Exhibit 13

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Tappahannock, Virginia

CONSOLIDATED FINANCIAL REPORT

DECEMBER 31, 2006



---

CONTENTS



|                                                        |  |        
|------------------------------------------------------- |  | -------
|                                                        |  | Page   
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |  | 1      
|                                                        | 
|CONSOLIDATED FINANCIAL STATEMENTS                       |  |        
|                                                        | 
|Consolidated balance sheets                             |  | 2      
|Consolidated statements of income                       |  | 3 and 4
|Consolidated statements of stockholders equity         |  | 5 and 6
|Consolidated statements of cash flows                   |  | 7 and 8
|Notes to consolidated financial statements              |  | 9-36   



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LOGO

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

BOE Financial Services of
Virginia, Inc.

Tappahannock, Virginia

We
have audited the accompanying consolidated balance sheets of BOE Financial Services of Virginia, Inc. and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders equity and cash flows
for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Corporations management. Our responsibility is to express an opinion on these financial statements based on our
audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Corporation is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Corporations internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of BOE Financial Services of Virginia, Inc. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with
U.S. generally accepted accounting principles.

As noted in Note 8 to the consolidated financial statements, the Corporation changed its
method of accounting for its defined benefit pension plan to adopt Statement of Financial Accounting Standards No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of FASB
Statements No. 87, 88, 106, and 132(R).

LOGO

Winchester, Virginia

March 22,
2007



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BOE FINANCIA
L SERVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2006 and 2005



|                                                                                                               |  |      |             |   |      |   |             |  
|-------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                                               |  | 2006 |             |   | 2005 |  
|Assets                                                                                                         |  |      |             |   |      |   |             |  
|Cash and due from banks                                                                                        |  | $    | 5,520,191   |   |      | $ | 7,365,111   |  
|Securities available for sale, at fair value                                                                   |  |      | 55,963,463  |   |      |   | 52,392,786  |  
|Securities held to maturity (fair value approximates $2,949,000 in 2006 and $2,932,500 in 2005)                |  |      | 3,000,000   |   |      |   | 3,000,000   |  
|Equity securities, restricted, at cost                                                                         |  |      | 1,552,500   |   |      |   | 1,188,200   |  
|Loans, net of allowance for loan losses of $2,399,638 in 2006 and $2,248,658 in 2005                           |  |      | 194,490,988 |   |      |   | 180,207,461 |  
|Bank premises and equipment, net                                                                               |  |      | 10,453,561  |   |      |   | 7,656,421   |  
|Accrued interest receivable                                                                                    |  |      | 1,362,989   |   |      |   | 1,190,466   |  
|Intangible assets, net                                                                                         |  |      | 524,263     |   |      |   | 650,086     |  
|Other assets                                                                                                   |  |      | 8,510,146   |   |      |   | 8,280,231   |  
|                                                                                                               |  |      |             |   |      |   |             |  
|Total assets                                                                                                   |  | $    | 281,378,101 |   |      | $ | 261,930,762 |  
|                                                                                                               |  |      |             |   |      |   |             |  
|Liabilities and Stockholders Equity                                                                           |  |      |             |   |      |   |             |  
|Liabilities                                                                                                    |  |      |             |   |      |   |             |  
|Deposits:                                                                                                      |  |      |             |   |      |   |             |  
|Noninterest-bearing                                                                                            |  | $    | 27,809,248  |   |      | $ | 30,790,902  |  
|Interest-bearing                                                                                               |  |      | 203,055,733 |   |      |   | 192,340,804 |  
|                                                                                                               |  |      |             |   |      |   |             |  
|Total deposits                                                                                                 |  | $    | 230,864,981 |   |      | $ | 223,131,706 |  
|Federal funds purchased                                                                                        |  |      | 3,207,000   |   |      |   | 1,810,000   |  
|Federal Home Loan Bank advances                                                                                |  |      | 12,000,000  |   |      |   | 5,000,000   |  
|Trust preferred capital notes                                                                                  |  |      | 4,124,000   |   |      |   | 4,124,000   |  
|Accrued interest payable                                                                                       |  |      | 851,114     |   |      |   | 526,095     |  
|Other liabilities                                                                                              |  |      | 2,284,448   |   |      |   | 1,104,324   |  
|                                                                                                               |  |      |             |   |      |   |             |  
|Total liabilities                                                                                              |  | $    | 253,331,543 |   |      | $ | 235,696,125 |  
|                                                                                                               |  |      |             |   |      |   |             |  
|Commitments and Contingent Liabilities                                                                         |  |      |             |   |      |   |             |  
|Stockholders Equity                                                                                           |  |      |             |   |      |   |             |  
|Preferred stock, $5 par value, authorized 100,000 shares; no shares issued and oustanding                      |  | $    |            |   |      | $ |            |  
|Common stock, $5 par value, authorized 10,000,000 shares; issued and oustanding 1,208,109 and 1,198,059 shares |  |      | 6,040,545   |   |      |   | 5,990,295   |  
|Additional paid-in capital                                                                                     |  |      | 5,476,874   |   |      |   | 5,264,250   |  
|Retained earnings                                                                                              |  |      | 17,256,210  |   |      |   | 15,059,873  |  
|Accumulated other comprehensive loss, net                                                                      |  |      | (727,071    | ) |      |   | (79,781     | )
|                                                                                                               |  |      |             |   |      |   |             |  
|Total stockholders equity                                                                                     |  | $    | 28,046,558  |   |      | $ | 26,234,637  |  
|                                                                                                               |  |      |             |   |      |   |             |  
|Total liabilities and stockholders equity                                                                     |  | $    | 281,378,101 |   |      | $ | 261,930,762 |  
|                                                                                                               |  |      |             |   |      |   |             |  

See Notes to Consolidated Financial Statements.



2



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BOE FINANCIAL SE
RVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Consolidated Statements of Income

Three Years Ended December 31, 2006



|                                                     |  |      |            |   |      |   |            |      |  |   |           
|---------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ----------
|                                                     |  | 2006 |            |   | 2005 |   |            | 2004
|Interest and Dividend Income                         |  |      |            |   |      |   |            |      |  |   |           
|Interest and fees on loans                           |  | $    | 14,241,540 |   |      | $ | 11,943,617 |      |  | $ | 10,663,837
|Interest and dividends on securities:                |  |      |            |   |      |   |            |      |  |   |           
|U.S. Treasury                                        |  |      | 40,054     |   |      |   | 59,996     |      |  |   | 45,349    
|U.S. Government agencies                             |  |      | 677,648    |   |      |   | 677,013    |      |  |   | 436,010   
|State and political subdivisions, nontaxable         |  |      | 1,379,808  |   |      |   | 1,346,092  |      |  |   | 1,228,077 
|State and political subdivisions, taxable            |  |      | 134,416    |   |      |   | 126,483    |      |  |   | 127,425   
|Other securities                                     |  |      | 183,447    |   |      |   | 150,215    |      |  |   | 321,596   
|Interest on federal funds sold                       |  |      | 76,875     |   |      |   | 39,103     |      |  |   | 52,737    
|                                                     |  |      |            |   |      |   |            |      |  |   |           
|Total interest and dividend income                   |  | $    | 16,733,788 |   |      | $ | 14,342,519 |      |  | $ | 12,875,031
|                                                     |  |      |            |   |      |   |            |      |  |   |           
|Interest Expense                                     |  |      |            |   |      |   |            |      |  |   |           
|Interest on deposits                                 |  | $    | 6,055,277  |   |      | $ | 3,985,067  |      |  | $ | 3,399,013 
|Interest on borrowings                               |  |      | 916,525    |   |      |   | 483,444    |      |  |   | 207,224   
|                                                     |  |      |            |   |      |   |            |      |  |   |           
|Total interest expense                               |  | $    | 6,971,802  |   |      | $ | 4,468,511  |      |  | $ | 3,606,237 
|                                                     |  |      |            |   |      |   |            |      |  |   |           
|Net interest income                                  |  | $    | 9,761,986  |   |      | $ | 9,874,008  |      |  | $ | 9,268,794 
|Provision for Loan Losses                            |  |      | 125,000    |   |      |   | 240,400    |      |  |   | 305,000   
|                                                     |  |      |            |   |      |   |            |      |  |   |           
|Net interest income after provision for loan losses  |  | $    | 9,636,986  |   |      | $ | 9,633,608  |      |  | $ | 8,963,794 
|                                                     |  |      |            |   |      |   |            |      |  |   |           
|Noninterest Income                                   |  |      |            |   |      |   |            |      |  |   |           
|Service charge income                                |  | $    | 1,042,529  |   |      | $ | 986,268    |      |  | $ | 993,880   
|Net security gains (losses)                          |  |      | (13,060    | ) |      |   | 2,625      |      |  |   | 65,606    
|Net gains on sales of loans                          |  |      | 60,717     |   |      |   | 55,774     |      |  |   | 56,981    
|Net gains (losses) on sale of premises and equipment |  |      | 467,415    |   |      |   | (23,017    | )    |  |   | 48,783    
|Other income                                         |  |      | 692,864    |   |      |   | 579,153    |      |  |   | 461,920   
|                                                     |  |      |            |   |      |   |            |      |  |   |           
|Total noninterest income                             |  | $    | 2,250,465  |   |      | $ | 1,600,803  |      |  | $ | 1,627,170 
|                                                     |  |      |            |   |      |   |            |      |  |   |           

See Notes to Consolidated Financial Statements.



3



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Consolidated Statements of Income

(Continued)

Three Years Ended
December 31, 2006



|                                         |  |      |           |      |   |           |  |   |          
|---------------------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                                         |  | 2006 |           | 2005 |   | 2004     
|Noninterest Expenses                     |  |      |           |      |   |           |  |   |          
|Salaries                                 |  | $    | 3,246,677 |      | $ | 3,053,914 |  | $ | 2,857,580
|Employee benefits and costs              |  |      | 1,134,457 |      |   | 982,274   |  |   | 804,201  
|Occupancy expenses                       |  |      | 422,793   |      |   | 330,219   |  |   | 342,340  
|Furniture and equipment related expenses |  |      | 449,283   |      |   | 415,150   |  |   | 437,259  
|Data processing                          |  |      | 554,996   |      |   | 530,033   |  |   | 471,357  
|Stationery and printing                  |  |      | 172,436   |      |   | 138,403   |  |   | 180,004  
|Postage                                  |  |      | 175,112   |      |   | 153,265   |  |   | 170,695  
|Bank franchise tax                       |  |      | 238,179   |      |   | 221,950   |  |   | 214,457  
|Other operating expenses                 |  |      | 1,498,637 |      |   | 1,436,547 |  |   | 1,404,262
|                                         |  |      |           |      |   |           |  |   |          
|Total noninterest expenses               |  | $    | 7,892,570 |      | $ | 7,261,755 |  | $ | 6,882,155
|                                         |  |      |           |      |   |           |  |   |          
|Net income before income taxes           |  | $    | 3,994,881 |      | $ | 3,972,656 |  | $ | 3,708,809
|Income Taxes                             |  |      | 872,023   |      |   | 871,890   |  |   | 823,314  
|                                         |  |      |           |      |   |           |  |   |          
|Net income                               |  | $    | 3,122,858 |      | $ | 3,100,766 |  | $ | 2,885,495
|                                         |  |      |           |      |   |           |  |   |          
|Earnings Per Share, basic                |  | $    | 2.60      |      | $ | 2.60      |  | $ | 2.43     
|                                         |  |      |           |      |   |           |  |   |          
|Earnings Per Share, diluted              |  | $    | 2.58      |      | $ | 2.58      |  | $ | 2.42     
|                                         |  |      |           |      |   |           |  |   |          

See Notes to Consolidated Financial Statements.



4



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Consolidated Statements of Stockholders Equity

Three Years Ended December 31, 2006



|                                                                                    |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  
|----------------------------------------------------------------------------------- |  | ----------- | --------- | ------------------------ | - | ---------------- |  | - | ---------------------------------------------- | - |  | --------------------- | --------- | - | ----- | - | --------- | - |  | - | ---------- | -
|                                                                                    |  | CommonStock |           | AdditionalPaid-InCapital |   | RetainedEarnings |  |   | Accumulated Other Compre- hensiveIncome (Loss) |   |  | Compre-hensive Income |           |   | Total |  
|Balance, December 31, 2003                                                          |  | $           | 5,915,735 |                          | $ | 5,008,853        |  | $ | 10,693,464                                     |   |  | $                     | 1,303,696 |   |       |   |           |   |  | $ | 22,921,748 |  
|Comprehensive income:                                                               |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  
|Net income - 2004                                                                   |  |             |          |                          |   |                 |  |   | 2,885,495                                      |   |  |                       |          |   |       | $ | 2,885,495 |   |  |   | 2,885,495  |  
|Other comprehensive loss, net of tax:                                               |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  
|Unrealized loss on securities available for sale, net of deferred taxes of $240,479 |  |             |          |                          |   |                 |  |   |                                               |   |  |                       |          |   |       |   | (466,812  | ) |  |   |           |  
|Less reclassification adjustment, net of taxes of $22,306                           |  |             |          |                          |   |                 |  |   |                                               |   |  |                       |          |   |       |   | (43,300   | ) |  |   |           |  
|                                                                                    |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  
|Other comprehensive loss, net of tax                                                |  |             |          |                          |   |                 |  |   |                                               |   |  |                       | (510,112  | ) |       | $ | (510,112  | ) |  |   | (510,112   | )
|                                                                                    |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  
|Total comprehensive income                                                          |  |             |          |                          |   |                 |  |   |                                               |   |  |                       |          |   |       | $ | 2,375,383 |   |  |   |           |  
|                                                                                    |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  
|Cash dividends, $0.63 per share                                                     |  |             |          |                          |   |                 |  |   | (747,240                                       | ) |  |                       |          |   |       |   |           |   |  |   | (747,240   | )
|Fractional shares purchased under dividend reinvestment plan                        |  |             |          |                          |   |                 |  |   | (78                                            | ) |  |                       |          |   |       |   |           |   |  |   | (78        | )
|Issuance of common stock under dividend reinvestment plan                           |  |             | 15,120    |                          |   | 69,375           |  |   |                                               |   |  |                       |          |   |       |   |           |   |  |   | 84,495     |  
|Exercise of stock options                                                           |  |             | 13,900    |                          |   | 32,548           |  |   |                                               |   |  |                       |          |   |       |   |           |   |  |   | 46,448     |  
|                                                                                    |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  
|Balance, December 31, 2004                                                          |  | $           | 5,944,755 |                          | $ | 5,110,776        |  | $ | 12,831,641                                     |   |  | $                     | 793,584   |   |       |   |           |   |  | $ | 24,680,756 |  
|Comprehensive income:                                                               |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  
|Net income - 2005                                                                   |  |             |          |                          |   |                 |  |   | 3,100,766                                      |   |  |                       |          |   |       | $ | 3,100,766 |   |  |   | 3,100,766  |  
|Other comprehensive loss, net of tax:                                               |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  
|Unrealized loss on securities available for sale, net of deferred taxes of $449,023 |  |             |          |                          |   |                 |  |   |                                               |   |  |                       |          |   |       |   | (871,632  | ) |  |   |           |  
|Less reclassification adjustment, net of taxes of $892                              |  |             |          |                          |   |                 |  |   |                                               |   |  |                       |          |   |       |   | (1,733    | ) |  |   |           |  
|                                                                                    |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  
|Other comprehensive loss, net of tax                                                |  |             |          |                          |   |                 |  |   |                                               |   |  |                       | (873,365  | ) |       | $ | (873,365  | ) |  |   | (873,365   | )
|                                                                                    |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  
|Total comprehensive income                                                          |  |             |          |                          |   |                 |  |   |                                               |   |  |                       |          |   |       | $ | 2,227,401 |   |  |   |           |  
|                                                                                    |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  
|Cash dividends, $0.73 per share                                                     |  |             |          |                          |   |                 |  |   | (872,371                                       | ) |  |                       |          |   |       |   |           |   |  |   | (872,371   | )
|Fractional shares purchased under dividend reinvestment plan                        |  |             |          |                          |   |                 |  |   | (163                                           | ) |  |                       |          |   |       |   |           |   |  |   | (163       | )
|Issuance of common stock under dividend reinvestment plan                           |  |             | 14,980    |                          |   | 80,074           |  |   |                                               |   |  |                       |          |   |       |   |           |   |  |   | 95,054     |  
|Exercise of stock options                                                           |  |             | 30,560    |                          |   | 73,400           |  |   |                                               |   |  |                       |          |   |       |   |           |   |  |   | 103,960    |  
|                                                                                    |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  
|Balance, December 31, 2005 (forwarded)                                              |  | $           | 5,990,295 |                          | $ | 5,264,250        |  | $ | 15,059,873                                     |   |  | $                     | (79,781   | ) |       |   |           |   |  | $ | 26,234,637 |  
|                                                                                    |  |             |           |                          |   |                  |  |   |                                                |   |  |                       |           |   |       |   |           |   |  |   |            |  

See Notes to Consolidated Financial Statements.



5



---

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Consolidated Statements of Stockholders Equity

(Continued)

Three Years
Ended December 31, 2006



|                                                                                   |  |             |           |                          |   |                  |  |   |                                             |   |  |                      |          |       |  |   |           |  |   |            |  
|---------------------------------------------------------------------------------- |  | ----------- | --------- | ------------------------ | - | ---------------- |  | - | ------------------------------------------- | - |  | -------------------- | -------- | ----- |  | - | --------- |  | - | ---------- | -
|                                                                                   |  | CommonStock |           | AdditionalPaid-InCapital |   | RetainedEarnings |  |   | AccumulatedOtherCompre-hensiveIncome (Loss) |   |  | Compre-hensiveIncome |          | Total | 
|Balance, December 31, 2005 (brought forward)                                       |  | $           | 5,990,295 |                          | $ | 5,264,250        |  | $ | 15,059,873                                  |   |  | $                    | (79,781  | )     |  |   |           |  | $ | 26,234,637 |  
|Comprehensive income:                                                              |  |             |           |                          |   |                  |  |   |                                             |   |  |                      |          |       |  |   |           |  |   |            |  
|Net income - 2006                                                                  |  |             |          |                          |   |                 |  |   | 3,122,858                                   |   |  |                      |         |       |  | $ | 3,122,858 |  |   | 3,122,858  |  
|Other comprehensive income, net of tax:                                            |  |             |           |                          |   |                  |  |   |                                             |   |  |                      |          |       |  |   |           |  |   |            |  
|Unrealized gain on securities available for sale, net of deferred taxes of $18,848 |  |             |          |                          |   |                 |  |   |                                            |   |  |                      |         |       |  |   | 36,588    |  |   |           |  
|Add reclassification adjustment, net of taxes of $4,440                            |  |             |          |                          |   |                 |  |   |                                            |   |  |                      |         |       |  |   | 8,620     |  |   |           |  
|                                                                                   |  |             |           |                          |   |                  |  |   |                                             |   |  |                      |          |       |  |   |           |  |   |            |  
|Other comprehensive income, net of tax:                                            |  |             |          |                          |   |                 |  |   |                                            |   |  |                      | 45,208   |       |  | $ | 45,208    |  |   | 45,208     |  
|                                                                                   |  |             |           |                          |   |                  |  |   |                                             |   |  |                      |          |       |  |   |           |  |   |            |  
|Total comprehensive income                                                         |  |             |          |                          |   |                 |  |   |                                            |   |  |                      |         |       |  | $ | 3,168,066 |  |   |           |  
|                                                                                   |  |             |           |                          |   |                  |  |   |                                             |   |  |                      |          |       |  |   |           |  |   |            |  
|Adjustment to initially apply SFAS No. 158, net of deferred taxes of $356,742      |  |             |          |                          |   |                 |  |   |                                            |   |  |                      | (692,498 | )     |  |   |           |  |   | (692,498   | )
|Cash dividends, $0.77 per share                                                    |  |             |          |                          |   |                 |  |   | (926,469                                    | ) |  |                      |         |       |  |   |           |  |   | (926,469   | )
|Fractional shares purchased under dividend reinvestment plan                       |  |             |          |                          |   |                 |  |   | (52                                         | ) |  |                      |         |       |  |   |           |  |   | (52        | )
|Issuance of common stock under dividend reinvestment plan                          |  |             | 15,600    |                          |   | 84,032           |  |   |                                            |   |  |                      |         |       |  |   |           |  |   | 99,632     |  
|Exercise of stock options                                                          |  |             | 34,650    |                          |   | 128,592          |  |   |                                            |   |  |                      |         |       |  |   |           |  |   | 163,242    |  
|                                                                                   |  |             |           |                          |   |                  |  |   |                                             |   |  |                      |          |       |  |   |           |  |   |            |  
|Balance, December 31, 2006                                                         |  | $           | 6,040,545 |                          | $ | 5,476,874        |  | $ | 17,256,210                                  |   |  | $                    | (727,071 | )     |  |   |           |  | $ | 28,046,558 |  
|                                                                                   |  |             |           |                          |   |                  |  |   |                                             |   |  |                      |          |       |  |   |           |  |   |            |  

See Notes to Consolidated Financial Statements.



6



---

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Three Years Ended December 31, 2006



|                                                                                                 |  |      |             |   |      |   |             |      |  |   |             |  
|------------------------------------------------------------------------------------------------ |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                                                 |  | 2006 |             |   | 2005 |   |             | 2004 | 
|Cash Flows from Operating Activities                                                             |  |      |             |   |      |   |             |      |  |   |             |  
|Net income                                                                                       |  | $    | 3,122,858   |   |      | $ | 3,100,766   |      |  | $ | 2,885,495   |  
|Adjustments to reconcile net income to net cash provided by operating activities:                |  |      |             |   |      |   |             |      |  |   |             |  
|Depreciation and amortization                                                                    |  |      | 605,594     |   |      |   | 507,708     |      |  |   | 507,201     |  
|Origination of loans available for sale                                                          |  |      | (6,932,350  | ) |      |   | (5,626,948  | )    |  |   | (7,059,823  | )
|Proceeds from sale of loans available for sale                                                   |  |      | 6,993,067   |   |      |   | 6,043,365   |      |  |   | 6,756,161   |  
|Provision for loan losses                                                                        |  |      | 125,000     |   |      |   | 240,400     |      |  |   | 305,000     |  
|(Gains) losses on sale of securities                                                             |  |      | 13,060      |   |      |   | (2,625      | )    |  |   | (65,606     | )
|(Gains) losses on disposal of premises and equipment                                             |  |      | (467,415    | ) |      |   | 23,017      |      |  |   | (48,783     | )
|(Gains) on sale of loans                                                                         |  |      | (60,717     | ) |      |   | (55,774     | )    |  |   | (56,981     | )
|Deferred income tax (benefit) expense                                                            |  |      | (287,988    | ) |      |   | (126,218    | )    |  |   | 124,848     |  
|Amortization of premiums on securities                                                           |  |      | 202,316     |   |      |   | 218,296     |      |  |   | 238,840     |  
|Accretion of discounts on securities                                                             |  |      | (17,936     | ) |      |   | (20,990     | )    |  |   | (24,244     | )
|(Increase) decrease in accrued interest receivable and other assets                              |  |      | 219,004     |   |      |   | 168,975     |      |  |   | (213,122    | )
|Increase (decrease) in accrued expenses and other liabilities                                    |  |      | 457,582     |   |      |   | 582,584     |      |  |   | (26,976     | )
|                                                                                                 |  |      |             |   |      |   |             |      |  |   |             |  
|Net cash provided by operating activities                                                        |  | $    | 3,972,075   |   |      | $ | 5,052,556   |      |  | $ | 3,322,010   |  
|                                                                                                 |  |      |             |   |      |   |             |      |  |   |             |  
|Cash Flows from Investing Activities                                                             |  |      |             |   |      |   |             |      |  |   |             |  
|Proceeds from sales, principal repayments, calls and maturities of securities available for sale |  | $    | 10,009,939  |   |      | $ | 9,556,053   |      |  | $ | 11,658,025  |  
|(Purchase) redemption of restricted equity securities                                            |  |      | (364,300    | ) |      |   | (355,400    | )    |  |   | 114,100     |  
|Purchase of securities available for sale                                                        |  |      | (13,711,239 | ) |      |   | (8,511,555  | )    |  |   | (15,335,053 | )
|Purchase of securities held to maturity                                                          |  |      |            |   |      |   |            |      |  |   | (3,000,000  | )
|Net (increase) decrease in loans to customers                                                    |  |      | (14,408,527 | ) |      |   | (22,976,389 | )    |  |   | 604,930     |  
|(Increase) decrease in federal funds sold                                                        |  |      |            |   |      |   | 5,064,000   |      |  |   | (4,779,000  | )
|Purchase of bank-owned life insurance                                                            |  |      |            |   |      |   | (5,500,000  | )    |  |   |            |  
|Purchases of premises and equipment                                                              |  |      | (3,524,885  | ) |      |   | (1,613,366  | )    |  |   | (675,219    | )
|Proceeds from disposal of premises and equipment                                                 |  |      | 715,389     |   |      |   |            |      |  |   | 420,594     |  
|                                                                                                 |  |      |             |   |      |   |             |      |  |   |             |  
|Net cash (used in) investing activities                                                          |  | $    | (21,283,623 | ) |      | $ | (24,336,657 | )    |  | $ | (10,991,623 | )
|                                                                                                 |  |      |             |   |      |   |             |      |  |   |             |  

See Notes to Consolidated Financial Statements.



7



---

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Continued)

Three Years Ended
December 31, 2006



|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                        |  | 2006 |            |   | 2005 |   |            | 2004 | 
|Cash Flows from Financing Activities                    |  |      |            |   |      |   |            |      |  |   |            |  
|Net increase in deposits                                |  | $    | 7,733,275  |   |      | $ | 16,158,987 |      |  | $ | 3,691,151  |  
|Increase in federal funds purchased                     |  |      | 1,397,000  |   |      |   | 1,810,000  |      |  |   |           |  
|Increase in Federal Home Loan Bank advances             |  |      | 7,000,000  |   |      |   | 5,000,000  |      |  |   |           |  
|Dividends paid                                          |  |      | (926,469   | ) |      |   | (872,371   | )    |  |   | (747,240   | )
|Net proceeds from issuance of common stock              |  |      | 262,874    |   |      |   | 199,014    |      |  |   | 130,943    |  
|Cash paid for fractional shares                         |  |      | (52        | ) |      |   | (163       | )    |  |   | (78        | )
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash provided by financing activities               |  | $    | 15,466,628 |   |      | $ | 22,295,467 |      |  | $ | 3,074,776  |  
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|Net increase (decrease) in cash and cash equivalents    |  | $    | (1,844,920 | ) |      | $ | 3,011,366  |      |  | $ | (4,594,837 | )
|Cash and Cash Equivalents                               |  |      |            |   |      |   |            |      |  |   |            |  
|Beginning of year                                       |  |      | 7,365,111  |   |      |   | 4,353,745  |      |  |   | 8,948,582  |  
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|End of year                                             |  | $    | 5,520,191  |   |      | $ | 7,365,111  |      |  | $ | 4,353,745  |  
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|Supplemental Disclosure of Cash Flow Information        |  |      |            |   |      |   |            |      |  |   |            |  
|Cash paid during year:                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Interest                                                |  | $    | 6,646,783  |   |      | $ | 4,261,817  |      |  | $ | 3,616,769  |  
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|Income taxes                                            |  | $    | 1,137,804  |   |      | $ | 481,000    |      |  | $ | 880,000    |  
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|Noncash Investing and Financing Activities              |  |      |            |   |      |   |            |      |  |   |            |  
|Unrealized gain (loss) on securities available for sale |  | $    | 68,496     |   |      | $ | (1,323,280 | )    |  | $ | (772,897   | )
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|Pension liability adjustment                            |  | $    | (1,049,240 | ) |      | $ |           |      |  | $ |           |  
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  

See Notes to Consolidated Financial Statements.



8



---

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1.
Nature of Banking Activities and Significant Accounting Policies

BOE Financial Services of Virginia, Inc. (the Corporation) is a bank
holding company, which owns all of the stock of its sole subsidiaries, Bank of Essex (the Bank) and BOE Statutory Trust I (the Trust). The Bank provides commercial, residential and consumer loans, and a variety of deposit products to its customers
in the Northern Neck and Richmond regions of Virginia.

Essex Services, Inc. is a wholly-owned subsidiary of the Bank and was formed to sell
title insurance to the Banks mortgage loan customers. Essex Services, Inc. also offers insurance and investment products through affiliations with two limited liability companies.

Principles of Consolidation

The
accompanying consolidated financial statements include the accounts of BOE Financial Services of Virginia, Inc. and its wholly-owned subsidiary, Bank of Essex. All material intercompany balances and transactions have been eliminated in
consolidation. FASB Interpretation No. 46 (R) requires that the Corporation no longer eliminate through consolidation the equity investment in BOE Statutory Trust I, which approximated $124,000 at December 31, 2006 and 2005. The
subordinated debt of the Trust is reflected as a liability of the Corporation.

Securities

Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at
amortized cost. Securities not classified as held to maturity, including equity securities with readily determinable fair values, are classified as available for sale and recorded at fair value, with unrealized gains and losses excluded
from earnings and reported in other comprehensive income.

Purchase premiums and discounts are recognized in interest income using the
interest method over the terms of the securities. Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In
estimating other than temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and
(3) the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date
and are determined using the specific identification method.

Restricted Securities

The Corporation is required to maintain an investment in the capital stock of certain correspondent banks. The Corporations investment in these
securities is recorded at cost.



9



---

Notes to Consolidated Financial Statements

Loans

The Bank grants mortgage,
commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by mortgage loans. The ability of the Banks debtors to honor their contracts is dependent upon the real estate and general economic
conditions in the Banks market area.

Loans that management has the intent and ability to hold for the foreseeable future or until
maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal
balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. Consumer loans are typically charged
off no later than 180 days past due. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged-off is reversed against interest income. The interest on these
loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all of the principal and interest amounts contractually due are brought current and future payments
are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the
uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance is an amount
that management believes will be adequate to absorb estimated losses relating to specifically identified loans, as well as probable credit losses inherent in the balance of the loan portfolio, based on an evaluation of the collectibility of existing
loans and prior loss experience. This evaluation also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that
may affect the borrowers ability to pay. This evaluation does not include the effects of expected losses on specific loans or groups of loans that are related to future events or expected changes in economic conditions. While management uses
the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process,
periodically review the Banks allowance for loan losses, and may require the Bank to make additions to the allowance based on their judgment about information available to them at the time of their examinations.



10



---

Notes to Consolidated Financial Statements

The allowance consists of specific, general and unallocated components. For loans that are also classified as impaired, an allowance is established when
the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for
qualitative factors. An unallocated component is maintained to cover uncertainties that could affect managements estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the
underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired
when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management
in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not
classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the
delay, the reasons for the delay, the borrowers prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by
either the present value of the expected future cash flows discounted at the loans effective interest rate, the loans obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual
consumer and residential loans for impairment disclosures.

Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market in the aggregate. Net
unrealized losses are recognized through a valuation allowance by charges to income. Mortgage loans held for sale are generally sold with the mortgage servicing rights released by the Corporation.

The Corporation enters into commitments to originate certain mortgage loans whereby the interest rate on the loans is determined prior to funding (rate
lock commitments). Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. The period of time between issuance of a loan commitment and closing and the sale of the loan generally ranges from thirty to
ninety days. The Corporation protects itself from changes in interest rates through the use of best efforts forward delivery commitments, whereby the Corporation commits to sell a loan at the time the borrower commits to an interest rate with the
intent that the buyer has assumed interest rate risk on the loan. As a result, the Corporation is not exposed to losses nor will it realize significant gains related to its rate lock commitments due to changes in interest rates. The correlation
between the rate lock commitments and the best efforts contracts is very high due to their similarity. Because of this high correlation, the gain or loss that occurs on the rate lock commitments is immaterial.



11



---

Notes to Consolidated Financial Statements

Bank Premises and Equipment

Bank
premises and equipment are stated at cost less accumulated depreciation. Land is carried at cost. Depreciation of bank premises and equipment is computed on the straight-line method over estimated useful lives of 10 to 50 years for premises and 5 to
20 years for equipment, furniture and fixtures.

Costs of maintenance and repairs are charged to expense as incurred and major improvements
are capitalized. Upon sale or retirement of depreciable properties, the cost and related accumulated depreciation are eliminated from the accounts and the resulting gain or loss is included in the determination of income.

Intangibles

Intangible assets
consist of core deposit premiums from a branch acquisition. Intangible assets are being amortized on a straight-line basis over 15 years.

Other Real Estate

Real estate acquired through, or in lieu of, loan foreclosure is held for sale and is initially recorded
at the lower of the loan balance or the fair value at the date of foreclosure net of estimated disposal costs, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried
at the lower of the carrying amount or the fair value less costs to sell. Revenues and expenses from operations and changes in the valuation allowance are included in other operating expenses. Costs to bring a property to salable condition are
capitalized up to the fair value of the property while costs to maintain a property in salable condition are expensed as incurred. The Corporation had no other real estate at December 31, 2006 or 2005.

Income Taxes

Deferred income tax
assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the
various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

Earnings Per Share

Basic earnings per share (EPS) is computed based on the weighted average number of shares outstanding and excludes any dilutive effects
of options, warrants and convertible securities. Diluted earnings per share is computed in a manner similar to basic EPS, except for certain adjustments to the numerator and the denominator. Diluted EPS gives effect to all dilutive potential common
shares that were outstanding during the period. Potential common shares that may be issued by the Corporation relate solely to outstanding stock options and are determined using the treasury stock method.



12



---

Notes to Consolidated Financial Statements

Stock-Based Compensation

At
December 31, 2006, the Corporation had two stock-based compensation plans, which are described more fully in Note 9. Effective January 1, 2006, the Corporation adopted SFAS No. 123 (revised 2004), Share-Based Payment. SFAS
No. 123R requires the costs resulting from all share-based payments to employees be recognized in the financial statements. Stock-based compensation is estimated at the date of grant using the Black-Scholes option valuation model for
determining fair value. Prior to adopting SFAS No. 123R, the Corporation accounted for the plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretations. No stock-based employee compensation cost was reflected in net income, as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

The following table illustrates the effect on net income and earnings per share as if the Corporation had applied the fair value recognition provisions of
SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based compensation for the years ended December 31, 2005 and 2004. No stock-based compensation expense was recognized for the year ended December 31, 2006 as no
stock options were granted or vested. Effective December 22, 2005, the Corporation accelerated the vesting of all novested stock options under the stock-based compensation plans.



|                                                                                                                                  |  |                          |           |   |      |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | --------- | - | ---- | - | --------- | -
|                                                                                                                                  |  | Years Ended December 31, |          
|                                                                                                                                  |  | 2005                     |           |   | 2004 |  
|Net income, as reported                                                                                                           |  | $                        | 3,100,766 |   |      | $ | 2,885,495 |  
|Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of tax
effect |  |                          | (202,201  | ) |      |   | (64,943   | )
|                                                                                                                                  |  |                          |           |   |      |   |           |  
|Pro forma net income                                                                                                              |  | $                        | 2,898,565 |   |      | $ | 2,820,552 |  
|                                                                                                                                  |  |                          |           |   |      |   |           |  
|Earnings per share:                                                                                                               |  |                          |           |   |      |   |           |  
|Basic - as reported                                                                                                               |  | $                        | 2.60      |   |      | $ | 2.43      |  
|                                                                                                                                  |  |                          |           |   |      |   |           |  
|Basic - pro forma                                                                                                                 |  | $                        | 2.43      |   |      | $ | 2.38      |  
|                                                                                                                                  |  |                          |           |   |      |   |           |  
|Diluted - as reported                                                                                                             |  | $                        | 2.58      |   |      | $ | 2.42      |  
|                                                                                                                                  |  |                          |           |   |      |   |           |  
|Diluted - pro forma                                                                                                               |  | $                        | 2.41      |   |      | $ | 2.36      |  
|                                                                                                                                  |  |                          |           |   |      |   |           |  

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Corporation has defined cash equivalents as those amounts included in the balance sheet
caption Cash and due from banks.

Advertising Costs

The Corporation follows the policy of charging the costs of production of advertising to expense as incurred. Total advertising expense incurred for 2006,
2005 and 2004 was $112,945, $78,330 and $93,578, respectively.



13



---

Notes to Consolidated Financial Statements

Use of Estimates

The preparation of
financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management estimates that are particularly susceptible to significant change in the near term
relate to the determination of the allowance for loan losses.

Reclassifications

Certain reclassifications have been made to prior period balances to conform to the current year provisions.

Note 2. Securities

The amortized cost and fair value
of securities available for sale as of December 31, 2006 and 2005, are as follows:



|                                                |  |               |            |                      |   |                         |  |   |            |   |  |   |           
|----------------------------------------------- |  | ------------- | ---------- | -------------------- | - | ----------------------- |  | - | ---------- | - |  | - | ----------
|                                                |  | AmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealized(Losses) |  |   | Fair Value
|                                                |  | 2006         
|U.S. Treasury securities                        |  | $             | 999,115    |                      | $ |                        |  | $ | (19,340    | ) |  | $ | 979,775   
|U.S. Agency and mortgage-backed securities      |  |               | 15,373,799 |                      |   | 11,055                  |  |   | (259,158   | ) |  |   | 15,125,697
|Obligations of state and political subdivisions |  |               | 38,299,358 |                      |   | 246,741                 |  |   | (320,870   | ) |  |   | 38,225,229
|Corporate debt securities                       |  |               | 1,280,598  |                      |   | 12,902                  |  |   | (5,057     | ) |  |   | 1,288,443 
|Other equity securities                         |  |               | 64,656     |                      |   | 279,664                 |  |   |           |   |  |   | 344,320   
|                                                |  |               |            |                      |   |                         |  |   |            |   |  |   |           
|                                                |  | $             | 56,017,526 |                      | $ | 550,362                 |  | $ | (604,425   | ) |  | $ | 55,963,463
|                                                |  |               |            |                      |   |                         |  |   |            |   |  |   |           
|                                                |  | 2005         
|U.S. Treasury securities                        |  | $             | 1,748,174  |                      | $ |                        |  | $ | (37,999    | ) |  | $ | 1,710,175 
|U.S. Agency and mortgage-backed securities      |  |               | 12,885,090 |                      |   | 5,490                   |  |   | (367,764   | ) |  |   | 12,522,816
|Obligations of state and political subdivisions |  |               | 36,833,547 |                      |   | 363,291                 |  |   | (347,462   | ) |  |   | 36,849,376
|Corporate debt securities                       |  |               | 982,199    |                      |   | 28,634                  |  |   |           |   |  |   | 1,010,833 
|Other equity securities                         |  |               | 64,656     |                      |   | 234,930                 |  |   |           |   |  |   | 299,586   
|                                                |  |               |            |                      |   |                         |  |   |            |   |  |   |           
|                                                |  | $             | 52,513,666 |                      | $ | 632,345                 |  | $ | (753,225   | ) |  | $ | 52,392,786
|                                                |  |               |            |                      |   |                         |  |   |            |   |  |   |           



14



---

Notes to Consolidated Financial Statements

The amortized cost and fair value of securities available for sale as of December 31, 2006, by contractual maturity are shown below. Expected
maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without any penalties.



|                                       |  |               |            |            |   |           
|-------------------------------------- |  | ------------- | ---------- | ---------- | - | ----------
|                                       |  | AmortizedCost |            | Fair Value
|Due in one year or less                |  | $             | 9,092,411  |            | $ | 9,070,047 
|Due after one year through five years  |  |               | 29,564,027 |            |   | 29,344,022
|Due after five years through ten years |  |               | 16,024,813 |            |   | 15,928,787
|Due after ten years                    |  |               | 1,271,619  |            |   | 1,276,287 
|Other equity securities                |  |               | 64,656     |            |   | 344,320   
|                                       |  |               |            |            |   |           
|                                       |  | $             | 56,017,526 |            | $ | 55,963,463
|                                       |  |               |            |            |   |           

At December 31, 2006 and 2005, the Corporation owned one U.S. Government Agency bond in the
held to maturity classification with a book value of $3,000,000. The market value of the bond was $2,949,000 and $2,932,500 at December 31, 2006 and 2005, respectively. The bond matures in 2024.

Proceeds from sales, principal repayments, calls and maturities of securities available for sale during 2006, 2005 and 2004 were $10,009,939, $9,566,053
and $11,658,025, respectively. Gross realized gains of $18,804, $11,960 and $101,138 and gross realized losses of $31,864, $9,335 and $35,532 were recognized on those sales for the years ended December 31, 2006, 2005 and 2004, respectively. The
tax provision (benefit) applicable to these net realized gains amounted to $(4,440), $892 and $22,306, respectively.

Securities with
amortized costs of $7,682,899 and $8,422,978 at December 31, 2006 and 2005 were pledged to secure public deposits and for other purposes required or permitted by law.



15



---

Notes to Consolidated Financial Statements

A summary of investments in an unrealized loss position at December 31, 2006 and 2005 follows:



|                                                |  |                                 |            |                    |                   |          |            |  |                    |            |  |   |          |  
|----------------------------------------------- |  | ------------------------------- | ---------- | ------------------ | ----------------- | -------- | ---------- |  | ------------------ | ---------- |  | - | -------- | -
|                                                |  | Duration of the Unrealized Loss |           
|                                                |  | Less Than 12 Months             |            |                    | 12 Months or More |         
|                                                |  | Fair Value                      |            | Unrealized(Losses) |                   |          | Fair Value |  | Unrealized(Losses) |           
|2006                                            |  |                                 |            |                    |                   |          |            |  |                    |            |  |   |          |  
|U.S. Treasury securities                        |  | $                               | 497,150    |                    | $                 | (3,337   | )          |  | $                  | 482,625    |  | $ | (16,003  | )
|U.S. Agency and mortgage- backed securities     |  |                                 | 2,160,944  |                    |                   | (9,264   | )          |  |                    | 9,089,792  |  |   | (249,894 | )
|Obligations of state and political subdivisions |  |                                 | 6,532,392  |                    |                   | (26,997  | )          |  |                    | 14,835,564 |  |   | (293,873 | )
|Corporate securities                            |  |                                 | 496,950    |                    |                   | (5,057   | )          |  |                    |           |  |   |         |  
|                                                |  |                                 |            |                    |                   |          |            |  |                    |            |  |   |          |  
|Total temporarily impaired securities           |  | $                               | 9,687,436  |                    | $                 | (44,655  | )          |  | $                  | 24,407,981 |  | $ | (559,770 | )
|                                                |  |                                 |            |                    |                   |          |            |  |                    |            |  |   |          |  
|2005                                            |  |                                 |            |                    |                   |          |            |  |                    |            |  |   |          |  
|U.S. Treasury securities                        |  | $                               |           |                    | $                 |         |            |  | $                  | 1,710,175  |  | $ | (37,999  | )
|U.S. Agency and mortgage- backed securities     |  |                                 | 6,452,591  |                    |                   | (159,992 | )          |  |                    | 5,876,641  |  |   | (207,772 | )
|Obligations of state and political subdivisions |  |                                 | 9,992,617  |                    |                   | (160,577 | )          |  |                    | 5,940,175  |  |   | (186,885 | )
|                                                |  |                                 |            |                    |                   |          |            |  |                    |            |  |   |          |  
|Total temporarily impaired securities           |  | $                               | 16,445,208 |                    | $                 | (320,569 | )          |  | $                  | 13,526,991 |  | $ | (432,656 | )
|                                                |  |                                 |            |                    |                   |          |            |  |                    |            |  |   |          |  



16



---

Notes to Consolidated Financial Statements

The unrealized losses in the investment portfolio as of December 31, 2006, are generally a result of market fluctuations that occur daily. The
unrealized losses are from 120 securities that are all of investment grade, backed by insurance, U.S. government agency guarantees, or the full faith and credit of local municipalities throughout the United States. The Corporation has the ability
and intent to hold these securities to maturity. Market prices are affected by conditions beyond the control of the Corporation. Investment decisions are made by the management group of the Corporation and reflect the overall liquidity and strategic
asset/liability objectives of the Corporation. Management analyzes the securities portfolio frequently and manages the portfolio to provide an overall positive impact to the Corporations income statement and balance sheet.

Note 3. Loans

Major classifications of loans are
summarized as follows:



|                                |  |                |         |      |   |        
|------------------------------- |  | -------------- | ------- | ---- | - | -------
|                                |  | December 31,  
|                                |  | 2006           |         | 2005
|                                |  | (in thousands)
|Mortgage loans on real estate:  |  |                |         |      |   |        
|Residential 1-4 family          |  | $              | 56,264  |      | $ | 48,898 
|Commercial                      |  |                | 73,594  |      |   | 62,580 
|Construction                    |  |                | 29,984  |      |   | 32,084 
|Equity lines of credit          |  |                | 8,150   |      |   | 9,818  
|Commercial loans                |  |                | 22,934  |      |   | 22,873 
|Consumer installment loans:     |  |                |         |      |   |        
|Personal                        |  |                | 5,036   |      |   | 5,276  
|Credit cards                    |  |                | 929     |      |   | 927    
|                                |  |                |         |      |   |        
|                                |  | $              | 196,891 |      | $ | 182,456
|Less: Allowance for loan losses |  |                | 2,400   |      |   | 2,249  
|                                |  |                |         |      |   |        
|Loans, net                      |  | $              | 194,491 |      | $ | 180,207
|                                |  |                |         |      |   |        

A summary of the transactions affecting the allowance for loan losses is as follows:



|                                           |  |      |           |   |      |   |           |      |  |   |           |  
|------------------------------------------ |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                           |  | 2006 |           |   | 2005 |   |           | 2004 | 
|Balance, beginning of year                 |  | $    | 2,248,658 |   |      | $ | 2,088,329 |      |  | $ | 2,128,254 |  
|Provision for loan losses                  |  |      | 125,000   |   |      |   | 240,400   |      |  |   | 305,000   |  
|Loans charged off                          |  |      | (137,873  | ) |      |   | (158,810  | )    |  |   | (429,781  | )
|Recoveries of loans previously charged off |  |      | 163,853   |   |      |   | 78,739    |      |  |   | 84,856    |  
|                                           |  |      |           |   |      |   |           |      |  |   |           |  
|Balance, end of year                       |  | $    | 2,399,638 |   |      | $ | 2,248,658 |      |  | $ | 2,088,329 |  
|                                           |  |      |           |   |      |   |           |      |  |   |           |  



17



---

Notes to Consolidated Financial Statements

The following is a summary of information pertaining to impaired loans:



|                                                             |  |              |           |      |   |           |  |   |          
|------------------------------------------------------------ |  | ------------ | --------- | ---- | - | --------- |  | - | ---------
|                                                             |  | December 31,
|                                                             |  | 2006         |           | 2005 |   | 2004     
|Impaired loans with a valuation allowance                    |  | $            | 1,635,400 |      | $ | 1,517,800 |  | $ | 2,823,700
|Impaired loans without a valuation allowance                 |  |              | 120,700   |      |   | 223,200   |  |   |         
|                                                             |  |              |           |      |   |           |  |   |          
|Total impaired loans                                         |  | $            | 1,756,100 |      | $ | 1,741,000 |  | $ | 2,823,700
|                                                             |  |              |           |      |   |           |  |   |          
|Valuation allowance related to impaired loans                |  | $            | 567,700   |      | $ | 536,300   |  | $ | 606,345  
|                                                             |  |              |           |      |   |           |  |   |          
|                                                             |  |              |          
|                                                             |  | 2006         |           | 2005 |   | 2004     
|Nonaccrual loans                                             |  | $            |          |      | $ | 150,418   |  | $ | 240,935  
|Loans past due ninety days or more and still accruing        |  |              | 101,560   |      |   | 259,500   |  |   | 100,236  
|Average balance of impaired loans                            |  |              | 1,748,550 |      |   | 2,394,350 |  |   | 2,610,500
|Interest income recognized on impaired loans                 |  |              | 175,261   |      |   | 195,899   |  |   | 168,359  
|Interest income recognized on a cash basis on impaired loans |  |              | 158,889   |      |   | 195,899   |  |   | 168,359  

The Corporation has not committed to lend additional funds to these debtors.

Note 4. Premises and Equipment

A summary of the
cost and accumulated depreciation of bank premises and equipment at December 31, 2006 and 2005 follows:



|                         |  |      |            |      |   |           
|------------------------ |  | ---- | ---------- | ---- | - | ----------
|                         |  | 2006 |            | 2005
|Land                     |  | $    | 2,629,218  |      | $ | 2,729,218 
|Buildings                |  |      | 7,849,978  |      |   | 3,940,808 
|Furniture and fixtures   |  |      | 4,847,910  |      |   | 4,278,944 
|Construction in progress |  |      | 11,203     |      |   | 1,317,470 
|                         |  |      |            |      |   |           
|                         |  | $    | 15,338,309 |      | $ | 12,266,440
|Accumulated depreciation |  |      | 4,884,748  |      |   | 4,610,019 
|                         |  |      |            |      |   |           
|                         |  | $    | 10,453,561 |      | $ | 7,656,421 
|                         |  |      |            |      |   |           

Depreciation expense for the years ended December 31, 2006, 2005 and 2004, amounted to
$479,771, $381,885 and $381,377, respectively.



18



---

Notes to Consolidated Financial Statements

Note 5. Deposits

The aggregate amount of time
deposits in denominations of $100,000 or more at December 31, 2006 and 2005 was $43,980,269 and $39,864,361, respectively.

The
scheduled maturities of time deposits at December 31, 2006 are as follows:



|     |  |   |            
|---- |  | - | -----------
|2007 |  | $ | 113,762,513
|2008 |  |   | 20,731,324 
|2009 |  |   | 3,289,543  
|2010 |  |   | 2,547,793  
|2011 |  |   | 1,638,744  
|     |  |   |            
|     |  | $ | 141,969,917
|     |  |   |            

At December 31, 2006 and 2005, overdraft demand deposits reclassified to loans totaled
$101,649 and $71,186, respectively.

Note 6. Income Taxes

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities follows:



|                                                 |  |      |           |      |   |        
|------------------------------------------------ |  | ---- | --------- | ---- | - | -------
|                                                 |  | 2006 |           | 2005
|Deferred tax assets:                             |  |      |           |      |   |        
|Allowance for loan losses                        |  | $    | 636,072   |      | $ | 594,442
|Deferred compensation                            |  |      | 224,155   |      |   | 163,578
|Nonaccrual loan interest                         |  |      |          |      |   | 5,168  
|Unrealized loss on securities available for sale |  |      | 18,382    |      |   | 41,099 
|Accrued pension                                  |  |      | 365,304   |      |   |       
|                                                 |  |      |           |      |   |        
|                                                 |  | $    | 1,243,913 |      | $ | 804,287
|                                                 |  |      |           |      |   |        
|Deferred tax liabilities:                        |  |      |           |      |   |        
|Depreciation                                     |  | $    | 249,319   |      | $ | 300,430
|Discount accretion on securities                 |  |      | 15,366    |      |   | 19,173 
|Partnership losses                               |  |      | 59,352    |      |   | 57,599 
|Prepaid pension                                  |  |      |          |      |   | 129,222
|Other                                            |  |      | 21,983    |      |   | 21,983 
|                                                 |  |      |           |      |   |        
|                                                 |  | $    | 346,020   |      | $ | 528,407
|                                                 |  |      |           |      |   |        
|Net deferred tax assets                          |  | $    | 897,893   |      | $ | 275,880
|                                                 |  |      |           |      |   |        



19



---

Notes to Consolidated Financial Statements

Allocation of the income tax expense between current and deferred portions is as follows:



|                                                                                                              |  |      |           |   |      |   |          |      |  |   |         |  
|------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | -------- | ---- |  | - | ------- | -
|                                                                                                              |  | 2006 |           |   | 2005 |   |          | 2004 | 
|Current tax provision                                                                                         |  | $    | 1,160,011 |   |      | $ | 998,108  |      |  | $ | 698,466 |  
|Deferred tax (benefit) expense                                                                                |  |      | (287,988  | ) |      |   | (126,218 | )    |  |   | 124,848 |  
|                                                                                                              |  |      |           |   |      |   |          |      |  |   |         |  
|                                                                                                              |  | $    | 872,023   |   |      | $ | 871,890  |      |  | $ | 823,314 |  
|                                                                                                              |  |      |           |   |      |   |          |      |  |   |         |  
|                                                                                                             
|The following is a reconciliation of the expected income tax expense with the reported expense for each year: | 
|                                                                                                              |  |      |          
|                                                                                                              |  | 2006 |           |   | 2005 |   |          | 2004 | 
|Statutory Federal income tax rate                                                                             |  |      | 34.0      | % |      |   | 34.0     | %    |  |   | 34.0    | %
|(Reduction) in taxes resulting from:                                                                          |  |      |           |   |      |   |          |      |  |   |         |  
|Municipal interest                                                                                            |  |      | (10.3     | ) |      |   | (10.6    | )    |  |   | (10.5   | )
|Other, net                                                                                                    |  |      | (1.9      | ) |      |   | (1.5     | )    |  |   | (1.3    | )
|                                                                                                              |  |      |           |   |      |   |          |      |  |   |         |  
|Effective income tax rate                                                                                     |  |      | 21.8      | % |      |   | 21.9     | %    |  |   | 22.2    | %
|                                                                                                              |  |      |           |   |      |   |          |      |  |   |         |  

Note 7. Federal Home Loan Bank Advances and Lines of Credit

The Corporation had advances on lines of credit with the Federal Home Loan Bank of Atlanta that totaled $12,000,000 and $5,000,000 at December 31,
2006 and 2005, respectively. The weighted average interest rate on these advances was 4.75%. One advance totaling $7,000,000 matures in 2007 with the remaining $5,000,000 advance maturing in 2015. Advances on the lines are secured by all of the
Corporations first lien loans on one-to-four unit single-family dwellings. As of December 31, 2006, the book value of these loans totaled approximately $42,804,000. The amount of available credit is limited to seventy-five percent of
qualifying collateral. Any borrowings in excess of the qualifying collateral require pledging of additional assets.

The Corporation has
unsecured lines of credit with correspondent banks available for overnight borrowing totaling approximately $16,500,000. At December 31, 2006, $3,207,000 had been drawn on these lines of credit.

Note 8. Employee Benefit Plans

The Corporation
has a noncontributory, defined benefit pension plan for all full-time employees over 21 years of age. Benefits are generally based upon years of service and the employees compensation. The Corporation funds pension costs in accordance with the
funding provisions of the Employee Retirement Income Security Act.



20



---

Notes to Consolidated Financial Statements

The following tables provide a reconciliation of the changes in the plans benefit obligations and fair value of assets over the years ending
December 31, 2006, 2005 and 2004, computed as of October 1, 2006, 2005 and 2004, respectively:



|                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                              |  | 2006 |            |   | 2005 |   |            | 2004 | 
|Change in Benefit Obligation                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Benefit obligation, beginning                                 |  | $    | 4,289,019  |   |      | $ | 3,561,978  |      |  | $ | 3,066,325  |  
|Service cost                                                  |  |      | 363,570    |   |      |   | 308,269    |      |  |   | 245,785    |  
|Interest cost                                                 |  |      | 245,828    |   |      |   | 212,894    |      |  |   | 198,503    |  
|Actuarial loss                                                |  |      | (332,800   | ) |      |   | 233,774    |      |  |   | 460,162    |  
|Benefits paid                                                 |  |      | (27,896    | ) |      |   | (27,896    | )    |  |   | (408,797   | )
|                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Benefit obligation, ending                                    |  | $    | 4,537,721  |   |      | $ | 4,289,019  |      |  | $ | 3,561,978  |  
|                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Change in Plan Assets                                         |  |      |            |   |      |   |            |      |  |   |            |  
|Fair value of plan assets, beginning                          |  | $    | 3,071,341  |   |      | $ | 2,545,270  |      |  | $ | 1,921,202  |  
|Actual return on plan assets                                  |  |      | 251,931    |   |      |   | 342,457    |      |  |   | 241,058    |  
|Employer contributions                                        |  |      | 167,914    |   |      |   | 211,510    |      |  |   | 791,807    |  
|Benefits paid                                                 |  |      | (27,896    | ) |      |   | (27,896    | )    |  |   | (408,797   | )
|                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Fair value of plan assets, ending                             |  | $    | 3,463,290  |   |      | $ | 3,071,341  |      |  | $ | 2,545,270  |  
|                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Funded Status                                                 |  | $    | (1,074,431 | ) |      | $ | (1,217,678 | )    |  | $ | (1,016,708 | )
|Unrecognized net actuarial loss                               |  |      |           |   |      |   | 1,428,442  |      |  |   | 1,378,746  |  
|Unrecognized net obligation at transition                     |  |      |           |   |      |   | (19,208    | )    |  |   | (22,408    | )
|Unrecognized prior service cost                               |  |      |           |   |      |   | 20,595     |      |  |   | 24,026     |  
|                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|(Accrued) prepaid benefit cost at October 1                   |  | $    | (1,074,431 | ) |      | $ | 212,151    |      |  | $ | 363,656    |  
|Contributions made in December                                |  |      |           |   |      |   | 167,914    |      |  |   | 211,510    |  
|                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|(Accrued) prepaid benefit cost at December 31                 |  | $    | (1,074,431 | ) |      | $ | 380,065    |      |  | $ | 575,166    |  
|                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Amounts Recognized in the Balance Sheet                       |  |      |            |   |      |   |            |      |  |   |            |  
|Other assets                                                  |  | $    |           |   |      | $ | 380,065    |      |  | $ | 575,166    |  
|Other liabilities                                             |  |      | 1,074,431  |   |      |   |           |      |  |   |           |  
|Amounts Recognized in Accumulated Comprehensive Income (Loss) |  |      |            |   |      |   |            |      |  |   |            |  
|Net loss                                                      |  | $    | 1,048,084  |   |      | $ |           |      |  | $ |           |  
|Prior service cost                                            |  |      | 17,164     |   |      |   |           |      |  |   |           |  
|Net obligation at transition                                  |  |      | (16,008    | ) |      |   |           |      |  |   |           |  
|                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Total amount recognized                                       |  | $    | 1,049,240  |   |      | $ |           |      |  | $ |           |  
|                                                              |  |      |            |   |      |   |            |      |  |   |            |  

The accumulated benefit obligation for the defined benefit pension plan was $2,741,049, $2,416,644
and $1,945,342 at September 30, 2006, 2005 and 2004, respectively.



21



---

Notes to Consolidated Financial Statements

The following table provides the components of net periodic benefit cost for the plan for the years ended December 31, 2006, 2005 and 2004:



|                                                                                                                                         |  |      |           |   |      |   |          |      |  |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                                                                         |  | 2006 |           |   | 2005 |   |          | 2004 | 
|Components of Net Periodic Benefit Cost                                                                                                  |  |      |           |   |      |   |          |      |  |   |          |  
|Service cost                                                                                                                             |  | $    | 363,570   |   |      | $ | 308,269  |      |  | $ | 245,785  |  
|Interest cost                                                                                                                            |  |      | 245,828   |   |      |   | 212,894  |      |  |   | 198,503  |  
|Expected return on plan assets                                                                                                           |  |      | (259,903  | ) |      |   | (215,187 | )    |  |   | (212,210 | )
|Amortization of prior service cost                                                                                                       |  |      | 3,431     |   |      |   | 3,431    |      |  |   | 3,431    |  
|Amortization of net obligation at transition                                                                                             |  |      | (3,200    | ) |      |   | (3,200   | )    |  |   | (3,200   | )
|Recognized net actuarial loss                                                                                                            |  |      | 55,530    |   |      |   | 56,808   |      |  |   | 37,694   |  
|                                                                                                                                         |  |      |           |   |      |   |          |      |  |   |          |  
|Net periodic benefit cost                                                                                                                |  | $    | 405,256   |   |      | $ | 363,015  |      |  | $ | 270,003  |  
|                                                                                                                                         |  |      |           |   |      |   |          |      |  |   |          |  
|Other Changes in Plan Assets and Benefit Obligations Recognized in Accumulated Other Comprehensive Income (Loss)                         |  |      |           |   |      |   |          |      |  |   |          |  
|Net loss                                                                                                                                 |  | $    | 1,048,084 |   |      | $ |         |      |  | $ |         |  
|Prior service cost                                                                                                                       |  |      | 17,164    |   |      |   |         |      |  |   |         |  
|Net obligation at transition                                                                                                             |  |      | (16,008   | ) |      |   |         |      |  |   |         |  
|Deferred income tax benefit                                                                                                              |  |      | (356,742  | ) |      |   |         |      |  |   |         |  
|                                                                                                                                         |  |      |           |   |      |   |          |      |  |   |          |  
|Total recognized in other comprehensive (loss)                                                                                           |  |      | 692,498   |   |      | $ |         |      |  | $ |         |  
|                                                                                                                                         |  |      |           |   |      |   |          |      |  |   |          |  
|Total recognized in net periodic benefit cost and accumulated other comprehensive (loss)                                                 |  | $    | 1,097,754 |   |      | $ | 363,015  |      |  | $ | 270,003  |  
|                                                                                                                                         |  |      |           |   |      |   |          |      |  |   |          |  
|                                                                                                                                        
|The weighted-average assumptions used in the measurement of the Corporations benefit obligation are shown in the following
table:       | 
|                                                                                                                                         |  |      |          
|                                                                                                                                         |  | 2006 |           |   | 2005 |   |          | 2004 | 
|Discount rate                                                                                                                            |  |      | 6.00      | % |      |   | 5.75     | %    |  |   | 6.00     | %
|Expected return on plan assets                                                                                                           |  |      | 8.50      | % |      |   | 8.50     | %    |  |   | 8.50     | %
|Rate of compensation increase                                                                                                            |  |      | 5.00      | % |      |   | 5.00     | %    |  |   | 5.00     | %
|                                                                                                                                        
|The weighted-average assumption used in the measurement of the Corporations net periodic benefit cost are shown in the following
table: | 
|                                                                                                                                         |  |      |          
|                                                                                                                                         |  | 2006 |           |   | 2005 |   |          | 2004 | 
|Discount rate                                                                                                                            |  |      | 5.75      | % |      |   | 6.00     | %    |  |   | 6.50     | %
|Expected return on plan assets                                                                                                           |  |      | 8.50      | % |      |   | 8.50     | %    |  |   | 8.50     | %
|Rate of compensation increase                                                                                                            |  |      | 5.00      | % |      |   | 5.00     | %    |  |   | 5.00     | %



22



---

Notes to Consolidated Financial Statements

Incremental Effect of Applying SFAS No. 158

on Individual Line Items in
the Consolidated Balance Sheet

December 31, 2006



|                                       |  |                                   |            |   |             |   |           |                                  |  |   |            |  
|-------------------------------------- |  | --------------------------------- | ---------- | - | ----------- | - | --------- | -------------------------------- |  | - | ---------- | -
|                                       |  | Before Applicationof SFAS No. 158 |            |   | Adjustments |   |           | After Applicationof SFAS No. 158 | 
|Other assets (deferred income taxes)   |  | $                                 | 8,153,404  |   |             | $ | 356,742   |                                  |  | $ | 8,510,146  |  
|Other liabilities (pension liability)  |  |                                   | 1,235,208  |   |             |   | 1,049,240 |                                  |  |   | 2,284,448  |  
|Accumulated other comprehensive (loss) |  |                                   | (34,573    | ) |             |   | (692,498  | )                                |  |   | (727,071   | )
|Total stockholders equity             |  |                                   | 28,739,056 |   |             |   | (692,498  | )                                |  |   | 28,046,558 |  

Long-Term Rate of Return

The plan sponsor selects the expected long-term rate of return on assets assumption in consultation with their investment advisors and actuary. This rate
is intended to reflect the average rate of earnings expected to be earned on the funds invested or to be invested to provide plan benefits. Historical performance is reviewed, especially with respect to real rates of return (net of inflation), for
the major asset classes held or anticipated to be held by the trust, and for the trust itself. Undue weight is not given to recent experience that may not continue over the measurement period, with higher significance placed on current forecasts of
future long-term economic conditions.

Because assets are held in a qualified trust, anticipated returns are not reduced for taxes. Further,
solely for this purpose, the plan is assumed to continue in force and not terminate during the period during which assets are invested. However, consideration is given to the potential impact of current and future investment policy, cash flow into
and out of the trust, and expenses (both investment and non-investment) typically paid from plan assets (to the extent such expenses are not explicitly estimated within periodic cost).

Asset Allocation

The pension
plans weighted-average asset allocations at September 30, 2006 and 2005, by asset category are as follows:



|                            |  |      |   |  |      |  
|--------------------------- |  | ---- | - |  | ---- | -
|                            |  | 2006 |   |  | 2005 |  
|Asset Category              |  |      |   |  |      |  
|Mutual funds - fixed income |  | 30   | % |  | 34   | %
|Mutual funds - equity       |  | 56   | % |  | 66   | %
|Cash and equivalents        |  | 14   | % |  | 0    | %
|                            |  |      |   |  |      |  
|                            |  | 100  | % |  | 100  | %
|                            |  |      |   |  |      |  



23



---

Notes to Consolidated Financial Statements

The trust fund is sufficiently diversified to maintain a reasonable level of risk without imprudently sacrificing return, with a targeted asset
allocation of 40% fixed income and 60% equities. The investment manager selects investment fund managers with demonstrated experience and expertise, and funds with demonstrated historical performance, for the implementation of the plans
investment strategy. The investment manager will consider both actively and passively managed investment strategies and will allocate funds across the asset classes to develop an efficient investment structure.

It is the responsibility of the trustee to administer the investments of the trust within reasonable costs, being careful to avoid sacrificing quality.
These costs include, but are not limited to, management and custodial fees, consulting fees, transaction costs and other administrative costs chargeable to the trust.

The Corporation does not expect to contribute to its pension plan in 2007.

Estimated future benefit
payments, which reflect expected future service, as appropriate, are as follows:



|          |  |   |          
|--------- |  | - | ---------
|2007      |  | $ | 38,876   
|2008      |  |   | 61,624   
|2009      |  |   | 67,432   
|2010      |  |   | 87,686   
|2011      |  |   | 104,130  
|2012-2016 |  |   | 1,124,836

401(k) Plan

The Corporation has also adopted a contributory 401(k) profit sharing plan which covers substantially all employees. The employee may contribute up to 15% of compensation, subject to statutory limitations. The
Corporation matches 50% of employee contributions up to 4% of compensation. The plan also provides for an additional discretionary contribution to be made by the Corporation as determined each year. The amounts charged to expense under this plan for
the years ended December 31, 2006, 2005 and 2004 were $53,642, $47,963 and $44,085, respectively.

Deferred Compensation Agreements

The Corporation has deferred compensation agreements with certain key employees and the Board of Directors. The retirement benefits to
be provided are fixed based upon the amount of compensation earned and deferred. Deferred compensation expense amounted to $268,011, $56,593 and $3,612 for the years ended December 31, 2006, 2005 and 2004, respectively. These contracts are
funded by life insurance policies.



24



---

Notes to Consolidated Financial Statements

Note 9. Stock Option Plans

During the year ended
December 31, 2000, the Corporation adopted stock option plans for all employees and outside directors. The plans provide that 110,000 shares of the Corporations common stock will be reserved for both incentive and non-statutory stock
options to purchase common stock of the Corporation. The exercise price per share for incentive stock options and non-statutory stock options shall not be less than the fair market value of a share of common stock on the date of grant, and may be
exercised at such times as may be specified by the Board of Directors in the participants stock option agreement. Each incentive and non-statutory stock option shall expire not more than ten years from the date the option is granted. The
options vest at the rate of one quarter per year from the grant date. Effective December 22, 2005, the Compensation Committee of the Board of Directors approved the acceleration of vesting of all unvested stock options under the plans.

A summary of the status of the stock plans follows:



|                                 |  |                 |   |  |                              |       |                                         |           |                         |   |        
|-------------------------------- |  | --------------- | - |  | ---------------------------- | ----- | --------------------------------------- | --------- | ----------------------- | - | -------
|                                 |  | Numberof Shares |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualTerm |           | AggregateIntrinsicValue
|Outstanding at beginning of year |  | 37,589          |   |  | $                            | 23.87 |                                         |           |                         |   |        
|Granted                          |  |                |   |  |                              |      |                                         |           |                         |   |        
|Exercised                        |  | (6,930          | ) |  |                              | 23.56 |                                         |           |                         |   |        
|Forfeited                        |  | (941            | ) |  |                              | 24.80 |                                         |           |                         |   |        
|                                 |  |                 |   |  |                              |       |                                         |           |                         |   |        
|Outstanding at year end          |  | 29,718          |   |  |                              | 23.92 |                                         | 6.5 years |                         | $ | 206,250
|                                 |  |                 |   |  |                              |       |                                         |           |                         |   |        
|Exercisable at year end          |  | 29,718          |   |  |                              | 23.92 |                                         | 6.5 years |                         | $ | 206,250
|                                 |  |                 |   |  |                              |       |                                         |           |                         |   |        

The aggregate intrinsic value of a stock option in the table above represents the total pre-tax
intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by option holders had all option holders exercised their options on December 31, 2006.
This amount changes based on changes in the market value of the Corporations stock.

The total intrinsic value of options exercised
during the year ended December 31, 2006 was $61,250.

The weighted average fair value of options granted during the year ended
December 31, 2004 was $8.22 and was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions. There were no option grants during the years ended December 31, 2006 and 2005.



|                        |  |          
|----------------------- |  | ---------
|Dividend yield          |  | 2.64%    
|Expected life           |  | 9.7 years
|Expected volatility     |  | 25.86%   
|Risk-free interest rate |  | 4.45%    



25



---

Notes to Consolidated Financial Statements

Note 10. Earnings Per Share

The following shows the
weighted average number of shares used in computing earnings per share and the effect on the weighted average number of shares of diluted potential stock. Potential dilutive common stock had no effect on income available to common stockholders.



|                                 |  |           |  |           |      |       |           |           |   |        |  |           |  |   |     
|-------------------------------- |  | --------- |  | --------- | ---- | ----- | --------- | --------- | - | ------ |  | --------- |  | - | ----
|                                 |  | 2006      |  | 2005      |      | 2004 
|                                 |  | Shares    |  | Per Share |      | Share |           | Per Share |   | Shares |  | Per Share
|Basic earnings per share         |  | 1,201,465 |  | $         | 2.60 |       | 1,193,467 |           | $ | 2.60   |  | 1,185,952 |  | $ | 2.43
|                                 |  |           |  |           |      |       |           |           |   |        |  |           |  |   |     
|Effect of dilutive stock options |  | 9,457     |  |           |      |       | 10,258    |           |   |        |  | 8,559     |  |   |     
|                                 |  |           |  |           |      |       |           |           |   |        |  |           |  |   |     
|Diluted earnings per share       |  | 1,210,922 |  | $         | 2.58 |       | 1,203,725 |           | $ | 2.58   |  | 1,194,511 |  | $ | 2.42
|                                 |  |           |  |           |      |       |           |           |   |        |  |           |  |   |     

The Company granted options to employees and directors to purchase 3,797 shares on average during
the year ended December 31, 2004 that were not included in the computation of diluted earnings per share because the exercise price of those options exceeded the average market price of the common shares during the year. No options were
excluded from the computation for the years ended December 31, 2006 and 2005.

Note 11. Related Party Transactions

In the ordinary course of business, the Bank has and expects to continue to have transactions, including borrowings, with its executive officers,
directors, and their affiliates. All such loans are made on substantially the same terms as those prevailing at the time for comparable loans to unrelated persons. Loans to such borrowers are summarized as follows:



|                                 |  |      |            |   |      |   |            |  
|-------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                 |  | 2006 |            |   | 2005 |  
|Balance, beginning of year       |  | $    | 2,677,102  |   |      | $ | 2,007,294  |  
|Principal additions              |  |      | 1,336,758  |   |      |   | 2,005,289  |  
|Repayments and reclassifications |  |      | (1,128,828 | ) |      |   | (1,335,481 | )
|                                 |  |      |            |   |      |   |            |  
|Balance, end of year             |  | $    | 2,885,032  |   |      | $ | 2,677,102  |  
|                                 |  |      |            |   |      |   |            |  



26



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Notes to Consolidated Financial Statements

Note 12. Commitments and Contingent Liabilities

In
the normal course of business, there are outstanding various commitments and contingent liabilities, such as guarantees, commitments to extend credit, etc., which are not reflected in the accompanying consolidated financial statements. The Bank does
not anticipate losses as a result of these transactions. See Note 15 with respect to financial instruments with off-balance-sheet risk.

As
members of the Federal Reserve System, the Bank is required to maintain certain average reserve balances. For the final weekly reporting period in the years ended December 31, 2006 and 2005, the aggregate amount of daily average required
balances were approximately $632,000 and $995,000, respectively.

The Bank is required to maintain certain required reserve balances with a
correspondent bank. Those required balances were $250,000 at December 31, 2006 and 2005.

Note 13. Dividend Limitations on Affiliate Bank

Transfers of funds from the banking subsidiary to the parent corporation in the form of loans, advances and cash dividends are
restricted by federal and state regulatory authorities. As of December 31, 2006, the aggregate amount of unrestricted funds, which could be transferred from the banking subsidiary to the parent corporation, without prior regulatory approval,
totaled $7,129,004 (25.4% of net assets).

Note 14. Concentration of Credit Risk

The Bank has a diversified loan portfolio consisting of commercial, real estate and consumer (installment) loans. Substantially all of the Banks
customers are residents or operate business ventures in its market area consisting of Essex, King William, Hanover, Henrico and adjacent counties. Therefore, a substantial portion of its debtors ability to honor their contracts and the
Banks ability to realize the value of any underlying collateral, if needed, is influenced by the economic conditions in this market area.

The Bank maintains a portion of its cash balances with several financial institutions located in its market area. Accounts at each institution are secured by the Federal Deposit Insurance Corporation up to $100,000. Uninsured balances were
approximately $996,000 and $1,978,000 at December 31, 2006 and 2005, respectively.



27



---

Notes to Consolidated Financial Statements

Note 15. Financial Instruments With Off-Balance-Sheet Risk

The Bank is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of
credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Bank has in
particular classes of financial instruments.

The Banks exposure to credit loss in the event of nonperformance by the other party to
the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it
does for on-balance-sheet instruments.

A summary of the contract amounts of the Banks exposure to off-balance-sheet risk as of
December 31, 2006 and 2005, is as follows:



|                                                                    |  |      |            |      |   |           
|------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                                                    |  | 2006 |            | 2005
|Financial instruments whose contract amounts represent credit risk: |  |      |            |      |   |           
|Commitments to extend credit                                        |  | $    | 45,251,000 |      | $ | 40,381,000
|Standby letters of credit                                           |  |      | 4,971,000  |      |   | 4,602,000 

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. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customers credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit,
is based on managements credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property and equipment, and income-producing commercial properties.

Unfunded commitments under commercial lines-of credit, revolving credit lines and overdraft protection agreements are commitments for possible future
extensions of credit to existing customers. These lines-of-credit are generally uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Bank is committed.

Standby letters of credit are 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, including commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending
loan facilities to customers. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on managements evaluation of the counterparty. Since most of the letters of credit are expected to expire
without being drawn upon, they do not necessarily represent future cash requirements.



28



---

Notes to Consolidated Financial Statements

Note 16. Minimum Regulatory Capital Requirements

The
Corporation (on a consolidated basis) 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 Corporations and Banks financial statements. Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The
capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2006 and
2005, that the Corporation and Bank met all capital adequacy requirements to which they are subject.

As of December 31, 2006, the most
recent notification from the Federal Reserve Bank categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based,
Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Banks category.



29



---

Notes to Consolidated Financial Statements

The Corporations and the Banks actual capital amounts and ratios as of December 31, 2006 and 2005, are also presented in the table.



|                                                      |  |                        |        |       |                            |   |        |                                                                        |        |  |      |        |  |       |        |  |       |  
|----------------------------------------------------- |  | ---------------------- | ------ | ----- | -------------------------- | - | ------ | ---------------------------------------------------------------------- | ------ |  | ---- | ------ |  | ----- | ------ |  | ----- | -
|                                                      |  | Actual                 |        |       | Minimum CapitalRequirement |   |        | Minimum To Be WellCapitalized Under Prompt CorrectiveAction Provisions |       
|                                                      |  | Amount                 |        | Ratio |                            |   | Amount |                                                                        | Ratio  |  |      | Amount |  | Ratio |       
|                                                      |  | (dollars in thousands) |       
|As of December 31, 2006:                              |  |                        |        |       |                            |   |        |                                                                        |        |  |      |        |  |       |        |  |       |  
|Total Capital (to Risk Weighted Assets) Consolidated  |  | $                      | 34,679 |       | 16.4                       | % |        | $                                                                      | 16,919 |  | 8.00 | %      |  |       | N/A    |  | N/A   |  
|Bank of Essex                                         |  | $                      | 33,869 |       | 16.1                       | % |        | $                                                                      | 16,866 |  | 8.00 | %      |  | $     | 21,083 |  | 10.00 | %
|Tier 1 Capital (to Risk Weighted Assets) Consolidated |  | $                      | 32,559 |       | 15.4                       | % |        | $                                                                      | 8,460  |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank of Essex                                         |  | $                      | 31,874 |       | 15.1                       | % |        | $                                                                      | 8,433  |  | 4.00 | %      |  | $     | 12,650 |  | 6.00  | %
|Tier 1 Capital (to Average Assets) Consolidated       |  | $                      | 32,559 |       | 11.7                       | % |        | $                                                                      | 11,162 |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank of Essex                                         |  | $                      | 31,874 |       | 11.4                       | % |        | $                                                                      | 11,162 |  | 4.00 | %      |  | $     | 13,953 |  | 5.00  | %
|As of December 31, 2005:                              |  |                        |        |       |                            |   |        |                                                                        |        |  |      |        |  |       |        |  |       |  
|Total Capital (to Risk Weighted Assets) Consolidated  |  | $                      | 31,788 |       | 15.7                       | % |        | $                                                                      | 16,224 |  | 8.00 | %      |  |       | N/A    |  | N/A   |  
|Bank of Essex                                         |  | $                      | 31,141 |       | 15.4                       | % |        | $                                                                      | 16,205 |  | 8.00 | %      |  | $     | 20,256 |  | 10.00 | %
|Tier 1 Capital (to Risk Weighted Assets) Consolidated |  | $                      | 29,944 |       | 14.8                       | % |        | $                                                                      | 8,112  |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank of Essex                                         |  | $                      | 29,297 |       | 14.5                       | % |        | $                                                                      | 8,102  |  | 4.00 | %      |  | $     | 12,154 |  | 6.00  | %
|Tier 1 Capital (to Average Assets) Consolidated       |  | $                      | 29,944 |       | 11.6                       | % |        | $                                                                      | 10,369 |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank of Essex                                         |  | $                      | 29,297 |       | 11.3                       | % |        | $                                                                      | 10,369 |  | 4.00 | %      |  | $     | 12,961 |  | 5.00  | %



30



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Notes to Consolidated Financial Statements

Note 17. Fair Value of Financial Instruments and Interest Rate Risk

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices.
However, in many instances, there are no quoted market prices for the Corporations various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.
SFAS No. 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the
Corporation.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it
is practicable to estimate that value:

Cash and Short-Term Investments

For those short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities

For securities held for
investment purposes, fair values are based on quoted market prices or dealer quotes.

Restricted Securities

The carrying value of restricted securities approximates their fair value based on the redemption provisions of the respective entity.

Loans Receivable

For certain
homogeneous categories of loans, such as some residential mortgages, and other consumer loans, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair
value of other types of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposit Liabilities

The fair value
of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of
similar remaining maturities.



31



---

Notes to Consolidated Financial Statements

Long-Term Borrowings

The fair
values of the Corporations long-term borrowings are estimated using discounted cash flow analyses based on the Corporations current incremental borrowing rates for similar types of borrowing arrangements.

Accrued Interest

The carrying
amounts of accrued interest approximate fair value.

Off-Balance-Sheet Financial Instruments

The fair value of commitments to extend credit is estimated using the fees currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates.

The fair value of stand-by letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or
otherwise settle the obligations with the counterparties at the reporting date.

At December 31, 2006 and 2005, the fair values of
loan commitments and stand-by letters of credit were deemed to be immaterial.

The carrying amounts and estimated fair values of the
Corporations financial instruments are as follows:



|                                |  |                |         |                     |   |                |  |                     |         |  |   |        
|------------------------------- |  | -------------- | ------- | ------------------- | - | -------------- |  | ------------------- | ------- |  | - | -------
|                                |  | 2006           |         | 2005               
|                                |  | CarryingAmount |         | EstimatedFair Value |   | CarryingAmount |  | EstimatedFair Value
|                                |  | (in thousands)
|Financial assets:               |  |                |         |                     |   |                |  |                     |         |  |   |        
|Cash and short-term investments |  | $              | 5,520   |                     | $ | 5,520          |  | $                   | 7,365   |  | $ | 7,365  
|Securities                      |  |                | 58,963  |                     |   | 58,912         |  |                     | 55,393  |  |   | 55,325 
|Restricted securities           |  |                | 1,553   |                     |   | 1,553          |  |                     | 1,188   |  |   | 1,188  
|Loans, net of allowance         |  |                | 194,491 |                     |   | 196,078        |  |                     | 180,207 |  |   | 182,006
|Accrued interest receivable     |  |                | 1,363   |                     |   | 1,363          |  |                     | 1,190   |  |   | 1,190  
|Financial liabilities:          |  |                |         |                     |   |                |  |                     |         |  |   |        
|Deposits                        |  | $              | 230,865 |                     | $ | 231,034        |  | $                   | 223,132 |  | $ | 222,479
|Federal funds purchased         |  |                | 3,207   |                     |   | 3,207          |  |                     | 1,810   |  |   | 1,810  
|Federal Home Loan Bank          |  |                |         |                     |   |                |  |                     |         |  |   |        
|Bank advances                   |  |                | 12,000  |                     |   | 11,637         |  |                     | 5,000   |  |   | 4,647  
|Trust preferred capital notes   |  |                | 4,124   |                     |   | 4,152          |  |                     | 4,124   |  |   | 4,161  
|Accrued interest payable        |  |                | 851     |                     |   | 851            |  |                     | 526     |  |   | 526    



32



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Notes to Consolidated Financial Statements

The Corporation assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the
fair values of the Corporations financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Corporation. Management attempts to match maturities of assets and liabilities to
the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who
are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to
minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Corporations overall interest rate risk.

Note 18. Trust Preferred Capital Notes

On December 12, 2003, BOE Statutory Trust I, a
wholly-owned subsidiary of the Corporation, was formed for the purpose of issuing redeemable capital securities. On December 12, 2003, $4.1 million of trust preferred securities were issued through a direct placement. The securities have a
LIBOR-indexed floating rate of interest. During the years ended December 31, 2006 and 2005, the weighted-average interest rate was 8.47% and 6.29%. The securities have a mandatory redemption date of December 12, 2033 and are subject to
varying call provisions beginning December 12, 2008. The principal asset of the Trust is $4.1 million of the Corporations junior subordinated debt securities with the like maturities and like interest rates to the capital securities.

The trust preferred notes may be included in Tier 1 capital for regulatory capital adequacy determination purposes up to 25% of Tier 1
capital after its inclusion. The portion of the trust preferred not considered as Tier 1 capital may be included in Tier 2 capital. At December 31, 2006 and 2005, all trust preferred notes were included in Tier 1 capital.

The obligations of the Corporation with respect to the issuance of the Capital Securities constitute a full and unconditional guarantee by the Corporation
of the Trusts obligations with respect to the Capital Securities.

Subject to certain exceptions and limitations, the Corporation may
elect from time to time to defer interest payments on the junior subordinated debt securities, which would result in a deferral of distribution payments on the related Capital Securities.



33



---

Notes to Consolidated Financial Statements

Note 19. Parent Corporation Only Financial Statements

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

(Parent Corporation Only)

Balance Sheets (Condensed)

December 31, 2006 and 2005



|                                             |  |      |            |      |   |           
|-------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                             |  | 2006 |            | 2005
|Assets                                       |  |      |            |      |   |           
|Cash                                         |  | $    | 124,813    |      | $ | 137,129   
|Investment in subsidiaries                   |  |      | 31,485,295 |      |   | 29,710,691
|Securities available for sale, at fair value |  |      | 344,320    |      |   | 299,586   
|Other assets                                 |  |      | 322,160    |      |   | 302,051   
|                                             |  |      |            |      |   |           
|Total assets                                 |  | $    | 32,276,588 |      | $ | 30,449,457
|                                             |  |      |            |      |   |           
|Liabilities and Stockholders Equity         |  |      |            |      |   |           
|Trust preferred capital notes                |  | $    | 4,124,000  |      | $ | 4,124,000 
|Other liabilities                            |  |      | 106,030    |      |   | 90,820    
|Stockholders equity                         |  |      | 28,046,558 |      |   | 26,234,637
|                                             |  |      |            |      |   |           
|Total liabilities and stockholders equity   |  | $    | 32,276,588 |      | $ | 30,449,457
|                                             |  |      |            |      |   |           



34



---

Notes to Consolidated Financial Statements

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

(Parent Corporation Only)

Statements of Income (Condensed)

Three Years Ended December 31, 2006



|                                                                           |  |      |           |      |   |           |  |   |          
|-------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                                                                           |  | 2006 |           | 2005 |   | 2004     
|Income:                                                                    |  |      |           |      |   |           |  |   |          
|Dividends from subsidiary                                                  |  | $    | 900,000   |      | $ | 870,000   |  | $ | 755,743  
|Dividends on other securities                                              |  |      | 15,310    |      |   | 11,399    |  |   | 7,481    
|                                                                           |  |      |           |      |   |           |  |   |          
|Total income                                                               |  | $    | 915,310   |      | $ | 881,399   |  | $ | 763,224  
|                                                                           |  |      |           |      |   |           |  |   |          
|Expenses:                                                                  |  |      |           |      |   |           |  |   |          
|Interest expense                                                           |  | $    | 338,615   |      | $ | 263,223   |  | $ | 187,004  
|Other                                                                      |  |      | 23,000    |      |   | 23,000    |  |   | 31,015   
|                                                                           |  |      |           |      |   |           |  |   |          
|Total expenses                                                             |  | $    | 361,615   |      | $ | 286,223   |  | $ | 218,019  
|                                                                           |  |      |           |      |   |           |  |   |          
|Income before allocated tax benefit and undistributed income of subsidiary |  | $    | 553,695   |      | $ | 595,176   |  | $ | 545,205  
|Allocated income tax benefit                                               |  |      | 117,743   |      |   | 93,441    |  |   | 74,855   
|                                                                           |  |      |           |      |   |           |  |   |          
|Income before equity in undistributed income of subsidiary                 |  | $    | 671,438   |      | $ | 688,617   |  | $ | 620,060  
|Equity in undistributed income of subsidiary                               |  |      | 2,451,420 |      |   | 2,412,149 |  |   | 2,265,435
|                                                                           |  |      |           |      |   |           |  |   |          
|Net income                                                                 |  | $    | 3,122,858 |      | $ | 3,100,766 |  | $ | 2,885,495
|                                                                           |  |      |           |      |   |           |  |   |          



35



---

Notes to Consolidated Financial Statements

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

(Parent Corporation Only)

Statements of Cash Flows (Condensed)

Three Years Ended December 31, 2006



|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|--------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                  |  | 2006 |            |   | 2005 |   |            | 2004 | 
|Cash Flows from Operating Activities                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Net income                                                                        |  | $    | 3,122,858  |   |      | $ | 3,100,766  |      |  | $ | 2,885,495  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |            |   |      |   |            |      |  |   |            |  
|(Increase) in other assets                                                        |  |      | (20,109    | ) |      |   | (41,559    | )    |  |   | (45,277    | )
|Deferred tax (benefit) provision                                                  |  |      | (15,208    | ) |      |   | 3,340      |      |  |   | 6,683      |  
|Undistributed earnings of subsidiary                                              |  |      | (2,451,420 | ) |      |   | (2,412,149 | )    |  |   | (2,265,435 | )
|Increase (decrease) in liabilities                                                |  |      | 15,210     |   |      |   | 20,718     |      |  |   | (7,987     | )
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash provided by operating activities                                         |  | $    | 651,331    |   |      | $ | 671,116    |      |  | $ | 573,479    |  
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Cash Flows from Financing Activities                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Cash dividends paid                                                               |  | $    | (926,469   | ) |      | $ | (872,371   | )    |  | $ | (747,240   | )
|Net proceeds from issuance of common stock                                        |  |      | 262,874    |   |      |   | 199,014    |      |  |   | 130,943    |  
|Cash paid for fractional shares                                                   |  |      | (52        | ) |      |   | (163       | )    |  |   | (78        | )
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash (used in) financing activities                                           |  | $    | (663,647   | ) |      | $ | (673,520   | )    |  | $ | (616,375   | )
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|(Decrease) in cash and cash equivalents                                           |  | $    | (12,316    | ) |      | $ | (2,404     | )    |  | $ | (42,896    | )
|Cash and Cash Equivalents                                                         |  |      |            |   |      |   |            |      |  |   |            |  
|Beginning                                                                         |  |      | 137,129    |   |      |   | 139,533    |      |  |   | 182,429    |  
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Ending                                                                            |  | $    | 124,813    |   |      | $ | 137,129    |      |  | $ | 139,533    |  
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  



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