AGREEMENT AND PLAN OF REORGANIZATION AND MERGER

Exhibit 99.2

AGREEMENT AND PLAN

OF REORGANIZATION AND MERGER

BY AND BETWEEN

GATEWAY FINANCIAL HOLDINGS, INC.

AND

THE BANK OF RICHMOND, N.A.

January 10, 2007

AGREEMENT AND PLAN

OF REORGANIZATION AND MERGER

BY AND BETWEEN

GATEWAY FINANCIAL HOLDINGS, INC.

AND

THE BANK OF RICHMOND, N.A.

      THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (hereinafter called “Agreement”) entered into as of the 10th day of January 2007, by and between GATEWAY FINANCIAL HOLDINGS, INC. (“Financial Holdings”) and THE BANK OF RICHMOND, N.A. (“Bank of Richmond”).

      WHEREAS , Gateway Bank & Trust Co. (“Gateway Bank”) is a North Carolina commercial bank with its principal office and place of business located in Elizabeth City, North Carolina; and,

      WHEREAS , Financial Holdings is a North Carolina corporation with its principal office and place of business located in Virginia Beach, Virginia and is the owner of all the outstanding shares of common stock of Gateway Bank; and,

      WHEREAS , Bank of Richmond is a National Bank with its principal office and place of business located in Richmond, Virginia; and,

      WHEREAS , Financial Holdings and Bank of Richmond have agreed that it is in their mutual best interests and in the best interests of their respective shareholders for Financial Holdings to acquire the Bank of Richmond and for each of the outstanding shares of Bank of Richmond’s common stock to be exchanged for either cash or shares of Financial Holdings’ common stock, all in the manner and upon the terms and conditions contained in this Agreement; and,

      WHEREAS , to effectuate the foregoing, Financial Holdings and Bank of Richmond desire to adopt this Agreement as a plan of reorganization in accordance with the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”); and,

      WHEREAS , the respective Boards of Directors of Bank of Richmond and Financial Holdings have determined that it is in the best interests of their companies and their shareholders to consummate the transactions provided for herein.

      NOW, THEREFORE , in consideration of the premises, the mutual benefits to be derived from this Agreement, and of the representations, warranties, conditions, covenants, and promises herein contained, and subject to the terms and conditions hereof, Bank of Richmond and Financial Holdings hereby mutually agree as follows:

ARTICLE I
THE MERGER

      1.01. Names Of Merging Corporations . The names of the corporations proposed to be merged are “The Bank of Richmond, N.A.” and “Gateway Bank & Trust Co.”

      1.02. Nature of Transaction; Plan of Merger . Subject to the provisions of this Agreement, at the “Effective Time” (as defined in Paragraph 1.07 below), the Bank of Richmond will be merged with and into Gateway Bank (the “Merger”) as provided in the plan of merger (the “Plan of Merger”) attached as Exhibit A to this Agreement.

      1.03. Effect of Merger; Surviving Corporation . At the Effective Time, and by reason of the Merger, the separate corporate existence of the Bank of Richmond shall cease while the corporate existence of Gateway Bank as the surviving corporation in the Merger shall continue with all of its purposes, objects, rights, privileges, powers and franchises, all of which shall be unaffected and unimpaired by the Merger. Following the Merger, Gateway Bank shall continue to operate as a North Carolina banking corporation and will conduct its business at its then legally established branches and main office. The duration of the corporate existence of Gateway Bank, as the surviving corporation, shall be perpetual and unlimited.

      1.04. Assets and Liabilities of the Bank of Richmond . At the Effective Time, and by reason of the Merger, and in accordance with applicable law, all of the property, assets and rights of every kind and character of the Bank of Richmond (including without limitation all real, personal or mixed property, all debts due on whatever account, all other choses in action and every other interest of or belonging to or due to the Bank of Richmond, whether tangible or intangible) shall be transferred to and vest in Gateway Bank, and Gateway Bank shall succeed to all the rights, privileges, immunities, powers, purposes and franchises of a public or private nature of the Bank of Richmond (including all trust and other fiduciary properties, powers and rights), all without any transfer, conveyance, assignment or further act or deed; and, Gateway Bank shall become responsible for all of the liabilities, duties and obligations of every kind, nature and description of the Bank of Richmond (including duties as trustee or fiduciary) as of the Effective Time.

      1.05. Conversion and Exchange of Stock .

      (a)  Merger Consideration . Except as otherwise provided in this Agreement, at the Effective Time, all rights of the Bank of Richmond’s shareholders with respect to all outstanding shares of the Bank of Richmond’s $4.00 par value common stock (the “Bank of Richmond Common Stock”) shall cease to exist and, as consideration for and to effect the Merger, each such outstanding share shall be converted, without any action by Financial Holdings, Bank of Richmond or any Bank of Richmond shareholder, into the right to receive either: (i) cash in the amount of $30.05 (the “Cash Consideration”); or (ii) a number of shares of Financial Holdings’ no par value common stock (“Financial Holdings Common Stock”) equal to the Exchange Ratio as defined in Paragraph 1.05(b) (the “Stock Consideration”). The Cash Consideration and the Stock Consideration, collectively and in the aggregate, shall be referred to herein as the “Merger Consideration.” No share of Bank of Richmond Common Stock, other than shares as to which the holders thereof have validly exercised Dissenters’ Rights (as defined in Paragraph 1.05(i)), shall be deemed to be outstanding or have any rights other than those set forth in this Paragraph 1.05(a) after the Effective Time.

      (b)  Stock Consideration Exchange Ratio . Should the Holdings Average Price (as defined below) be equal to or greater than $12.83 or equal to or less than $15.69, then the Exchange Ratio shall be equal to $30.05 divided by the Holdings Average Price, rounded to five decimal places. However, should the Holdings Average Price be less than $12.83, the Exchange Ratio will be 2.34217 and should the Holdings Average Price be greater than $15.69, then the Exchange Ratio will be 1.91523. For purposes of this Paragraph 1.05(b), “Holdings Average Price” shall mean the average of the closing price per share of Financial Holdings Common Stock as reported on the Nasdaq Global Market for the ten (10) consecutive trading days on which there is an actual trade ending two trading days prior to the date of the approval order of the Merger by the Board of Governors of the Federal Reserve System or the North Carolina Banking Commission, whichever is later.

      (c)  Election of Form of Merger Consideration . Subject to the limitations described in this Agreement, each Bank of Richmond shareholder shall have the right to elect the following forms of Merger Consideration into which his or her shares of Bank of Richmond Common Stock will be converted: (i) all Cash Consideration, (ii) all Stock Consideration, or (iii) a combination of Cash Consideration and Stock Consideration (allocated in accordance with whole shares of Bank of Richmond Common Stock). Each shareholder’s election must be made in writing in a form prescribed by Financial Holdings (an “Election of Consideration”). Financial Holdings shall forward the Election of Consideration to all Bank of Richmond shareholders at a reasonable date prior to the Bank of Richmond Shareholders Meeting (as such term is defined in Paragraph 4.01(b) hereof). To be valid, an Election of Consideration must be signed by the shareholder and delivered to Financial Holdings (or its transfer agent) within 10 business days following the Bank of Richmond Shareholders Meeting, or such other time and date as Bank of Richmond and Financial Holdings may mutually agree. Shareholders of Bank of Richmond

who do not return a properly completed Election of Consideration, or whose Elections of Consideration are received by Financial Holdings after the time prescribed, will be deemed to have made no election (“Non-Election”). Financial Holdings shall have the discretion, which it may delegate in whole or in part to its transfer agent (“Exchange Agent”), to determine whether the Elections of Consideration have been properly completed, signed and submitted or changed or revoked and to disregard immaterial defects in Elections of Consideration. The decision of Financial Holdings (or its Exchange Agent) in such matters shall be conclusive and binding and without any liability whatsoever to Bank of Richmond. Neither Financial Holdings nor its Exchange Agent will be under any obligation to notify any person of any defect in Elections of Consideration submitted to the Exchange Agent.

      (d)  Required Ratio of Merger Consideration; Allocations of Merger Consideration . Notwithstanding the right of Bank of Richmond shareholders to elect the form of Merger Consideration into which their shares of Bank of Richmond Common Stock are converted, the aggregate Merger Consideration (not including cash delivered to Bank of Richmond shareholders who properly exercise their Dissenters’ Rights) must consist of shares of Financial Holdings Common Stock and cash, such that 50% of the outstanding shares of Bank of Richmond Common Stock are converted into shares of Financial Holdings Common Stock and 50% of the outstanding shares of Bank of Richmond Common Stock are converted into cash. An election of Cash Consideration is herein referred to as a “Cash Election” and shares as to which a Cash Election has been made are herein referred to as “Cash Election Shares.” An election of Stock Consideration is herein referred to as a “Stock Election” and shares as to which a Stock Election has been made are herein referred to as “Stock Election Shares.” Shares of Bank of Richmond Common Stock as to which there is a Non-Election are herein referred to as “Non-Electing Shares.” The aggregate number of shares of Bank of Richmond Common Stock that are to be converted into the Cash Consideration is referred to herein as the “Cash Election Number.” In the event that the elections of Merger Consideration by Bank of Richmond shareholders call for an aggregate number of shares of Bank of Richmond Common Stock to be converted into Financial Holdings Common Stock (not including shares for which cash is issued to Bank of Richmond shareholders who exercise Dissenters’ Rights), which is equal to, more than, or less than the percentage specified above, then the Merger Consideration shall be allocated among part or all of Bank of Richmond shareholders as follows:

      (i) If the Cash Election Number is equal to 50.0% of the number of outstanding shares of Bank of Richmond Common Stock, then: (A) there shall be no adjustment to the Cash Election Shares or Stock Election Shares; and (B) Non-Electing Shares shall be treated as Stock Election Shares.

      (ii) If the Cash Election Number is in excess of 50.0% of the number of outstanding shares of Bank of Richmond Common Stock, then: (A) Non-Electing Shares shall first be deemed to be Stock Election Shares; (B) Cash Election Shares shall be reduced pro rata to equal 50% of the outstanding shares of Bank of Richmond Common Stock; and (C) the shares of each such shareholder representing the difference between the Bank of Richmond shareholder’s initial Cash Election and the shareholder’s reduced Cash Election pursuant to clause (d)(ii)(B) shall be converted into and be deemed to be Stock Election Shares.

      (iii) If the Cash Election Number is less than 50.0% of the number of outstanding shares of Bank of Richmond Common Stock, then: (A) Non-Electing Shares shall first be deemed to be Cash Election Shares to the extent necessary to equal 50% of the outstanding shares of Bank of Richmond Common Stock and any remaining Non-Electing Shares shall be deemed to be Stock Election Shares; (B) if the Stock Election Shares exceed 50% of the outstanding shares of Bank of Richmond Common Stock, then the Stock Election Shares of each Bank of Richmond shareholder shall be reduced pro rata to equal 50% of the outstanding shares of Bank of Richmond Common Stock; and (C) the shares of each such shareholder representing the difference between the shareholder’s initial Stock Election and the shareholder’s reduced Stock Election pursuant to clause (d)(iii)(B) shall be converted into and be deemed to be Cash Election Shares.

      (e)  Exchange and Payment Procedures; Surrender of Certificates . As promptly as is reasonably practicable following the Effective Time, Financial Holdings shall send or cause to be sent to each former Bank of Richmond shareholder of record immediately prior to the Effective Time written instructions and transmittal materials (a “Transmittal Letter”) for use in surrendering certificates evidencing Bank of Richmond Common Stock (each a “Bank of Richmond Certificate”) to Financial Holdings or to its Exchange Agent (which shall specify that

delivery shall be effected, and risk of loss and title to the Bank of Richmond Certificate prior to such Effective Time shall pass, only upon proper delivery of such certificates to the Exchange Agent). Upon the proper surrender and delivery to Financial Holdings or its Exchange Agent (in accordance with its instructions, and accompanied by a properly completed Transmittal Letter) by a former shareholder of Bank of Richmond of his or her Bank of Richmond Certificate(s), and in exchange therefor, Financial Holdings shall as soon as practicable thereafter issue and deliver to the shareholder: (i) a certificate evidencing any Financial Holdings Common Stock into which the shareholder’s Bank of Richmond Common Stock has been converted; and (ii) any cash to which such holder is entitled hereunder in respect of rights to receive Cash Consideration or fractional shares. Financial Holdings shall not be obligated to deliver any of such payments until such holder surrenders the Bank of Richmond Certificate. The Bank of Richmond Certificates so surrendered shall be duly endorsed as the Exchange Agent may require. Any other provision of this Agreement notwithstanding, neither Financial Holdings nor the Exchange Agent shall be liable to any holder of Bank of Richmond Common Stock for any amounts paid or properly delivered in good faith to a public official pursuant to any applicable abandoned property law.

      (f)  Bank of Richmond Certificates. At the Effective Time, and without any action by Financial Holdings, Bank of Richmond or any Bank of Richmond shareholder, Bank of Richmond’s stock transfer books shall be closed and there shall be no further transfers of Bank of Richmond Common Stock on its stock transfer books or the registration of any transfer of a Bank of Richmond Certificate by any holder thereof, and the holders of Bank of Richmond Certificates shall cease to be, and shall have no further rights as, stockholders of Bank of Richmond other than as provided in this Agreement. Following the Effective Time, Bank of Richmond Certificates shall evidence only the right of the registered holder thereof to receive the Merger Consideration into which his or her Bank of Richmond Common Stock was converted at the Effective Time or, in the case of Bank of Richmond Common Stock held by shareholders who properly shall have exercised Dissenters’ Rights, cash.

      (g)  Certificates and Dividends. To the extent permitted by applicable law, former shareholders of record of Bank of Richmond shall be entitled to vote after the Merger Consideration has been paid pursuant to the provisions of this Paragraph 1.05 at any meeting of Financial Holdings shareholders the number of whole shares into which their respective Bank of Richmond Common Stock are converted pursuant to the Merger, regardless of whether such holders have exchanged their certificates representing such Bank of Richmond Common Stock for certificates representing Financial Holdings Common Stock in accordance with the provisions of this Agreement. Whenever a dividend or other distribution is declared by Financial Holdings on Financial Holdings Common Stock, the record date of which is at or after the Effective Time of the Merger, the declaration shall include dividends or other distributions on all shares of Financial Holdings Common Stock issuable pursuant to this Agreement. However, beginning at the Effective Time, until a former Bank of Richmond shareholder’s Bank of Richmond Certificates are surrendered and certificates for the Financial Holdings Common Stock into which his or her Bank of Richmond Common Stock was converted at the Effective Time actually are issued to him or her, no dividend or other distribution payable by Financial Holdings with respect to that Financial Holdings Common Stock as of any date subsequent to the Effective Time shall be paid or delivered to the former Bank of Richmond shareholder. However, upon the proper surrender of the shareholder’s Bank of Richmond Certificate, Financial Holdings shall pay to the shareholder the amount of any such dividends or other distributions, without interest, that have accrued but remain unpaid with respect to that Financial Holdings Common Stock.

      (h)  Antidilutive Adjustments . If, prior to the Effective Time, Bank of Richmond or Financial Holdings shall properly declare any dividend payable in shares of Bank of Richmond Common Stock or Financial Holdings Common Stock or shall subdivide, split, reclassify or combine the presently outstanding shares of Bank of Richmond Common Stock or Financial Holdings Common Stock, then an appropriate and proportionate adjustment shall be made in the number of shares of Financial Holdings Common Stock to be issued in exchange for each of the shares of Bank of Richmond Common Stock.

      (i)  Dissenters . Any shareholder of Bank of Richmond who properly exercises the right of dissent and appraisal (“Dissenter’s Rights”) with respect to the Merger as provided in the rules of the Office of the Comptroller of the Currency shall be entitled to receive payment of the fair value of his or her shares of Bank of Richmond Common Stock in the manner and pursuant to the procedures provided therein. Shares of Bank of Richmond Common Stock held by persons who exercise Dissenter’s Rights shall not be converted as described in Paragraph 1.05(a). However, if any shareholder of Bank of Richmond who exercises Dissenter’s Rights shall fail to perfect those rights, or effectively shall waive or lose such rights, then each of his or her shares of Bank of Richmond Common Stock, at Financial Holdings’ sole option, shall be deemed to have been converted into the right to receive the Merger Consideration as of the Effective Time as provided in Paragraph 1.05(a) hereof.

      (j)  Lost Certificates . Shareholders of Bank of Richmond whose Bank of Richmond Certificates have been lost, destroyed, stolen or otherwise are missing shall be entitled to receive the Merger Consideration to which they are entitled in accordance with and upon compliance with reasonable conditions imposed by Financial Holdings, including without limitation, a requirement that those shareholders provide lost instruments indemnities or surety bonds in form, substance and amounts satisfactory to Financial Holdings.

      (k)  Fractional Shares . No fractional shares of Financial Holdings Common Stock shall be issued or delivered in connection with the Merger. In lieu of any such fractional share, subject to the terms and conditions of this paragraph 1.05, each holder of shares of Bank of Richmond Common Stock who would otherwise have been entitled to a fraction of a share of Financial Holdings Common Stock shall be entitled to receive cash (without interest) in an amount equal to such fraction multiplied by the Holdings Average Price.

      (l)  Bank of Richmond Stock Options . At the Effective Time of the Merger, each unexercised option for Bank of Richmond Common Stock (“Bank of Richmond Stock Option”), other than Bank of Richmond Stock Options owned by employees of Bank of Richmond who remain employed at Gateway Bank, shall be deemed canceled, and as consideration therefor shall be converted into the right to receive solely a cash payment amount equal to (A) the difference between the exercise price of the Bank of Richmond Stock Option and the Cash Consideration, multiplied by (B) the total number of shares of Bank of Richmond Common Stock covered by the Bank of Richmond Stock Option (“Surrendered Options”). Treatment of Bank of Richmond Stock Options held by employees continuing employment with Gateway Bank and the Bank of Richmond Directors is described in Paragraph 6.07(b). At the election of any Director of Bank of Richmond, all or a portion of any such directors’ Bank of Richmond Stock Options shall be deemed canceled, and as consideration therefore shall be converted into the right to receive solely a cash payment amount equal to (A) the difference between the exercise price of the Bank of Richmond Stock Option and the Cash Consideration, multiplied by (B) the Surrendered Options.

      1.06. Articles of Incorporation, Bylaws and Management . The Articles of Incorporation and the Bylaws of Financial Holdings in effect at the Effective Time will remain in effect until otherwise amended in accordance with law and the Bylaws of Financial Holdings. The Articles of Incorporation and Bylaws of Gateway Bank in effect at the Effective Time shall be the Articles of Incorporation and Bylaws of Gateway Bank as the surviving corporation of the Merger. A director of Bank of Richmond as provided in Paragraph 5.01(f) shall be appointed to the Board of Directors of Financial Holdings and Gateway Bank, to hold such office until removed as provided by law or until the election or appointment of a successor. The directors and officers of Financial Holdings and Gateway Bank in office at the Effective Time shall continue to hold such offices until removed as provided by law or until the election or appointment of their respective successors.

      1.07. Closing; Articles Of Merger; Effective Time . The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Financial Holdings in Elizabeth City, North Carolina, or at such other place as Financial Holdings and Bank of Richmond shall mutually designate, on a date mutually agreed by Financial Holdings and Bank of Richmond (the “Closing Date”) which the parties shall use their best efforts to occur no later than the month end following the later of (i) the expiration of any and all required waiting periods following the effective date of required approvals of the Merger by governmental or regulatory authorities, (ii) the Bank of Richmond Shareholders Meeting (as defined in Paragraph 4.01(b)), or (iii) the Financial Holdings Shareholders Meeting (as defined in Paragraph 5.01(a)). At the Closing, Bank of Richmond and Financial Holdings shall take such actions (including, without limitation, the delivery of certain closing documents) as are required herein and as shall otherwise be required by law to consummate the Merger and cause it to become

effective, and shall execute Articles of Merger under North Carolina law which shall contain a “Plan of Merger” substantially in the form attached as Exhibit A hereto. Financial Holdings and Bank of Richmond shall issue a mutually agreeable press release indicating that the anticipated Closing Date will be May 31, 2007, and the parties shall use their best efforts to consummate the Closing by such date.

     Subject to the terms and conditions set forth in this Agreement (including, without limitation, the receipt of all required approvals of governmental agencies and regulatory authorities), the Merger shall be effective on the date and at the time (the “Effective Time”) specified in the Articles of Merger as filed with the North Carolina Secretary of State in accordance with law.

      1.08. Outstanding Financial Holdings Common Stock . The status of the shares of Financial Holdings Common Stock that are outstanding immediately prior to the Effective Time shall not be affected by the Merger.

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BANK OF RICHMOND

     Except as otherwise specifically provided herein or as “Previously Disclosed” (as defined in Paragraph 10.13 below) to Financial Holdings, Bank of Richmond hereby makes the following representations and warranties to Financial Holdings:

      2.01. Organization; Standing; Power . Bank of Richmond (i) is duly organized and incorporated, validly existing, and in good standing under the laws of the United States; (ii) has all requisite power and authority (corporate and other) to own, lease, and operate its properties and to carry on its business as now being conducted; (iii) is duly qualified to do business and is in good standing in each other jurisdiction in which the character of the properties owned, leased, or operated by it therein or in which the transaction of its business makes such qualification necessary, except where failure so to qualify would not have a material adverse effect on Bank of Richmond, and (iv) is not transacting business or operating any properties owned or leased by it in violation of any provision of federal or state law or any rule or regulation promulgated thereunder, which violation would have a material adverse effect on Bank of Richmond. Bank of Richmond is an “insured depository institution” as defined in the Federal Deposit Insurance Act and applicable regulations thereunder. Bank of Richmond is a member of the Federal Home Loan Bank (“FHLB”) of Atlanta.

      2.02. Bank of Richmond’s Capital Stock .

      (a)  At the Effective Time, Bank of Richmond’s authorized capital stock will consist of 6,000,000 shares of common stock, $4.00 par value per share, of which no more than 1,717,265 shares, plus such number of additional shares, if any, as shall have been issued by Bank of Richmond after the date of this Agreement as provided in Paragraph 4.02(b) hereof pursuant to Bank of Richmond Stock Options, will be issued and outstanding and constitute Bank of Richmond’s only outstanding securities.

     Each outstanding share of Bank of Richmond Common Stock (i) has been duly authorized and is validly issued and outstanding, and is fully paid and nonassessable, and (ii) has not been issued in violation of the preemptive rights of any shareholder. The Bank of Richmond Common Stock has been registered with the Office of the Comptroller of the Currency (“Comptroller”) under the Securities Exchange Act of 1934, as amended (the “1934 Act”) and Bank of Richmond is subject to the registration and reporting requirements of the 1934 Act.

      (b)  Subsidiaries . Bank of Richmond has no subsidiaries.

      2.03. Principal Shareholders. Other than as Previously Disclosed, no person or entity is known to management of Bank of Richmond to beneficially own, directly or indirectly, more than 5% of the outstanding shares of Bank of Richmond Common Stock.

      2.04. Convertible Securities, Options, Etc . With the exception of options to purchase an aggregate of 212,166 shares of Bank of Richmond Common Stock which have been granted and are outstanding under Bank of

Richmond Stock Options, Bank of Richmond does not have any outstanding (i) securities or other obligations (including debentures or other debt instruments) which are convertible into shares of Bank of Richmond Common Stock or any other securities of Bank of Richmond; (ii) options, warrants, rights, calls, or other commitments of any nature which entitle any person to receive or acquire any shares of Bank of Richmond Common Stock or any other securities of Bank of Richmond; or (iii) plans, agreements or other arrangements pursuant to which shares of Bank of Richmond Common Stock or any other securities of Bank of Richmond, or options, warrants, rights, calls, or other commitments of any nature pertaining thereto, have been or may be issued.

      2.05. Authorization and Validity of Agreement . This Agreement has been duly and validly approved by Bank of Richmond’s Board of Directors in the manner required by law. Subject only to approval of this Agreement by the shareholders of Bank of Richmond in the manner required by law (as contemplated by Paragraph 6.01(b) below) and receipt of all required approvals of governmental or regulatory authorities having jurisdiction over Bank of Richmond, Gateway Bank and Financial Holdings (collectively, the “Regulatory Authorities”) (as contemplated by Paragraph 6.02 below), (i) Bank of Richmond has the corporate power and authority to execute and deliver this Agreement and to perform its obligations and agreements and carry out the transactions described in this Agreement; (ii) all corporate action required to authorize Bank of Richmond to enter into this Agreement and to perform its obligations and agreements and carry out the transactions described herein has been duly and properly completed or obtained; and (iii) this Agreement has been duly executed on behalf of Bank of Richmond, and (assuming due authorization, execution and delivery by Financial Holdings) constitutes the valid and binding agreement of Bank of Richmond, enforceable in accordance with its terms (except to the extent enforceability may be limited by (A) applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws from time to time in effect which affect creditors’ rights generally; and (B) by legal and equitable limitations on the availability of injunctive relief, specific performance, and other equitable remedies), and (C) general principles of equity and applicable laws or court decisions limiting the enforceability of indemnification provisions).

      2.06. Validity of Transactions; Absence of Required Consents or Waivers . Subject to the approval of this Agreement by the shareholders of Bank of Richmond and receipt of required approvals of Regulatory Authorities, neither the execution and delivery of this Agreement, nor the consummation of the transactions described herein, nor compliance by Bank of Richmond with any of its obligations or agreements contained herein, will: (i) conflict with or result in a breach of the terms and conditions of, or constitute a default or violation under any provision of, Bank of Richmond’s Articles of Incorporation or Bylaws, or any material contract, agreement, lease, mortgage, note, bond, indenture, license, or obligation or understanding (oral or written) to which Bank of Richmond is bound or by which it, its business, capital stock, or any properties or assets may be affected; (ii) result in the creation or imposition of any lien, claim, interest, charge, restriction, or encumbrance upon any of Bank of Richmond’s properties or assets; (iii) violate any applicable federal or state statute, law, rule, or regulation, or any judgment, order, writ, injunction, or decree of any court, administrative or regulatory agency, or governmental body which violation will or may have a material adverse effect on Bank of Richmond, its financial condition, results of operations, prospects, businesses, assets, loan portfolio, (other than cyclical variations in loan balances outstanding), investments, properties or operations, or on Bank of Richmond’s ability to consummate the transactions described herein or to carry on the business of Bank of Richmond as presently conducted; (iv) result in the acceleration of any material obligation or indebtedness of Bank of Richmond; or (v) materially interfere with or otherwise adversely affect Bank of Richmond’s ability to carry on its business as presently conducted.

     No consents, approvals, or waivers are required to be obtained from any person or entity in connection with Bank of Richmond’s execution and delivery of this Agreement, or the performance of its obligations or agreements or the consummation of the transactions described herein, except for required approvals of Bank of Richmond shareholders and of the Regulatory Authorities.

      2.07. Bank of Richmond’s Books and Records . Bank of Richmond’s books of account and business records have been maintained in material compliance with all applicable legal and accounting requirements and in accordance with good business practices, and such books and records are complete and reflect accurately in all material respects Bank of Richmond’s items of income and expense and all of its assets, liabilities, and stockholders’ equity. The minute books of Bank of Richmond accurately reflect in all material respects the corporate actions that its shareholders and Board of Directors, and all committees thereof, have taken during the time periods covered by such minute books. All such minute books have been or will be made available to Financial Holdings and its representatives.

      2.08. Bank of Richmond Reports . Bank of Richmond has filed all reports, registrations, and statements, together with any amendments required to be made with respect thereto, that were required to be filed with (i) the Comptroller, and (ii) any other Regulatory Authorities. All such reports, registrations, and statements filed by Bank of Richmond with the Comptroller or other such Regulatory Authorities are collectively referred to herein as the “Bank of Richmond Reports.” To the Best Knowledge (as such term is defined in Paragraph 10.14 hereof) of management of Bank of Richmond, as of their respective dates, each Bank of Richmond Report complied in all material respects with all the statutes, rules, and regulations enforced or promulgated by the regulatory authority with which it was filed and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and Bank of Richmond has not been notified by any such governmental or regulatory authority that any such Bank of Richmond Report was deficient in any material respect as to form or content.

      2.09. Bank of Richmond Financial Statements . Bank of Richmond has Previously Disclosed to Financial Holdings a copy of its audited statements of financial condition as of December 31, 2005, 2004, and 2003 and its audited statements of income, stockholders’ equity and cash flows for the years ended December 31, 2005, 2004, and 2003, together with notes thereto (collectively, the “Bank of Richmond Audited Financial Statements”), together with copies of its unaudited statements of financial condition as of September 30, 2006, and unaudited statements of income and cash flows for the three-month period ended September 30, 2006 and 2005 (collectively, the “Bank of Richmond Interim Financial Statements”). Following the date of this Agreement, Bank of Richmond promptly will deliver to Financial Holdings all other annual or interim financial statements prepared by or for Bank of Richmond. The Bank of Richmond Audited Financial Statements and the Bank of Richmond Interim Financial Statements (including any related notes and schedules thereto) (i) are in accordance with Bank of Richmond’s books and records, and (ii) were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) applied on a consistent basis throughout the periods indicated and (iii) present fairly in all material respects Bank of Richmond’s financial condition, assets and liabilities, results of operations, changes in stockholders’ equity, and changes in cash flows as of the dates indicated and for the periods specified therein. The Bank of Richmond Audited Financial Statements have been audited by Bank of Richmond’s independent certified public accountants, Yount, Hyde and Barbour, P.C.

      2.10. Tax Returns and Other Tax Matters . (i) Bank of Richmond has timely filed or caused to be filed all federal, state, and local tax returns and reports which are required by law to have been filed, and to the Best Knowledge of management of Bank of Richmond, all such returns and reports were true, correct, and complete in all material respects and contained all material information required to be contained therein; (ii) all federal, state, and local income, profits, franchise, sales, use, occupation, property, excise, and other taxes (including interest and penalties), charges and assessments which have become due from or been assessed or levied against Bank of Richmond or its property have been fully paid, or if not yet due, a reserve or accrual, which is adequate in all material respects for the payment of all such taxes to be paid and the obligation for such unpaid taxes, is reflected in the Bank of Richmond Interim Financial Statements; (iii) the income, profits, franchise, sales, use, occupation, property, excise, withholding, employment and other tax returns and reports of Bank of Richmond have not been subjected to audit by the Internal Revenue Service (the “IRS”) or the Virginia Department of Taxation, and Bank of Richmond has not received any indication of the pendency of any audit or examination in connection with any tax return or report and, to the Best Knowledge of management of Bank of Richmond, no such return or report is subject to adjustment; and (iv) Bank of Richmond has not executed any waiver or extended the statute of limitations (or been asked to execute a waiver or extend a statute of limitation) with respect to any tax year, the audit of any tax return or report or the assessment or collection of any tax.

      2.11. Absence of Material Adverse Changes or Certain Other Events .

      (a)  Since September 30, 2006, Bank of Richmond has conducted its business only in the ordinary course and there has been no material adverse change, and there has occurred no event or development and there currently exists no condition or circumstance to the Best Knowledge of management of Bank of Richmond which, with the lapse of time or otherwise, is reasonably likely to cause, create, or result in a material adverse change, in or affecting Bank of Richmond’s financial condition or results of operations, prospects, business, assets, loan portfolio (other than cyclical variations in loan balances outstanding), investments, properties, or operations.

      (b)  Since September 30, 2006, and other than as Previously Disclosed and in the ordinary course of its business including its normal salary review for 2006 and up to and including the Closing Date for non-executive employees of Bank of Richmond, Bank of Richmond has not incurred any material liability or engaged in any material transaction or entered into any material agreement, increased the salaries, compensation, or general benefits payable or provided to its employees, suffered any material loss, destruction, or damage to any of its properties or assets, or made a material acquisition or disposition of any assets or entered into any material contract or lease.

      2.12. Absence of Undisclosed Liabilities . Bank of Richmond has no liabilities or obligations, whether known or unknown, matured or unmatured, accrued, absolute, contingent, or otherwise, whether due or to become due (including, without limitation, tax liabilities or unfunded liabilities under employee benefit plans or arrangements), other than (i) those reflected in the Bank of Richmond Audited Financial Statements or the Bank of Richmond Interim Financial Statements; (ii) increases in deposit accounts in the ordinary course of its business since September 30, 2006; or (iii) loan commitments in the ordinary course of its business since September 30, 2006.

      2.13. Compliance with Existing Obligations . Bank of Richmond has performed in all material respects all obligations required to be performed by it under, and it is not in default in any material respect under, or in violation in any material respect of, the terms and conditions of its Articles of Incorporation or Bylaws, and/or any contract, agreement, lease, mortgage, note, bond, indenture, license, obligation, understanding, or other undertaking (whether oral or written) to which Bank of Richmond is bound or by which it, its business, capital stock, or any of its properties or assets may be affected, which default or violation would have a material adverse effect on Bank of Richmond.

      2.14. Litigation and Compliance with Law .

      (a)  There are no actions, suits, arbitrations, controversies, or other proceedings or investigations (or, to the Best Knowledge of management of Bank of Richmond, any facts or circumstances which reasonably could result in such), including, without limitation, any such action by any governmental or regulatory authority, which currently exists or is ongoing, pending, or, to the Best Knowledge of management of Bank of Richmond, threatened, contemplated, or probable of assertion, against, relating to, or otherwise affecting Bank of Richmond or any of its properties, assets or employees.

      (b)  Bank of Richmond has all licenses, permits, orders, authorizations, or approvals (“Bank of Richmond Permits”) of any federal, state, local, or foreign governmental or regulatory body that are material to or necessary for the conduct of its business or to own, lease, and operate its properties. All such Bank of Richmond Permits are in full force and effect. No violations are or have been recorded in respect of any such Bank of Richmond Permits. No proceeding is pending or, to the Best Knowledge of management of Bank of Richmond, threatened or probable of assertion to suspend, cancel, revoke, or limit any Bank of Richmond Permit.

      (c)  Bank of Richmond is not subject to any supervisory agreement, enforcement order, writ, injunction, capital directive, supervisory directive, memorandum of understanding, or other similar agreement, order, directive, memorandum, or consent of, with or issued by any regulatory or other governmental authority (including, without limitation, the Comptroller or the Federal Deposit Insurance Corporation) relating to its financial condition, directors or officers, operations, capital, regulatory compliance, or any other matter. There are no judgments, orders, stipulations, injunctions, decrees, or awards against Bank of Richmond that in any manner limit, restrict, regulate, enjoin, or prohibit any present or past business or practice of Bank of Richmond. Bank of Richmond has not been advised that any regulatory or other governmental authority or any court is contemplating, threatening, or requesting the issuance of any such agreement, order, injunction, directive, memorandum, judgment, stipulation, decree, or award.

      (d)  Bank of Richmond is not in violation of, or default in any material respect under, and Bank of Richmond has complied in all material respects with, all laws, statutes, ordinances, rules, regulations, orders, writs, injunctions, or decrees of any court or federal, state, municipal, or other governmental or regulatory authority having jurisdiction or authority over it or its business operations, properties, or assets (including, without limitation, the Consumer Credit Protection Act and all other laws and regulations applicable to extensions of credit by Bank of Richmond). To the Best Knowledge of management of Bank of Richmond, there is no basis for any claim by any

person or authority for compensation, reimbursement, or damages or other penalties for any violations described in this subparagraph (d).

2.15. Real Properties .

      (a)  Bank of Richmond has Previously Disclosed to Financial Holdings a listing of all real property owned or leased by Bank of Richmond (including, without limitation, banking facilities and all other real estate or foreclosed properties, including improvements thereon, owned by Bank of Richmond) (collectively the “Bank of Richmond Real Property”) and all leases, if any, pertaining to any such Bank of Richmond Real Property to which Bank of Richmond is a party (the “Bank of Richmond Real Property Leases”). With respect to each parcel of the Bank of Richmond Real Property owned by Bank of Richmond, Bank of Richmond has good and marketable fee simple title to such Bank of Richmond Real Property and owns the same free and clear of all mortgages, liens, leases, encumbrances, title defects, and exceptions to title other than (i) the lien of current taxes not yet due and payable, and (ii) such imperfections of title and restrictions, covenants and easements (including utility easements) which do not materially and adversely affect the value of the Bank of Richmond Real Property and which do not and will not materially detract from, interfere with, or restrict the present or future use of the Bank of Richmond Real Property. With respect to each Bank of Richmond Real Property Lease: (A) such lease is valid and enforceable in accordance with its terms; (B) there currently exists no circumstance or condition which constitutes an event of default by Bank of Richmond or their lessor or which, with the passage of time or the giving of required notices, will or could constitute such an event of default; (C) the execution and delivery of this Agreement does not constitute an event of default thereunder; and (D) there are no provisions restricting assignment.

      (b)  The Bank of Richmond Real Property complies in all material respects with all applicable federal, state, and local laws, regulations, ordinances, or orders of any governmental or regulatory authority, including those relating to zoning, building and use permits, and the parcels of Bank of Richmond Real Property upon which Bank of Richmond’s banking or other offices are situated, or which are used by Bank of Richmond in conjunction with its banking or other offices or for other purposes, may be used under applicable zoning ordinances for the purposes for which they are currently used as a matter of right rather than as a conditional or nonconforming use.

      (c)  All improvements and fixtures included in or on the Bank of Richmond Real Property are in good condition and repair, ordinary wear and tear excepted, and there does not exist any condition which in any material respect interferes with Bank of Richmond’s use (or will interfere with Financial Holdings’ use after the Merger) or adversely affects the economic value thereof.

      2.16. Loans, Accounts, Notes and Other Receivables .

      (a)  All loans, accounts, notes and other receivables reflected as assets on Bank of Richmond’s books and records (i) have resulted from bona fide business transactions in the ordinary course of Bank of Richmond’s operations; (ii) in all material respects were made in accordance with Bank of Richmond’s customary loan policies and procedures; and (iii) except as Previously Disclosed, are owned by Bank of Richmond free and clear of all liens, encumbrances, assignments, participation or repurchase agreements, or other exceptions to title or to the ownership or collection rights of any other person or entity (other than Federal Home Loan Bank borrowings or repurchase agreements entered into in the ordinary course of business).

      (b)  All records of Bank of Richmond regarding all outstanding loans, accounts, notes, and other receivables, and all other real estate owned, are accurate in all material respects, and, with respect to each loan which Bank of Richmond’s loan documentation indicates is secured by any real or personal property or property rights (“Loan Collateral”), such loan is secured by valid, perfected, and enforceable liens on all such Loan Collateral having the priority described in Bank of Richmond’s records of such loan.

      (c)  Each loan reflected as an asset on Bank of Richmond’s books, and each guaranty therefor, is the legal, valid, and binding obligation of the obligor or guarantor thereon, and no defense, offset, or counterclaim has been asserted with respect to any such loan or guaranty.

      (d)  Bank of Richmond has Previously Disclosed to Financial Holdings a listing of (i) each loan, extension of credit, or other asset of Bank of Richmond which, as of September 30, 2006, was classified by the

Comptroller or by Bank of Richmond as “Loss”, “Doubtful”, “Substandard”, or “Special Mention” (or otherwise by words of similar import), or which Bank of Richmond has designated as a special asset or for special handling or placed on any “watch list” because of concerns regarding the ultimate collectibility or deteriorating condition of such asset or any obligor or Loan Collateral therefor, and (ii) each loan or extension of credit of Bank of Richmond which, as of September 30, 2006, was past due thirty (30) days or more as to the payment of principal and/or interest, or as to which any obligor thereon (including the borrower or any guarantor) otherwise was in default, is the subject of a proceeding in bankruptcy, or otherwise has indicated an inability or intention not to repay such loan or extension of credit.

      (e)  To the Best Knowledge of management of Bank of Richmond, each of Bank of Richmond’s loans and other extensions of credit (with the exception of those loans and extensions of credit specified in the written listings described in Subparagraph (d) above) is collectible in the ordinary course of Bank of Richmond’s business in an amount which is not less than the amount at which it is carried on Bank of Richmond’s books and records.

      (f)  Bank of Richmond’s reserve for possible loan losses (the “Loan Loss Reserve”) has been established in conformity with GAAP, sound banking practices and all applicable requirements, rules and policies of the Comptroller and, in the best judgment of management of Bank of Richmond, is reasonable in view of the size and character of Bank of Richmond’s loan portfolio, current economic conditions and other relevant factors, and is adequate to provide for losses relating to or the risk of loss inherent in Bank of Richmond’s loan portfolios and other real estate owned.

      2.17. Securities Portfolio and Investments . Bank of Richmond has Previously Disclosed to Financial Holdings a listing of all securities owned, of record or beneficially, by Bank of Richmond as of September 30, 2006. All securities owned are held free and clear of all mortgages, liens, pledges, encumbrances, or any other restriction or rights of any other person or entity, whether contractual or statutory (other than customary pledges in the ordinary course of its business to secure public funds deposits or Federal Home Loan Bank borrowings or repurchase agreements entered into in the ordinary course of business), which would materially impair the ability of Bank of Richmond to dispose freely of any such security or otherwise to realize the benefits of ownership thereof at any time. There are no voting trusts or other agreements or undertakings to which Bank of Richmond is a party with respect to the voting of any such securities. With respect to all “repurchase agreements” under which Bank of Richmond has “sold” securities under agreement to repurchase, Bank of Richmond has a valid, perfected first lien or security interest in the government securities or other collateral securing the repurchase agreement, and the value of the collateral securing each such repurchase agreement equals or exceeds the amount of the debt owed by Bank of Richmond, as the case may be, which is secured by such collateral.

     Except for fluctuations in the market values of United States Treasury and agency securities, municipal securities, or other debt securities since September 30, 2006, there has been no material deterioration or adverse change in the quality, or any material decrease in the value, of Bank of Richmond’s securities portfolio as a whole.

      2.18. Personal Property and Other Assets . Bank of Richmond has Previously Disclosed to Financial Holdings a listing of all banking equipment, data processing equipment, vehicles, and other personal property used by Bank of Richmond and material to the operation of its business. Such assets are owned or leased by Bank of Richmond free and clear of all liens, encumbrances, title defects, or exceptions to title. All personal property of Bank of Richmond material to its business is in good operating condition and repair, ordinary wear and tear excepted.

      2.19. Patents and Trademarks . Bank of Richmond owns, possesses or has the right to use any and all patents, licenses, trademarks, trade names, copyrights, trade secrets and proprietary and other confidential information necessary to conduct its business as now conducted. Bank of Richmond has Previously Disclosed to Financial Holdings a listing of all such patents, licenses, trademarks, trade names, copyrights, trade secrets and proprietary rights. Bank of Richmond has not violated, and currently is not in conflict with, any patent, license, trademark, trade name, copyright or proprietary right of any other person or entity.

      2.20. Environmental Matters .

      (a)  As used in this Agreement, “Environmental Laws” shall mean, without limitation:

           (i) all federal, state, and local statutes, regulations, ordinances, orders, decrees, and similar provisions having the force or effect of law (including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, the Superfund Amendment and Reauthorization Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Clean Air Act, the Toxic Substances Control Act, the Oil Pollutant Act, the Coastal Zone Management Act, any “Superfund” or “Superlien” law, including any amendments thereto from time to time); and

           (ii) all common law concerning public health and safety, worker health and safety, and pollution or protection of the environment, including, without limitation, all standards of conduct and bases of obligations relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, discharge, release, threatened release, control, or clean-up of any Hazardous Substances (as defined below).

     As used in this Agreement, “Hazardous Substance” shall mean any materials, substances, wastes, chemical substances, or mixtures presently listed, defined, designated, or classified as hazardous, toxic, or dangerous, or otherwise regulated, under any Environmental Laws, whether by type, quantity or concentration, including without limitation pesticides, pollutants, contaminants, toxic chemicals, oil, or other petroleum products, byproducts or additives, asbestos or materials containing (or presumed to contain) asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, lead, radon, methyl tertiary butyl ether (“MTBE”) or radioactive material.

      (b)  Bank of Richmond has Previously Disclosed to Financial Holdings copies of all written reports, correspondence, notices, or other materials, if any, in its possession pertaining to environmental reports, surveys, assessments, notices of violation, notices of regulatory requirements, penalty assessments, claims, actions, or proceedings, past or pending, of the Bank of Richmond Real Property and any improvements thereon, or pertaining to any violation or alleged violation of Environmental Laws on, affecting or otherwise involving the Bank of Richmond Real Property or involving Bank of Richmond.

      (c)  To the Best Knowledge of management of Bank of Richmond after reasonable inquiry, there has been no presence, use, production, generation, handling, transportation, treatment, storage, disposal, emission, discharge, release, or threatened release of any Hazardous Substances by any person on, from or relating to the Bank of Richmond Real Property which constitutes a violation of any Environmental Laws, or any removal, clean-up or remediation of any Hazardous Substances from, on or relating to the Bank of Richmond Real Property.

      (d)  Bank of Richmond has not violated any Environmental Laws, and, to the Best Knowledge of management of Bank of Richmond after reasonable inquiry, there has been no violation of any Environmental Laws by any other person or entity for whose liability or obligation with respect to any particular matter or violation Bank of Richmond is or may be responsible or liable.

      (e)  Bank of Richmond is not subject to any claims, demands, causes of action, suits, proceedings, losses, damages, penalties, liabilities, obligations, costs or expenses of any kind and nature which arise out of, under or in connection with, or which result from or are based upon the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, emission, discharge, release, threatened release, control, removal, clean-up or remediation of any Hazardous Substances on, from or relating to the Bank of Richmond Real Property by any person or entity.

      (f)  To the Best Knowledge of management of Bank of Richmond after reasonable inquiry, no facts, events or conditions relating to the Bank of Richmond Real Property or the operations of Bank of Richmond at any of its office locations, will prevent, hinder or limit continued compliance with Environmental Laws, or give rise to any investigatory, emergency removal, remedial or corrective actions, obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to Environmental Laws.

      (g)  To the Best Knowledge of management of Bank of Richmond (it being understood by Financial Holdings that, for purposes of this representation, management of Bank of Richmond has not undertaken a review of each of Bank of Richmond’s loan files with respect to all Loan Collateral) and except as Previously Disclosed, (i)

there has been no violation of any Environmental Laws by any person or entity (including any violation with respect to any Loan Collateral) for whose liability or obligation with respect to any particular matter or violation Bank of Richmond is or may be responsible or liable; (ii) Bank of Richmond is not subject to any claims, demands, causes of action, suits, proceedings, losses, damages, penalties, liabilities, obligations, costs or expenses of any kind and nature which arise out of, under or in connection with, or which result from or are based upon, the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, emission, discharge, release, threatened release, control, removal, clean-up or remediation of any Hazardous Substances on, from or relating to any Loan Collateral, by any person or entity; and (iii) there are no facts, events or conditions relating to any Loan Collateral that will give rise to any investigatory, emergency removal, remedial or corrective actions, obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to Environmental Laws.

      2.21. Absence of Brokerage or Finder’s Commissions . Except for the engagement of Keefe, Bruyette & Woods, Inc. by Bank of Richmond the terms and conditions of which have been Previously Disclosed to Financial Holdings: ( i) no person or firm has been retained by or has acted on behalf of, pursuant to any agreement, arrangement or understanding with, or under the authority of, Bank of Richmond or its Board of Directors, as a broker, finder or agent or has performed similar functions or otherwise is or may be entitled to receive or claim a brokerage fee or other commission in connection with or as a result of the transactions described herein; and, (ii) Bank of Richmond has not agreed, or has any obligation, to pay any brokerage fee or other commission to any person or entity in connection with or as a result of the transactions described herein, except for fees and commissions payable to Keefe, Bruyette & Woods, Inc.

      2.22. Material Contracts . Other than a benefit plan or employment agreement Previously Disclosed to Financial Holdings pursuant to Paragraph 2.24 hereof, Bank of Richmond is not a party to or bound by any agreement (i) involving money or other property in an amount or with a value in excess of $25,000 (ii) which is not to be performed in full within the six month period following the date of this Agreement; (iii) which calls for the provision of goods or services to Bank of Richmond and cannot be terminated without material penalty upon written notice to the other party thereto; (iv) which is material to Bank of Richmond and was not entered into in the ordinary course of business; (v) which involves hedging, options or any similar trading activity, or interest rate exchanges or swaps; (vi) which commits Bank of Richmond to extend any loan or credit (with the exception of letters of credit, lines of credit and loan commitments extended in the ordinary course of Bank of Richmond’s business); (vii) which involves the sale of any assets of Bank of Richmond which are used in and material to the operation of their business; (viii) which involves any purchase of real property, or which involves the purchase of any other assets in the amount of $10,000 or more in the case of any single transaction or $25,000 or more in the case of all such transactions; (ix) which involves the purchase, sale, issuance, redemption or transfer of any capital stock or other securities of Bank of Richmond; or (x) with any director, officer or principal shareholder of Bank of Richmond (including without limitation any consulting agreement, but not including any agreements relating to loans or other banking services which were made in the ordinary course of Bank of Richmond’s business and on substantially the same terms and conditions as were prevailing at that time for similar agreements with unrelated persons).

     Bank of Richmond is not in default in any material respect, and there has not occurred any event which with the lapse of time or giving of notice or both would constitute a default, under any contract, lease, insurance policy, commitment, or arrangement to which it is a party or by which it or its property is or may be bound or affected or under which it or its property receives benefits, where the consequences of such default would have a material adverse effect on the financial condition, results of operations, prospects, business, assets, loan portfolio (other than cyclical variations in loan balances outstanding), investments, properties, or operations of Bank of Richmond.

      2.23. Employment Matters; Employee Relations . Bank of Richmond has Previously Disclosed to Financial Holdings a listing of the names, years of credited service and current base salary or wage rates of all of its employees as of December 31, 2006. Bank of Richmond (i) has in all material respects in the ordinary course of its business paid in full to or accrued on behalf of all its directors, officers and employees all wages, salaries, commissions, bonuses, fees and other direct compensation for all labor or services performed by them to the date of this Agreement, and all vacation pay, sick pay, severance pay, overtime pay and other amounts for which it is obligated under applicable law or its existing agreements, benefit plans, policies or practices; and (ii) is in all material respects in compliance with all federal, state, and local laws, statutes, rules, and regulations with regard to

employment and employment practices, terms and conditions, and wages and hours, and other compensation matters. No person has, to the Best Knowledge of management of Bank of Richmond, asserted that Bank of Richmond is liable in any amount for any arrearages in wages or employment taxes or for any penalties for failure to comply with any of the foregoing.

     There is no action, suit, or proceeding by any person pending or, to the Best Knowledge of management of Bank of Richmond, threatened, against Bank of Richmond (or any of its employees), involving employment discrimination, sexual harassment, wrongful discharge, or similar claims.

     Bank of Richmond is in all material respects in compliance with all applicable laws and regulations relating to employment or the workplace, including, without limitation, provisions relating to wages, hours, collective bargaining, safety and health, work authorization, equal employment opportunity, immigration and the withholding of income taxes, unemployment compensation, workers compensation, employee privacy and right to know and social security contributions.

     Bank of Richmond is not a party to or bound by any collective bargaining agreement with any of its employees, any labor union, or any other collective bargaining unit or organization. There is no pending or, to the Best Knowledge of management of Bank of Richmond, threatened labor dispute, work stoppage, or strike involving Bank of Richmond and any of its employees, or any pending or, to the Best Knowledge of management of Bank of Richmond, threatened proceeding in which it is asserted that Bank of Richmond has committed an unfair labor practice; and, to the Best Knowledge of management of Bank of Richmond, there is no activity involving it or any of its employees seeking to certify a collective bargaining unit or engaging in any other labor organization activity.

      2.24. Employment Agreements; Employee Benefit Plans.

      (a)  Bank of Richmond is not a party to or bound by any employment agreements with any of its directors, officers, or employees, except for the employment agreement between Bank of Richmond and Rex L. Smith III dated October 20, 2006. Bank of Richmond is also a party to severance agreements with six other executive officers, which have been Previously Disclosed to Financial Holdings.

      (b)  Bank of Richmond has Previously Disclosed to Financial Holdings a true and complete list of all bonus, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock and stock option plans; all employment and severance contracts; all medical, dental, health, and life insurance plans; all vacation, sickness and other leave plans, disability and death benefit plans; and all other employee benefit plans, contracts, or arrangements maintained or contributed to by Bank of Richmond for the benefit of any employees, former employees, directors, former directors or any of their beneficiaries (collectively, the “Bank of Richmond Plans”). True and complete copies of all Bank of Richmond Plans, including, but not limited to, any trust instruments or insurance contracts, if any, forming a part thereof or applicable to the administration of any such Bank of Richmond Plans or the assets thereof, and all amendments thereto, previously have been supplied to Financial Holdings. Bank of Richmond does not maintain, sponsor, contribute to or otherwise participate in any “Employee Benefit Plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), any “Multi-employer Plan” within the meaning of Section 3(37) of ERISA, or any “Multiple Employer Welfare Arrangement” within the meaning of Section 3(40) of ERISA. Each Bank of Richmond Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA and which is intended to be qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”) has received or applied for a favorable determination letter from the IRS to the effect that they are so qualified, and Bank of Richmond is not aware of any circumstances reasonably likely to result in the revocation or denial of any such favorable determination letter. To the Best Knowledge of management of Bank of Richmond, all reports and returns with respect to the Bank of Richmond Plans required to be filed with any governmental department, agency, service or other authority, including without limitation IRS Form 5500 (Annual Report), have been properly and timely filed.

      (c)  To the Best Knowledge of management of Bank of Richmond, all “Employee Benefit Plans” maintained by or otherwise covering employees or former employees of Bank of Richmond, to the extent each is subject to ERISA, currently are, and at all times have been, in compliance with all material provisions and requirements of ERISA. There is no pending or, to the Best Knowledge of management of Bank of Richmond, threatened litigation relating to any Bank of Richmond Plan or any employee benefit plan, contract or arrangement

previously maintained by Bank of Richmond. To the Best Knowledge of management of Bank of Richmond, Bank of Richmond has not engaged in a transaction with respect to any Bank of Richmond Plan that could subject Bank of Richmond to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.

      (d)  Bank of Richmond has delivered to Financial Holdings a true, correct and complete copy (including copies of all amendments thereto) of each retirement plan maintained by Bank of Richmond which is intended to be a plan qualified under Section 401(a) of the Code (collectively, the “Bank of Richmond Retirement Plans”), together with true, correct and complete copies of the summary plan descriptions relating to the Bank of Richmond Retirement Plans, the most recent determination letters received from the IRS regarding the Bank of Richmond Retirement Plans, and the most recent Annual Reports (Form 5500 series) and related schedules, if any, for the Bank of Richmond Retirement Plans.

     To the Best Knowledge of management of Bank of Richmond, the Bank of Richmond Retirement Plans are qualified under the provisions of Section 401(a) of the Code, the trusts under the Bank of Richmond Retirement Plans are exempt trusts under Section 501(a) of the Code, and determination letters have been issued or applied for with respect to the Bank of Richmond Retirement Plans to said effect, including determination letters covering the current terms and provisions of the Bank of Richmond Retirement Plans. There are no issues relating to said qualification or exemption of the Bank of Richmond Retirement Plans currently pending before the IRS, the United States Department of Labor, the Pension Benefit Guarantee Corporation or any court. To the Best Knowledge of management of Bank of Richmond, the Bank of Richmond Retirement Plans and the administration thereof meet (and have met since the establishment of the Bank of Richmond Retirement Plans) in all material respects all of the applicable requirements of ERISA, the Code and all other laws, rules and regulations applicable to the Bank of Richmond Retirement Plans and do not violate (and since the establishment of the Bank of Richmond Retirement Plans have not violated) in any material respect any of the applicable provisions of ERISA, the Code and such other laws, rules and regulations. Without limiting the generality of the foregoing and to the Best Knowledge of management of Bank of Richmond, all reports and returns with respect to the Bank of Richmond Retirement Plans required to be filed with any governmental department, agency, service or other authority have been properly and timely filed. There are no issues or disputes with respect to the Bank of Richmond Retirement Plans or the administration thereof currently existing between Bank of Richmond, or to the Best Knowledge of management of Bank of Richmond, any trustee or other fiduciary thereunder, and any governmental agency, any current or former employee of Bank of Richmond or beneficiary of any such employee, or any other person or entity. To the Best Knowledge of management of Bank of Richmond, no “reportable event” within the meaning of Section 4043 of ERISA has occurred at any time with respect to the Bank of Richmond Retirement Plans.

      (e)  No liability under subtitle C or D of Title IV of ERISA has been or is expected to be incurred by Bank of Richmond with respect to the Bank of Richmond Retirement Plans or with respect to any other ongoing, frozen or terminated defined benefit pension plan currently or formerly maintained by Bank of Richmond. Bank of Richmond does not presently contribute, and has not contributed, to a “Multi-employer Plan.” All contributions required to be made pursuant to the terms of each of the Bank of Richmond Plans (including without limitation the Bank of Richmond Retirement Plans and any other “pension plan” (as defined in Section 3(2) of ERISA, provided such plan is intended to qualify under the provisions of Section 401(a) of the Code) maintained by Bank of Richmond have been timely made. Neither the Bank of Richmond Retirement Plans nor any other “pension plan” maintained by Bank of Richmond has an “accumulated funding deficiency” (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA. Bank of Richmond has not provided, and is not required to provide, security to any “pension plan” or to any “Single Employer Plan” pursuant to Section 401(a)(29) of the Code. Under the Bank of Richmond Retirement Plans and any other “pension plan” maintained by Bank of Richmond as of the last day of the most recent plan year ended prior to the date hereof, the actuarially determined present value of all “benefit liabilities,” within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions contained in the plan’s most recent actuarial valuation) did not exceed the then current value of the assets of such plan, and there has been no material change in the financial condition of any such plan since the last day of the most recent plan year.

      (f)  Except as provided in the terms of the Bank of Richmond Retirement Plans themselves, there are no restrictions on the rights of Bank of Richmond to amend or terminate any Bank of Richmond Retirement Plan without incurring any liability thereunder. Neither the execution and delivery of this Agreement nor the consummation of the transactions described herein will, except as otherwise specifically provided in this Agreement,

(i) result in any payment to any person (including without limitation any severance compensation or payment, unemployment compensation, “golden parachute” or “change in control” payment, or otherwise) becoming due under any plan or agreement to any director, officer, employee or consultant; (ii) increase any benefits otherwise payable under any plan or agreement; or (iii) result in any acceleration of the time of payment or vesting of any such benefit.

      2.25. Insurance . Bank of Richmond has Previously Disclosed to Financial Holdings a listing of each blanket bond, liability insurance, life insurance or other insurance policy in effect on September 30, 2006, and in which it was an insured party or beneficiary (each a “Bank of Richmond Policy” and collectively the “Bank of Richmond Policies”). The Bank of Richmond Policies provide coverage in such amounts and against such liabilities, casualties, losses, or risks as is customary or reasonable for entities engaged in Bank of Richmond’s businesses or as is required by applicable law or regulation. In the opinion of management of Bank of Richmond, the insurance coverage provided under the Bank of Richmond Policies is reasonable and adequate in all respects for Bank of Richmond. Each of the Bank of Richmond Policies is in full force and effect and is valid and enforceable in accordance with its terms, and is underwritten by an insurer of recognized financial responsibility and which is qualified to transact business in Virginia, and Bank of Richmond has taken all requisite actions (including the giving of required notices) under each such Policy in order to preserve all rights thereunder with respect to all matters. Bank of Richmond is not in default under the provisions of, has not received notice of cancellation or nonrenewal of or any material premium increase on, and has not failed to pay any premium on any Bank of Richmond Policy, and, to the Best Knowledge of management of Bank of Richmond, there has not been any inaccuracy in any application for any Bank of Richmond Policy. There are no pending claims with respect to any Bank of Richmond Policy (and there are no facts which would form the basis of any such claim), and, to the Best Knowledge of management of Bank of Richmond, there is currently no condition, and there has occurred no event, that is reasonably likely to form the basis for any such claim.

      2.26. Insurance Of Deposits . All deposits of Bank of Richmond are insured by the Federal Deposit Insurance Corporation (the “FDIC”) to the maximum extent permitted by law, all deposit insurance premiums due from Bank of Richmond to the FDIC have been paid in full in a timely fashion, and no proceedings have been commenced or, to the Best Knowledge of management of Bank of Richmond, are contemplated by the FDIC or otherwise to terminate such insurance.

      2.27. Transactions with Management. Except as Previously Disclosed and for (i) deposits, all of which are on terms and conditions comparable to those made available to other customers of Bank of Richmond at the time such deposits were entered into, (ii) arm’s length loans to employees entered into in the ordinary course of business, (iii) obligations under employee benefit plans of Bank of Richmond, and (iv) any loan or deposit agreements entered into in the ordinary course with customers of Bank of Richmond, there are no contracts with or commitments to directors, officers or employees involving the expenditure of more than $5,000 as to any one individual, including, with respect to any business directly or indirectly controlled by any such person, or $5,000 for all such contracts for commitments in the aggregate for all such individuals.

      2.28 Derivative Contracts. Bank of Richmond is not a party to, nor has it agreed to enter into, an exchange-traded or over-the-counter swap, forward, future, option, cap, floor or collar financial contract or agreement, or any other contract or agreement which is a financial derivative contract (including various combinations thereof).

      2.29 Accounting Controls; Disclosure Controls. Bank of Richmond has devised and maintained a system of internal accounting control sufficient to provide reasonable assurances that: (i) all material transactions are executed in accordance with general or specific authorization of the Board of Directors and the duly authorized executive officers of Bank of Richmond; (ii) all material transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP consistently applied with respect to institutions such as Bank of Richmond or any other criteria applicable to such financial statements, and to maintain proper accountability for items therein; (iii) access to the material properties and assets of Bank of Richmond is permitted only in accordance with general or specific authorization of the Board of Directors and the duly authorized executive officers of Bank of Richmond; and (iv) the recorded accountability for items is compared with the actual levels at reasonable intervals and appropriate actions taken with respect to any differences.

     To the extent required, Bank of Richmond h