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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2006



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
|- | -----------------------------------------------------------------------------

For the transition period from  to

Commission File No. 000-31711



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Virginia                                                       |  | 54-1980794                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
|                                                               | 
|323 Prince St., Tappahannock, VA                               |  | 22560                            
|(Address of principal executive offices)                       |  | (Zip Code)                       

(804) 443-4343

(Registrants telephone number, including area code)



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Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x

State the number of shares outstanding of each of the issuers classes of common equity as of August 9, 2006.



|                              |  |                              
|----------------------------- |  | -----------------------------
|Class                         |  | Outstanding at August 9, 2006
|Common Stock, $5.00 par value |  | 1,201,836                    



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##### Table of Contents

BOE Financial Services of Virginia, Inc.

FORM 10-Q

INDEX



|                                                                                                               |  |                                                                                       |  |      
|-------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | -----
|                                                                                                               |  |                                                                                       |  | Page 
|                                                                                                               |  | PART I -
FINANCIAL INFORMATION                                                        |  |      
|                                                                                                               |  |                                                                                      
|Item 1.                                                                                                        |  | Financial Statements                                                                  |  | 1-5  
|                                                                                                               | 
|Consolidated Balance Sheets June 30, 2006 (Unaudited) and December 31, 2005                                    |  | 1-2                                                                                  
|                                                                                                               | 
|Consolidated Statements of Income Three months ended June 30, 2006 and 2005 (Unaudited)                        |  | 3                                                                                    
|                                                                                                               | 
|Consolidated Statements of Income Six months ended June 30, 2006 and 2005 (Unaudited)                          |  | 4                                                                                    
|                                                                                                               | 
|Consolidated Statements of Cash Flows Six Months ended June 30, 2006 and 2005 (Unaudited)                      |  | 5                                                                                    
|                                                                                                               | 
|Consolidated Statements of Changes in Stockholders Equity Six months ended June 30, 2006 and 2005 (Unaudited) |  | 6                                                                                    
|                                                                                                               | 
|Notes to Consolidated Financial Statements (Unaudited)                                                         |  | 7-10                                                                                 
|                                                                                                               |  |                                                                                      
|Item 2.                                                                                                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 11-15
|                                                                                                               |  |                                                                                      
|Item 3.                                                                                                        |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 15-16
|                                                                                                               |  |                                                                                      
|Item 4.                                                                                                        |  | Controls and Procedures                                                               |  | 17   
|                                                                                                              
|PART II -
OTHER INFORMATION                                                                                   
|                                                                                                               |  |                                                                                      
|Item 1.                                                                                                        |  | Legal Proceedings                                                                     |  | 17   
|                                                                                                               |  |                                                                                      
|Item 2.                                                                                                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 17   
|                                                                                                               |  |                                                                                      
|Item 3.                                                                                                        |  | Defaults Upon Senior Securities                                                       |  | 17   
|                                                                                                               |  |                                                                                      
|Item 4.                                                                                                        |  | Submission of Matters to a Vote of Security Holders                                   |  | 17   
|                                                                                                               |  |                                                                                      
|Item 5.                                                                                                        |  | Other Information                                                                     |  | 17   
|                                                                                                               |  |                                                                                      
|Item 6.                                                                                                        |  | Exhibits                                                                              |  | 18   
|                                                                                                               | 
|Signatures                                                                                                     |  | 19                                                                                   



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##### Table of Contents

PART I  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Balance Sheets



|                                                                           |  |               |         |   |                   |   |         |  
|-------------------------------------------------------------------------- |  | ------------- | ------- | - | ----------------- | - | ------- | -
|(in Thousands except share data)                                           |  | June 30, 2006 |         |   | December 31, 2005 |  
|                                                                           |  | (Unaudited)   |         |   |                   |  
|ASSETS                                                                     |  |               |         |   |                   |   |         |  
|Cash and due from banks                                                    |  | $             | 8,306   |   |                   | $ | 7,365   |  
|Securities available for sale, at fair value                               |  |               | 52,679  |   |                   |   | 52,393  |  
|Securities held to maturity (fair value $2,852 in 2006 and $2,933 in 2005) |  |               | 3,000   |   |                   |   | 3,000   |  
|Equity Securities, restricted, at cost                                     |  |               | 1,553   |   |                   |   | 1,188   |  
|                                                                           |  |              
|Loans                                                                      |  |               | 188,526 |   |                   |   | 182,456 |  
|Less: Allowance for loan losses                                            |  |               | (2,388  | ) |                   |   | (2,249  | )
|                                                                           |  |               |         |   |                   |   |         |  
|Net loans                                                                  |  |               | 186,138 |   |                   |   | 180,207 |  
|                                                                           |  |              
|Bank premises and equipment, net                                           |  |               | 10,601  |   |                   |   | 7,656   |  
|Accrued interest receivable                                                |  |               | 1,234   |   |                   |   | 1,191   |  
|Intangible assets, net                                                     |  |               | 587     |   |                   |   | 650     |  
|Other assets                                                               |  |               | 6,534   |   |                   |   | 8,281   |  
|                                                                           |  |               |         |   |                   |   |         |  
|Total assets                                                               |  | $             | 270,632 |   |                   | $ | 261,931 |  
|                                                                           |  |               |         |   |                   |   |         |  

See accompanying notes to consolidated financial statements.



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Balance Sheets



|                                            |  |            |  |            |  |               |         |   |                   |   |         |  
|------------------------------------------- |  | ---------- |  | ---------- |  | ------------- | ------- | - | ----------------- | - | ------- | -
|                                            |  |            |  |            |  | June 30, 2006 |         |   | December 31, 2005 |  
|                                            |  |            |  |            |  | (Unaudited)   |         |   |                   |  
|LIABILITIES AND STOCKHOLDERS EQUITY        |  |            |  |            |  |               |         |   |                   |   |         |  
|                                            |  |            |  |           
|Deposits                                    |  |            |  |            |  |               |         |   |                   |   |         |  
|Noninterest bearing deposits                |  |            |  |            |  | $             | 27,312  |   |                   | $ | 30,791  |  
|Interest bearing deposits                   |  |            |  |            |  |               | 196,284 |   |                   |   | 192,341 |  
|                                            |  |            |  |            |  |               |         |   |                   |   |         |  
|Total deposits                              |  |            |  |            |  |               | 223,596 |   |                   |   | 223,132 |  
|                                            |  |            |  |           
|Federal funds purchased                     |  |            |  |            |  |               | 2,708   |   |                   |   | 1,810   |  
|Federal Home Loan Bank advances             |  |            |  |            |  |               | 12,000  |   |                   |   | 5,000   |  
|Accrued interest payable                    |  |            |  |            |  |               | 691     |   |                   |   | 526     |  
|Other liabilities                           |  |            |  |            |  |               | 517     |   |                   |   | 1,105   |  
|Trust preferred capital notes               |  |            |  |            |  |               | 4,124   |   |                   |   | 4,124   |  
|                                            |  |            |  |            |  |               |         |   |                   |   |         |  
|Total liabilities                           |  |            |  |            |  |               | 243,636 |   |                   |   | 235,697 |  
|                                            |  |            |  |            |  |               |         |   |                   |   |         |  
|Commitments and Contingent Liabilities      |  |            |  |            |  |               |         |   |                   |   |         |  
|Stockholders equity                        |  |            |  |            |  |               |         |   |                   |   |         |  
|Common stock, $5.00 par value               |  |            |  |            |  |               | 6,007   |   |                   |   | 5,990   |  
|                                            |  |            |  |           
|                                            |  | 6/30/06    |  | 12/31/05   |  |               |         |   |                   |  
|Shares authorized                           |  | 10,000,000 |  | 10,000,000 |  |               |         |   |                   |   |         |  
|Shares outstanding                          |  | 1,201,492  |  | 1,198,059  |  |               |         |   |                   |   |         |  
|Additional paid in capital                  |  |            |  |            |  |               | 5,340   |   |                   |   | 5,264   |  
|Accumulated other comprehensive (loss), net |  |            |  |            |  |               | (458    | ) |                   |   | (80     | )
|Retained earnings                           |  |            |  |            |  |               | 16,107  |   |                   |   | 15,060  |  
|                                            |  |            |  |            |  |               |         |   |                   |   |         |  
|Total stockholders equity                  |  |            |  |            |  |               | 26,996  |   |                   |   | 26,234  |  
|                                            |  |            |  |            |  |               |         |   |                   |   |         |  
|Total liabilities and stockholders equity  |  |            |  |            |  | $             | 270,632 |   |                   | $ | 261,931 |  
|                                            |  |            |  |            |  |               |         |   |                   |   |         |  

See accompanying notes to consolidated financial statements.



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Statements of Income

(In Thousands except per share data)



|                                                                 |  |                    |       |               |   |      
|---------------------------------------------------------------- |  | ------------------ | ----- | ------------- | - | -----
|                                                                 |  | Three Months Ended
|                                                                 |  | June 30, 2006      |       | June 30, 2005
|                                                                 |  | (Unaudited)       
|Interest Income                                                  |  |                    |       |               |   |      
|Interest and fees on loans                                       |  | $                  | 3,632 |               | $ | 2,911
|Interest on federal funds sold                                   |  |                    | 10    |               |   | 20   
|Interest on U.S. Treasury securities and U.S. Agency Obligations |  |                    | 99    |               |   | 102  
|Interest on obligations of state and political subdivisions      |  |                    | 337   |               |   | 336  
|Interest on other securities                                     |  |                    | 123   |               |   | 135  
|Other interest income                                            |  |                    | 0     |               |   | 3    
|                                                                 |  |                    |       |               |   |      
|Total interest income                                            |  |                    | 4,201 |               |   | 3,507
|                                                                 |  |                    |       |               |   |      
|Interest Expense                                                 |  |                    |       |               |   |      
|Interest on savings and interest bearing deposits                |  |                    | 101   |               |   | 114  
|Interest on certificates of deposit                              |  |                    | 1,320 |               |   | 803  
|Interest on federal funds purchased                              |  |                    | 24    |               |   | 15   
|Interest on long  term debt                                     |  |                    | 136   |               |   | 23   
|Interest on trust preferred capital notes                        |  |                    | 83    |               |   | 77   
|                                                                 |  |                    |       |               |   |      
|Total interest expense                                           |  |                    | 1,664 |               |   | 1,032
|                                                                 |  |                    |       |               |   |      
|Net interest income                                              |  |                    | 2,537 |               |   | 2,475
|Provision for loan losses                                        |  |                    | 25    |               |   | 75   
|                                                                 |  |                    |       |               |   |      
|Net interest income after provision for loan losses              |  |                    | 2,512 |               |   | 2,400
|                                                                 |  |                    |       |               |   |      
|Noninterest Income                                               |  |                    |       |               |   |      
|Service charges on deposit accounts                              |  |                    | 274   |               |   | 247  
|Securities gains -net                                            |  |                    | 3     |               |   | 3    
|Gains on sale of loans                                           |  |                    | 33    |               |   | 15   
|Other fee income                                                 |  |                    | 58    |               |   | 36   
|All other noninterest income                                     |  |                    | 124   |               |   | 99   
|                                                                 |  |                    |       |               |   |      
|Total noninterest income                                         |  |                    | 492   |               |   | 400  
|                                                                 |  |                    |       |               |   |      
|Noninterest Expense                                              |  |                    |       |               |   |      
|Salaries and employee benefits                                   |  |                    | 1,107 |               |   | 1,046
|Premises and fixed assets                                        |  |                    | 269   |               |   | 240  
|Intangible premium amortization                                  |  |                    | 32    |               |   | 32   
|Other expenses                                                   |  |                    | 619   |               |   | 517  
|                                                                 |  |                    |       |               |   |      
|Total noninterest expense                                        |  |                    | 2,027 |               |   | 1,835
|                                                                 |  |                    |       |               |   |      
|Income before income taxes                                       |  |                    | 977   |               |   | 965  
|Income taxes                                                     |  |                    | 211   |               |   | 227  
|                                                                 |  |                    |       |               |   |      
|Net income                                                       |  | $                  | 766   |               | $ | 738  
|                                                                 |  |                    |       |               |   |      
|Earnings per share, basic                                        |  | $                  | 0.64  |               | $ | 0.62 
|Earnings per share, diluted                                      |  | $                  | 0.63  |               | $ | 0.61 

See accompanying notes to consolidated financial statements.



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Statements of Income

(In Thousands except per share data)



|                                                                 |  |                  |       |   |               |   |      
|---------------------------------------------------------------- |  | ---------------- | ----- | - | ------------- | - | -----
|                                                                 |  | Six Months Ended
|                                                                 |  | June 30, 2006    |       |   | June 30, 2005
|                                                                 |  | (Unaudited)     
|Interest Income                                                  |  |                  |       |   |               |   |      
|Interest and fees on loans                                       |  | $                | 7,014 |   |               | $ | 5,642
|Interest on federal funds sold                                   |  |                  | 13    |   |               |   | 35   
|Interest on U.S. Treasury securities and U.S. Agency Obligations |  |                  | 199   |   |               |   | 205  
|Interest on obligations of state and political subdivisions      |  |                  | 676   |   |               |   | 657  
|Interest on other securities                                     |  |                  | 246   |   |               |   | 284  
|Other interest income                                            |  |                  | 9     |   |               |   | 5    
|                                                                 |  |                  |       |   |               |   |      
|Total interest income                                            |  |                  | 8,157 |   |               |   | 6,828
|                                                                 |  |                  |       |   |               |   |      
|Interest Expense                                                 |  |                  |       |   |               |   |      
|Interest on savings and interest bearing deposits                |  |                  | 202   |   |               |   | 230  
|Interest on certificates of deposit                              |  |                  | 2,476 |   |               |   | 1,549
|Interest on federal funds purchased                              |  |                  | 87    |   |               |   | 15   
|Interest on long  term debt                                     |  |                  | 205   |   |               |   | 23   
|Interest on trust preferred capital notes                        |  |                  | 161   |   |               |   | 134  
|                                                                 |  |                  |       |   |               |   |      
|Total interest expense                                           |  |                  | 3,131 |   |               |   | 1,951
|                                                                 |  |                  |       |   |               |   |      
|Net interest income                                              |  |                  | 5,026 |   |               |   | 4,877
|Provision for loan losses                                        |  |                  | 125   |   |               |   | 155  
|                                                                 |  |                  |       |   |               |   |      
|Net interest income after provision for loan losses              |  |                  | 4,901 |   |               |   | 4,722
|                                                                 |  |                  |       |   |               |   |      
|Noninterest Income                                               |  |                  |       |   |               |   |      
|Service charges on deposit accounts                              |  |                  | 522   |   |               |   | 468  
|Securities gains (losses)-net                                    |  |                  | (18   | ) |               |   | 8    
|Gains on sale of loans                                           |  |                  | 49    |   |               |   | 31   
|Other fee income                                                 |  |                  | 101   |   |               |   | 98   
|All other noninterest income                                     |  |                  | 240   |   |               |   | 189  
|                                                                 |  |                  |       |   |               |   |      
|Total noninterest income                                         |  |                  | 894   |   |               |   | 794  
|                                                                 |  |                  |       |   |               |   |      
|Noninterest Expense                                              |  |                  |       |   |               |   |      
|Salaries and employee benefits                                   |  |                  | 2,171 |   |               |   | 2,069
|Premises and fixed assets                                        |  |                  | 485   |   |               |   | 468  
|Intangible premium amortization                                  |  |                  | 63    |   |               |   | 63   
|Other expenses                                                   |  |                  | 1,134 |   |               |   | 1,014
|                                                                 |  |                  |       |   |               |   |      
|Total noninterest expense                                        |  |                  | 3,853 |   |               |   | 3,614
|                                                                 |  |                  |       |   |               |   |      
|Income before income taxes                                       |  |                  | 1,942 |   |               |   | 1,902
|Income taxes                                                     |  |                  | 438   |   |               |   | 443  
|                                                                 |  |                  |       |   |               |   |      
|Net income                                                       |  | $                | 1,504 |   |               | $ | 1,459
|                                                                 |  |                  |       |   |               |   |      
|Earnings per share, basic                                        |  | $                | 1.25  |   |               | $ | 1.22 
|Earnings per share, diluted                                      |  | $                | 1.24  |   |               | $ | 1.21 

See accompanying notes to consolidated financial statements.



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##### Table of Contents

BOE FINANCIAL SERVICES OF VIRGINIA, Inc.

Consolidated Statements of Cash Flows

(in Thousands)



|                                                                                  |  |                           |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Six Months Ended June 30, |        
|                                                                                  |  | 2006                      |         |   | 2005 |  
|                                                                                  |  | (Unaudited)               |        
|Cash Flows from Operating Activities                                              |  |                           |         |   |      |   |         |  
|Net income                                                                        |  | $                         | 1,504   |   |      | $ | 1,459   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                           |         |   |      |   |         |  
|Depreciation and amortization                                                     |  |                           | 275     |   |      |   | 252     |  
|(Gain) on sale of loans                                                           |  |                           | (49     | ) |      |   | (31     | )
|Origination of loans held for sale                                                |  |                           | (3,806  | ) |      |   | (1,805  | )
|Proceeds from sale of loans held for sale                                         |  |                           | 3,855   |   |      |   | 1,728   |  
|Provision for loan losses                                                         |  |                           | 125     |   |      |   | 155     |  
|Net amortization on securities                                                    |  |                           | 95      |   |      |   | 99      |  
|Net (gain) loss on sale of securities                                             |  |                           | 18      |   |      |   | (8      | )
|(Increase) decrease in accrued interest receivable and other assets               |  |                           | 1,899   |   |      |   | (72     | )
|Increase (decrease) in accrued expenses and other liabilities                     |  |                           | (423    | ) |      |   | 126     |  
|                                                                                  |  |                           |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                           | 3,493   |   |      |   | 1,903   |  
|                                                                                  |  |                           |         |   |      |   |         |  
|Cash Flows from Investing Activities                                              |  |                           |         |   |      |   |         |  
|Proceeds from sale of securities available-for-sale                               |  |                           | 3,699   |   |      |   | 1,970   |  
|Proceeds from maturities and calls of securities available-for-sale               |  |                           | 1,656   |   |      |   | 3,320   |  
|Purchase of securities available for sale                                         |  |                           | (6,327  | ) |      |   | (6,895  | )
|Purchase of restricted securities                                                 |  |                           | (365    | ) |      |   | (235    | )
|Net (increase) in loans to customers                                              |  |                           | (6,056  | ) |      |   | (14,299 | )
|Decrease in federal funds sold                                                    |  |                           | 0       |   |      |   | 5,064   |  
|Purchase of Bank Owned Life Insurance                                             |  |                           | 0       |   |      |   | (3,667  | )
|Capital expenditures                                                              |  |                           | (3,157  | ) |      |   | (114    | )
|                                                                                  |  |                           |         |   |      |   |         |  
|Net cash (used in) investing activities                                           |  |                           | (10,550 | ) |      |   | (14,856 | )
|                                                                                  |  |                           |         |   |      |   |         |  
|Cash Flows from Financing Activities                                              |  |                           |         |   |      |   |         |  
|Net increase in deposits                                                          |  |                           | 464     |   |      |   | 5,937   |  
|Issuance of Common Stock                                                          |  |                           | 93      |   |      |   | 106     |  
|Increase in federal funds purchased                                               |  |                           | 898     |   |      |   | 4,437   |  
|Increase in FHLB advances                                                         |  |                           | 7,000   |   |      |   | 5,000   |  
|Dividends paid                                                                    |  |                           | (457    | ) |      |   | (417    | )
|                                                                                  |  |                           |         |   |      |   |         |  
|Net cash provided by financing activities                                         |  |                           | 7,998   |   |      |   | 15,063  |  
|                                                                                  |  |                           |         |   |      |   |         |  
|Net increase in cash and cash equivalents                                         |  |                           | 941     |   |      |   | 2,110   |  
|Cash and Cash Equivalents                                                         |  |                           |         |   |      |   |         |  
|Beginning of period                                                               |  |                           | 7,365   |   |      |   | 4,354   |  
|                                                                                  |  |                           |         |   |      |   |         |  
|End of period                                                                     |  | $                         | 8,306   |   |      | $ | 6,464   |  
|                                                                                  |  |                           |         |   |      |   |         |  
|Supplemental disclosure of cash flow information                                  |  |                           |         |   |      |   |         |  
|Cash paid during the year                                                         |  |                           |         |   |      |   |         |  
|Interest                                                                          |  | $                         | 2,966   |   |      | $ | 1,895   |  
|                                                                                  |  |                           |         |   |      |   |         |  
|Income Taxes                                                                      |  | $                         | 525     |   |      | $ | 200     |  
|                                                                                  |  |                           |         |   |      |   |         |  

See accompanying notes to consolidated financial statements.



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##### Table of Contents

BOE Financial Services of Virginia, Inc.

Statement of Changes in Stockholders Equity

For the Six Month Periods Ended June 30, 2006 and 2005

(in thousands)

(Unaudited)



|                                                                        |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|----------------------------------------------------------------------- |  | ----------- | ----- | ------------------------ | - | ---------------- |  | - | ------------------------------------ | - |  | ------------------- | ---- | - | ----- | - | ----- | - |  | - | ------ | -
|                                                                        |  | CommonStock |       | AdditionalPaid-InCapital |   | RetainedEarnings |  |   | Accumulated OtherComprehensiveIncome |   |  | ComprehensiveIncome |      |   | Total |  
|Balance, December 31, 2004                                              |  | $           | 5,945 |                          | $ | 5,111            |  | $ | 12,831                               |   |  | $                   | 794  |   |       |   |       |   |  | $ | 24,681 |  
|Comprehensive Income:                                                   |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|                                                                        |  |             |       |                          |   |                 
|Net income                                                              |  |             |       |                          |   |                  |  |   | 1,459                                |   |  |                     |      |   |       | $ | 1,459 |   |  |   | 1,459  |  
|Other comprehensive (loss), net of tax:                                 |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Unrealized loss on securities available for sale, net of deferred taxes |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   | (404  | ) |  |   |        |  
|Less: Reclassification adjustment, net of tax                           |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   | (5    | ) |  |   |        |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Other comprehensive (loss), net of tax:                                 |  |             |       |                          |   |                  |  |   |                                      |   |  |                     | (409 | ) |       |   | (409  | ) |  |   | (409   | )
|                                                                        |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Total comprehensive income                                              |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   | 1,050 |   |  |   |        |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Cash dividends, $0.35                                                   |  |             |       |                          |   |                  |  |   | (417                                 | ) |  |                     |      |   |       |   |       |   |  |   | (417   | )
|Issuance of common stock                                                |  |             | 30    |                          |   | 76               |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   | 106    |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Balance, June 30, 2005                                                  |  | $           | 5,975 |                          | $ | 5,187            |  | $ | 13,873                               |   |  | $                   | 385  |   |       |   |       |   |  | $ | 25,420 |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|                                                                        |  |             |       |                          |   |                 
|                                                                        |  | CommonStock |       | AdditionalPaid-InCapital |   | RetainedEarnings |  |   | Accumulated OtherComprehensive(Loss) |   |  | ComprehensiveIncome |      |   | Total |  
|Balance, December 31, 2005                                              |  | $           | 5,990 |                          | $ | 5,264            |  | $ | 15,060                               |   |  | $                   | (80  | ) |       |   |       |   |  | $ | 26,234 |  
|Comprehensive Income:                                                   |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Net income                                                              |  |             |       |                          |   |                  |  |   | 1,504                                |   |  |                     |      |   |       | $ | 1,504 |   |  |   | 1,504  |  
|Other comprehensive (loss), net of tax:                                 |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Unrealized loss on securities available for sale, net of deferred taxes |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   | (390  | ) |  |   |        |  
|Add: Reclassification adjustment, net of tax                            |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   | 12    |   |  |   |        |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Other comprehensive income, net of tax:                                 |  |             |       |                          |   |                  |  |   |                                      |   |  |                     | (378 | ) |       |   | (378  | ) |  |   | (378   | )
|                                                                        |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Total comprehensive income                                              |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   | 1,126 |   |  |   |        |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Cash dividends, $0.38                                                   |  |             |       |                          |   |                  |  |   | (457                                 | ) |  |                     |      |   |       |   |       |   |  |   | (457   | )
|Issuance of common stock                                                |  |             | 17    |                          |   | 76               |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   | 93     |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Balance, June 30, 2006                                                  |  | $           | 6,007 |                          | $ | 5,340            |  | $ | 16,107                               |   |  | $                   | (458 | ) |       |   |       |   |  | $ | 26,996 |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                      |   |  |                     |      |   |       |   |       |   |  |   |        |  

See accompanying notes to consolidated financial statements.



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Notes to Consolidated Financial Statements

(Unaudited)

1. The accounting and reporting policies of BOE Financial
Services of Virginia, Inc. (the Company) conform to accounting principles generally accepted in the United States of America and to the general practices within the banking industry. The interim financial statements have not been
audited; however, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the consolidated financial statements have been included. Operating results for the three month
and six month period ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ended December 31, 2006.

These financial statements should be read in conjunction with the financial statements and the footnotes included in the Companys 2005 Annual Report to Shareholders.

2. At June 30, 2006, the Company had stock-based employee compensation plans more fully described in Note 9 of the financial statements included in Form 10-K for
the year ended December 31, 2005. The Company accounted for the plan 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 plan 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 Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation to the periods before January 1, 2006.



|                                                                                                                                  |  |                                  |      |   |                                  |   |       |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---- | - | -------------------------------- | - | ----- | -
|                                                                                                                                  |  | Three months ended June 30, 2005 |      |   | Three months ended June 30, 2005 |  
|Net income, as reported                                                                                                           |  | $                                | 738  |   |                                  | $ | 1,459 |  
|Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of tax
effect |  |                                  | (18  | ) |                                  |   | (35   | )
|                                                                                                                                  |  |                                  |      |   |                                  |   |       |  
|Pro forma net income                                                                                                              |  | $                                | 720  |   |                                  | $ | 1,424 |  
|                                                                                                                                  |  |                                  |      |   |                                  |   |       |  
|Earnings per share:                                                                                                               |  |                                  |      |   |                                  |   |       |  
|Basic-as reported                                                                                                                 |  | $                                | 0.62 |   |                                  | $ | 1.22  |  
|Basic-pro forma                                                                                                                   |  | $                                | 0.60 |   |                                  | $ | 1.20  |  
|Diluted-as reported                                                                                                               |  | $                                | 0.61 |   |                                  | $ | 1.21  |  
|Diluted-pro forma                                                                                                                 |  | $                                | 0.60 |   |                                  | $ | 1.18  |  

Effective January 1, 2006, SFAS No. 123R requires the Company to recognize the cost of employee services
received in exchange for awards of equity instruments such as stock options based on the fair value of these awards at the date of grant. For the three and six months ended June 30, 2006, the Company had no stock-based compensation expense as
no options were granted and all prior awards were fully vested December 31, 2005.



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Stock option plan activity for the six months ended June 30, 2006 is summarized below:



|                       |  |        |   |  |                                |       |                                                      |      |                                                     |   |        
|---------------------- |  | ------ | - |  | ------------------------------ | ----- | ---------------------------------------------------- | ---- | --------------------------------------------------- | - | -------
|                       |  | Shares |   |  | Weighted AverageExercise Price |       | Weighted AverageRemaining ContractualLife (in years) |      | Instrinsic Value ofUnexercised In-The-Money Options
|Outstanding, January 1 |  | 37,589 |   |  | $                              | 23.87 |                                                      |      |                                                     |   |        
|Exercised              |  | (3,433 | ) |  |                                | 27.09 |                                                      |      |                                                     |   |        
|                       |  |        |   |  |                                |       |                                                      |      |                                                     |   |        
|Outstanding, June 30,  |  | 34,156 |   |  |                                | 23.55 |                                                      | 7.25 |                                                     | $ | 284,000
|                       |  |        |   |  |                                |       |                                                      |      |                                                     |   |        
|Exercisable, June 30,  |  | 34,156 |   |  |                                | 23.55 |                                                      | 7.25 |                                                     | $ | 284,000
|                       |  |        |   |  |                                |       |                                                      |      |                                                     |   |        

The intrinsic value of options exercised during the six months ended June 30, 2006 was approximately $21,750.

3. Earnings per share are based on the weighted average number of common shares and common stock equivalents outstanding during the applicable periods.
Potential dilutive common stock had no effect on income available to common shareholders. No shares were excluded from the calculation because the effect would be anti-dilutive.



|                                 |  |                    |  |               |      |        |           |           |   |     
|-------------------------------- |  | ------------------ |  | ------------- | ---- | ------ | --------- | --------- | - | ----
|                                 |  | Six months ended  
|                                 |  | June 30, 2006      |  | June 30, 2005
|                                 |  | Shares             |  | Per Share     |      | Shares |           | Per Share
|Basic earnings per share         |  | 1,199,776          |  | $             | 1.25 |        | 1,191,458 |           | $ | 1.22
|Effect of dilutive stock options |  | 11,249             |  |               |      |        | 11,474    |           |   |     
|                                 |  |                    |  |               |      |        |           |           |   |     
|Diluted earnings per share       |  | 1,211,025          |  | $             | 1.24 |        | 1,202,932 |           | $ | 1.21
|                                 |  |                    |  |               |      |        |           |           |   |     
|                                 | 
|                                 |  | Three months ended
|                                 |  | June 30, 2006      |  | June 30, 2005
|                                 |  | Shares             |  | Per Share     |      | Shares |           | Per Share
|Basic earnings per share         |  | 1,200,315          |  | $             | 0.64 |        | 1,192,803 |           | $ | 0.62
|Effect of dilutive stock options |  | 10,091             |  |               |      |        | 9,675     |           |   |     
|                                 |  |                    |  |               |      |        |           |           |   |     
|Diluted earnings per share       |  | 1,210,406          |  | $             | 0.63 |        | 1,202,478 |           | $ | 0.61
|                                 |  |                    |  |               |      |        |           |           |   |     

4. The unrealized losses in the investment portfolio as of June 30, 2006 are generally a result of market
fluctuations that occur daily. The unrealized losses are from securities that are all of investment grade, backed by insurance, U.S. government agency guarantees, or the full faith and credit of local municipalities throughout the United States. The
Corporation has the ability and intent to hold these securities to maturity. Market prices are affected by conditions beyond the control of the Corporation. Investment decisions are made by the management group of the Corporation and reflect the
overall liquidity and strategic asset/liability objectives of the Corporation. Management analyzes the securities portfolio frequently and manages the portfolio to provide an overall positive impact to the Corporations income statement and
balance sheet.



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5. Defined Benefit Pension Plan

Components of Net Periodic Benefit Cost

(In Thousands)



|                                             |  |                           |      |   |                             |   |      |      |  |   |      |   |  |   |     |  
|-------------------------------------------- |  | ------------------------- | ---- | - | --------------------------- | - | ---- | ---- |  | - | ---- | - |  | - | --- | -
|                                             |  | Pension Benefits          |     
|                                             |  | Six Months Ended June 30, |      |   | Three Months Ended June 30, |  
|                                             |  | 2006                      |      |   | 2005                        |   |      | 2005 |  |   | 2004 |  
|Service cost                                 |  | $                         | 182  |   |                             | $ | 154  |      |  | $ | 91   |   |  | $ | 77  |  
|Interest cost                                |  |                           | 122  |   |                             |   | 106  |      |  |   | 61   |   |  |   | 53  |  
|Expected return on plan assets               |  |                           | (130 | ) |                             |   | (108 | )    |  |   | (65  | ) |  |   | (54 | )
|Amortization of prior service cost           |  |                           | 2    |   |                             |   | 2    |      |  |   | 1    |   |  |   | 1   |  
|Amortization of net obligation at transition |  |                           | (2   | ) |                             |   | (2   | )    |  |   | (1   | ) |  |   | (1  | )
|Amortization of net (gain) loss              |  |                           | 28   |   |                             |   | 28   |      |  |   | 14   |   |  |   | 14  |  
|                                             |  |                           |      |   |                             |   |      |      |  |   |      |   |  |   |     |  
|Net periodic benefit cost                    |  | $                         | 202  |   |                             | $ | 180  |      |  | $ | 101  |   |  | $ | 90  |  
|                                             |  |                           |      |   |                             |   |      |      |  |   |      |   |  |   |     |  

Employer Contributions

The Company previously disclosed in its financial statements for the year ended December 31, 2005, that it expected to contribute $177,000 to its pension plan in
2006. As of June 30, 2006, no contributions have been made.

6. Loans are shown on the balance sheets net of unearned discounts and the allowance for
loan losses. Interest is computed by methods which result in level rates of return on principal. Loans are charged off when in the opinion of management they are deemed to be uncollectable after taking into consideration such factors as the current
financial condition of the customer and the underlying collateral and guarantees. Loan fees and origination costs are deferred and the net amount amortized as an adjustment of the related loans yield using the level yield method. Bank of Essex (the
Bank), a wholly owned subsidiary of the Company, is amortizing these amounts over the contractual life of the related loans.



|                               |  |                         |         |   |              |   |         |                         |  |   |         |  
|------------------------------ |  | ----------------------- | ------- | - | ------------ | - | ------- | ----------------------- |  | - | ------- | -
|(Dollars in thousands)         |  | (unaudited)June 30,2006 |         |   | December2005 |   |         | (unaudited)June 30,2005 | 
|Loans:                         |  |                         |         |   |              |   |         |                         |  |   |         |  
|Commercial                     |  | $                       | 22,672  |   |              | $ | 22,873  |                         |  | $ | 22,336  |  
|Real Estate                    |  |                         | 128,318 |   |              |   | 121,296 |                         |  |   | 119,225 |  
|Real Estateconstruction       |  |                         | 31,185  |   |              |   | 32,084  |                         |  |   | 26,174  |  
|Installment & other loans      |  |                         | 6,351   |   |              |   | 6,203   |                         |  |   | 6,115   |  
|                               |  |                         |         |   |              |   |         |                         |  |   |         |  
|Total loans                    |  |                         | 188,526 |   |              |   | 182,456 |                         |  |   | 173,850 |  
|Less allowance for loan losses |  |                         | (2,388  | ) |              |   | (2,249  | )                       |  |   | (2,235  | )
|                               |  |                         |         |   |              |   |         |                         |  |   |         |  
|Net loans                      |  | $                       | 186,138 |   |              | $ | 180,207 |                         |  | $ | 171,615 |  
|                               |  |                         |         |   |              |   |         |                         |  |   |         |  



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7. The Companys allowance for loan losses was as follows at the dates indicated:



|                                 |  |                         |       |   |              |   |       |                         |  |   |       |  
|-------------------------------- |  | ----------------------- | ----- | - | ------------ | - | ----- | ----------------------- |  | - | ----- | -
|(Dollars in thousands)           |  | (unaudited)June 30,2006 |       |   | December2005 |   |       | (unaudited)June 30,2005 | 
|Balance January 1                |  | $                       | 2,249 |   |              | $ | 2,088 |                         |  | $ | 2,088 |  
|Provision charged against income |  |                         | 125   |   |              |   | 240   |                         |  |   | 155   |  
|Recoveries of loans charged off  |  |                         | 63    |   |              |   | 80    |                         |  |   | 78    |  
|Loans charged off                |  |                         | (49   | ) |              |   | (159  | )                       |  |   | (86   | )
|                                 |  |                         |       |   |              |   |       |                         |  |   |       |  
|Balance at end of period         |  | $                       | 2,388 |   |              | $ | 2,249 |                         |  | $ | 2,235 |  
|                                 |  |                         |       |   |              |   |       |                         |  |   |       |  



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Item 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The Companys financial statements are prepared in accordance with accounting
principles generally accepted in the United States (GAAP). The financial information contained within the statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events
that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability. The Company uses historical loss factors as one
factor in determining the inherent loss that may be present in its loan portfolio. Actual losses could differ significantly from the historical factors that the Company uses. In addition, GAAP itself may change from one previously acceptable method
to another method. Although the economics of the Companys transactions would be the same, the timing of events that would impact its transactions could change.

CRITICAL ACCOUNTING POLICIES

Allowance for Loan Losses

The allowance for loan losses is an estimate of the losses that may be sustained in the Companys loan portfolio. The allowance is based on two basic
principles of accounting: (i) SFAS 5, Accounting for Contingencies,which requires that losses be accrued when they are probable of occurring and estimatable and (ii) SFAS 114, Accounting by Creditors for Impairment of a Loan,which requires that losses be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance. The use of these values is inherently
subjective and actual losses could be greater or less than the estimates.

The allowance for loan losses is increased by charges to income
and decreased by charge-offs (net of recoveries). Managements periodic evaluation of the adequacy of the allowance is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the
borrowers ability to repay, the estimated value of any underlying collateral, and current economic conditions.

The following
discussion is intended to assist readers in understanding and evaluating the financial condition and results of operations of the Company and the Bank. This section should be read in conjunction with BOEs consolidated financial statements and
accompanying notes included elsewhere in this report.

Overview

On June 30, 2006 the Company had total assets of $270.6 million, an increase of $8.7 million, or 3.3%, from $261.9 million at December 31, 2005.
Total assets at June 30, 2005 were $253.2 million. The June 30, 2006 total assets figure represents an increase of 6.9%, or $17.5 million, over one year ago. Total loans amounted to $188.5 million on June 30, 2006, an increase of $6.1
million, or 3.3%, over December 31, 2005 total loans of $182.5 million. The June 30, 2006 figure represents an increase of $14.7 million, or 8.4%, over total loans of $173.9 million on June 30, 2005. The Companys securities
portfolio increased $286,000, or 0.5%, from $55.4 million at December 31, 2005 to $55.7 million at June 30, 2006. Total securities were $58.8 million on June 30, 2005. The company had Federal Funds purchased of $2.7 million on
June 30, 2006, $1.8 million on December 31, 2005 and Federal Funds purchased of $4.4 million on June 30, 2005.



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The Company is required to account for the effect of market changes in the value of securities
available-for-sale (AFS) under SFAS 115. The market value of the June 30, 2006 securities AFS portfolio was $52.7 million compared to $52.4 million at December 31, 2005 and $55.8 million at June 30, 2005. The impact of the change in
market value of AFS securities, net of deferred income taxes, is reflected in the Statement of Changes in Stockholders Equity under Accumulated Other Comprehensive Income (Loss). On June 30, 2006, $695,000 represented the Companys
net unrealized loss on AFS securities compared to $121,000 at December 31, 2005 and a net unrealized gain of $584,000 at June 30, 2005.

Total deposits at June 30, 2006 were $223.6 million. This $464,000 decrease is 0.2% less than total deposits of $223.1 million at December 31, 2005 and $10.7 million, or 5.0% greater than total deposits of $212.9 million at
June 30, 2005.

Stockholders equity at June 30, 2006 was $27.0 million and represented 10.0% of total assets.
Stockholders equity was $26.2 million, or 10.0% of total assets at December 31, 2005 and $25.4 million, or 10.0% of total assets at June 30, 2005.

On June 30, 2005 the company purchased $3,666,666 in Bank  Owned Life Insurance (BOLI). An Additional $1,333,333 was added on September 21, 2005. The Company does not foresee adding any additional BOLI
in the near future. The Board of Directors is using this investment to fund a Supplemental Executive Retirement Program for certain of the Companys Executive Officers.

Results of Operations

Net Income

Net income for the second quarter of 2006 was $766,000, a 3.8% increase from 2005 second quarter
income of $738,000. Fully diluted earnings per common share were $0.63 in the second quarter of 2006 compared to $0.61 in the second quarter of 2005. Tangible book value increased $1.28 to $21.98 per common share on June 30, 2006 compared to
$20.70 on June 30, 2005.

This increase in quarterly earnings was primarily attributable to a $92,000 increase in noninterest income and a $62,000
increase in net interest income. Noninterest income was $492,000 in the second quarter of 2006 compared to $400,000 in the same period in 2005. Net interest income increased 2.5%, from $2,475,000 in the second quarter of 2005, to $2,537,000 in the
second quarter of 2006. Additionally, the expense provision for loan losses decreased $50,000 for the second quarter of 2006 compared to the same period in 2005. Provision for loan losses was $25,000 for the second quarter of 2006 compared to
$75,000 for the same period in 2005. Income tax expense was $211,000 for the second quarter of 2006 compared to $227,000 for the same period in 2005, a decrease of 7.0%, or $16,000. Offsetting these increases to net income was an increase of
$192,000, or 10.5%, in noninterest expenses. Noninterest expenses were $2,027,000 in the second quarter of 2006 compared to $1,835,000 in the same period in 2005.

For the six month period ended June 30, 2006, BOE Financial Services of Virginia reported a 3.1%, or $45,000, increase in net income over the same period in 2005. Net income for the six months ended June 30,
2006 was $1,504,000 compared to six month earnings of $1,459,000 in 2005. This increase was primarily the result of a $149,000, or 3.1%, increase in net interest income. Net interest income was $5,026,000 for the first six months of 2006 compared to
$4,877,000 for the same period in 2005. This was the result of higher loan volumes and rate increases by the Federal Reserve Board of Governors which, in turn, increased rates on loans tied to the prime rate. Also, noninterest income increased
$100,000, or 12.6%, from $794,000 for the six month period ended June 30, 2005 to $894,000 for the six month period ended June 30, 2005. Additionally, income tax expense was $5,000 less for the six month period ended June 30, 2006
compared to the same period in 2005.



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Net Interest Income

The Companys results of operations are significantly affected by its ability to manage effectively the interest rate sensitivity and maturity of its
interest-earning assets and interest-bearing liabilities. At June 30, 2006, the Companys interest-earning assets exceeded its interest-bearing liabilities by approximately $28.3 million, compared with a $33.5 million excess one year ago.
Net interest margins on a fully tax equivalent basis were 4.28% through June 30, 2006 compared to 4.47% through June 30, 2005. The decrease in net interest margin was the result of an increase 64 basis points in yield on total earning
assets coupled with an decrease of 83 basis points in the cost of total sources of funds. The Companys yield on average earning assets, on a fully tax equivalent and annualized basis, was 6.72% for the first six months of 2006 compared to
6.08% for the first six months of 2005. Total sources of funds were 2.44% for the first six months of 2006 compared to 1.61% for the same period in 2005.

The Companys loan-to-deposit ratio was 84.4%, on average, through the first six months of 2006 compared to 79.0% for the same period in 2005. On June 30, 2006, the Companys loan-to-deposit ratio was
84.3% compared to 81.8% on December 31, 2005 and 81.7% on June 30, 2005.

Provision for Credit Losses

The Companys provision for credit losses decreased $50,000 to $25,000 for the second quarter of 2006 compared to $75,000 in the
second quarter of 2005. Net charge-offs of $17,000 in the second quarter of 2006 compared to net charge-offs on loans of $32,000 in the second quarter of 2005. For the six month period ended June 30, 2006 provision for credit losses was
$125,000, a decrease of 19.4%, or $30,000, from provision for credit losses of $155,000 through six months in 2005. Through six months in 2006 net recoveries were $14,000, represented by charge-offs of $49,000 and recoveries of $63,000.

Noninterest Income

Noninterest income, including net gains and losses on securities, was $492,000 in the second quarter of 2006 compared to $400,000 in the same period of 2005. This represents an increase of 23.0%, or $92,000. Service charges on deposit
accounts were $274,000 in the second quarter of 2006 and $247,000 in the second quarter of 2005. This is an increase of 10.9%, or $27,000. The increase was the result of higher levels of demand deposit accounts utilizing the Companys automated
program for overdrafts, which provides fee income. Securities gains/(losses) was $3,000 in both the second quarter of 2005 and 2006. All other noninterest income increased 25.3% or $25,000, from $99,000 in the second quarter of 2005 to $124,000 in
the second quarter of 2006. Other fee income increased 61.1%, or $22,000, from $36,000 in the second quarter of 2005 to $58,000 in the second quarter of 2006. Gains on sale of loans increased $18,000, or 120.0%, from $15,000 in the second quarter of
2005 to $33,000 in the second quarter of 2006.

For the six month period ended June 30, 2006 noninterest income of $894,000 was an
increase of $100,000, or 12.6%, from noninterest income of $794,000 for the first six months of 2005. Service charges on deposit accounts were $522,000 for the period compared to $468,000 in 2005. This is an increase 11.5%, or $54,000. All other
noninterest increased $51,000, or 27.0% and was $240,000 for the first six months of 2006 compared to $189,000 for the same period in 2005. Gains on sales of loans was $49,000 for the first six months of 2006 compared to $31,000 for the same period
in 2005, representing an increase of 58.1%, or $18,000. Other fee income increased 3.1%, or $3,000, and was $101,000 for the first six months of 2006 compared to $98,000 for the same period in 2005. Offsetting these increases to total noninterest
income was a decrease of $26,000, or 325.0%, in securities gains/(losses) which were a loss of $18,000 in the first six months of 2006 compared to a gain of $8,000 for the first six months of 2005.



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Noninterest Expenses

Noninterest expenses were $2.0 million and increased $192,000, or 10.5%, in the second quarter of 2006 compared to 2005. Other expenses increased,
$102,000, from $517,000 in the second quarter of 2005 to $619,000 in the second quarter of 2006. Salaries and employee benefits increased $61,000, or 5.8%, from $1.0 million in the second quarter of 2005 to $1.1 million in the second quarter of
2006. Premises and fixed assets increased $29,000, or 12.1%, from $240,000 in the second quarter of 2005 to $269,000 in the second quarter of 2006.

For the six month period ended June 30, 2006 noninterest expenses were $3,853,000, a $239,000, or 6.6%, increase over noninterest expenses of $3,614,000 for the first six months of 2005. Other expenses increased $120,000, or 11.8%,
from $1,134,000 for the first six months of 2006 compared to $1,014,000 for the same period in 2005.

Income Taxes

Income tax expense was $211,000 in the second quarter of 2006. This represents a decrease of $16,000, or 7.0%, compared to $227,000 of
income tax expense in the second quarter of 2005. Income tax expense for the six month period ended June 30, 2006 was $438,000 compared to $443,000 for the same period in 2005. This represents a decrease of $5,000, of 1.1%.

Asset Quality

The
Companys allowance for credit losses totaled $2,388,000 on June 30, 2006 or 1.27% of total loans. On December 31, 2005, the allowance for credit losses totaled $2.2 million and was 1.23% of total loans. On June 30, 2005, the
allowance for credit losses was $2,235,000 and was 1.29% of total loans.

On June 30, 2006, the Company had nonaccruing assets of
$54,000 compared to $222,000 on June 30, 2005. Loans past due and still accruing interest totaled $928,000 on June 30, 2006 compared to $44,000 on June 30, 2005.

Capital Requirements

The
determination of capital adequacy depends upon a number of factors, such as asset quality, liquidity, earnings, growth trends and economic conditions. The Company seeks to maintain a strong capital base to support its growth and expansion plans,
provide stability to current operations and promote public confidence in the Company.

The federal banking regulators have defined three
tests for assessing the capital strength and adequacy of banks, based on two definitions of capital. Tier 1 Capital is defined as a combination of common and qualifying preferred stockholders equity less goodwill. Tier 2
Capital is defined as qualifying subordinated debt and a portion of the allowance for loan losses. Total Capital is defined as Tier 1 Capital plus Tier 2 Capital.

Three risk-based capital ratios are computed using the above capital definitions, total assets and risk-weighted assets and are measured against
regulatory minimums to ascertain adequacy. All assets and off-balance sheet risk items are grouped into categories according to degree of risk and assigned a risk-weighting and the resulting total is risk-weighted assets. Tier 1 Risk-based
Capital is Tier 1 Capital divided by risk-weighted assets. Total Risk-based Capital is Total Capital divided by risk-weighted assets. The Leverage ratio is Tier 1 Capital divided by total average assets.



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The Companys ratio of total capital to risk-weighted assets was 13.64%% on June 30, 2006
compared to 15.79 on June 30, 2005. Its ratio of Tier 1 Capital to risk-weighted assets was 12.71% on June 30, 2006 and 14.80% on June 30, 2005. The Companys leverage ratio (Tier I capital to average adjusted total assets) was
10.00% on June 30, 2006 and 11.73% on June 30, 2005. These ratios exceed regulatory minimums. The Company issued trust preferred subordinated debt that qualifies as regulatory capital in the fourth quarter of 2003. This trust preferred
debt has a 30-year maturity with a 5-year call option and was issued at a rate of three month LIBOR plus 3.00% and was priced at 7.97938% in the second quarter of 2006.

RECENT ACCOUNTING PRONOUNCEMENTS

On
December 16, 2004, the Financial Accounting Standards Board issued Statement No. 123R (revised 2004), Share-Based Payment, (FAS 123R) that addresses the accounting for share-based payment transactions in which a company
receives employee services in exchange for either equity instruments of the company or liabilities that are based on the fair value of the companys equity instruments or that may be settled by the issuance of such equity instruments. FAS 123R
eliminates the ability to account for share-based compensation transactions using the intrinsic method and requires that such transactions be accounted for using a fair-value-based method and recognized as expense in the consolidated statement of
income. The effective date of FAS 123R (as amended by the SEC) is for annual periods beginning after June 15, 2005. The provisions of FAS 123R do not have an impact on the Companys results of operations at the present time.

In March 2005, the SEC issued Staff Accounting Bulleting No. 107 (SAB 107). SAB 107 expresses the views of the SEC staff regarding the interaction
of FAS 123R and certain SEC rules and regulations and provides the SEC staffs view regarding the valuation of share-based payment arrangements for public companies. SAB 107 does not impact the Companys results of operations at the
present time.

In March 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 156, Accounting for
Servicing of Financial Assets an amendment of FASB Statement 140 (Statement 156). Statement 156 amends Statement 140 with respect to separately recognized servicing assets and liabilities. Statement 156 requires an entity to recognize a
servicing asset or liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract and requires all servicing assets and liabilities to be initially measured at fair value, if practicable. Statement
156 also permits entities to subsequently measure servicing assets and liabilities using an amortization method or fair value measurement method. Under the amortization method, servicing assets and liabilities are amortized in proportion to and over
the estimated period of servicing. Under the fair value measurement method, servicing assets are measured at fair value at each reporting date and changes in fair value are reported in net income for the period the change occurs.

Adoption of Statement 156 is required as of the beginning of fiscal years beginning subsequent to September 15, 2006. Earlier adoption is permitted as of the beginning
of an entitys fiscal year, provided the entity has not yet issued financial statements, including interim financial statements.

The Corporation does
not expect the adoption of Statement 156 at the beginning of 2007 to have a material impact.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse
changes in the fair value of financial instruments due to changes in interest rates, exchange rates and equity prices. The Companys market risk is composed primarily of interest rate risk. The Companys Asset and Liability Management
Committee (ALCO) is responsible for reviewing the interest rate sensitivity position and establishing policies to monitor and limit exposure to this risk. The Board of Directors reviews and approves the guidelines established by ALCO.

Earnings Simulation Analysis

Market
risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates and equity prices. The Companys market risk is composed primarily of interest rate risk. The
Companys Asset and Liability Management Committee (ALCO) is responsible for reviewing the interest rate sensitivity position and establishing policies to monitor and limit exposure to this risk. The Board of Directors reviews and
approves the guidelines established by ALCO.

Interest rate risk is monitored through the use of two complimentary modeling tools: earnings simulation
modeling and economic value simulation (net present value estimation). Each of these models measure changes in a variety of interest rate scenarios. While each of the interest rate risk measures has limitations, taken together they represent a
reasonably comprehensive view of the magnitude of interest rate risk in the Company, the distribution of risk along the yield curve, the level of risk through time, and the amount of exposure to changes in certain interest rate relationships.
Earnings simulation and economic value models, which more effectively measure the cash flow and optionality impacts, are utilized by management on a regular basis and are explained below.



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Earnings Simulation Analysis

Management uses simulation analysis to measure the sensitivity of net interest income to changes in interest rates. The model calculates an earnings estimate based on
current and projected balances and rates. This method is subject to the accuracy of the assumptions that management has input, but it provides a better analysis of the sensitivity of earnings to changes in interest rates than other potential
analyses.

Assumptions used in the model are derived from historical trends and managements outlook and include loan and deposit growth rates and
projected yields and rates. Such assumptions are monitored and periodically adjusted as appropriate. All maturities, calls and prepayments in the securities portfolio are assumed to be reinvested in like instruments. Mortgage loans and mortgage
backed securities prepayment assumptions are based on industry estimates of prepayment speeds for portfolios with similar coupon ranges and seasoning. Different interest rate scenarios and yield curves are used to measure the sensitivity of earnings
to changing interest rates. Interest rates on different asset and liability accounts move differently when the prime rate changes and are reflected in the different rate scenarios.

The Company uses its simulation model to estimate earnings in rate environments where rates ramp up or down around a most likely rate scenario, based on implied forward rates. The analysis assesses the
impact on net interest income over a 12 month time horizon by applying 12-month shock versus the implied forward rates of 200 basis points up and down. The following table represents the interest rate sensitivity on net interest income for the
Company across the rate paths modeled as of June 30, 2006:



|                          |  |                               |   |  |                  |      |  
|------------------------- |  | ----------------------------- | - |  | ---------------- | ---- | -
|                          |  | Change in Net Interest Income |  
|Change in Yield Curve     |  | (Percent)                     |   |  | ($ in thousands) |     
|+200 basis points         |  | -1.32                         | % |  | $                | (145 | )
|Most likely rate scenario |  | 0.00                          | % |  | $                |     |  
|-200 basis points         |  | -0.99                         | % |  | $                | (109 | )

Economic Value Simulation

Economic value simulation is used to determine the estimated fair value of assets and liabilities over different interest rate scenarios. Economic values are calculated
based on discounted cash flow analysis. The net economic value of equity is the economic value of all assets minus the economic value of all liabilities. The change in net economic value over different rate scenarios is an indication of the longer
term earnings sensitivity capability of the balance sheet. The same assumptions are used in the economic value simulation as in the earnings simulation. The economic value simulation uses simultaneous rate shocks to the balance sheet, whereas the
earnings simulation uses rate shock over 12 months. The following chart reflects the estimated change in net economic value over different rate environments using economic value simulation as of June 30, 2006:



|                          |  |                                    |   |  |                  |        |  
|------------------------- |  | ---------------------------------- | - |  | ---------------- | ------ | -
|                          |  | Change in Economic Value of Equity |  
|Change in Yield Curve     |  | (Percent)                          |   |  | ($ in thousands) |       
|+200 basis points         |  | -13.22                             | % |  | $                | (4,541 | )
|Most likely rate scenario |  | 0.00                               | % |  | $                |       |  
|-200 basis points         |  | 7.34                               | % |  | $                | 2,523  |  



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##### Table of Contents

Item 4. Controls and Procedures

Based on their most recent review, which was completed as of the last day of
the period covered by this report, the Companys principal executive officer and principal financial officer have concluded that the Companys disclosure controls and procedures are effective to ensure that information required to be
disclosed by the Companys in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Companys management, including its principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding required disclosure and are effective to ensure that such information is recorded, processed, summarized and reported within the time periods specified in the SECs rules and
forms. There were no significant changes in the Corporations internal controls or in other factors that could significantly affect those controls subsequent to the date of their evaluation.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None

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

None

Item 3. Defaults Upon Senior Securities

None

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

The Company held its annual shareholders meeting
on May 12, 2006.

Alexander F. Dillard, Jr., Frances H. Ellis and Philip T. Minor, all of the directors nominated for election, were elected to the
Board of Directors of the Company to serve until the Annual Meeting to be held in 2009 and until their successors are duly elected.

Votes were cast in the election of directors as follows:



|                          |  |         |  |         |  |        
|------------------------- |  | ------- |  | ------- |  | -------
|                          |  | FOR     |  | AGAINST |  | ABSTAIN
|Alexander F. Dillard, Jr. |  | 918,712 |  | 34,638  |  | 1,000  
|Frances H. Ellis          |  | 952,369 |  | 981     |  | 1,000  
|Philip T. Minor           |  | 953,350 |  | 0       |  | 1,000  

Yount, Hyde & Barbour, P.C., Certified Public Accountants, were ratified as the independent auditors of
the Company for 2006.

Item 5. Other Information

None



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##### Table of Contents

Item 6. Exhibits

The information furnished herein, including Exhibit 99.1, shall not be deemed to be
filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.



| | (a) | Exhibit Listing
| | --- | ---------------



|              |  |                                                                                                                                                                                                                                                                                   
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                       
|2             |  | Agreement and Plan of Reorganization (the Reorganization Agreement) dated as of March 20, 2000 between the Corporation and Bank. (Exhibit A of the Proxy Statement included in Form
S-4 Registration Statement (No. 333-33260) filed March 24, 2000, incorporated by reference).
|              | 
|3(a)          |  | Articles of Incorporation of the Corporation (Appendix 1 to Exhibit A of the Proxy Statement included in Form S-4 Registration Statement (No. 333-33260) filed March 24, 2000, incorporated by
reference).                                                                        
|              | 
|3(b)          |  | Bylaws (Appendix 2 to Exhibit A of the Proxy Statement included in Form S-4 Registration Statement (No. 333-33260) filed March 24, 2000, incorporated by reference).                                                                                                              
|              | 
|10(a)         |  | The Corporations Stock Incentive Plan (Appendix 3 to Exhibit A of the Proxy Statement included in Form S-4 Registration Statement (No. 333-33260) filed March 24, 2000, incorporated by
reference).                                                                              
|              | 
|10(b)         |  | First Amendment to the Corporations Stock Incentive Plan (Exhibit 99(b) to Form S-8 Registration Statement (No. 333-49538) filed November 8, 2000, incorporated by
reference).                                                                                                   
|              | 
|10(c)         |  | The Corporations Stock Option Plan for Outside Directors (Appendix 4 to Exhibit A of the Proxy Statement included in Form S-4 Registration Statement (No. 333-33260) filed March 24, 2000,
incorporated by reference).                                                           
|              | 
|10(d)         |  | First Amendment to the Corporations Stock Option Plan for Outside Directors (Exhibit 99(d) to Form S-8 Registration Statement (No. 333-49538) filed November 8, 2000, incorporated by
reference).                                                                                
|              | 
|31.1          |  | Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act.                                                                                                                                                                             
|              | 
|31.2          |  | Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act                                                                                                                                                                              
|              | 
|32            |  | Certification of Chief Executive Officer and Chief Financial Officer.                                                                                                                                                                                                             
|              | 
|99.1          |  | BOE Financial Services Dividend Reinvestment Plan (Incorporated by reference to the Registrants Registration Statement on Form S-3D filed November 8, 2000)                                                                                                                      



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Signatures

In accordance with to the requirements of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.



|        |  |                                          |  |                                                           
|------- |  | ---------------------------------------- |  | ----------------------------------------------------------
|        |  | BOE Financial Services of Virginia, Inc.
|        |  | (Registrant)                            
|        |  |                                         
|8/14/06 |  | By:                                      |  | /s/ George M. Longest, Jr.                                
|(Date)  |  |                                          |  | (Signature)                                               
|        |  |                                          |  | George M. Longest, Jr.                                    
|        |  |                                          |  | President and Chief Executive Officer                     
|        |  |                                         
|8/14/06 |  | By:                                      |  | /s/ Bruce E. Thomas                                       
|(Date)  |  |                                          |  | (Signature)                                               
|        |  |                                          |  | Bruce E. Thomas                                           
|        |  |                                          |  | Secretary, Senior Vice President & Chief Financial Officer



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