3,491,163
|
Less accumulated depreciation
|
|
|
1,586,666
|
|
|
1,413,343
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
$
|
5,647,461
|
|
$
|
2,077,820
|
|
|
|
|
|
|
|
Note 8 Stock Offering
On June 19, 2007, the Company closed on a public stock offering of 1,020,000 shares of common stock at $15.75 per share. The offering was underwritten by two local brokerage houses. Gross proceeds totaled $16.1 million.
On July 11, 2007, an additional 152,900 shares of common stock were issued as a result of the exercise of the over-allotment option granted to the underwriters of
the Companys public offering of 1,020,000 shares of common stock at $15.75 per share. The gross proceeds to the Company from this exercise of the over-allotment option were $2.4 million.
Total costs of the offerings were $1.4 million. The Company will use the net proceeds from the offering to increase equity and for general corporate purposes, including
using the net proceeds to provide additional equity to the Bank to support the growth of its operations.
Note 9 Fair Value Disclosures
Effective January 1, 2008, the Company adopted FAS 157, Fair Value Measurement. FAS 157 clarifies the definition of fair value and describes methods
available to appropriately measure fair value in accordance with generally accepted accounting principles. This statement applies whenever other accounting pronouncements require or permit fair value measurements.
10
The fair value hierarchy under FAS 157 prioritizes the inputs to valuation techniques used to measure fair value into
three broad levels (Levels 1, 2 and 3). Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are
inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability and reflect the reporting entitys own
evaluation about the assumptions that market participants would use in pricing the asset or liability.
SFAS 157 defines fair value as the exchange price
that would be received for an asset in the principal or most advantageous market for the asset in an orderly transaction between market participants on the measurement date.
Assets measured at fair value on a recurring basis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
Fair Value Measurements Using
|
|
Fair
Values
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
(Dollars in thousands)
|
`
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies
|
|
$
|
17,816
|
|
$
|
|
|
$
|
|
|
$
|
17,816
|
Mortgage-backed securities
|
|
|
|
|
|
7,041
|
|
|
0
|
|
|
7,041
|
Corporate bonds
|
|
|
|
|
|
3,149
|
|
|
0
|
|
|
3,149
|
Municipal bonds
|
|
|
|
|
|
1,731
|
|
|
0
|
|
|
1,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
17,816
|
|
$
|
11,921
|
|
$
|
|
|
$
|
29,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale
|
|
$
|
|
|
$
|
|
|
$
|
299
|
|
$
|
299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 Valuations based on quoted prices in active markets for identical assets that the Company has the
ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Assets utilizing Level 1 inputs include U. S.
Government agency securities.
Level 2 Valuations based on quoted prices in markets that are not active or for which all significant inputs are
observable, either directly or indirectly. Assets utilizing Level 2 inputs include mortgage-backed securities, corporate and municipal bonds.
Level 3
Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Residential loans held for sale
Loans held for sale are required to be measured at lower of cost or fair value. Under SFAS 157, market value is to represent fair value. Management obtains
quotes or bids on all or part of these loans directly from the purchasing financial institutions. Premiums received or to be received on the quotes or bids are indicative of the fact that cost is lower than fair value.
The Bank did not make any changes to its valuation techniques during the six months ended June 30, 2008.
Note 10 Recently Issued Accounting Pronouncements
In December 2007,
the FASB issued SFAS No. 141R, Business Combinations (revised 2007). SFAS No. 141R improves reporting by creating greater consistency in the accounting and financial reporting of business combinations, resulting in more
complete,
11
comparable, and relevant information for investors and other users of financial statements. To achieve this goal, the new standard requires the acquiring
entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed;
and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS No. 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the first fiscal year that commences after December 15, 2008.
In December
2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 160 improves the relevance, comparability, and transparency of financial information provided to investors by requiring
all entities to report noncontrolling (minority) interests in subsidiaries in the same wayas equity in the consolidated financial statements. In addition, SFAS No.160 eliminates the diversity that currently exists in accounting for
transactions between an entity and noncontrolling interests by requiring that they be treated as equity transactions. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008 and is not expected to have a material
impact on the Companys financial condition or results of operations.
In February 2007, the FASB issued SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilitiesincluding an amendment of FASB Statement No. 115. SFAS No. 159 provides companies with the option of electing fair value as an alternative measurement for most financial
assets and liabilities. It also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159
requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of a companys choice to use fair value on its earnings. It also requires entities to
display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. Under SFAS No. 159, fair value is used for both the initial and subsequent measurement of the designated
assets and/or liabilities, with the changes in value recognized in earnings. The Company adopted this statement on January 1, 2008 and did not elect the SFAS No. 159 fair value option for any of its financial assets or liabilities,
therefore the adoption did not have an impact on its consolidated financial position, consolidated results of operations, or liquidity.
In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. SFAS No. 161 applies to all derivative instruments and related hedged
items accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 161 requires entities to provide greater transparency about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entitys financial
position, results of operations and cash flows. To meet those objectives, SFAS No. 161 requires (1) qualitative disclosures about objectives for using derivatives by primary underlying risk exposure (e.g., interest rate, credit or foreign
exchange rate) and by purpose or strategy (fair value hedge, cash flow hedge, net investment hedge, and non-hedges), (2) information about the volume of derivative activity in a flexible format that the preparer believes is the most relevant
and practicable, (3) tabular disclosures about balance sheet location and gross fair value amounts of derivative instruments, income statement and other comprehensive income location of gain and loss amounts on derivative instruments by type of
contract, and (4) disclosures about credit-risk related contingent features in derivative agreements. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.
Accordingly, the Bank will adopt the provisions of SFAS No. 161 in the first quarter 2009. The Bank does not expect the adoption of the provisions of SFAS No. 161 to have a material effect on the its financial condition and results of
operations.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material
impact on the Banks financial position, results of operations and cash flows.
12
FIRST CAPITAL BANCORP, INC
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The purpose of this discussion is to focus on important factors affecting
the Companys 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 Companys 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 Companys 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.
13
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 Banks 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 Companys 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
14
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
Balance
|
|
|
Income/
Expense
|
|
Yields/
Rates
|
|
|
Average
Balance
|
|
|
Income/
Expense
|
|
Yields/
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
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Average Balances, Income and Expenses, Yields and Rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Average
Balance
|
|
|
Income/
Expense
|
|
Yields/
Rates
|
|
|
Average
Balance
|
|
|
Income/
Expense
|
|
Yields/
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.
16
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.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
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 Companys 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 Companys 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.
17
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
June 30,
|
|
|
Six Months Ended
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 Companys 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.
18
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 Companys 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
Companys capital on an ongoing basis with reference to the size, composition, and quality of the Companys 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 applied to various assets including off-balance sheet assets in relation to their perceived risk. Tier 1 capital consists of stockholders equity and minority interests in consolidated
subsidiaries, less net unrealized gains on available-for-sale securities. Tier 2 capital, a component of total capital, consists of a portion of the allowance for loan losses, certain components of nonpermanent preferred stock and subordinated debt.
The $5 million in trust preferred securities issued by the Company in September 2006 qualified as Tier 1 capital. First Capital Banks ratios exceed regulatory requirements. As of June 30, 2008 First Capital Bank had a Tier 1 risk-based
capital ratio of 9.47% and a Total risk-based capital ratio of 10.92%. At December 31, 2007 these ratios were 10.13% and 12.01%, respectively.
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
N/A
ITEM 4.
|
CONTROLS AND PROCEDURES
|
We maintain a system of
internal controls and procedures designed to provide reasonable assurance as to the reliability of our published financial statements and other disclosures included in this report. Within the 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the participation of the Companys management, including the Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are
effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in periodic SEC filings. There have been no significant changes in the Companys internal
controls or in other factors that could significantly affect internal controls subsequent to the date the Company carries out its evaluation.
PART II OTHER INFORMATION
Item 1.
|
Legal Proceedings None to report
|
Item 1A.
|
Risk Factors Not Applicable
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds Not Applicable
|
Item 3.
|
Defaults Upon Senior Securities Not Applicable
|
Item 4.
|
Submission of Matters to a Vote of Security Holders
|
19
The Company held its 2008 Annual Meeting of Stockholders on Wednesday, May 21, 2008 at 10:00 a.m. at the Comfort
Suites, 4051 Innslake Drive, Glen Allen, Virginia.
There were 2,214,042 shares represented in person or by proxy at the meeting, which represented 74.5%
of the outstanding shares. There was a quorum for all purposes.
The shareholders were asked to vote on the election of four directors of the Company to
serve until the 2011 Annual Meeting of Stockholders and to ratify the appointment of Cherry, Bekaert & Holland, L.L.P. as the independent registered public accountant for the Company for the year ended December 31, 2008.
The votes cast for or withheld for the election of directors were as follows:
|
|
|
|
|
|
|
For
|
|
Withheld
|
Gerald Blake
|
|
2,192,939
|
|
21,103
|
Dr. Kamlesh N. Dave
|
|
2,122,361
|
|
91,681
|
Grant S. Grayson
|
|
2,199,339
|
|
14,703
|
Gerald H. Yospin
|
|
2,192,164
|
|
21,878
|
The votes cast to ratify the appointment of Cherry, Bekaert & Holland, L.L.P. as the independent
registered public accountant were as follows:
|
|
|
For
|
|
Withheld
|
2,196,880
|
|
17,162
|
Item 5.
|
Other Information None to report
|
|
|
|
Exhibit No.
|
|
Description of Exhibit
|
3.1
|
|
Articles of Incorporation of First Capital Bancorp, Inc.
(1)
|
|
|
3.2
|
|
Bylaws of First Capital Bancorp, Inc.
(1)
|
|
|
31.1
|
|
Certification of Robert G. Watts, Jr. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 14, 2008.
|
|
|
31.2
|
|
Certification of William W. Ranson Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 14, 2008.
|
|
|
32
|
|
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated August 14, 2008.
|
(1
)
|
Expressly incorporated by reference from the Companys Report on Form 10-QSB filed with the Securities and Exchange
Commission on November 13, 2006. The Exhibit number set forth above corresponds to the exhibit number in such Form 10-QSB.
|
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Capital Bancorp, Inc.
|
|
|
|
|
|
|
Date: August 14, 2008
|
|
|
|
By:
|
|
/s/ Robert G. Watts, Jr.
|
|
|
|
|
|
|
Robert G. Watts, Jr.
|
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ William W. Ranson
|
|
|
|
|
|
|
William W. Ranson
|
|
|
|
|
|
|
Chief Financial Officer, Treasurer and Secretary
|
21
Index of Exhibits
|
|
|
Exhibit No.
|
|
Description of Exhibit
|
3.1
|
|
Articles of Incorporation of First Capital Bancorp, Inc.
(1)
|
|
|
3.2
|
|
Bylaws of First Capital Bancorp, Inc.
(1)
|
|
|
31.1
|
|
Certification of Robert G. Watts, Jr. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 14, 2008.
|
|
|
31.2
|
|
Certification of William W. Ranson Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 14, 2008.
|
|
|
32
|
|
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated August 14, 2008.
|
(1
)
|
Expressly incorporated by reference from the Companys Report on Form 10-QSB filed with the Securities and Exchange
Commission on November 13, 2006. The Exhibit number set forth above corresponds to the exhibit number in such Form 10-QSB.
|
22
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