Exhibit 13

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Tappahannock, Virginia

CONSOLIDATED FINANCIAL REPORT

DECEMBER 31, 2007



---

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              |  | 9-35   



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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, 2007 and 2006, and the related consolidated statements of income, stockholders equity and cash flows for
each of the three years in the period ended December 31, 2007. 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes 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, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in
conformity with U.S. generally accepted accounting principles.

We were not engaged to examine managements assertion about the
effectiveness of BOE Financial Services of Virginia, Inc. and Subsidiaries internal control over financial reporting as of December 31, 2007 included in the accompanying Managements Annual Report on Internal Control over Financial
Reporting appearing under Item 9A and, accordingly, we do not express an opinion thereon.

LOGO

Winchester, Virginia

March 17,
2008



1



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2007 and 2006



|                                                                                                                |  |      |             |   |      |   |             |  
|--------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                |  | 2007 |             |   | 2006 |  
|Assets                                                                                                          |  |      |             |   |      |   |             |  
|Cash and due from banks                                                                                         |  | $    | 4,100,147   |   |      | $ | 5,520,191   |  
|Securities available for sale, at fair value                                                                    |  |      | 52,542,730  |   |      |   | 55,963,463  |  
|Securities held to maturity (fair value approximates $3,009,900 in 2007 and $2,949,000 in 2006)                 |  |      | 3,000,000   |   |      |   | 3,000,000   |  
|Equity securities, restricted, at cost                                                                          |  |      | 1,760,500   |   |      |   | 1,552,500   |  
|Loans held for sale                                                                                             |  |      | 496,500     |   |      |   |            |  
|Loans, net of allowance for loan losses of $2,594,757 in 2007 and $2,399,638 in 2006                            |  |      | 218,954,463 |   |      |   | 194,490,988 |  
|Bank premises and equipment, net                                                                                |  |      | 10,663,393  |   |      |   | 10,453,561  |  
|Accrued interest receivable                                                                                     |  |      | 1,514,147   |   |      |   | 1,362,989   |  
|Intangible assets, net                                                                                          |  |      | 398,439     |   |      |   | 524,263     |  
|Other assets                                                                                                    |  |      | 9,000,288   |   |      |   | 8,510,146   |  
|                                                                                                                |  |      |             |   |      |   |             |  
|Total assets                                                                                                    |  | $    | 302,430,607 |   |      | $ | 281,378,101 |  
|                                                                                                                |  |      |             |   |      |   |             |  
|                                                                                                                |  |     
|Liabilities and Stockholders Equity                                                                            |  |      |             |   |      |   |             |  
|                                                                                                                |  |     
|Liabilities                                                                                                     |  |      |             |   |      |   |             |  
|Deposits:                                                                                                       |  |      |             |   |      |   |             |  
|Noninterest-bearing                                                                                             |  | $    | 26,219,892  |   |      | $ | 27,809,248  |  
|Interest-bearing                                                                                                |  |      | 218,373,096 |   |      |   | 203,055,733 |  
|                                                                                                                |  |      |             |   |      |   |             |  
|Total deposits                                                                                                  |  | $    | 244,592,988 |   |      | $ | 230,864,981 |  
|Federal funds purchased                                                                                         |  |      | 3,152,000   |   |      |   | 3,207,000   |  
|Federal Home Loan Bank advances                                                                                 |  |      | 17,000,000  |   |      |   | 12,000,000  |  
|Trust preferred capital notes                                                                                   |  |      | 4,124,000   |   |      |   | 4,124,000   |  
|Accrued interest payable                                                                                        |  |      | 1,007,335   |   |      |   | 851,114     |  
|Other liabilities                                                                                               |  |      | 2,444,845   |   |      |   | 2,284,448   |  
|                                                                                                                |  |      |             |   |      |   |             |  
|Total liabilities                                                                                               |  | $    | 272,321,168 |   |      | $ | 253,331,543 |  
|                                                                                                                |  |      |             |   |      |   |             |  
|Commitments and Contingent Liabilities                                                                          |  |      |             |   |      |   |             |  
|                                                                                                                |  |     
|Stockholders Equity                                                                                            |  |      |             |   |      |   |             |  
|Preferred stock, $5 par value, authorized 100,000 shares; no shares issued and outstanding                      |  | $    |            |   |      | $ |            |  
|Common stock, $5 par value, authorized 10,000,000 shares; issued and outstanding 1,212,294 and 1,208,109 shares |  |      | 6,061,470   |   |      |   | 6,040,545   |  
|Additional paid-in capital                                                                                      |  |      | 5,576,420   |   |      |   | 5,476,874   |  
|Retained earnings                                                                                               |  |      | 18,872,272  |   |      |   | 17,256,210  |  
|Accumulated other comprehensive loss, net                                                                       |  |      | (400,723    | ) |      |   | (727,071    | )
|                                                                                                                |  |      |             |   |      |   |             |  
|Total stockholders equity                                                                                      |  | $    | 30,109,439  |   |      | $ | 28,046,558  |  
|                                                                                                                |  |      |             |   |      |   |             |  
|Total liabilities and stockholders equity                                                                      |  | $    | 302,430,607 |   |      | $ | 281,378,101 |  
|                                                                                                                |  |      |             |   |      |   |             |  

See Notes to Consolidated Financial Statements.



2



---

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Consolidated Statements of Income

Three Years Ended December 31, 2007



|                                                     |  |      |            |   |      |   |            |      |  |   |            |  
|---------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                     |  | 2007 |            |   | 2006 |   |            | 2005 | 
|Interest and Dividend Income                         |  |      |            |   |      |   |            |      |  |   |            |  
|Interest and fees on loans                           |  | $    | 16,201,739 |   |      | $ | 14,241,540 |      |  | $ | 11,943,617 |  
|Interest and dividends on securities:                |  |      |            |   |      |   |            |      |  |   |            |  
|U.S. Treasury                                        |  |      | 15,465     |   |      |   | 40,054     |      |  |   | 59,996     |  
|U.S. Government agencies                             |  |      | 774,295    |   |      |   | 677,648    |      |  |   | 677,013    |  
|State and political subdivisions, nontaxable         |  |      | 1,334,711  |   |      |   | 1,379,808  |      |  |   | 1,346,092  |  
|State and political subdivisions, taxable            |  |      | 115,565    |   |      |   | 134,416    |      |  |   | 126,483    |  
|Other securities                                     |  |      | 179,693    |   |      |   | 183,447    |      |  |   | 150,215    |  
|Interest on federal funds sold                       |  |      | 72,815     |   |      |   | 76,875     |      |  |   | 39,103     |  
|                                                     |  |      |            |   |      |   |            |      |  |   |            |  
|Total interest and dividend income                   |  | $    | 18,694,283 |   |      | $ | 16,733,788 |      |  | $ | 14,342,519 |  
|                                                     |  |      |            |   |      |   |            |      |  |   |            |  
|Interest Expense                                     |  |      |            |   |      |   |            |      |  |   |            |  
|Interest on deposits                                 |  | $    | 7,586,170  |   |      | $ | 6,055,277  |      |  | $ | 3,985,067  |  
|Interest on borrowings                               |  |      | 1,108,875  |   |      |   | 916,525    |      |  |   | 483,444    |  
|                                                     |  |      |            |   |      |   |            |      |  |   |            |  
|Total interest expense                               |  | $    | 8,695,045  |   |      | $ | 6,971,802  |      |  | $ | 4,468,511  |  
|                                                     |  |      |            |   |      |   |            |      |  |   |            |  
|Net interest income                                  |  | $    | 9,999,238  |   |      | $ | 9,761,986  |      |  | $ | 9,874,008  |  
|                                                     |  |      |           
|Provision for Loan Losses                            |  |      | 6,000      |   |      |   | 125,000    |      |  |   | 240,400    |  
|                                                     |  |      |            |   |      |   |            |      |  |   |            |  
|Net interest income after provision for loan losses  |  | $    | 9,993,238  |   |      | $ | 9,636,986  |      |  | $ | 9,633,608  |  
|                                                     |  |      |            |   |      |   |            |      |  |   |            |  
|Noninterest Income                                   |  |      |            |   |      |   |            |      |  |   |            |  
|Service charge income                                |  | $    | 1,110,212  |   |      | $ | 1,042,529  |      |  | $ | 986,268    |  
|Net security gains (losses)                          |  |      | (37,082    | ) |      |   | (13,060    | )    |  |   | 2,625      |  
|Net gains on sales of loans                          |  |      | 36,976     |   |      |   | 60,717     |      |  |   | 55,774     |  
|Net gains (losses) on sale of premises and equipment |  |      | (4,948     | ) |      |   | 467,415    |      |  |   | (23,017    | )
|Other income                                         |  |      | 852,408    |   |      |   | 692,864    |      |  |   | 579,153    |  
|                                                     |  |      |            |   |      |   |            |      |  |   |            |  
|Total noninterest income                             |  | $    | 1,957,566  |   |      | $ | 2,250,465  |      |  | $ | 1,600,803  |  
|                                                     |  |      |            |   |      |   |            |      |  |   |            |  

See Notes to Consolidated Financial Statements.



3



---

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Consolidated Statements of Income

(Continued)

Three Years Ended
December 31, 2007



|                                         |  |      |           |      |   |           |  |   |          
|---------------------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                                         |  | 2007 |           | 2006 |   | 2005     
|Noninterest Expenses                     |  |      |           |      |   |           |  |   |          
|Salaries                                 |  | $    | 3,678,911 |      | $ | 3,246,677 |  | $ | 3,053,914
|Employee benefits and costs              |  |      | 1,097,606 |      |   | 1,134,457 |  |   | 982,274  
|Occupancy expenses                       |  |      | 517,017   |      |   | 422,793   |  |   | 330,219  
|Furniture and equipment related expenses |  |      | 514,466   |      |   | 449,283   |  |   | 415,150  
|Data processing                          |  |      | 607,927   |      |   | 554,996   |  |   | 530,033  
|Stationery and printing                  |  |      | 185,200   |      |   | 172,436   |  |   | 138,403  
|Postage                                  |  |      | 180,546   |      |   | 175,112   |  |   | 153,265  
|Bank franchise tax                       |  |      | 243,673   |      |   | 238,179   |  |   | 221,950  
|Other operating expenses                 |  |      | 1,737,680 |      |   | 1,498,637 |  |   | 1,436,547
|                                         |  |      |           |      |   |           |  |   |          
|Total noninterest expenses               |  | $    | 8,763,026 |      | $ | 7,892,570 |  | $ | 7,261,755
|                                         |  |      |           |      |   |           |  |   |          
|Net income before income taxes           |  | $    | 3,187,778 |      | $ | 3,994,881 |  | $ | 3,972,656
|                                         |  |      |          
|Income Taxes                             |  |      | 579,604   |      |   | 872,023   |  |   | 871,890  
|                                         |  |      |           |      |   |           |  |   |          
|Net income                               |  | $    | 2,608,174 |      | $ | 3,122,858 |  | $ | 3,100,766
|                                         |  |      |           |      |   |           |  |   |          
|Earnings Per Share,basic                 |  | $    | 2.16      |      | $ | 2.60      |  | $ | 2.60     
|                                         |  |      |           |      |   |           |  |   |          
|Earnings Per Share,diluted               |  | $    | 2.15      |      | $ | 2.58      |  | $ | 2.58     
|                                         |  |      |           |      |   |           |  |   |          

See Notes to Consolidated Financial Statements.



4



---

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

AND SUBSIDIARIES

Consolidated Statements of Stockholders Equity

Three Years Ended December 31, 2007



|                                                                                    |  |             |           |                          |   |                  |  |   |                                            |   |  |                     |          |   |       |   |           |   |  |   |            |  
|----------------------------------------------------------------------------------- |  | ----------- | --------- | ------------------------ | - | ---------------- |  | - | ------------------------------------------ | - |  | ------------------- | -------- | - | ----- | - | --------- | - |  | - | ---------- | -
|                                                                                    |  | CommonStock |           | AdditionalPaid-InCapital |   | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | ComprehensiveIncome |          |   | Total |  
|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                                                          |  | $           | 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 (forwarded)                                              |  | $           | 6,040,545 |                          | $ | 5,476,874        |  | $ | 17,256,210                                 |   |  | $                   | (727,071 | ) |       |   |           |   |  | $ | 28,046,558 |  
|                                                                                    |  |             |           |                          |   |                  |  |   |                                            |   |  |                     |          |   |       |   |           |   |  |   |            |  

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, 2007



|                                                                                   |  |             |           |                          |   |                  |  |   |                                            |   |  |                     |          |       |  |   |           |  |   |            |  
|---------------------------------------------------------------------------------- |  | ----------- | --------- | ------------------------ | - | ---------------- |  | - | ------------------------------------------ | - |  | ------------------- | -------- | ----- |  | - | --------- |  | - | ---------- | -
|                                                                                   |  | CommonStock |           | AdditionalPaid-InCapital |   | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | ComprehensiveIncome |          | Total | 
|Balance, December 31, 2006 (brought forward)                                       |  | $           | 6,040,545 |                          | $ | 5,476,874        |  | $ | 17,256,210                                 |   |  | $                   | (727,071 | )     |  |   |           |  | $ | 28,046,558 |  
|Comprehensive income:                                                              |  |             |           |                          |   |                  |  |   |                                            |   |  |                     |          |       |  |   |           |  |   |            |  
|Net income - 2007                                                                  |  |             |          |                          |   |                 |  |   | 2,608,174                                  |   |  |                     |         |       |  | $ | 2,608,174 |  |   | 2,608,174  |  
|Other comprehensive income, net of tax:                                            |  |             |           |                          |   |                  |  |   |                                            |   |  |                     |          |       |  |   |           |  |   |            |  
|Unrealized gain on securities available for sale, net of deferred taxes of $67,959 |  |             |          |                          |   |                 |  |   |                                           |   |  |                     |         |       |  |   | 131,920   |  |   |           |  
|Add reclassification adjustment, net of taxes of $ 12,608                          |  |             |          |                          |   |                 |  |   |                                           |   |  |                     |         |       |  |   | 24,474    |  |   |           |  
|Minimum pension liability adjustment, net of deferred taxes of $87,552             |  |             |          |                          |   |                 |  |   |                                           |   |  |                     |         |       |  |   | 169,954   |  |   |           |  
|                                                                                   |  |             |           |                          |   |                  |  |   |                                            |   |  |                     |          |       |  |   |           |  |   |            |  
|Other comprehensive income, net of tax                                             |  |             |          |                          |   |                 |  |   |                                           |   |  |                     | 326,348  |       |  | $ | 326,348   |  |   | 326,348    |  
|                                                                                   |  |             |           |                          |   |                  |  |   |                                            |   |  |                     |          |       |  |   |           |  |   |            |  
|Total comprehensive income                                                         |  |             |          |                          |   |                 |  |   |                                           |   |  |                     |         |       |  | $ | 2,934,522 |  |   |           |  
|                                                                                   |  |             |           |                          |   |                  |  |   |                                            |   |  |                     |          |       |  |   |           |  |   |            |  
|Cash dividends, $0.82 per share                                                    |  |             |          |                          |   |                 |  |   | (991,975                                   | ) |  |                     |         |       |  |   |           |  |   | (991,975   | )
|Fractional shares purchased under dividend reinvestment plan                       |  |             |          |                          |   |                 |  |   | (137                                       | ) |  |                     |         |       |  |   |           |  |   | (137       | )
|Issuance of common stock under dividend reinvestment plan                          |  |             | 19,130    |                          |   | 91,038           |  |   |                                           |   |  |                     |         |       |  |   |           |  |   | 110,168    |  
|Exercise of stock options                                                          |  |             | 1,795     |                          |   | 8,508            |  |   |                                           |   |  |                     |         |       |  |   |           |  |   | 10,303     |  
|                                                                                   |  |             |           |                          |   |                  |  |   |                                            |   |  |                     |          |       |  |   |           |  |   |            |  
|Balance, December 31, 2007                                                         |  | $           | 6,061,470 |                          | $ | 5,576,420        |  | $ | 18,872,272                                 |   |  | $                   | (400,723 | )     |  |   |           |  | $ | 30,109,439 |  
|                                                                                   |  |             |           |                          |   |                  |  |   |                                            |   |  |                     |          |       |  |   |           |  |   |            |  

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, 2007



|                                                                                                 |  |      |             |   |      |   |             |      |  |   |             |  
|------------------------------------------------------------------------------------------------ |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                                                 |  | 2007 |             |   | 2006 |   |             | 2005 | 
|Cash Flows from Operating Activities                                                             |  |      |             |   |      |   |             |      |  |   |             |  
|Net income                                                                                       |  | $    | 2,608,174   |   |      | $ | 3,122,858   |      |  | $ | 3,100,766   |  
|Adjustments to reconcile net income to net cash provided by operating activities:                |  |      |             |   |      |   |             |      |  |   |             |  
|Depreciation and amortization                                                                    |  |      | 676,234     |   |      |   | 605,594     |      |  |   | 507,708     |  
|Origination of loans available for sale                                                          |  |      | (5,550,254  | ) |      |   | (6,932,350  | )    |  |   | (5,626,948  | )
|Proceeds from sale of loans available for sale                                                   |  |      | 5,090,730   |   |      |   | 6,993,067   |      |  |   | 6,043,365   |  
|Provision for loan losses                                                                        |  |      | 6,000       |   |      |   | 125,000     |      |  |   | 240,400     |  
|(Gains) losses on sale of securities                                                             |  |      | 37,082      |   |      |   | 13,060      |      |  |   | (2,625      | )
|(Gains) losses on disposal of premises and equipment                                             |  |      | 4,948       |   |      |   | (467,415    | )    |  |   | 23,017      |  
|(Gains) on sale of loans                                                                         |  |      | (36,976     | ) |      |   | (60,717     | )    |  |   | (55,774     | )
|Deferred income tax (benefit)                                                                    |  |      | (173,222    | ) |      |   | (287,988    | )    |  |   | (126,218    | )
|Amortization of premiums on securities                                                           |  |      | 157,210     |   |      |   | 202,316     |      |  |   | 218,296     |  
|Accretion of discounts on securities                                                             |  |      | (32,062     | ) |      |   | (17,936     | )    |  |   | (20,990     | )
|(Increase) decrease in accrued interest receivable and other assets                              |  |      | (636,197    | ) |      |   | 219,004     |      |  |   | 168,975     |  
|Increase in accrued expenses and other liabilities                                               |  |      | 574,124     |   |      |   | 457,582     |      |  |   | 582,584     |  
|                                                                                                 |  |      |             |   |      |   |             |      |  |   |             |  
|Net cash provided by operating activities                                                        |  | $    | 2,725,791   |   |      | $ | 3,972,075   |      |  | $ | 5,052,556   |  
|                                                                                                 |  |      |             |   |      |   |             |      |  |   |             |  
|                                                                                                 |  |      |            
|Cash Flows from Investing Activities                                                             |  |      |             |   |      |   |             |      |  |   |             |  
|Proceeds from sales, principal repayments, calls and maturities of securities available for sale |  | $    | 21,638,253  |   |      | $ | 10,009,939  |      |  | $ | 9,556,053   |  
|(Purchase) of restricted equity securities                                                       |  |      | (208,000    | ) |      |   | (364,300    | )    |  |   | (355,400    | )
|Purchase of securities available for sale                                                        |  |      | (18,142,789 | ) |      |   | (13,711,239 | )    |  |   | (8,511,555  | )
|Net (increase) in loans to customers                                                             |  |      | (24,469,475 | ) |      |   | (14,408,527 | )    |  |   | (22,976,389 | )
|(Increase) decrease in federal funds sold                                                        |  |      |            |   |      |   |            |      |  |   | 5,064,000   |  
|Purchase of bank-owned life insurance                                                            |  |      |            |   |      |   |            |      |  |   | (5,500,000  | )
|Purchases of premises and equipment                                                              |  |      | (765,190    | ) |      |   | (3,524,885  | )    |  |   | (1,613,366  | )
|Proceeds from disposal of premises and equipment                                                 |  |      |            |   |      |   | 715,389     |      |  |   |            |  
|                                                                                                 |  |      |             |   |      |   |             |      |  |   |             |  
|Net cash (used in) investing activities                                                          |  | $    | (21,947,201 | ) |      | $ | (21,283,623 | )    |  | $ | (24,336,657 | )
|                                                                                                 |  |      |             |   |      |   |             |      |  |   |             |  

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, 2007



|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                        |  | 2007 |            |   | 2006 |   |            | 2005 | 
|Cash Flows from Financing Activities                    |  |      |            |   |      |   |            |      |  |   |            |  
|Net increase in deposits                                |  | $    | 13,728,007 |   |      | $ | 7,733,275  |      |  | $ | 16,158,987 |  
|Increase (decrease) in federal funds purchased          |  |      | (55,000    | ) |      |   | 1,397,000  |      |  |   | 1,810,000  |  
|Increase in Federal Home Loan Bank advances             |  |      | 5,000,000  |   |      |   | 7,000,000  |      |  |   | 5,000,000  |  
|Dividends paid                                          |  |      | (991,975   | ) |      |   | (926,469   | )    |  |   | (872,371   | )
|Net proceeds from issuance of common stock              |  |      | 120,471    |   |      |   | 262,874    |      |  |   | 199,014    |  
|Cash paid for fractional shares                         |  |      | (137       | ) |      |   | (52        | )    |  |   | (163       | )
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash provided by financing activities               |  | $    | 17,801,366 |   |      | $ | 15,466,628 |      |  | $ | 22,295,467 |  
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|Net increase (decrease) in cash and cash equivalents    |  | $    | (1,420,044 | ) |      | $ | (1,844,920 | )    |  | $ | 3,011,366  |  
|                                                        |  |      |           
|Cash and Cash Equivalents                               |  |      |            |   |      |   |            |      |  |   |            |  
|Beginning of year                                       |  |      | 5,520,191  |   |      |   | 7,365,111  |      |  |   | 4,353,745  |  
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|End of year                                             |  | $    | 4,100,147  |   |      | $ | 5,520,191  |      |  | $ | 7,365,111  |  
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|Supplemental Disclosure of Cash Flow Information        |  |      |            |   |      |   |            |      |  |   |            |  
|Cash paid during year:                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Interest                                                |  | $    | 8,538,824  |   |      | $ | 6,646,783  |      |  | $ | 4,261,817  |  
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|Income taxes                                            |  | $    | 900,011    |   |      | $ | 1,137,804  |      |  | $ | 481,000    |  
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|Noncash Investing and Financing Activities              |  |      |            |   |      |   |            |      |  |   |            |  
|Unrealized gain (loss) on securities available for sale |  | $    | 236,961    |   |      | $ | 68,496     |      |  | $ | (1,323,280 | )
|                                                        |  |      |            |   |      |   |            |      |  |   |            |  
|Pension liability adjustment                            |  | $    | 257,506    |   |      | $ | (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, 2007 and 2006. 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 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, 2007 or 2006.

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.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are
subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all
available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other
positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The
portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and
penalties that would be payable to the taxing authorities upon examination.



12



---

Notes to Consolidated Financial Statements



Interest and penalties associated with unrecognized tax benefits are classified as additional income
taxes in the statement of income.

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.

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 123R). SFAS 123R requires the costs resulting from all share-based payments 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 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 year ended
December 31, 2005. No stock-based compensation expense was recognized for the years ended December 31, 2007 and 2006, as no stock options were granted or vested. Effective December 22, 2005, the Corporation accelerated the vesting of
all unvested stock options under the stock-based compensation plans.



|                                                                                                                                  |  |                            |           |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | --------- | -
|                                                                                                                                  |  | Year EndedDecember 31,2005 |          
|Net income, as reported                                                                                                           |  | $                          | 3,100,766 |  
|Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of tax
effect |  |                            | (202,201  | )
|                                                                                                                                  |  |                            |           |  
|Pro forma net income                                                                                                              |  | $                          | 2,898,565 |  
|                                                                                                                                  |  |                            |           |  
|Earnings per share:                                                                                                               |  |                            |           |  
|Basic - as reported                                                                                                               |  | $                          | 2.60      |  
|                                                                                                                                  |  |                            |           |  
|Basic - pro forma                                                                                                                 |  | $                          | 2.43      |  
|                                                                                                                                  |  |                            |           |  
|Diluted - as reported                                                                                                             |  | $                          | 2.58      |  
|                                                                                                                                  |  |                            |           |  
|Diluted - pro forma                                                                                                               |  | $                          | 2.41      |  
|                                                                                                                                  |  |                            |           |  



13



---

Notes to Consolidated Financial Statements



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 advertising to expense as incurred. Total advertising expense incurred for 2007, 2006 and 2005
was $143,306, $112,945 and $78,330, respectively.

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, 2007 and 2006, are as follows:



|                                                |  |               |            |                      |   |                         |  |   |           |   |  |   |           
|----------------------------------------------- |  | ------------- | ---------- | -------------------- | - | ----------------------- |  | - | --------- | - |  | - | ----------
|                                                |  | AmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealized(Losses) |  |   | FairValue
|                                                |  | 2007         
|U.S. Treasury securities                        |  | $             | 499,098    |                      | $ |                        |  | $ | (1,198    | ) |  | $ | 497,900   
|U.S. Agency and mortgage-backed securities      |  |               | 13,668,692 |                      |   | 55,581                  |  |   | (76,638   | ) |  |   | 13,647,635
|Obligations of state and political subdivisions |  |               | 37,410,158 |                      |   | 206,684                 |  |   | (351,329  | ) |  |   | 37,265,513
|Corporate debt securities                       |  |               | 700,895    |                      |   | 2,640                   |  |   |          |   |  |   | 703,535   
|Other equity securities                         |  |               | 80,989     |                      |   | 350,885                 |  |   | (3,727    | ) |  |   | 428,147   
|                                                |  |               |            |                      |   |                         |  |   |           |   |  |   |           
|                                                |  | $             | 52,359,832 |                      | $ | 615,790                 |  | $ | (432,892  | ) |  | $ | 52,542,730
|                                                |  |               |            |                      |   |                         |  |   |           |   |  |   |           



14



---

Notes to Consolidated Financial Statements



|                                                |  |      |            |  |   |         |  |   |          |   |  |   |           
|----------------------------------------------- |  | ---- | ---------- |  | - | ------- |  | - | -------- | - |  | - | ----------
|                                                |  | 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
|                                                |  |      |            |  |   |         |  |   |          |   |  |   |           

The amortized cost and fair value of securities available for sale as of December 31, 2007,
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 |            | FairValue
|Due in one year or less                |  | $             | 4,054,080  |           | $ | 4,061,013 
|Due after one year through five years  |  |               | 26,918,214 |           |   | 26,956,781
|Due after five years through ten years |  |               | 18,314,830 |           |   | 18,123,446
|Due after ten years                    |  |               | 2,991,719  |           |   | 2,973,343 
|Other equity securities                |  |               | 80,989     |           |   | 428,147   
|                                       |  |               |            |           |   |           
|                                       |  | $             | 52,359,832 |           | $ | 52,542,730
|                                       |  |               |            |           |   |           

At December 31, 2007 and 2006, 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 $3,009,900 and $2,949,000 at December 31, 2007 and 2006, respectively. The bond matures in 2024.

Proceeds from sales, principal repayments, calls and maturities of securities available for sale during 2007, 2006 and 2005 were $21,638,253, $10,009,939
and $9,566,053, respectively. Gross realized gains of $50,787, $18,804 and $11,960 and gross realized losses of $87,869, $31,864 and $9,335 were recognized on those sales for the years ended December 31, 2007, 2006 and 2005, respectively. The
tax provision (benefit) applicable to these net realized gains (losses) amounted to $12,608, $(4,440) and $892, respectively.

Securities
with amortized costs of $6,608,025 and $7,682,899 at December 31, 2007 and 2006 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, 2007 and 2006 follows:



|                                                |  |                                 |           |                    |                   |          |            |  |                    |            |  |   |          |  
|----------------------------------------------- |  | ------------------------------- | --------- | ------------------ | ----------------- | -------- | ---------- |  | ------------------ | ---------- |  | - | -------- | -
|                                                |  | Duration of the Unrealized Loss |          
|                                                |  | Less Than 12 Months             |           |                    | 12 Months or More |         
|                                                |  | Fair Value                      |           | Unrealized(Losses) |                   |          | Fair Value |  | Unrealized(Losses) |           
|2007                                            |  |                                 |           |                    |                   |          |            |  |                    |            |  |   |          |  
|U.S. Treasury securities                        |  | $                               |          |                    | $                 |         |            |  | $                  | 497,900    |  | $ | (1,198   | )
|U.S. Agency and mortgage-backed securities      |  |                                 | 759,322   |                    |                   | (8       | )          |  |                    | 5,729,846  |  |   | (76,630  | )
|Obligations of state and political subdivisions |  |                                 | 8,133,853 |                    |                   | (133,137 | )          |  |                    | 13,479,295 |  |   | (218,192 | )
|Other equity securities                         |  |                                 | 10,529    |                    |                   | (3,727   | )          |  |                    |           |  |   |         |  
|                                                |  |                                 |           |                    |                   |          |            |  |                    |            |  |   |          |  
|Total temporarily impaired securities           |  | $                               | 8,903,704 |                    | $                 | (136,872 | )          |  | $                  | 19,707,041 |  | $ | (296,020 | )
|                                                |  |                                 |           |                    |                   |          |            |  |                    |            |  |   |          |  
|                                                |  |                                 |           |                   
|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 | )
|                                                |  |                                 |           |                    |                   |          |            |  |                    |            |  |   |          |  

The unrealized losses in the investment portfolio as of December 31, 2007, 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 or until a recovery of value. 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.



16



---

Notes to Consolidated Financial Statements



|Note 3. | Loans
|------- | -----

Major classifications of loans are
summarized as follows:



|                                |  |                |         |      |   |        
|------------------------------- |  | -------------- | ------- | ---- | - | -------
|                                |  | December 31,  
|                                |  | 2007           |         | 2006
|                                |  | (in thousands)
|Mortgage loans on real estate:  |  |                |         |      |   |        
|Residential 1-4 family          |  | $              | 65,378  |      | $ | 56,264 
|Commercial                      |  |                | 80,112  |      |   | 73,594 
|Construction                    |  |                | 36,602  |      |   | 29,984 
|Equity lines of credit          |  |                | 9,080   |      |   | 8,150  
|Commercial loans                |  |                | 23,852  |      |   | 22,934 
|Consumer installment loans:     |  |                |         |      |   |        
|Personal                        |  |                | 5,425   |      |   | 5,036  
|Credit cards                    |  |                | 1,100   |      |   | 929    
|                                |  |                |         |      |   |        
|                                |  | $              | 221,549 |      | $ | 196,891
|Less: Allowance for loan losses |  |                | 2,595   |      |   | 2,400  
|                                |  |                |         |      |   |        
|Loans, net                      |  | $              | 218,954 |      | $ | 194,491
|                                |  |                |         |      |   |        

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



|                                           |  |      |           |   |      |   |           |      |  |   |           |  
|------------------------------------------ |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                           |  | 2007 |           |   | 2006 |   |           | 2005 | 
|Balance, beginning of year                 |  | $    | 2,399,638 |   |      | $ | 2,248,658 |      |  | $ | 2,088,329 |  
|Provision for loan losses                  |  |      | 6,000     |   |      |   | 125,000   |      |  |   | 240,400   |  
|Loans charged off                          |  |      | (255,839  | ) |      |   | (137,873  | )    |  |   | (158,810  | )
|Recoveries of loans previously charged off |  |      | 444,958   |   |      |   | 163,853   |      |  |   | 78,739    |  
|                                           |  |      |           |   |      |   |           |      |  |   |           |  
|Balance, end of year                       |  | $    | 2,594,757 |   |      | $ | 2,399,638 |      |  | $ | 2,248,658 |  
|                                           |  |      |           |   |      |   |           |      |  |   |           |  

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



|                                              |  |              |           |      |   |           |  |   |          
|--------------------------------------------- |  | ------------ | --------- | ---- | - | --------- |  | - | ---------
|                                              |  | December 31,
|                                              |  | 2007         |           | 2006 |   | 2005     
|Impaired loans with a valuation allowance     |  | $            | 2,030,400 |      | $ | 1,635,400 |  | $ | 1,517,800
|Impaired loans without a valuation allowance  |  |              |          |      |   | 120,700   |  |   | 223,200  
|                                              |  |              |           |      |   |           |  |   |          
|Total impaired loans                          |  | $            | 2,030,400 |      | $ | 1,756,100 |  | $ | 1,741,000
|                                              |  |              |           |      |   |           |  |   |          
|Valuation allowance related to impaired loans |  | $            | 469,300   |      | $ | 567,700   |  | $ | 536,300  
|                                              |  |              |           |      |   |           |  |   |          



17



---

Notes to Consolidated Financial Statements



|                                                             |  |      |           |      |   |           |  |   |          
|------------------------------------------------------------ |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                                                             |  | 2007 |           | 2006 |   | 2005     
|Nonaccrual loans                                             |  | $    | 96,206    |      | $ |          |  | $ | 150,418  
|Loans past due ninety days or more and still accruing        |  |      | 17,671    |      |   | 101,560   |  |   | 259,500  
|Average balance of impaired loans                            |  |      | 2,563,372 |      |   | 1,748,550 |  |   | 2,394,350
|Interest income recognized on impaired loans                 |  |      | 198,964   |      |   | 175,261   |  |   | 195,899  
|Interest income recognized on a cash basis on impaired loans |  |      | 184,244   |      |   | 158,889   |  |   | 195,899  

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, 2007 and 2006 follows:



|                         |  |      |            |      |   |           
|------------------------ |  | ---- | ---------- | ---- | - | ----------
|                         |  | 2007 |            | 2006
|Land                     |  | $    | 2,830,814  |      | $ | 2,629,218 
|Buildings                |  |      | 7,947,106  |      |   | 7,849,978 
|Furniture and fixtures   |  |      | 4,995,159  |      |   | 4,847,910 
|Construction in progress |  |      | 323,654    |      |   | 11,203    
|                         |  |      |            |      |   |           
|                         |  | $    | 16,096,733 |      | $ | 15,338,309
|Accumulated depreciation |  |      | 5,433,340  |      |   | 4,884,748 
|                         |  |      |            |      |   |           
|                         |  | $    | 10,663,393 |      | $ | 10,453,561
|                         |  |      |            |      |   |           

Depreciation expense for the years ended December 31, 2007, 2006 and 2005, amounted to
$550,410, $479,771 and $381,885, respectively.



|Note 5. | Deposits
|------- | --------

The aggregate amount of time deposits in
denominations of $100,000 or more at December 31, 2007 and 2006 was $53,262,998 and $43,980,269, respectively.

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



|     |  |   |            
|---- |  | - | -----------
|2008 |  | $ | 117,902,714
|2009 |  |   | 25,430,565 
|2010 |  |   | 2,904,603  
|2011 |  |   | 1,904,520  
|2012 |  |   | 1,217,644  
|     |  |   |            
|     |  | $ | 149,360,046
|     |  |   |            

At December 31, 2007 and 2006, overdraft demand deposits reclassified to loans totaled
$128,698 and $101,649, respectively.



18



---

Notes to Consolidated Financial Statements



|Note 6. | Income Taxes
|------- | ------------

The Company files income tax returns
in the U.S. federal jurisdiction and the state of Virginia. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2004.

The Company adopted the provisions of FIN 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007 with no impact on the financial
statements.

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



|                                                 |  |      |           |      |   |          
|------------------------------------------------ |  | ---- | --------- | ---- | - | ---------
|                                                 |  | 2007 |           | 2006
|Deferred tax assets:                             |  |      |           |      |   |          
|Allowance for loan losses                        |  | $    | 637,781   |      | $ | 636,072  
|Deferred compensation                            |  |      | 267,832   |      |   | 224,155  
|Nonaccrual loan interest                         |  |      |          |      |   |         
|Unrealized loss on securities available for sale |  |      |          |      |   | 18,382   
|Accrued pension                                  |  |      | 394,068   |      |   | 365,304  
|                                                 |  |      |           |      |   |          
|                                                 |  | $    | 1,299,681 |      | $ | 1,243,913
|                                                 |  |      |           |      |   |          
|Deferred tax liabilities:                        |  |      |           |      |   |          
|Depreciation                                     |  | $    | 245,192   |      | $ | 249,319  
|Discount accretion on securities                 |  |      | 13,148    |      |   | 15,366   
|Partnership losses                               |  |      | 51,878    |      |   | 59,352   
|Unrealized gain on securities available for sale |  |      | 62,185    |      |   |         
|Other                                            |  |      | 24,282    |      |   | 21,983   
|                                                 |  |      |           |      |   |          
|                                                 |  | $    | 396,685   |      | $ | 346,020  
|                                                 |  |      |           |      |   |          
|Net deferred tax assets                          |  | $    | 902,996   |      | $ | 897,893  
|                                                 |  |      |           |      |   |          

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



|                       |  |      |          |   |      |   |           |      |  |   |          |  
|---------------------- |  | ---- | -------- | - | ---- | - | --------- | ---- |  | - | -------- | -
|                       |  | 2007 |          |   | 2006 |   |           | 2005 | 
|Current tax provision  |  | $    | 752,826  |   |      | $ | 1,160,011 |      |  | $ | 998,108  |  
|Deferred tax (benefit) |  |      | (173,222 | ) |      |   | (287,988  | )    |  |   | (126,218 | )
|                       |  |      |          |   |      |   |           |      |  |   |          |  
|                       |  | $    | 579,604  |   |      | $ | 872,023   |      |  | $ | 871,890  |  
|                       |  |      |          |   |      |   |           |      |  |   |          |  



19



---

Notes to Consolidated Financial Statements



The following is a reconciliation of the expected income tax expense with the reported expense for
each year:



|                                     |  |       |   |  |       |   |  |       |  
|------------------------------------ |  | ----- | - |  | ----- | - |  | ----- | -
|                                     |  | 2007  |   |  | 2006  |   |  | 2005  |  
|Statutory Federal income tax rate    |  | 34.0  | % |  | 34.0  | % |  | 34.0  | %
|(Reduction) in taxes resulting from: |  |       |   |  |       |   |  |       |  
|Municipal interest                   |  | (12.1 | ) |  | (10.3 | ) |  | (10.6 | )
|Other, net                           |  | (3.7  | ) |  | (1.9  | ) |  | (1.5  | )
|                                     |  |       |   |  |       |   |  |       |  
|Effective income tax rate            |  | 18.2  | % |  | 21.8  | % |  | 21.9  | %
|                                     |  |       |   |  |       |   |  |       |  



|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 $17,000,000 and $12,000,000 at December 31, 2007 and 2006, respectively. The weighted average interest rate on these advances was
4.75%. One advance totaling $12,000,000 matures in 2012 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, 2007, the book value of these loans totaled approximately $48,785,000. 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, 2007, $3,152,000 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, 2007, 2006 and 2005, computed as of October 1, 2007, 2006 and 2005, respectively:



|                                                                    |  |      |            |   |      |   |            |      |  |   |            |  
|------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                    |  | 2007 |            |   | 2006 |   |            | 2005 | 
|Change in Benefit Obligation                                        |  |      |            |   |      |   |            |      |  |   |            |  
|Benefit obligation, beginning                                       |  | $    | 4,537,721  |   |      | $ | 4,289,019  |      |  | $ | 3,561,978  |  
|Service cost                                                        |  |      | 328,554    |   |      |   | 363,570    |      |  |   | 308,269    |  
|Interest cost                                                       |  |      | 271,114    |   |      |   | 245,828    |      |  |   | 212,894    |  
|Actuarial loss                                                      |  |      | (102,204   | ) |      |   | (332,800   | )    |  |   | 233,774    |  
|Benefits paid                                                       |  |      | (66,320    | ) |      |   | (27,896    | )    |  |   | (27,896    | )
|                                                                    |  |      |            |   |      |   |            |      |  |   |            |  
|Benefit obligation, ending                                          |  | $    | 4,968,865  |   |      | $ | 4,537,721  |      |  | $ | 4,289,019  |  
|                                                                    |  |      |            |   |      |   |            |      |  |   |            |  
|Change in Plan Assets                                               |  |      |            |   |      |   |            |      |  |   |            |  
|Fair value of plan assets, beginning                                |  | $    | 3,463,290  |   |      | $ | 3,071,341  |      |  | $ | 2,545,270  |  
|Actual return on plan assets                                        |  |      | 412,871    |   |      |   | 251,931    |      |  |   | 342,457    |  
|Employer contributions                                              |  |      |           |   |      |   | 167,914    |      |  |   | 211,510    |  
|Benefits paid                                                       |  |      | (66,320    | ) |      |   | (27,896    | )    |  |   | (27,896    | )
|                                                                    |  |      |            |   |      |   |            |      |  |   |            |  
|Fair value of plan assets, ending                                   |  | $    | 3,809,841  |   |      | $ | 3,463,290  |      |  | $ | 3,071,341  |  
|                                                                    |  |      |            |   |      |   |            |      |  |   |            |  
|Funded Status                                                       |  | $    | (1,159,024 | ) |      | $ | (1,074,431 | )    |  | $ | (1,217,678 | )
|Unrecognized net actuarial loss                                     |  |      |           |   |      |   |           |      |  |   | 1,428,442  |  
|Unrecognized net obligation at transition                           |  |      |           |   |      |   |           |      |  |   | (19,208    | )
|Unrecognized prior service cost                                     |  |      |           |   |      |   |           |      |  |   | 20,595     |  
|                                                                    |  |      |            |   |      |   |            |      |  |   |            |  
|(Accrued) prepaid benefit cost at October 1                         |  | $    | (1,159,024 | ) |      | $ | (1,074,431 | )    |  | $ | 212,151    |  
|Contributions made in December                                      |  |      |           |   |      |   |           |      |  |   | 167,914    |  
|                                                                    |  |      |            |   |      |   |            |      |  |   |            |  
|(Accrued) prepaid benefit cost at December 31                       |  | $    | (1,159,024 | ) |      | $ | (1,074,431 | )    |  | $ | 380,065    |  
|                                                                    |  |      |            |   |      |   |            |      |  |   |            |  
|Amounts Recognized in the Balance Sheet                             |  |      |            |   |      |   |            |      |  |   |            |  
|Other assets                                                        |  | $    |           |   |      | $ |           |      |  | $ | 380,065    |  
|Other liabilities                                                   |  |      | 1,159,024  |   |      |   | 1,074,431  |      |  |   |           |  
|Amounts Recognized in Accumulated Other Comprehensive Income (Loss) |  |      |            |   |      |   |            |      |  |   |            |  
|Net loss                                                            |  | $    | 790,809    |   |      | $ | 1,048,084  |      |  | $ |           |  
|Prior service cost                                                  |  |      | 13,733     |   |      |   | 17,164     |      |  |   |           |  
|Net obligation at transition                                        |  |      | (12,808    | ) |      |   | (16,008    | )    |  |   |           |  
|Deferred tax                                                        |  |      | (269,190   | ) |      |   | (356,742   | )    |  |   |           |  
|                                                                    |  |      |            |   |      |   |            |      |  |   |            |  
|Total amount recognized                                             |  | $    | 522,544    |   |      | $ | 692,498    |      |  | $ |           |  
|                                                                    |  |      |            |   |      |   |            |      |  |   |            |  

The accumulated benefit obligation for the defined benefit pension plan was $3,040,294, $2,741,049
and $2,416,644 at September 30, 2007, 2006 and 2005, 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, 2007, 2006 and 2005:



|                                                                                                                 |  |      |          |   |      |   |           |      |  |   |          |  
|---------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | --------- | ---- |  | - | -------- | -
|                                                                                                                 |  | 2007 |          |   | 2006 |   |           | 2005 | 
|Components of Net Periodic Benefit Cost                                                                          |  |      |          |   |      |   |           |      |  |   |          |  
|Service cost                                                                                                     |  | $    | 328,554  |   |      | $ | 363,570   |      |  | $ | 308,269  |  
|Interest cost                                                                                                    |  |      | 271,114  |   |      |   | 245,828   |      |  |   | 212,894  |  
|Expected return on plan assets                                                                                   |  |      | (292,761 | ) |      |   | (259,903  | )    |  |   | (215,187 | )
|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                                                                                    |  |      | 34,960   |   |      |   | 55,530    |      |  |   | 56,808   |  
|                                                                                                                 |  |      |          |   |      |   |           |      |  |   |          |  
|Net periodic benefit cost                                                                                        |  | $    | 342,098  |   |      | $ | 405,256   |      |  | $ | 363,015  |  
|                                                                                                                 |  |      |          |   |      |   |           |      |  |   |          |  
|Other Changes in Plan Assets and Benefit Obligations Recognized in Accumulated Other Comprehensive Income (Loss) |  |      |          |   |      |   |           |      |  |   |          |  
|Net (gains) loss                                                                                                 |  | $    | (257,275 | ) |      | $ | 1,048,084 |      |  | $ |         |  
|Prior service cost                                                                                               |  |      |         |   |      |   | 17,164    |      |  |   |         |  
|Amortization of prior service cost                                                                               |  |      | (3,431   | ) |      |   |          |      |  |   |         |  
|Net obligation at transition                                                                                     |  |      |         |   |      |   | (16,008   | )    |  |   |         |  
|Amortization of net obligation at transition                                                                     |  |      | 3,200    |   |      |   |          |      |  |   |         |  
|Deferred income tax (benefit) expense                                                                            |  |      | 87,552   |   |      |   | (356,742  | )    |  |   |         |  
|                                                                                                                 |  |      |          |   |      |   |           |      |  |   |          |  
|Total recognized in other comprehensive (loss)                                                                   |  | $    | (169,954 | ) |      | $ | 692,498   |      |  | $ |         |  
|                                                                                                                 |  |      |          |   |      |   |           |      |  |   |          |  
|Total recognized in net periodic benefit cost and accumulated other comprehensive (loss)                         |  | $    | 172,144  |   |      | $ | 1,097,754 |      |  | $ | 363,015  |  
|                                                                                                                 |  |      |          |   |      |   |           |      |  |   |          |  

The weighted-average assumptions used in the measurement of the Corporations benefit
obligation are shown in the following table:



|                               |  |      |   |  |      |   |  |      |  
|------------------------------ |  | ---- | - |  | ---- | - |  | ---- | -
|                               |  | 2007 |   |  | 2006 |   |  | 2005 |  
|Discount rate                  |  | 6.25 | % |  | 6.00 | % |  | 5.75 | %
|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:



|                               |  |      |   |  |      |   |  |      |  
|------------------------------ |  | ---- | - |  | ---- | - |  | ---- | -
|                               |  | 2007 |   |  | 2006 |   |  | 2005 |  
|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 | %



22



---

Notes to Consolidated Financial Statements



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, 2007 and 2006, by asset category are as follows:



|                            |  |      |   |  |      |  
|--------------------------- |  | ---- | - |  | ---- | -
|                            |  | 2007 |   |  | 2006 |  
|Asset Category              |  |      |   |  |      |  
|Mutual funds - fixed income |  | 35   | % |  | 30   | %
|Mutual funds - equity       |  | 60   | % |  | 56   | %
|Cash and equivalents        |  | 5    | % |  | 14   | %
|                            |  |      |   |  |      |  
|                            |  | 100  | % |  | 100  | %
|                            |  |      |   |  |      |  

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 2008.



23



---

Notes to Consolidated Financial Statements



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



|          |  |   |          
|--------- |  | - | ---------
|2008      |  | $ | 64,870   
|2009      |  |   | 66,800   
|2010      |  |   | 85,509   
|2011      |  |   | 99,948   
|2012      |  |   | 144,812  
|2013-2017 |  |   | 1,045,571

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, 2007, 2006 and 2005 were $56,091, $53,642 and $47,963, 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 $221,051, $268,011 and $56,593 for the years ended December 31, 2007, 2006 and 2005, respectively. These contracts are
funded by life insurance policies.



|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.



24



---

Notes to Consolidated Financial Statements



A summary of the status of the stock plans follows:



|                                 |  |                 |   |  |                              |       |                                         |           |                         |   |        
|-------------------------------- |  | --------------- | - |  | ---------------------------- | ----- | --------------------------------------- | --------- | ----------------------- | - | -------
|                                 |  | Numberof Shares |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualTerm |           | AggregateIntrinsicValue
|Outstanding at beginning of year |  | 29,718          |   |  | $                            | 23.92 |                                         |           |                         |   |        
|Granted                          |  |                |   |  |                              |      |                                         |           |                         |   |        
|Exercised                        |  | (359            | ) |  |                              | 28.70 |                                         |           |                         |   |        
|Forfeited                        |  |                |   |  |                              |      |                                         |           |                         |   |        
|                                 |  |                 |   |  |                              |       |                                         |           |                         |   |        
|Outstanding at year end          |  | 29,359          |   |  |                              | 23.86 |                                         | 5.5 years |                         | $ | 230,129
|                                 |  |                 |   |  |                              |       |                                         |           |                         |   |        
|Exercisable at year end          |  | 29,359          |   |  |                              | 23.86 |                                         | 5.5 years |                         | $ | 230,129
|                                 |  |                 |   |  |                              |       |                                         |           |                         |   |        

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, 2007.
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, 2007 was $879.



|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.



|                                 |  |           |  |           |      |        |           |           |   |        |  |           |  |   |     
|-------------------------------- |  | --------- |  | --------- | ---- | ------ | --------- | --------- | - | ------ |  | --------- |  | - | ----
|                                 |  | 2007      |  | 2006      |      | 2005  
|                                 |  | Shares    |  | Per Share |      | Shares |           | Per Share |   | Shares |  | Per Share
|Basic earnings per share         |  | 1,209,761 |  | $         | 2.16 |        | 1,201,465 |           | $ | 2.60   |  | 1,193,467 |  | $ | 2.60
|                                 |  |           |  |           |      |        |           |           |   |        |  |           |  |   |     
|Effect of dilutive stock options |  | 5,183     |  |           |      |        | 9,457     |           |   |        |  | 10,258    |  |   |     
|                                 |  |           |  |           |      |        |           |           |   |        |  |           |  |   |     
|Diluted earnings per share       |  | 1,214,944 |  | $         | 2.15 |        | 1,210,922 |           | $ | 2.58   |  | 1,203,725 |  | $ | 2.58
|                                 |  |           |  |           |      |        |           |           |   |        |  |           |  |   |     

No options were excluded from the computation for the years ended December 31, 2007, 2006 and
2005.



25



---

Notes to Consolidated Financial Statements



|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:



|                                 |  |      |           |   |      |   |            |  
|-------------------------------- |  | ---- | --------- | - | ---- | - | ---------- | -
|                                 |  | 2007 |           |   | 2006 |  
|Balance, beginning of year       |  | $    | 2,885,032 |   |      | $ | 2,677,102  |  
|Principal additions              |  |      | 1,303,402 |   |      |   | 1,336,758  |  
|Repayments and reclassifications |  |      | (856,933  | ) |      |   | (1,128,828 | )
|                                 |  |      |           |   |      |   |            |  
|Balance, end of year             |  | $    | 3,331,501 |   |      | $ | 2,885,032  |  
|                                 |  |      |           |   |      |   |            |  



|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, 2007 and 2006, the aggregate amount of daily average required
balances were approximately $25,000 and $632,000, respectively.

The Bank is required to maintain certain required reserve balances with a
correspondent bank. Those required balances were $250,000 at December 31, 2007 and 2006.



|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, 2007, the aggregate amount of unrestricted funds,
which could be transferred from the banking subsidiary to the parent corporation, without prior regulatory approval, totaled $6,749,756 (22.4% of net assets).



26



---

Notes to Consolidated Financial Statements



|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 $428,000 and $996,000 at December 31, 2007 and 2006, respectively.



|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, 2007 and 2006, is as follows:



|                                                                    |  |      |            |      |   |           
|------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                                                    |  | 2007 |            | 2006
|Financial instruments whose contract amounts represent credit risk: |  |      |            |      |   |           
|Commitments to extend credit                                        |  | $    | 58,573,000 |      | $ | 45,251,000
|Standby letters of credit                                           |  |      | 3,867,000  |      |   | 4,971,000 

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.



27



---

Notes to Consolidated Financial Statements



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.



|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, 2007 and
2006, that the Corporation and Bank met all capital adequacy requirements to which they are subject.

As of December 31, 2007, 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.



28



---

Notes to Consolidated Financial Statements



The Corporations and the Banks actual capital amounts and ratios as of December 31,
2007 and 2006, are also presented in the table.



|                                                      |  |                        |        |       |                            |   |        |                                                                      |        |  |      |        |  |       |        |  |       |  
|----------------------------------------------------- |  | ---------------------- | ------ | ----- | -------------------------- | - | ------ | -------------------------------------------------------------------- | ------ |  | ---- | ------ |  | ----- | ------ |  | ----- | -
|                                                      |  | Actual                 |        |       | Minimum CapitalRequirement |   |        | MinimumTo Be WellCapitalized UnderPrompt
CorrectiveAction Provisions |       
|                                                      |  | Amount                 |        | Ratio |                            |   | Amount |                                                                      | Ratio  |  |      | Amount |  | Ratio |       
|                                                      |  | (dollars in thousands) |       
|As of December 31, 2007:                              |  |                        |        |       |                            |   |        |                                                                      |        |  |      |        |  |       |        |  |       |  
|Total Capital (to Risk Weighted Assets) Consolidated  |  | $                      | 36,533 |       | 15.9                       | % |        | $                                                                    | 18,434 |  | 8.00 | %      |  |       | N/A    |  | N/A   |  
|Bank of Essex                                         |  | $                      | 36,076 |       | 15.7                       | % |        | $                                                                    | 18,415 |  | 8.00 | %      |  | $     | 23,018 |  | 10.00 | %
|Tier 1 Capital (to Risk Weighted Assets) Consolidated |  | $                      | 34,343 |       | 14.9                       | % |        | $                                                                    | 9,217  |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank of Essex                                         |  | $                      | 33,886 |       | 14.7                       | % |        | $                                                                    | 9,207  |  | 4.00 | %      |  | $     | 13,811 |  | 6.00  | %
|Tier 1 Capital (to Average Assets) Consolidated       |  | $                      | 34,343 |       | 11.5                       | % |        | $                                                                    | 11,911 |  | 4.00 | %      |  |       | N/A    |  | N/A   |  
|Bank of Essex                                         |  | $                      | 33,886 |       | 11.4                       | % |        | $                                                                    | 11,911 |  | 4.00 | %      |  | $     | 14,889 |  | 5.00  | %
|                                                      |  |                        |        |       |                            |  
|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  | %



29



---

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.



30



---

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, 2007 and 2006, 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:



|                                |  |                |         |                     |   |                |  |                     |         |  |   |        
|------------------------------- |  | -------------- | ------- | ------------------- | - | -------------- |  | ------------------- | ------- |  | - | -------
|                                |  | 2007           |         | 2006               
|                                |  | CarryingAmount |         | EstimatedFair Value |   | CarryingAmount |  | EstimatedFair Value
|                                |  | (in thousands)
|Financial assets:               |  |                |        
|Cash and short-term investments |  | $              | 4,100   |                     | $ | 4,100          |  | $                   | 5,520   |  | $ | 5,520  
|Securities                      |  |                | 55,543  |                     |   | 55,553         |  |                     | 58,963  |  |   | 58,912 
|Restricted securities           |  |                | 1,761   |                     |   | 1,761          |  |                     | 1,553   |  |   | 1,553  
|Loans, net of allowance         |  |                | 219,451 |                     |   | 226,180        |  |                     | 194,491 |  |   | 196,078
|Accrued interest receivable     |  |                | 1,514   |                     |   | 1,514          |  |                     | 1,363   |  |   | 1,363  
|                                |  |                |         |                    
|Financial liabilities:          |  |                |         |                     |   |                |  |                     |         |  |   |        
|Deposits                        |  | $              | 244,593 |                     | $ | 247,083        |  | $                   | 230,865 |  | $ | 231,034
|Federal funds purchased         |  |                | 3,152   |                     |   | 3,152          |  |                     | 3,207   |  |   | 3,207  
|Federal Home Loan Bank          |  |                |         |                     |   |                |  |                     |         |  |   |        
|Bank advances                   |  |                | 17,000  |                     |   | 17,218         |  |                     | 12,000  |  |   | 11,637 
|Trust preferred capital notes   |  |                | 4,124   |                     |   | 4,164          |  |                     | 4,124   |  |   | 4,152  
|Accrued interest payable        |  |                | 1,007   |                     |   | 1,007          |  |                     | 851     |  |   | 851    



31



---

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, 2007 and 2006, the weighted-average interest rate was 8.70% and 8.47%. 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, 2007 and 2006, 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.



32



---

Notes to Consolidated Financial Statements



|Note 19. | Pending Merger
|-------- | --------------

On December 14, 2007, the
Corporation announced it had entered into an Agreement and Plan of Merger dated as of December 13, 2007 with Community Bankers Acquisition Corp (CBAC). The merger agreement sets forth terms and conditions of CBACs acquisition of the
Corporation through merger of the Corporation with and into CBAC. Under the terms of the agreement, CBAC will issue to the stockholders of the Corporation 5.7278 shares of CBACs common stock for each share of the Corporations Stock they
own, subject to adjustment pursuant to the merger agreement. After the merger, Bank of Essex will become a wholly owned subsidiary of CBAC.

Previously, on September 5, 2007, CBAC entered into an Agreement and Plan of Merger with TransCommunity Financial Corporation (TFC). TFC has given its consent to CBAC entering into the merger agreement with the Corporation Consummation of
the merger is subject to Consummation of the merger between CBAC and TFC, approval of the merger by stockholders, and receipt of regulatory approvals.



|Note 20. | Parent Corporation Only Financial Statements
|-------- | --------------------------------------------

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

(Parent Corporation Only)

Balance Sheets (Condensed)

December 31, 2007 and 2006



|                                             |  |      |            |      |   |           
|-------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                             |  | 2007 |            | 2006
|Assets                                       |  |      |            |      |   |           
|                                             |  |     
|Cash                                         |  | $    | 49,485     |      | $ | 124,813   
|Investment in subsidiaries                   |  |      | 33,653,284 |      |   | 31,485,295
|Securities available for sale, at fair value |  |      | 428,148    |      |   | 344,320   
|Other assets                                 |  |      | 231,500    |      |   | 322,160   
|                                             |  |      |            |      |   |           
|Total assets                                 |  | $    | 34,362,417 |      | $ | 32,276,588
|                                             |  |      |            |      |   |           
|                                             |  |     
|Liabilities and Stockholders Equity         |  |      |            |      |   |           
|                                             |  |     
|Trust preferred capital notes                |  | $    | 4,124,000  |      | $ | 4,124,000 
|Other liabilities                            |  |      | 128,978    |      |   | 106,030   
|Stockholders equity                         |  |      | 30,109,439 |      |   | 28,046,558
|                                             |  |      |            |      |   |           
|Total liabilities and stockholders equity   |  | $    | 34,362,417 |      | $ | 32,276,588
|                                             |  |      |            |      |   |           



33



---

Notes to Consolidated Financial Statements



BOE FINANCIAL SERVICES OF VIRGINIA, INC.

(Parent Corporation Only)

Statements of
Income (Condensed)

Three Years Ended December 31, 2007



|                                                                           |  |      |           |      |   |           |  |   |          
|-------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                                                                           |  | 2007 |           | 2006 |   | 2005     
|Income:                                                                    |  |      |           |      |   |           |  |   |          
|Dividends from subsidiary                                                  |  | $    | 950,000   |      | $ | 900,000   |  | $ | 870,000  
|Dividends on other securities                                              |  |      | 20,608    |      |   | 15,310    |  |   | 11,399   
|                                                                           |  |      |           |      |   |           |  |   |          
|Total income                                                               |  | $    | 970,608   |      | $ | 915,310   |  | $ | 881,399  
|                                                                           |  |      |           |      |   |           |  |   |          
|Expenses:                                                                  |  |      |           |      |   |           |  |   |          
|Interest expense                                                           |  | $    | 348,081   |      | $ | 338,615   |  | $ | 263,223  
|Other                                                                      |  |      | 18,000    |      |   | 23,000    |  |   | 23,000   
|                                                                           |  |      |           |      |   |           |  |   |          
|Total expenses                                                             |  | $    | 366,081   |      | $ | 361,615   |  | $ | 286,223  
|                                                                           |  |      |           |      |   |           |  |   |          
|Income before allocated tax benefit and undistributed income of subsidiary |  | $    | 604,527   |      | $ | 553,695   |  | $ | 595,176  
|                                                                           |  |      |          
|Allocated income tax benefit                                               |  |      | 117,460   |      |   | 117,743   |  |   | 93,441   
|                                                                           |  |      |           |      |   |           |  |   |          
|Income before equity in undistributed income of subsidiary                 |  | $    | 721,987   |      | $ | 671,438   |  | $ | 688,617  
|                                                                           |  |      |          
|Equity in undistributed income of subsidiary                               |  |      | 1,886,187 |      |   | 2,451,420 |  |   | 2,412,149
|                                                                           |  |      |           |      |   |           |  |   |          
|Net income                                                                 |  | $    | 2,608,174 |      | $ | 3,122,858 |  | $ | 3,100,766
|                                                                           |  |      |           |      |   |           |  |   |          



34



---

Notes to Consolidated Financial Statements



BOE FINANCIAL SERVICES OF VIRGINIA, INC.

(Parent Corporation Only)

Statements of
Cash Flows (Condensed)

Three Years Ended December 31, 2007



|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|--------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                  |  | 2007 |            |   | 2006 |   |            | 2005 | 
|Cash Flows from Operating Activities                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Net income                                                                        |  | $    | 2,608,174  |   |      | $ | 3,122,858  |      |  | $ | 3,100,766  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |            |   |      |   |            |      |  |   |            |  
|(Increase) decrease in other assets                                               |  |      | 90,660     |   |      |   | (20,109    | )    |  |   | (41,559    | )
|Deferred tax (benefit) provision                                                  |  |      | (23,075    | ) |      |   | (15,208    | )    |  |   | 3,340      |  
|Undistributed earnings of subsidiary                                              |  |      | (1,886,187 | ) |      |   | (2,451,420 | )    |  |   | (2,412,149 | )
|Increase in liabilities                                                           |  |      | 22,948     |   |      |   | 15,210     |      |  |   | 20,718     |  
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash provided by operating activities                                         |  | $    | 812,520    |   |      | $ | 651,331    |      |  | $ | 671,116    |  
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Cash Flows from Investing Activities                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Purchase of securities available for sale                                         |  | $    | (16,207    | ) |      | $ |           |      |  | $ |           |  
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash (used in) investing activities                                           |  | $    | (16,207    | ) |      | $ |           |      |  | $ |           |  
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Cash Flows from Financing Activities                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Cash dividends paid                                                               |  | $    | (991,975   | ) |      | $ | (926,469   | )    |  | $ | (872,371   | )
|Net proceeds from issuance of common stock                                        |  |      | 120,471    |   |      |   | 262,874    |      |  |   | 199,014    |  
|Cash paid for fractional shares                                                   |  |      | (137       | ) |      |   | (52        | )    |  |   | (163       | )
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash (used in) financing activities                                           |  | $    | (871,641   | ) |      | $ | (663,647   | )    |  | $ | (673,520   | )
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|(Decrease) in cash and cash equivalents                                           |  | $    | (75,328    | ) |      | $ | (12,316    | )    |  | $ | (2,404     | )
|                                                                                  |  |      |           
|Cash and Cash Equivalents                                                         |  |      |            |   |      |   |            |      |  |   |            |  
|Beginning                                                                         |  |      | 124,813    |   |      |   | 137,129    |      |  |   | 139,533    |  
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|Ending                                                                            |  | $    | 49,485     |   |      | $ | 124,813    |      |  | $ | 137,129    |  
|                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  



35