UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

(MARK ONE) FORM 10-Q

T QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended June 30, 2008

OR

£ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _________to_________

Commission File No. 001-16413

FIRST CENTURY BANCORP.

(Exact name of registrant as specified in its charter)

Georgia	58-2554464
(State or other jurisdiction	(I.R.S. Employer
of incorporation)	Identification No.)

807 Dorsey Street

Gainesville, Georgia 30501

(Address of principal executive offices)

(770) 297-8060

(Registrant's telephone number, including area code)

________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 T   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.  See the definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer £	Accelerated filer £
Non-accelerated £ (do not check if smaller reporting company)	Smaller reporting company T

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes £   No T

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: 1,732,458 shares of common stock, no par value per share, were issued and outstanding as of July 15, 2008

%

PART I. FINANCIAL INFORMATION		Page No.
Item 1. Financial Statements
	Consolidated Balance Sheets –
	June 30, 2008 (Unaudited) and December 31, 2007	3
	Consolidated Statements of Operations (Unaudited) –
	Three Months Ended June 30, 2008 and 2007	5
	Consolidated Statements of Comprehensive Income (Loss) (Unaudited) –
	Three Months Ended June 30, 2008 and 2007	6
	Consolidated Statements of Cash Flows (Unaudited) –
	Three Months Ended June 30, 2008 and 2007	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
Item 3. Quantitative and Qualitative Disclosures About Market Risk		21
Item 4. Controls and Procedures		21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		22
Item 3. Defaults upon Senior Securities		22
Item 4. Submission of Matters to a Vote of Security Holders		22
Item 5. Other Information		22
Item 6. Exhibits		22
	Signatures	23

2

FIRST CENTURY BANCORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

ASSETS

	June 30,
	2008			December 31,
	(Unaudited)			2007
Cash and Cash Equivalents
Cash and Due from Banks	$	4,124,438		$	2,111,446
Federal Funds Sold		8,913,000			6,238,000
Total Cash and Cash Equivalents		13,037,438			8,349,446
Investment Securities Available for Sale, at Fair Value		8,672,749			8,404,238
Other Investments		399,870			402,770
Loans Held for Sale		1,236,199			-
Loans		19,888,869			19,305,101
Allowance for Loan Losses		(189,635	)		(275,920	)
Loans, Net		19,699,234			19,029,181
Premises and Equipment		2,225,367			2,122,763
Other Real Estate		183,600			98,343
Other Assets		466,083			244,721
Total Assets	$	45,920,540		$	38,651,462

The accompanying notes are an integral part of these consolidated balance sheets.

3

FIRST CENTURY BANCORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS’ EQUITY

	June 30,
	2008			December 31,
	(Unaudited)			2007
Deposits
Non-interest-Bearing	$	2,754,364		$	1,566,488
Interest-Bearing		36,790,814			29,439,470
Total Deposits		39,545,178			31,005,958
Borrowings		4,000,000			4,000,000
Other Liabilities		484,222			151,816
Total Liabilities		44,029,400			35,157,774
Shareholders’ Equity
Preferred Stock, No Par Value; 10,000,000 Shares Authorized; 75,000 Shares Issued and Outstanding		750,000			750,000
Common Stock, No Par Value; 50,000,000 Shares Authorized; 1,732,458 Shares Issued and Outstanding		10,312,466			10,311,206
Accumulated Deficit		(9,142,566	)		(7,559,873	)
Accumulated Other Comprehensive (Loss)		(28,760	)		(7,645	)
Total Shareholders’ Equity		1,891,140			3,493,688
Total Liabilities and Shareholders’ Equity	$	45,920,540		$	38,651,462

The accompanying notes are an integral part of these consolidated balance sheets.

4

FIRST CENTURY BANCORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30

(UNAUDITED)

	Three Months Ended						Six Months Ended
	2008			2007			2008			2007
Interest Income
Loans, Including Fees	$	382,002		$	407,454		$	740,425		$	848,213
Investments		126,791			106,859			214,048			206,570
Interest Bearing Deposits		12,438			4,808			33,427			11,383
Federal Funds Sold		24,254			30,915			68,300			55,676
Total Interest Income		545,485			550,036			1,056,200			1,121,842
Interest Expense
Deposits		317,513			305,922			666,838			643,065
Federal Funds Purchased		-			3,190			-			3,190
Borrowings		29,410			24,382			71,302			51,607
Total Interest Expense		346,923			333,494			738,140			697,862
Net Interest Income		198,562			216,542			318,060			423,980
Provision for Loan Losses		244,923			-			244,923			-
Net Interest Income (Loss) After Provision for Loan Losses		(46,361	)		216,542			73,137			423,980
Non-interest Income
Service Charges and Fees on Deposits		5,893			11,740			11,650			25,954
Gain on Sale or Call of Investment Securities		-			-			3,507			-
Mortgage Origination and Processing Fees		158,022			-			178,419			-
Other		7,897			3,985			15,675			9,090
Total Non-interest Income		171,812			15,725			209,251			35,044
Non-interest Expense
Salaries and Employee Benefits		553,541			258,310			941,924			515,982
Occupancy and Equipment		135,499			87,349			249,956			173,281
Professional Fees		108,035			114,843			208,247			161,207
Other		299,112			121,031			464,954			222,956
Total Non-interest Expense		1,096,187			581,533			1,865,081			1,073,426
Loss Before Income Taxes		(970,736	)		(349,266	)		(1,582,693	)		(614,402	)
Provision for Income Taxes		-			-			-			-
Net Loss	$	(970,736	)	$	(349,266	)	$	(1,582,693	)	$	(614,402	)
Basic Loss Per Share	$	(.56	)	$	(.22	)	$	(.91	)	$	(.48	)
Weighted Average Shares Outstanding		1,732,458			1,562,206			1,732,458			1,270,823

The accompanying notes are an integral part of these consolidated statements.

5

FIRST CENTURY BANCORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED JUNE 30

(UNAUDITED)

	Three Months Ended						Six Months Ended
	2008			2007			2008			2007
Net Loss	$	(970,736	)	$	(349,266	)	$	(1,582,693	)	$	(614,402	)
Other Comprehensive Loss, Net of Tax
Gain (Loss) on Securities Arising During the Quarter		(69,278	)		(54,899	)		(24,622	)		5,566
Reclassification Adjustment		-			-			3,507			-
Unrealized Gain (Loss) on Securities		(69,278	)		(54,899	)		(21,115	)		5,566
Comprehensive Loss	$	(1,040,014	)	$	(404,165	)	$	(1,603,808	)	$	(608,836	)

The accompanying notes are an integral part of these consolidated statements.

6

FIRST CENTURY BANCORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30

(UNAUDITED)

	2008			2007
Cash Flows from Operating Activities
Net Loss	$	(1,582,693	)	$	(614,402	)
Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities
Depreciation, Amortization and Accretion		87,296			89,486
Loss on Sale of Other Real Estate		-			3,778
Provision for Loan Losses		244,923			-
Gains on Investment Securities		(3,507	)		-
Stock Compensation Expense		1,260			14,940
Change In
Loans Held for Sale		(1,236,199	)		-
Other Assets		(230,304	)		(1,367	)
Other Liabilities		332,406			35,946
Net Cash Used by Operating Activities		(2,386,818	)		(471,619	)
Cash Flows from Investing Activities
Purchases of Investment Securities Available for Sale		(4,838,593	)		(971,061	)
Purchases of Other Investments		(13,650	)		-
Proceeds from Sale of Other Investments		16,550			29,300
Proceeds from Maturities, Calls and Paydowns of Investment Securities Available for Sale		4,552,440			1,105,077
Net Change in Loans		(1,000,233	)		1,567,691
Proceeds from the Sale of Other Real Estate		-			62,453
Purchases of Premises and Equipment		(180,924	)		(7,109	)
Net Cash Provided (used) by Investing Activities		(1,464,410	)		1,786,351
Cash Flows from Financing Activities
Net Change in Deposits		8,539,220			(4,964,441	)
Proceeds from Borrowings		-			3,000,000
Proceeds from the Issuance of Common Stock, net		-			1,879,107
Redemption of Preferred Stock		-			(350,000	)
Net Cash Provided (Used) by Financing Activities		8,539,220			(435,334	)
Net Increase in Cash and Cash Equivalents		4,687,992			879,398
Cash and Cash Equivalents, Beginning		8,349,446			1,337,476
Cash and Cash Equivalents, Ending	$	13,037,438		$	2,216,874

See accompanying notes to consolidated financial statements.

7

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

First Century Bancorp. (the “Company”), a bank holding company, owns 100% of the outstanding common stock of First Century Bank, National Association (the “Bank”), which operates in the Gainesville, Georgia area.  The Company opened two loan production/deposit productions offices (LP/DP) in south Hall County and in Oconee-Clarke County during the second quarter to expand our geographic footprint to encompass key locations in the northern Georgia market.

The consolidated financial statements include the accounts of the Company and the Bank. All inter-company accounts and transactions have been eliminated in consolidation.

The accompanying financial statements have been prepared in accordance with the requirements for interim financial statements and, accordingly, they omit disclosures, which would substantially duplicate those contained in the most recent annual report to shareholders on Form 10-KSB.  The financial statements as of June 30, 2008 and 2007 are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation.  The results of operations for the quarter ended June 30, 2008 are not necessarily indicative of the results of a full year’s operations. The financial information as of December 31, 2007 has been derived from the audited financial statements as of that date.  For further information, refer to the financial statements and the notes included in the Company’s 2007 Form 10-KSB.

As reported in the accompanying consolidated financial statements, the Company has incurred a net loss of $970,736 and $1,582,693 for the three and six months ended June 30, 2008 respectively, and has an accumulated deficit of $9,142,566 as of June 30, 2008.  These conditions create an uncertainty about the Company’s ability to continue as a going concern.  Management of the Company has developed a capital plan to maintain minimum capital levels equal to or above those determined by regulatory authorities through the issuance of additional common stock in a private placement offering.  The ability of the Company to continue as a going concern is dependent on the success of the capital plan.  The unaudited financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.

RECENT ACCOUNTING PRONOUNCMENTS

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement establishes a fair value hierarchy about the assumptions used to measure fair value and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset. The standard is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective date of FAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company adopted Statement No. 157 effective January 1, 2008 which had no effect on the consolidated balance sheets or consolidated statements of operations.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. The standard provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The Company did not elect the fair value option for any financial assets or financial liabilities as of January 1, 2008, the effective date of the standard.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations”. The statement establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statement to evaluate the nature and financial effects of the business combination. SFAS No. 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008. Accordingly, any business combinations the Company engages in will be recorded and disclosed following existing generally accepted accounting principles until January 1, 2009. The Company expects SFAS No. 141R would have an impact on its consolidated financial statements when effective if it acquires another company, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions the Company consummates after the effective date.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements,” which provides guidance for accounting and reporting of non-controlling (minority) interests in consolidated financial statements. The statement is effective for fiscal years and interim periods within fiscal years beginning on or after December 15, 2008.  The Company does not hold minority interests in subsidiaries, therefore it is expected that SFAS No. 160 will have no impact on its financial condition or results of operations.

8

NOTE 2 – CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company has adopted various accounting policies, which govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements.  The Company’s significant accounting policies are described in the footnotes to the consolidated financial statements at December 31, 2007 as filed on our annual report on Form 10-KSB.

Certain accounting policies involve significant estimates and assumptions by the Company, which have a material impact on the carrying value of certain assets and liabilities.  The Company considers these accounting policies to be critical accounting policies.  The estimates and assumptions used are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the estimates and assumptions made, actual results could differ from these estimates and assumptions which could have a material impact on carrying values of assets and liabilities and results of operations.

The Company believes that the provision and allowance for loan losses and income taxes are critical accounting policies that require the most significant judgments and estimates used in preparation of its consolidated financial statements.  Refer to the portion of management’s discussion and analysis of financial condition and results of operations that addresses the provision for allowance for loan losses and income taxes for a description of the Company’s processes and methodology for determining the allowance for loan losses and income taxes.

NOTE 3 – STOCK COMPENSATION PLANS

The Company granted a total of 398,000 options to new employees during the quarter ended June 30, 2008.  These options have an exercise price of $2.00 per share, vest over a five year period and terminate ten years after the date of grant.  Total unrecognized compensation cost related to non-vested options granted as of June 30, 2008 was $290,436, and is expected to be expensed ratably over the remaining vesting periods of the stock options.   No options were granted during the six months ended June 30, 2007.

The fair value of each option granted was estimated on the date of grant using the Black-Scholes pricing model with the following assumptions used for grants:  expected volatility of 29 percent, risk-free interest rate of 3.98 percent, dividend yield of 0 percent, and expected life of 6.50 years using the “simplified method” described in SEC Staff Accounting Bulletin No. 110.

NOTE 4 – NET LOSS PER SHARE

Net loss per common share is based on the weighted average number of common shares outstanding during the period.  The effects of potential common shares outstanding, including warrants and options, are included in diluted earnings per share.  No common stock equivalents were considered in 2008 and 2007 as the effects of such would be anti-dilutive to the loss per share calculation.

9

NOTE 5 - LOANS

Activity in the allowance for loan losses for the six months ended June 30, 2008 and the twelve months ended December 31, 2007 is summarized as follows:

	2008			2007
Beginning Balance	$	275,920		$	445,629
Provision Charged to Operations		244,923			115,199
Loan Charge-Offs		(358,785	)		(335,175	)
Loan Recoveries		27,577			50,267
Ending Balance	$	189,635		$	275,920

The following is a summary of risk elements in the loan portfolio at June 30, 2008 and at December 31, 2007:

	2008			2007
Loans on Nonaccrual	$	374,859		$	850,774
Loans Past Due 90 Days and Still Accruing		-			-
Other Real Estate Owned and Repossessions		183,600			98,343
Total Nonperforming Assets	$	558,459		$	949,117
Total Nonperforming Assets as a Percentage of Gross Loans		2.80	%		4.92	%

A loan is placed on non-accrual status when, in management’s judgment, the collection of interest appears doubtful. As a result of management's ongoing review of the loan portfolio, loans are classified as non-accrual when management believes, after considering economic and business conditions and collection efforts, the borrower’s financial condition is such that collection of interest is doubtful. Generally, loans are placed on non-accrual status when principal or interest payments are past due for more than 90 days.  Exceptions are allowed for loans past due greater than 90 days when such loans are well secured and in process of collection.  Interest income that would have been reported on the non-accrual loans totaled $15,629 for the six months ended June 30, 2008 and totaled $34,151 for the twelve months ended December 31, 2007.

NOTE 6 – INCOME TAXES

The Company accounts for income taxes under the liability method.  Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.  Deferred tax assets are subject to management’s judgment based upon available evidence that future realization is more likely than not.  For financial reporting purposes, a valuation allowance of 100 percent of the deferred tax asset as of June 30, 2008 and December 31, 2007 has been recognized to offset the deferred tax assets related to cumulative temporary differences and tax loss carry-forwards.  If management determines that the Company may be able to realize all or part of the deferred tax asset in the future, a credit to income tax expense may be required to increase the recorded value of net deferred tax asset to the expected realizable amount.

NOTE 7 – REGULATORY MATTERS

The Company and the Bank are 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 consolidated financial statements.  Under certain adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines that involve quantitative measures of the assets, liabilities and certain off-balance sheet items, as calculated under regulatory accounting practices, must be met. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

10

The Bank’s actual ratios as of June 30, 2008 are as follows:

Tier 1 Capital (to risk-weighted assets)	7.91	%
Total Capital (to risk-weighted assets)	8.69	%
Tier 1 Capital (to total average assets)	4.95	%

On August 18, 2004, the Bank entered a formal written agreement with the OCC, which set forth a series of actions necessary to correct identified weaknesses.  On February 5, 2008 the OCC determined that the protection of the depositors, other customers and shareholders of the Bank as well as the Bank’s safe and sound operation did not require the continued existence of the agreement, and the OCC terminated the formal agreement.

NOTE 8 – FAIR VALUE DISCLOSURES

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157).  FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  FAS 157 has been applied prospectively as of the beginning of the year.

FAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  FAS 157 also establishes a fair value hierarchy which requires the use of observable inputs and minimizes the use of unobservable inputs with measuring fair value.  The standard describes three levels of input that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liabilities

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Available-for-sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.  Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities.  If quoted market prices are not available then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.  Level 2 securities include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities.  In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.  Currently, all of the Company’s securities are considered to be Level 2.

Following is a description of the valuation methodologies used for instruments measured at fair value on a non-recurring basis and recognized in the accompanying balance sheet, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Impaired Loans

Loan impairment is reported when full payment under the loan terms is not expected.  Impaired loans are carried at the present value of estimated future cash flows using the loan’s existing rate, or the fair value of collateral if the loan is collateral dependent.  A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance.  If these allocations cause the allowance for loan losses to require increase, such increase is reported as a component of the provision for loan losses.  Loan losses are charged against the allowance when management believes the uncollectablility of the loan is confirmed.  During the 2008 second quarter, certain impaired loans were partially charged off or re-evaluated resulting in a remaining balance for these loans, net of specific allowance, of $397,348 as of June 30, 2008.  This valuation would be considered Level 3, consisting of appraisals of underlying collateral and discount cash flow analysis.

Loans Held for Sale

Loans held for sale are reported at the lower of cost or fair value.  Fair value is determined based on the expected proceeds based on sales contracts and commitments and are considered Level 2 inputs.

11

Other Real Estate

Other real estate is reported at the lower of the loan carrying amount at foreclosure or fair value.  Fair value is based on third party or internally developed appraisals considering the assumptions in the valuation and are considered Level 2 or Level 3 inputs.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation

This discussion and analysis is intended to assist you in understanding our financial condition and results of operations.  You should read this commentary in conjunction with the financial statements and the related notes and the other statistical information included elsewhere in this report and in our 2007 Form 10-KSB,  as well as with an understanding of our short operating history.

Discussion of Forward-Looking Statements

This report contains “forward-looking statements” relating to, without limitation, future economic performance, plans and objectives of management for future operations, and projections of revenues and other financial items that are based on the beliefs of management, as well as assumptions made by and information currently available to management.  The words  “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements.  Our actual results may differ materially from the results discussed in the forward-looking statements, and our operating performance each quarter is subject to various risks and uncertainties that are discussed in detail in our filings with the Securities and Exchange Commission, including, without limitation:

· the effects of future economic conditions;

· governmental monetary and fiscal policies, as well as legislative and regulatory changes;

· changes in interest rates and their effect on the level and composition of deposits, loan demand, and the values of loan collateral, securities and other interest-sensitive assets and liabilities;

· our ability to control costs, expenses, and loan delinquency rates;

· changes occurring in business conditions and inflation;

· changes in technology;

· changes in deposit flows;

· the level of allowance for loan loss;

· adverse changes in asset quality and resulting credit risk-related losses and expenses;

· the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market area and elsewhere, including institutions operating regionally, nationally, and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet;

· loss of consumer confidence and economic disruptions resulting from terrorist activities;

· changes in securities markets; and

· other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission.

Forward-looking statements speak only as of the date on which they are made.   We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made to reflect the occurrence of unanticipated events.

12

General

First Century Bancorp. (the “Company”) opened for business through its banking subsidiary, First Century Bank, National Association (the “Bank”), on March 25, 2002.

The following discussion describes our results of operations for the three months and six months ended June 30, 2008 as compared to the same periods ended June 30, 2007 and also analyzes our financial condition at June 30, 2008 compared to December 31, 2007.  Like most community banks, we derive a significant portion of our income from interest we receive on our loans and investments.  Our primary sources of funds for making these loans and investments are our deposits and borrowings, on which we pay interest.  Consequently, one of the key measures of our success is our amount of net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits and borrowings.  Another key measure is the spread between the yield we earn on these interest-earning assets and the rate we pay on our interest-bearing liabilities.

Of course, there are risks inherent in all loans, so we maintain an allowance for loan losses to absorb probable losses on existing loans that may become uncollectible.  We establish and maintain this allowance by charging a provision for loan losses against our operating earnings.  In the “Provision and Allowance for Loan Losses” section we have included a detailed discussion of this process.

In addition to earning interest on our loans and investments, we earn income through fees and other expenses we charge to our customers.  We describe the various components of this non-interest income, as well as our non-interest expense, in the following discussion.

The following discussion and analysis also identifies significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements.  We encourage you to read this discussion and analysis in conjunction with the financial statements and the related notes and the other statistical information also included herein.

Critical Accounting Policies

We have adopted various accounting policies, which govern the application of accounting principles generally accepted in the United States of America, in the preparation of our consolidated financial statements.  Our significant accounting policies are described in Note 1 in the footnotes to the consolidated financial statements at December 31, 2007 included in the Company’s 2007 Form 10-KSB.  Critical accounting policies are dependent on estimates that are particularly susceptible to significant changes.  We believe that the allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation of our financial statements.  

Allowance for Loan Losses

The allowance for loan losses represents management’s best estimate of the losses known and inherent in the loan portfolio that are both probable and reasonable to estimate, based on, among other factors, prior loss experience, volume and type of lending conducted, estimated value of any underlying collateral, economic conditions (particularly as such conditions relate to the Bank’s market area), regulatory guidance, peer statistics, management’s judgment, past due loans in the loan portfolio, loan charge off experience and concentrations of risk (if any).  Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant estimates, assumptions, and judgments.  The loan portfolio also represents the largest asset type on the consolidated balance sheets.

The evaluation of the adequacy of the allowance for loan losses is based upon loan categories except for delinquent loans and loans for which management has knowledge about possible credit problems of the borrower or knowledge of problems with loan collateral, which are evaluated separately and assigned loss amounts based upon the evaluation.  Loss ratios are applied to each category of loan other than commercial loans, where the loans are further divided by risk rating, and loss ratios are applied by risk rating, to determine estimated loss amounts.  Categories of loans are real estate loans (including mortgage and construction), consumer loans, and commercial loans.

Management has significant discretion in making the judgments inherent in the determination of the provision and allowance for loan losses, including in connection with the valuation of collateral and the financial condition of the borrower, and in establishing loss ratios and risk ratings.  The establishment of allowance factors is a continuing exercise and allowance factors may change over time, resulting in an increase or decrease in the amount of the provision or allowance based upon the same volume and classification of loans.

Changes in allowance factors or in management's interpretation of those factors will have a direct impact on the amount of the provision, and a corresponding effect on income and assets. Also, errors in management’s perception and assessment of the allowance factors could result in the allowance not being adequate to cover losses in the portfolio and may result in additional provisions or charge-offs, which would adversely affect income and capital. For additional information regarding the allowance for loan losses, see the “Provision and Allowance for Loan Losses” section below.

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Income Taxes

Accounting for income taxes is another critical accounting policy because it requires significant estimates, assumptions, and judgments. Income taxes are accounted for using the asset and liability method.  Under this method, deferred tax assets or liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  The determination of current and deferred taxes is based on complex analyses of many factors including interpretation of federal and state income tax laws, the difference between tax and financial reporting basis assets and liabilities (temporary differences), estimates of amounts due or owed such as the reversals of temporary differences, and current financial accounting standards.  Actual results could differ significantly from the estimates and interpretations used in determining current and deferred taxes.

Our ability to realize a deferred tax benefit as a result of net operating losses will depend upon whether we have sufficient taxable income of an appropriate character in the carry-forward periods.  We then establish a valuation allowance to reduce the deferred tax asset to the level that it is “more likely than not” that we will realize the tax benefit.

Termination of Formal Agreement

On August 18, 2004, the Bank entered a formal written agreement with the OCC, which set forth a series of actions necessary to correct identified weaknesses.  On February 5, 2008 the OCC determined that the protection of the depositors, other customers and shareholders of the Bank as well as the Bank’s safe and sound operation did not require the continued existence of the agreement, and the OCC terminated the formal agreement.

Results of Operations

Three and Six Months Ended June 30, 2008 and 2007

The net loss for the three months ended June 30, 2008 of $970,736 increased $621,470 or 178%, from $349,266 in the second quarter of 2007.  A net loss of $1,582,693 was incurred for the first six months of 2008 as compared to a net loss of $614,402 for the same period in 2007 resulting in an increase of $968,291 or 158%.  Our operational results depend to a large degree on three factors: our net interest income, our provision for loan losses, and our non-interest expenses.  Net interest income is the difference between the interest income received on investments (such as loans, investment securities, and federal funds sold) and the interest expense on deposit liabilities and borrowings.  Net interest income after provision for loan losses declined $350,843 to $73,173 for the six months ended June 30, 2008 compared to $423,980 for the same period in 2007.  Net interest income after provision for loan losses declined $262,903, or 121% to $(46,361) for the quarter ended June 30, 2008 compared to $216,542 for the quarter ended June 30, 2007.  This decrease was due to a lower volume of loan demand during the last twelve months, a large provision for loan losses, and is part of an ongoing effort by management to reduce classified and criticized loans by payoff or by their exit from the Bank.  This decrease was also due to interest foregone on classified loans being placed in a non-earning status.

Provision for Loan Losses

The provision for loan losses for the second quarter of 2008 was $244,923 compared to $0 for the same period in 2007.  Management considers the current allowance for loan losses to be adequate to sustain any estimated or potential losses based on the Bank’s internal analysis and on external credit review examinations conducted by regulatory authorities and by third-party review services.  The Bank continues to demonstrate improvement in the credit quality of the Bank’s loan portfolio and management’s efforts to identify and reduce criticized and classified loans.  The allowance for loan loss was $189,635 (.95% of total gross loans) at June 30, 2008 compared to $293,726 (1.58% of total gross loans) at June 30, 2007 and $275,920 (1.43% of total gross loans) at December 31, 2007.  See “Provision and Allowance for Loan Losses” below for further discussion.

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Non-interest Income and Expense

The Bank has experienced significant growth in the first six months of 2008 due to several initiatives established and implemented during the time period, including the opening of Century Point Mortgage, a division of First Century Bank, and two Loan Production offices in Oakwood, Georgia and Athens, Georgia.  All these divisions were initiated due to favorable market conditions and the Bank’s ability to attract and hire experienced Bankers to lead these new divisions.

Non-interest income reported below includes service charges on deposit accounts, customer service fees, mortgage origination fee income and investment security gains (losses).  Total non-interest income for the quarter ended June 30, 2008 grew to $171,812 compared to $15,725 for the quarter ended June 30, 2007.  For the six months ending June 30, 2008 income grew to $209,251 compared to $35,044 for the same six months ending June 30, 2007, an increase of $174,207, or 497%.  The increase in non-interest income for the first six months of 2008 was primarily due to an increase in fees earned on mortgage origination, due to the establishment of the mortgage division near the end of 2007.

In furtherance of the growth initiatives the Bank hired a team of talented individuals in the Bank’s respective markets based on mergers and acquisitions occurring within the banking industry in the spring of 2008.  The Bank has hired four (4) Divisional Presidents, six (6) key lending personnel, and seven (7) Mortgage origination/support staff since June 30, 2007.  The salary and benefit expense of this additional staff hired to drive our growth initiatives constitute the majority of the increase of the non-interest expense from 2007 to 2008.  Total non-interest expense for the quarter ended June 30, 2008 was $1,096,187 as compared to $581,533 for the quarter ended June 30, 2007.  For the six months ending June 30, 2008 the non-interest expense was $1,865,081 as compared to $1,073,426 for the six months ended June 30, 2007, an increase of $791,655 or 74%.  Salaries and benefits, the largest component of non-interest expense, was $941,924 for the first six months ended June 30, 2008 compared to $515,982 for the same period a year ago.

The Bank’s growth initiative has included the opening of three strategic locations in the first six months of 2008.  Total occupancy and equipment expense was $135,499 for the quarter ended June 30, 2008 compared to $87,349 for the same period a year ago and totaled $249,956 for the first six months ended June 30, 2008 compared to $173,281 for the same period in 2007.  Total occupancy expense for the second quarter of 2008 was higher than the second quarter of 2007 due to the addition of the online mortgage division and the two LP/DP offices.  Telephone expense and office supply expense also increased during the respective time periods due to the establishment of these new locations. The specifics of each location are detailed as follows.

In February 2008 the Bank opened an online mortgage division in Atlanta doing business as Century Point Mortgage. The online mortgage division leased 3,477 square feet of space at 1455 Lincoln Parkway, Suite 250, Atlanta, Georgia.  The portion of the increase in occupancy expense attributable to the online mortgage division was $38,857 for the six month period ended June 30, 2008.

In May 2008 the Bank opened an Oakwood LP/DP office in south Hall County, Georgia.  The Bank has leased 1,800 square feet of space at 3715 Mundy Mill Road, Suite A, Oakwood, Georgia for twelve months at $2,175 per month. The portion of the increase in occupancy expense attributable to the Oakwood LP/DP was $14,247 for the six month period ended June 30, 2008.

In June 2008 the Bank opened an Athens LP/DP office in Oconee-Clarke County.  The Bank has leased 1,600 square feet of space at 1551 Jennings Mill Road, Suite 1600A, Bogart, Georgia for twelve months at $1,100 per month.  The portion of the increase in occupancy expense attributable to the Athens LP/DP was $1,224 for the six month period ended June 30, 2008.

Professional fees totaled $108,035 for the quarter ended June 30, 2008, compared to $114,843 for the quarter ended June 30, 2007 and totaled $208,247 for the first six months of 2008 compared to $161,207 for the first six months of 2007.  The $47,040 increase was due to several initiatives including consulting fees related to the creation and development of the Century Point Mortgage website, network support and security protection for the new offices, and legal and accounting fees related to the timing of annual filings.

Marketing expense totaled $72,045 for the quarter ended June 30, 2008, compared to $14,265 for the quarter ended June 30, 2007 and totaled $103,798 for the six month period ended June 30, 2008 compared to $22,775 for the same period in 2007.  The increase in marketing expense was primarily attributable to Century Point Mortgage internet advertising.  A significant portion of this division’s business model is to generate leads through the employment of internet based rate tables and search engines.

The Bank has entered into a Data Processing contract to move its processing from Fidelity to Providence, the internal data processing system provided by First Covenant Bank.  This change will enable First Century to decrease its costs and increase its flexibility in data processing.  Data processing expense totaled $75,893 for the quarter ended June 30, 2008 compared to $33,440 for the quarter ended June 30, 2007 and totaled $110,672 for the period ended June 30, 2008 compared to $66,057 for the same period in 2007.  The increase was primarily due to a contract termination fee of $41,662 assessed by the Fidelity Information Systems, the Bank’s current data processing host.

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Other loan related expenses totaled $44,314 for the quarter ended June 30, 2008, compared to $12,163 for the quarter ended June 30, 20007 and totaled $58,903 for the six month period ended June 30, 2008 compared to $17,217 for the same period in 2007.  The increase is primarily related to higher collection expenses and maintaining and selling foreclosed properties owned by the Bank.

The following table shows the components of noninterest expense for the three months and six months ended June 30, 2008 and 2007:

(Dollars in thousands)(Unaudited)

	Three Months Ended				Six Months Ended
	2008		2007		2008		2007
Salaries and employee benefits	$	553,541	$	258,310	$	941,924	$	515,982
Occupancy expenses		135,499		87,349		249,956		173,281
Professional fees		108,035		114,843		208,247		161,207
Marketing		72,045		14,265		103,798		22,775
Business Development		4,116		3,649		6,119		5,345
Data Processing		75,893		33,440		110,672		66,057
Telephone		17,125		6,669		29,923		13,395
Postage/Freight		6,365		3,855		12,251		6,969
Courier		4,247		4,062		8,200		7,766
Insurance, Tax & Assessment		31,865		22,510		67,079		45,582
Office Supplies		21,622		7,698		35,602		13,154
Travel and Training		4,469		1,778		5,616		2,658
Other Loan Related Expense		44,314		12,163		58,903		17,217
Other		17,051		10,942		26,791		22,038
Total noninterest expense		1,096,187		581,533		1,865,081		1,073,426

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The following table shows the components of noninterest expense incurred for six months ended June 30, 2008 attributable to the growth of the Company:

										New Branches Opened in 2008
	June, 30 2007		June30, 2008		Increase / (Decrease)		Bank & Parent Increase / (Decrease)			Oakwood		Athens		Century Point		SBA		Consolidated
Salaries and employee benefits	$	515,982	$	941,924	$	425,942	$	62,047		$	86,904	$	21,074	$	248,035	$	7,882	$	363,895
Occupancy expenses		173,281		249,956		76,675		(5,949	)		14,247		1,224		38,857		28,296	$	82,624
Professional fees		161,207		208,247		47,040		23,861			5,468		-		16,800		911	$	23,179
Marketing		22,775		103,798		81,023		(4,676	)		-		-		85,699		-	$	85,699
Business Development		5,345		6,119		774		(1,724	)		62		-		2,248		188	$	2,498
Data Processing		66,057		110,672		44,615		44,615			-		-		-		-		-
Telephone		13,395		29,923		16,528		814			1,736		-		6,374		7,604	$	15,714
Postage/Freight		6,969		12,251		5,282		1,792			57		-		3,307		126	$	3,490
Courier		7,766		8,200		434		434			-		-		-		-		-
Insurance, Tax & Assessment		45,582		67,079		21,497		19,512			-		-		1,233		752	$	1,985
Office Supplies		13,154		35,602		22,448		15,001			932		102		3,800		2,613	$	7,447
Travel and Training		2,658		5,616		2,958		1,222			383		238		1,115		-	$	1,736
Other Loan Related Expense		17,217		58,903		41,686		33,681			461		-		7,517		27	$	8,005
Other		22,038		26,791		4,753		(2,343	)		193		-		2,953		3,950	$	7,096
Total noninterest expense	$	1,073,426	$	1,865,081	$	791,655	$	188,287		$	110,443	$	22,638	$	417,938	$	52,349	$	603,368

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Interest Rate Sensitivity and Asset Liability Management

Interest rate sensitivity measures the timing and magnitude of the re-pricing of assets compared with the re-pricing of liabilities and is an important part of asset/liability management of a financial institution.  The objective of interest rate sensitivity management is to generate stable growth in net interest income, and to control the risks associated with interest rate movements.  Management constantly reviews interest rate risk exposure and the expected interest rate environment so that adjustments in interest rate sensitivity can be timely made.  Since the assets and liabilities of a bank are primarily monetary in nature (payable in fixed, determinable amounts), the performance of a bank is affected more by changes in interest rates than by inflation.  Interest rates generally increase as the rate of inflation increases, but the magnitude of the change in rates may not be the same.

Net interest income is the primary component of net income for financial institutions.  Net interest income is affected by the timing and magnitude of re-pricing of as well as the mix of interest sensitive and non-interest sensitive assets and liabilities.  “Gap” is a static measurement of the difference between the contractual maturities or re-pricing dates of interest sensitive assets and interest sensitive liabilities within the following twelve months.  Gap is an attempt to predict the behavior of the Bank’s net interest income in general terms during periods of movement in interest rates.  In general, if the Bank is liability sensitive, more of its interest sensitive liabilities are expected to re-price within twelve months than its interest sensitive assets over the same period.  In a rising interest rate environment, liabilities re-pricing more quickly is expected to decrease net interest income.  Alternatively, decreasing interest rates would be expected to have the opposite effect on net interest income since liabilities would theoretically be re-pricing at lower interest rates more quickly than interest sensitive assets.  Although it can be used as a general predictor, Gap as a predictor of movements in net interest income has limitations due to the static nature of its definition and due to its inherent assumption that all assets will re-price immediately and fully at the contractually designated time.  At June 30, 2008, the Bank, as measured by Gap, is in a liability sensitive position within one year.  Management has several tools available to it to evaluate and affect interest rate risk, including deposit pricing policies and changes in the mix of various types of assets and liabilities.

Provision and Allowance for Loan Losses

The allowance for loan losses was $189,635 and $275,920 as of June 30, 2008 and December 31, 2007, respectively.

In general, loans do not begin to show signs of credit deterioration or default until they have been outstanding for some period of time, a process we refer to as “seasoning.”  As a result, a portfolio of older loans will usually behave more predictably than a newer portfolio.  Because our loan portfolio is relatively new, the current level of delinquencies and defaults may not be representative of the level that will prevail when the portfolio becomes more seasoned, which may be higher than current levels.There are risks inherent in making all loans, including risks with respect to the period of time over which loans may be repaid, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers, and, in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral.  We anticipate maintaining an allowance for loan losses based on, among other things, historical experience, an evaluation of economic conditions, and regular reviews of delinquencies and loan portfolio quality.  Our judgment about the adequacy of the allowance is based upon a number of assumptions about future events, which we believe to be reasonable, but which may not prove to be accurate.  Thus, there is a risk that charge-offs in future periods could exceed the allowance for loan losses or that substantial additional increases in the allowance for loan losses could be required.  Our loan loss reserve methodology incorporates any anticipated write-downs and charge-offs in all problem loans identified by management, credit review services and regulatory authorities.  We consider the current allowance for loan losses to be adequate to sustain any estimated or potential losses based on the Bank’s internal analysis and on credit review examinations conducted by regulatory authorities and third-party review services.  

Activity in the allowance for loan losses for the six months ended June 30, 2008 and the twelve months ended December 31, 2007 is summarized as follows:

	2008			2007
Beginning Balance	$	275,920		$	445,629
Provision Charged to Operations		244,923			115,199
Loan Charge-Offs		(358,785	)		(335,175	)
Loan Recoveries		27,577			50,267
Ending Balance	$	189,635		$	275,920

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The following is a summary of risk elements in the loan portfolio at June 30, 2008 and at December 31, 2007:

	2008			2007
Loans on Nonaccrual	$	374,859		$	850,774
Loans Past Due 90 Days and Still Accruing		-			-
Other Real Estate Owned and Repossessions		183,600			98,343
Total Nonperforming Assets	$	558,459		$	949,117
Total Nonperforming Assets as a Percentage of Gross Loans		2.80	%		4.92	%

A loan is placed on non-accrual status when, in management’s judgment, the collection of interest appears doubtful. As a result of management’s ongoing review of the loan portfolio, loans are classified as non-accrual when management believes, after considering economic and business conditions and collection efforts, the borrower’s financial condition is such that collection of interest is doubtful. Generally, loans are placed on non-accrual status when principal or interest payments are past due for more than 90 days.  Exceptions are allowed for loans past due greater than 90 days when such loans are well secured and in process of collection.  Interest income that would have been reported on the non-accrual loans totaled $15,629 for the six months ended June 30, 2008 and totaled $34,151 for the twelve months ended December 31, 2007.

Financial Condition

Total assets increased $7,269,078, or 19%, from December 31, 2007 to June 30, 2008.  The sources of the increase were in Cash and Due from Banks and Federal Funds Sold, which increased by $2,012,992, or 95%, and $2,675,000, or 43%, respectively.  Gross loans increased $583,768, or 3%, over the first six months of 2008.  Total deposits increased by $8,539,220, or 28%, from December 31, 2007 to June 30, 2008 with a $1,187,876, or 76%, increase in non-interest bearing accounts (core deposits).  Total shareholders’ equity decreased from $3,493,688 at December 31, 2007 to $1,891,140 at June 30, 2008.  This decrease primarily was attributable to the $1,582,693 net loss for the six months ended June 30, 2008.

Loans

Gross loans totaled approximately $19,888,869 at June 30, 2008, an increase of $583,768, or 3% since December 31, 2007.  This increase was due to the addition in LP/DP offices in Oakwood and Athens loan production.  Balances within the major loans receivable categories as of June 30, 2008 and December 31, 2007 are as follows (amounts presented in thousands).

	June 30, 2008					December 31, 2007
	Amount		Percent of loans in each category to total loans			Amount		Percent of loans in each category to total loans
Commercial, financial and agricultural	$	7,595		38	%	$	3,339		17	%
Real estate - mortgage		7,790		39	%		13,865		72	%
Real estate - construction		2,871		14	%		509		3	%
Consumer		1,633		9	%		1,592		8	%
	$	19,889		100	%	$	19,305		100	%

Deposits

Total deposits as of June 30, 2008 and December 31, 2007 were approximately $39,545,000 and $31,006,000, respectively.  This increase was primarily due to the purchase of approximately $8,173,000 of brokered deposits.

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Balances within the major deposit categories as of June 30, 2008 and December 31, 2007 are as follows (amounts presented in thousands):

	June 30, 2008					December 31, 2007
	Amount		Rate			Amount		Rate
Non-interest-bearing demand deposits	$	2,754		N/A		$	1,567		N/A
Interest-bearing demand deposits		1,060		2.45	%		1,296		3.01	%
Savings deposits		3,923		2.86	%		1,185		1.24	%
Time deposits		28,949		5.00	%		26,152		5.16	%
Time deposits over $100,000		2,859		1.64	%		806		5.32	%
	$	39,545				$	31,006

Capital Resources

Total shareholders’ equity decreased from $3,493,688 at December 31, 2007 to $1,891,140 at June 30, 2008.  This decrease was primarily attributable to the $1,582,693 net loss for the six months ended June 30, 2008.

Bank holding companies and their banking subsidiaries are required by banking regulators to meet specific minimum levels of capital adequacy, which are expressed in the form of ratios.  The Federal Reserve guidelines contain an exemption from the capital requirements for “small bank holding companies,” which in 2006 was amended to cover most bank holding companies with less than $500 million in total assets that do not have a material amount of debt or equity securities outstanding registered with the SEC.  Although our class of common stock is registered under Section 12 of the Securities Exchange Act, we believe that because our stock is not listed on any exchange or otherwise actively traded, the Federal Reserve Board will interpret its new guidelines to mean that we qualify as a small bank holding company.  Nevertheless, the Bank remains subject to capital requirements.  Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on the bank’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.  The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Capital is separated into Tier 1 Capital (essentially common shareholders' equity less intangible assets) and Tier 2 Capital (essentially the allowance for loan losses limited to 1.25% of risk-weighted assets).  The first two ratios, which are based on the degree of credit risk in our assets, provide for the weighting of assets based on assigned risk factors and include off-balance sheet items such as loan commitments and stand-by letters of credit.  The ratio of Tier 1 Capital to risk-weighted assets must be at least 4.0% and the ratio of Total Capital (Tier 1 Capital plus Tier 2 Capital) to risk-weighted assets must be at least 8.0%.

Banks and bank holding companies are also required to maintain a minimum ratio of Tier 1 Capital to adjusted quarterly average total assets of 4.0%.

The following table summarizes the Bank’s risk-based capital ratios at June 30, 2008:

Tier 1 Capital (to risk-weighted assets)	7.91	%
Total Capital (to risk-weighted assets)	8.69	%
Tier 1 Capital (to total average assets)	4.95	%

We are pursuing a private offering of shares of our common stock, no par value per share to qualified institutional buyers and “accredited investors” (as such terms is defined under Rule 501(a) of the Securities Act of 1933, as amended (the “Act”).  The net proceeds of the offering are expected to be up to approximately $23,450,000.  We anticipate using the net proceeds for working capital purposes, including the possible redemption of preferred stock.  We have not entered into any definitive agreement with potential investors with respect to the offering of common stock.  There is no minimum number of shares which must be sold in order for us to accept subscriptions in the offering, and no assurance can be given as to whether, or on what terms we will be able to consummate the proposed offering.  The common stock to be sold in the offering has not been registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Regulatory Matters

From time to time, various bills are introduced in the United States Congress with respect to the regulation of financial institutions.  Certain of these proposals, if adopted, could significantly change the regulation of banks and the financial services industry.  We cannot predict whether any of these proposals will be adopted or, if adopted, how these proposals would affect us.

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Liquidity

The Bank must maintain, on a daily basis, sufficient funds to cover the withdrawals from depositors’ accounts and to supply new borrowers with funds.  To meet these obligations, the Bank keeps cash on hand, maintains account balances with its correspondent banks, and purchases and sells federal funds and other short-term investments.  Asset and liability maturities are monitored in an attempt to match the maturities to meet liquidity needs.  It is the policy of the Bank to monitor its liquidity to meet regulatory requirements and our local funding requirements.  

As of June 30, 2008 the Bank has $13,037,438 in cash and cash equivalents as well as $8,672,749 in investment securities available-for-sale to fund its operations and loan growth.  The Bank also maintains relationships with correspondent banks that can provide funds to it on short notice, if needed.  Presently, the Bank has arrangements with commercial banks for short-term unsecured advances up to $2,000,000.  At June 30, 2008 there were no advances on these lines. The Bank has borrowing capacity through its membership in the Federal Home Loan Bank of Atlanta (“FHLB”) subject to the availability of investment securities to pledge as collateral.  As of June 30, 2008, the Bank had advances outstanding of $4,000,000.

Off-Balance Sheet Arrangements

We are a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers.  These financial instruments consist of commitments to extend credit and standby letters of credit.  Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Standby letters of credit are written conditional commitments issued by the bank to guarantee the performance of a customer to a third party.  Those guarantees are primarily issued to support public and private borrowing arrangements.  Most letters of credit extend for less than one year.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  A commitment involves, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets.  Our exposure to credit loss in the event of nonperformance by the other party to the instrument is represented by the contractual notional amount of the instrument.

Since certain commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  We use the same credit policies in making commitments to extend credit as we do for on-balance-sheet instruments.  Collateral held for commitments to extend credit varies but may include unimproved and improved real estate, certificates of deposit or personal property.

The following table summarizes our off-balance-sheet financial instruments whose contract amounts represent credit risk as of June 30, 2008:

Commitments to extend credit	$	3,059,000
Stand-by letters of credit	$	105,000

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Not applicable.

Item 4. Controls and Procedures

As of the end of the period covered by this report we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e).

Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our current disclosure controls and procedures are effective as of June 30, 2008.  There have been no significant changes in our internal controls over financial reporting during the fiscal quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

21

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings

On May 19, 2008, Fairfield Financial Services, Inc. (“Fairfield”) filed a complaint against Plant A Seed, L.L.C., Mark L. Jennings, Zach W. McLeroy, Stephen C. Rogers, James R. Finerty and Starke V. Hudson in the Superior Court of Gwinnett County, Georgia.  Fairfield alleges claims of breach of contract under the notes and guaranties related to two real estate loans made to Plant A Seed, L.L.C.   The aggregate amount of the loans made to Plant A Seed, L.L.C. was approximately $27,000,000.  The Bank participated in the loans and as of June 30, 2008, the current balance of the Bank’s portion of such loans was approximately $375,000.  Fairfield is currently pursuing the claims on behalf of the lenders.

We are not a party to any other material legal proceedings, nor are there any other material proceedings known to us to be contemplated by any governmental authority.  Additionally, we are not aware of any material proceedings, pending or contemplated, in which any of our directors, officers or affiliates, or any principal security holder or any associate of any of the foregoing, is a party or has an interest adverse to us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits

31.1 Rule 13a-14(a) Certification of the Principal Executive Officer.

31.2 Rule 13a-14(a) Certification of the Principal Financial Officer.

32. Section 1350 Certifications.

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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.

		/S/ FIRST CENTURY BANCORP.
		(Registrant)
Date: August 20, 2008	By:	/S/ R. WILLIAM R. BLANTON
		William R. Blanton
		Principal Executive Officer
Date: August 20, 2008	By:	/S/ SONDRA J. PERKINS
		Sondra J. Perkins
		Principal Financial and Accounting Officer

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FIRST CENTURY BANCORP.

EXHIBIT INDEX

Exhibit

Number Description

31.1 Rule 13a-14(a) Certification of the Principal Executive Officer.

31.2 Rule 13a-14(a) Certification of the Principal Financial Officer.

32 Section 1350 Certifications.

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