Apr. 4--Eastern Virginia Bankshares Inc. of Tappahannock and Glen Allen-based First Capital Bancorp Inc. said yesterday that they plan to merge.

The combined company would create the second-largest community bank, by total assets, based in the Richmond area and one of the 10 largest in Virginia.

It was the second Virginia bank combination announced this week. On Monday, First Market Bank in Richmond and Union Bankshares Corp. in Bowling Green announced a merger to create the state's largest community bank.

That deal, which is scheduled to close by year's end, is valued at $105 million.

Under the agreement announced yesterday, First Capital common stockholders will receive 0.98 shares of Eastern Virginia for each share of First Capital, which was valued at about $27 million as of the close of business yesterday.

As with the First Market merger, the headquarters of the merged banks will be in the Richmond area, although the location has not been determined.

The name of the holding company and the bank will be determined later. First Capital is the eighth-largest bank by deposits in the Richmond area, according to SNL Financial in Charlottesville. Eastern Virginia is the 13th largest in the area.

"The greater Richmond community will once again have significant banks with headquarters in this marketplace," said Robert G. Watts Jr., president and chief executive officer of First Capital Bank, a subsidiary of First Capital Bancorp.

Watts will become president and CEO of the combined bank. Joe A. Shearin, president and CEO of Eastern Virginia Bankshares, will retain his title. John M. Presley, managing director and CEO of First Capital Bancorp, will become managing director and chief financial officer of Eastern Virginia Bankshares, the parent company of EVB.

"This acquisition is unique because the primary leaders from First Capital will have key and active leadership roles in the combined entity," said Kent Engelke, chief economic strategist at Capitol Securities Management in Richmond.

Typically, key executives at acquired banks have little or no authority in the newly combined entity, he said.

"The merger is good for EVB shareholders as EVB now has a strong presence in the solid Richmond market, and First Capital will have the increased lending capacity and flexibility to compete with the behemoths from North Carolina," Engelke said.

Expect to see more bank consolidations on the local, regional and national levels, mostly because of depressed valuations, Engelke said.

The merger is expected to close in the third quarter, pending regulatory and shareholder approval.

"We see this as a true strategic allegiance," Shearin said. "It combines two solid, healthy banks to make an even stronger financial-services provider."

EVB has an operations center with enough capacity to handle First Capital's operations, which are being outsourced to an out-of-state vendor. The operations center is in Tappahannock and will remain there.

The merger will position the combined company for long-term growth, Presley said. "We intend over time to add significantly to the employment base."

He said he did not know how many employees would be added. However, the merger will create momentum, he said. "We expect to be an important bank in central Virginia."

The combined company initially will have 32 branches in eastern and central Virginia and about 350 employees.

Cost savings will be achieved through combining operations, not reducing staff, Watts said. "We have no real redundancies," he said. ------

Contact Carol Hazard at (804) 775-8023 or chazard@timesdispatch.com.

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