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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 September 30, 2006

or



| ̈ | 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 November 9, 2006.



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



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BOE Financial Services of Virginia, Inc.

FORM 10-Q

INDEX



|                               |  |                                                                                                          |  |      
|------------------------------ |  | -------------------------------------------------------------------------------------------------------- |  | -----
|                               |  |                                                                                                          |  | Page 
|PART I - FINANCIAL INFORMATION |  |                                                                                                         
|Item 1.                        |  | Financial Statements                                                                                     |  | 1-10 
|                               |  |                                                                                                         
|                               |  | Consolidated Balance Sheets September 30, 2006 and December 31, 2005                                     |  | 1-2  
|                               |  |                                                                                                         
|                               |  | Consolidated Statements of Income Three months ended September 30, 2006 and 2005                         |  | 3    
|                               |  |                                                                                                         
|                               |  | Consolidated Statements of Income Nine months ended September 30, 2006 and 2005                          |  | 4    
|                               |  |                                                                                                         
|                               |  | Consolidated Statements of Cash Flows Nine Months ended September 30, 2006 and 2005                      |  | 5    
|                               |  |                                                                                                         
|                               |  | Consolidated Statements of Changes in Stockholders Equity Nine months ended September 30, 2006 and 2005 |  | 6    
|                               |  |                                                                                                         
|                               |  | Notes to Consolidated Financial Statements                                                               |  | 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                                               |  | 17-18
|                               |  |                                                                                                         
|Item 4.                        |  | Controls and Procedures                                                                                  |  | 18   
|                               | 
|PART II - OTHER INFORMATION    |  |                                                                                                         
|Item 1.                        |  | Legal Proceedings                                                                                        |  | 19   
|                               |  |                                                                                                         
|Item 1A.                       |  | Risk Factors                                                                                             |  | 19   
|                               |  |                                                                                                         
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                              |  | 19   
|                               |  |                                                                                                         
|Item 3.                        |  | Defaults Upon Senior Securities                                                                          |  | 19   
|                               |  |                                                                                                         
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                                      |  | 19   
|                               |  |                                                                                                         
|Item 5.                        |  | Other Information                                                                                        |  | 19   
|                               |  |                                                                                                         
|Item 6.                        |  | Exhibits                                                                                                 |  | 19   
|                               |  |                                                                                                         
|Signatures                     |  |                                                                                                          |  | 19   



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PART I  FINANCIAL INFORMATION

Item 1. 
FINANCIAL STATEMENTS

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Balance Sheets



|                                                                          |  |                   |         |   |                  |   |         |  
|------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                          |  | September 30,2006 |         |   | December 31,2005 |  
|(in Thousands except share data)                                          |  | (Unaudited)       |         |   |                  |  
|ASSETS                                                                    |  |                   |         |   |                  |   |         |  
|Cash and due from banks                                                   |  | $                 | 5,265   |   |                  | $ | 7,365   |  
|Federal funds sold                                                        |  |                   | 6,016   |   |                  |   |        |  
|Securities available for sale, at fair value                              |  |                   | 53,937  |   |                  |   | 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 held for resale                                                     |  |                   | 96      |   |                  |   | 0       |  
|                                                                          |  |                  
|Loans                                                                     |  |                   | 189,720 |   |                  |   | 182,456 |  
|Less: Allowance for loan losses                                           |  |                   | (2,366  | ) |                  |   | (2,249  | )
|                                                                          |  |                   |         |   |                  |   |         |  
|Net loans                                                                 |  |                   | 187,354 |   |                  |   | 180,207 |  
|                                                                          |  |                  
|Bank premises and equipment, net                                          |  |                   | 10,530  |   |                  |   | 7,656   |  
|Accrued interest receivable                                               |  |                   | 1,422   |   |                  |   | 1,191   |  
|Intangible assets, net                                                    |  |                   | 556     |   |                  |   | 650     |  
|Other assets                                                              |  |                   | 8,241   |   |                  |   | 8,281   |  
|                                                                          |  |                   |         |   |                  |   |         |  
|Total assets                                                              |  | $                 | 277,970 |   |                  | $ | 261,931 |  
|                                                                          |  |                   |         |   |                  |   |         |  

See accompanying notes to consolidated financial statements.



Page: 1



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Balance Sheets



|                                           |  |            |  |            |  |                   |         |   |                  |   |         |  
|------------------------------------------ |  | ---------- |  | ---------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                           |  |            |  |            |  | September 30,2006 |         |   | December 31,2005 |  
|                                           |  |            |  |            |  | (Unaudited)       |         |   |                  |  
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |            |  |            |  |                   |         |   |                  |   |         |  
|Deposits                                   |  |            |  |            |  |                   |         |   |                  |   |         |  
|Noninterest bearing deposits               |  |            |  |            |  | $                 | 29,815  |   |                  | $ | 30,791  |  
|Interest bearing deposits                  |  |            |  |            |  |                   | 202,276 |   |                  |   | 192,341 |  
|                                           |  |            |  |            |  |                   |         |   |                  |   |         |  
|Total deposits                             |  |            |  |            |  |                   | 232,091 |   |                  |   | 223,132 |  
|Federal funds purchased                    |  |            |  |            |  |                   | 0       |   |                  |   | 1,810   |  
|Federal Home Loan Bank advances            |  |            |  |            |  |                   | 12,000  |   |                  |   | 5,000   |  
|Accrued interest payable                   |  |            |  |            |  |                   | 883     |   |                  |   | 526     |  
|Other liabilities                          |  |            |  |            |  |                   | 771     |   |                  |   | 1,105   |  
|Trust preferred capital notes              |  |            |  |            |  |                   | 4,124   |   |                  |   | 4,124   |  
|                                           |  |            |  |            |  |                   |         |   |                  |   |         |  
|Total liabilities                          |  |            |  |            |  |                   | 249,869 |   |                  |   | 235,697 |  
|                                           |  |            |  |            |  |                   |         |   |                  |   |         |  
|Commitments and Contingent Liabilities     |  |            |  |            |  |                   |         |   |                  |   |         |  
|Stockholders equity                       |  |            |  |            |  |                   |         |   |                  |   |         |  
|Common stock, $5.00 par value              |  |            |  |            |  |                   | 6,019   |   |                  |   | 5,990   |  
|                                           |  |            |  |           
|                                           |  | 9/30/06    |  | 12/31/05   |  |                   |         |   |                  |  
|Shares authorized                          |  | 10,000,000 |  | 10,000,000 |  |                   |         |   |                  |   |         |  
|Shares outstanding                         |  | 1,203,857  |  | 1,198,059  |  |                   |         |   |                  |   |         |  
|Additional paid in capital                 |  |            |  |            |  |                   | 5,386   |   |                  |   | 5,264   |  
|Accumulated other comprehensive (loss),net |  |            |  |            |  |                   | (118    | ) |                  |   | (80     | )
|Retained earnings                          |  |            |  |            |  |                   | 16,814  |   |                  |   | 15,060  |  
|                                           |  |            |  |            |  |                   |         |   |                  |   |         |  
|Total stockholders equity                 |  |            |  |            |  |                   | 28,101  |   |                  |   | 26,234  |  
|                                           |  |            |  |            |  |                   |         |   |                  |   |         |  
|Total liabilities and stockholders equity |  |            |  |            |  | $                 | 277,970 |   |                  | $ | 261,931 |  
|                                           |  |            |  |            |  |                   |         |   |                  |   |         |  

See accompanying notes to consolidated financial statements.



Page: 2



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Statements of Income



|                                                                 |  |                    |       |   |                   |   |      
|---------------------------------------------------------------- |  | ------------------ | ----- | - | ----------------- | - | -----
|                                                                 |  | Three Months Ended
|                                                                 |  | September 30,2006  |       |   | September 30,2005
|(In Thousands except per share data)                             |  | (Unaudited)       
|Interest Income                                                  |  |                    |       |   |                   |   |      
|Interest and fees on loans                                       |  | $                  | 3,701 |   |                   | $ | 3,175
|Interest on federal funds sold                                   |  |                    | 28    |   |                   |   | 2    
|Interest on U.S. Treasury securities and U.S. Agency Obligations |  |                    | 99    |   |                   |   | 105  
|Interest on obligations of state and political subdivisions      |  |                    | 349   |   |                   |   | 352  
|Interest on other securities                                     |  |                    | 112   |   |                   |   | 110  
|Other interest income                                            |  |                    | 1     |   |                   |   | 3    
|                                                                 |  |                    |       |   |                   |   |      
|Total interest income                                            |  |                    | 4,290 |   |                   |   | 3,747
|                                                                 |  |                    |       |   |                   |   |      
|Interest Expense                                                 |  |                    |       |   |                   |   |      
|Interest on savings and interest bearing deposits                |  |                    | 134   |   |                   |   | 109  
|Interest on certificates of deposit                              |  |                    | 1,452 |   |                   |   | 928  
|Interest on federal funds purchased                              |  |                    | 4     |   |                   |   | 47   
|Interest on long  term debt                                     |  |                    | 135   |   |                   |   | 48   
|Interest on trust preferred capital notes.                       |  |                    | 83    |   |                   |   | 110  
|                                                                 |  |                    |       |   |                   |   |      
|Total interest expense                                           |  |                    | 1,808 |   |                   |   | 1,242
|                                                                 |  |                    |       |   |                   |   |      
|Net interest income                                              |  |                    | 2,482 |   |                   |   | 2,505
|Provision for loan losses                                        |  |                    | 0     |   |                   |   | 5    
|                                                                 |  |                    |       |   |                   |   |      
|Net interest income after provision for loan losses              |  |                    | 2,482 |   |                   |   | 2,500
|                                                                 |  |                    |       |   |                   |   |      
|Noninterest Income                                               |  |                    |       |   |                   |   |      
|Service charges on deposit accounts                              |  |                    | 257   |   |                   |   | 260  
|Gains on sale of loans                                           |  |                    | 31    |   |                   |   | 34   
|Securities (losses), net                                         |  |                    | (1    | ) |                   |   | 0    
|Other fee income                                                 |  |                    | 48    |   |                   |   | 64   
|All other non interest income                                    |  |                    | 130   |   |                   |   | 75   
|                                                                 |  |                    |       |   |                   |   |      
|Total non interest income                                        |  |                    | 465   |   |                   |   | 433  
|                                                                 |  |                    |       |   |                   |   |      
|Non interest Expense                                             |  |                    |       |   |                   |   |      
|Salaries and employee benefits                                   |  |                    | 1,129 |   |                   |   | 1,060
|Premises and fixed assets                                        |  |                    | 315   |   |                   |   | 255  
|Intangible premium amortization                                  |  |                    | 31    |   |                   |   | 31   
|Other expenses                                                   |  |                    | 532   |   |                   |   | 541  
|                                                                 |  |                    |       |   |                   |   |      
|Total noninterest expense                                        |  |                    | 2,007 |   |                   |   | 1,887
|                                                                 |  |                    |       |   |                   |   |      
|Income before income taxes                                       |  |                    | 940   |   |                   |   | 1,046
|Income taxes                                                     |  |                    | 234   |   |                   |   | 240  
|                                                                 |  |                    |       |   |                   |   |      
|Net income                                                       |  | $                  | 706   |   |                   | $ | 806  
|                                                                 |  |                    |       |   |                   |   |      
|Earnings per share, basic                                        |  | $                  | 0.59  |   |                   | $ | 0.67 
|Earnings per share, diluted                                      |  | $                  | 0.58  |   |                   | $ | 0.67 

See accompanying notes to consolidated financial statements.



Page: 3



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Statements of Income



|                                                                 |  |                   |        |   |                   |   |       
|---------------------------------------------------------------- |  | ----------------- | ------ | - | ----------------- | - | ------
|                                                                 |  | Nine Months Ended
|                                                                 |  | September 30,2006 |        |   | September 30,2005
|(In Thousands except per share data)                             |  | (Unaudited)      
|Interest Income                                                  |  |                   |        |   |                   |   |       
|Interest and fees on loans                                       |  | $                 | 10,715 |   |                   | $ | 8,817 
|Interest on federal funds sold                                   |  |                   | 41     |   |                   |   | 37    
|Interest on U.S. Treasury securities and U.S. Agency Obligations |  |                   | 298    |   |                   |   | 310   
|Interest on obligations of state and political subdivisions      |  |                   | 1,025  |   |                   |   | 1,009 
|Interest on other securities                                     |  |                   | 358    |   |                   |   | 394   
|Other interest income                                            |  |                   | 7      |   |                   |   | 8     
|                                                                 |  |                   |        |   |                   |   |       
|Total interest income                                            |  |                   | 12,444 |   |                   |   | 10,575
|                                                                 |  |                   |        |   |                   |   |       
|Interest Expense                                                 |  |                   |        |   |                   |   |       
|Interest on savings and interest bearing deposits                |  |                   | 336    |   |                   |   | 339   
|Interest on certificates of deposit                              |  |                   | 3,928  |   |                   |   | 2,477 
|Interest on federal funds purchased                              |  |                   | 91     |   |                   |   | 62    
|Interest on long  term debt                                     |  |                   | 340    |   |                   |   | 71    
|Interest on trust preferred capital notes                        |  |                   | 244    |   |                   |   | 244   
|                                                                 |  |                   |        |   |                   |   |       
|Total interest expense                                           |  |                   | 4,939  |   |                   |   | 3,193 
|                                                                 |  |                   |        |   |                   |   |       
|Net interest income                                              |  |                   | 7,505  |   |                   |   | 7,382 
|Provision for loan losses                                        |  |                   | 125    |   |                   |   | 160   
|                                                                 |  |                   |        |   |                   |   |       
|Net interest income after provision for loan losses              |  |                   | 7,380  |   |                   |   | 7,222 
|                                                                 |  |                   |        |   |                   |   |       
|Noninterest Income                                               |  |                   |        |   |                   |   |       
|Service charges on deposit accounts                              |  |                   | 779    |   |                   |   | 728   
|Securities gains(losses)-net                                     |  |                   | (19    | ) |                   |   | 8     
|Gains on sale of loans                                           |  |                   | 80     |   |                   |   | 65    
|Other fee income                                                 |  |                   | 149    |   |                   |   | 162   
|All other noninterest income                                     |  |                   | 373    |   |                   |   | 264   
|                                                                 |  |                   |        |   |                   |   |       
|Total noninterest income                                         |  |                   | 1,362  |   |                   |   | 1,227 
|                                                                 |  |                   |        |   |                   |   |       
|Noninterest Expense                                              |  |                   |        |   |                   |   |       
|Salaries and employee benefits                                   |  |                   | 3,300  |   |                   |   | 3,129 
|Premises and fixed assets                                        |  |                   | 800    |   |                   |   | 723   
|Intangible premium amortization                                  |  |                   | 94     |   |                   |   | 94    
|Other expenses                                                   |  |                   | 1,666  |   |                   |   | 1,555 
|                                                                 |  |                   |        |   |                   |   |       
|Total noninterest expense                                        |  |                   | 5,860  |   |                   |   | 5,501 
|                                                                 |  |                   |        |   |                   |   |       
|Income before income taxes                                       |  |                   | 2,882  |   |                   |   | 2,948 
|Income taxes                                                     |  |                   | 672    |   |                   |   | 683   
|                                                                 |  |                   |        |   |                   |   |       
|Net income                                                       |  | $                 | 2,210  |   |                   | $ | 2,265 
|                                                                 |  |                   |        |   |                   |   |       
|Earnings per share, basic                                        |  | $                 | 1.84   |   |                   | $ | 1.90  
|Earnings per share, diluted                                      |  | $                 | 1.83   |   |                   | $ | 1.88  

See accompanying notes to consolidated financial statements.



Page: 4



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BOE FINANCIAL SERVICES OF VIRGINIA, Inc.

Consolidated Statements of Cash Flows



|                                                                                  |  |                                |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Nine Months EndedSeptember 30, |        
|                                                                                  |  | 2006                           |         |   | 2005 |  
|(in Thousands)                                                                    |  | (Unaudited)                    |        
|Cash Flows from Operating Activities                                              |  |                                |         |   |      |   |         |  
|Net income                                                                        |  | $                              | 2,210   |   |      | $ | 2,265   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |         |   |      |   |         |  
|Depreciation and amortization                                                     |  |                                | 449     |   |      |   | 380     |  
|Origination of loans held for sale                                                |  |                                | (5,351  | ) |      |   | (3,354  | )
|Proceeds from sale of loans held for sale                                         |  |                                | 5,335   |   |      |   | 3,562   |  
|Provision for loan losses                                                         |  |                                | 125     |   |      |   | 160     |  
|Net amortization on securities                                                    |  |                                | 141     |   |      |   | 149     |  
|Net (gain)/loss on sale of securities                                             |  |                                | 19      |   |      |   | (8      | )
|(Gain) on sale of loans                                                           |  |                                | (80     | ) |      |   | (65     | )
|Net loss on disposal of equipment                                                 |  |                                | 10      |   |      |   |        |  
|(Increase) decrease in accrued interest receivable and other assets               |  |                                | (171    | ) |      |   | 208     |  
|Increase in accrued expenses and other liabilities                                |  |                                | 23      |   |      |   | 12      |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                                | 2,710   |   |      |   | 3,309   |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Cash Flows from Investing Activities                                              |  |                                |         |   |      |   |         |  
|Proceeds from sale of securities available-for-sale                               |  |                                | 3,089   |   |      |   | 1,970   |  
|Proceeds from maturities and calls of securities available-for-sale               |  |                                | 2,844   |   |      |   | 5,120   |  
|Purchase of securities available for sale                                         |  |                                | (7,695  | ) |      |   | (7,715  | )
|Purchase of restricted securities                                                 |  |                                | (365    | ) |      |   | (355    | )
|Net (increase) in loans to customers                                              |  |                                | (7,272  | ) |      |   | (20,774 | )
|Decrease (increase) in federal funds sold                                         |  |                                | (6,016  | ) |      |   | 5,064   |  
|Purchase of Bank Owned Life Insurance                                             |  |                                |        |   |      |   | (5,500  | )
|Capital expenditures                                                              |  |                                | (3,239  | ) |      |   | (175    | )
|                                                                                  |  |                                |         |   |      |   |         |  
|Net cash (used in)investing activities                                            |  |                                | (18,654 | ) |      |   | (22,365 | )
|                                                                                  |  |                                |         |   |      |   |         |  
|Cash Flows from Financing Activities Net increase in deposits                     |  |                                | 8,959   |   |      |   | 10,743  |  
|Issuance of Common Stock                                                          |  |                                | 151     |   |      |   | 118     |  
|Increase(decrease) in federal funds purchased.                                    |  |                                | (1,810  | ) |      |   | 5,083   |  
|Increase in FHLB Advances                                                         |  |                                | 7,000   |   |      |   |        |  
|Increase in long  term debt                                                      |  |                                |        |   |      |   | 5,000   |  
|Dividends paid                                                                    |  |                                | (456    | ) |      |   | (417    | )
|                                                                                  |  |                                |         |   |      |   |         |  
|Net cash provided by financing activities                                         |  |                                | 13,844  |   |      |   | 20,527  |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Net increase(decrease) in cash and cash equivalents                               |  |                                | (2,100  | ) |      |   | 1,471   |  
|Cash and Cash Equivalents                                                         |  |                                |         |   |      |   |         |  
|Beginning of period                                                               |  |                                | 7,365   |   |      |   | 4,354   |  
|                                                                                  |  |                                |         |   |      |   |         |  
|End of period                                                                     |  | $                              | 5,265   |   |      | $ | 5,825   |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Supplemental disclosure of cash flow information Cash paid during the year        |  |                                |         |   |      |   |         |  
|Interest                                                                          |  | $                              | 4,582   |   |      | $ | 2,847   |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Income Taxes                                                                      |  | $                              | 685     |   |      | $ | 465     |  
|                                                                                  |  |                                |         |   |      |   |         |  

See accompanying notes to consolidated financial statements.



Page: 5



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BOE Financial Services of Virginia, Inc.

Consolidated Statements of Changes in Stockholders Equity

For the Nine Month Periods Ended September 30, 2006 and 2005

(in thousands)

(Unaudited)



|                                                                        |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|----------------------------------------------------------------------- |  | ----------- | ----- | ------------------------ | - | ---------------- |  | - | ----------------------------------------- | - |  | ------------------- | ---- | - | ----- | - | ----- | - |  | - | ------ | -
|                                                                        |  | CommonStock |       | AdditionalPaid-InCapital |   | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome(Loss) |   |  | ComprehensiveIncome |      |   | Total |  
|Balance, December 31, 2004                                              |  | $           | 5,945 |                          | $ | 5,111            |  | $ | 12,831                                    |   |  | $                   | 794  |   |       |   |       |   |  | $ | 24,681 |  
|Comprehensive Income:                                                   |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Net income                                                              |  |             |       |                          |   |                  |  |   | 2,265                                     |   |  |                     |      |   |       | $ | 2,265 |   |  |   | 2,265  |  
|Other comprehensive loss, net of tax:                                   |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Unrealized loss on securities available for sale, net of deferred taxes |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   | (493  | ) |  |   |        |  
|Add: Reclassification adjustment, net of tax                            |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   | (5    | ) |  |   |        |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Other comprehensive loss, net of tax:                                   |  |             |       |                          |   |                  |  |   |                                           |   |  |                     | (498 | ) |       |   | (498  | ) |  |   | (498   | )
|                                                                        |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Total comprehensive income                                              |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       | $ | 1,767 |   |  |   |        |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Cash dividends, $0.35 per share                                         |  |             |       |                          |   |                  |  |   | (417                                      | ) |  |                     |      |   |       |   |       |   |  |   | (417   | )
|Issuance of common stock                                                |  |             | 34    |                          |   | 84               |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   | 118    |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Balance, September 30, 2005                                             |  | $           | 5,979 |                          | $ | 5,195            |  | $ | 14,679                                    |   |  | $                   | 296  |   |       |   |       |   |  | $ | 26,149 |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Balance, December 31, 2005                                              |  | $           | 5,990 |                          | $ | 5,264            |  | $ | 15,060                                    |   |  | $                   | (80  | ) |       |   |       |   |  | $ | 26,234 |  
|Comprehensive Income:                                                   |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Net income                                                              |  |             |       |                          |   |                  |  |   | 2,210                                     |   |  |                     |      |   |       | $ | 2,210 |   |  |   | 2,210  |  
|Other comprehensive loss, net of tax:                                   |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Unrealized loss on securities available for sale, net of deferred taxes |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   | (50   | ) |  |   |        |  
|Add: Reclassification adjustment, net of tax                            |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   | 12    |   |  |   |        |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Other comprehensive loss, net of tax:                                   |  |             |       |                          |   |                  |  |   |                                           |   |  |                     | (38  | ) |       |   | (38   | ) |  |   | (38    | )
|                                                                        |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Total comprehensive income                                              |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       | $ | 2,172 |   |  |   |        |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Cash dividends, $0.38 per share                                         |  |             |       |                          |   |                  |  |   | (456                                      | ) |  |                     |      |   |       |   |       |   |  |   | (456   | )
|Issuance of common stock                                                |  |             | 29    |                          |   | 122              |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   | 151    |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  
|Balance, September 30, 2006                                             |  | $           | 6,019 |                          | $ | 5,386            |  | $ | 16,814                                    |   |  | $                   | (118 | ) |       |   |       |   |  | $ | 28,101 |  
|                                                                        |  |             |       |                          |   |                  |  |   |                                           |   |  |                     |      |   |       |   |       |   |  |   |        |  

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 periods ended September 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 on Form 10-K.

2. At September 30, 2006, the Company had stock-based employee compensation plans more fully disclosed in Note 9 of the
financial statements included in Form 10-K for the year ended December 31, 2005. The Company previously 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 is 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.



|                                                                                                                                  |  |                                      |      |   |                                    |   |       |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ---- | - | ---------------------------------- | - | ----- | -
|(in thousands)                                                                                                                    |  | Three months endedSeptember 30, 2005 |      |   | Nine months endedSeptember 30,2005 |  
|Net income, as reported                                                                                                           |  | $                                    | 806  |   |                                    | $ | 2,265 |  
|Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of tax
effect |  |                                      | (18  | ) |                                    |   | (53   | )
|                                                                                                                                  |  |                                      |      |   |                                    |   |       |  
|Pro forma net income                                                                                                              |  | $                                    | 788  |   |                                    | $ | 2,212 |  
|                                                                                                                                  |  |                                      |      |   |                                    |   |       |  
|Earnings per share:                                                                                                               |  |                                      |      |   |                                    |   |       |  
|Basic-as reported                                                                                                                 |  | $                                    | 0.67 |   |                                    | $ | 1.90  |  
|Basic-pro forma                                                                                                                   |  | $                                    | 0.66 |   |                                    | $ | 1.85  |  
|Diluted-as reported                                                                                                               |  | $                                    | 0.67 |   |                                    | $ | 1.88  |  
|Diluted-pro forma                                                                                                                 |  | $                                    | 0.65 |   |                                    | $ | 1.84  |  

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 nine months ended September 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 nine months ended September 30, 2006 is summarized below:



|                           |  |        |   |  |                                |       |                                                      |      |                                                    |   |        
|-------------------------- |  | ------ | - |  | ------------------------------ | ----- | ---------------------------------------------------- | ---- | -------------------------------------------------- | - | -------
|                           |  | Shares |   |  | Weighted AverageExercise Price |       | Weighted AverageRemaining ContractualLife (in years) |      | Intrinsic Value ofUnexercised In-The-Money Options
|Outstanding, January 1     |  | 37,589 |   |  | $                              | 23.87 |                                                      |      |                                                    |   |        
|Exercised                  |  | (4,281 | ) |  |                                | 23.80 |                                                      |      |                                                    |   |        
|                           |  |        |   |  |                                |       |                                                      |      |                                                    |   |        
|Outstanding, September 30, |  | 33,308 |   |  |                                | 23.88 |                                                      | 7.00 |                                                    | $ | 237,000
|                           |  |        |   |  |                                |       |                                                      |      |                                                    |   |        
|Exercisable, September 30, |  | 33,308 |   |  |                                | 23.88 |                                                      | 7.00 |                                                    | $ | 237,000
|                           |  |        |   |  |                                |       |                                                      |      |                                                    |   |        

The intrinsic value of options exercised during the nine months ended
September 30, 2006 was approximately $40,500.

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.



|                                 |  |                    |  |                    |      |        |           |           |   |     
|-------------------------------- |  | ------------------ |  | ------------------ | ---- | ------ | --------- | --------- | - | ----
|                                 |  | Nine months ended 
|                                 |  | September 30, 2006 |  | September 30, 2005
|                                 |  | Shares             |  | Per Share          |      | Shares |           | Per Share
|Basic earnings per share         |  | 1,200,259          |  | $                  | 1.84 |        | 1,192,606 |           | $ | 1.90
|Effect of dilutive stock options |  | 10,188             |  |                    |      |        | 10,746    |           |   |     
|                                 |  |                    |  |                    |      |        |           |           |   |     
|Diluted earnings per share       |  | 1,210,447          |  | $                  | 1.83 |        | 1,203,352 |           | $ | 1.88
|                                 |  |                    |  |                    |      |        |           |           |   |     
|                                 | 
|                                 |  | Three months ended
|                                 |  | September 30, 2006 |  | September 30, 2005
|                                 |  | Shares             |  | Per Share          |      | Shares |           | Per Share
|Basic earnings per share         |  | 1,202,243          |  | $                  | 0.59 |        | 1,195,268 |           | $ | 0.67
|Effect of dilutive stock options |  | 8,065              |  |                    |      |        | 9,292     |           |   |     
|                                 |  |                    |  |                    |      |        |           |           |   |     
|Diluted earnings per share       |  | 1,210,308          |  | $                  | 0.58 |        | 1,204,560 |           | $ | 0.67
|                                 |  |                    |  |                    |      |        |           |           |   |     

4. The unrealized losses in the investment portfolio as of September 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 Company has the ability and intent to hold these securities to maturity. Market prices are affected by conditions beyond the control of the Company. Investment decisions are made by the management group of the Company and reflect the
overall liquidity and strategic asset/liability objectives of the Company. Management analyzes the securities portfolio frequently and manages the portfolio to provide an overall positive impact to the Companys income statement and balance
sheet.



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5. Defined Benefit Pension Plan

Components of Net Periodic Benefit Cost



|                                             |  |                                |      |   |                                 |   |      |      |  |   |      |   |  |   |     |  
|-------------------------------------------- |  | ------------------------------ | ---- | - | ------------------------------- | - | ---- | ---- |  | - | ---- | - |  | - | --- | -
|                                             |  | Pension Benefits               |     
|                                             |  | Nine Months EndedSeptember 30, |      |   | Three Months EndedSeptember 30, |  
|(In Thousands)                               |  | 2006                           |      |   | 2005                            |   |      | 2006 |  |   | 2005 |  
|Service cost                                 |  | $                              | 273  |   |                                 | $ | 231  |      |  | $ | 91   |   |  | $ | 77  |  
|Interest cost                                |  |                                | 183  |   |                                 |   | 159  |      |  |   | 61   |   |  |   | 53  |  
|Expected return on plan assets               |  |                                | (195 | ) |                                 |   | (162 | )    |  |   | (65  | ) |  |   | (54 | )
|Amortization of prior service cost           |  |                                | 3    |   |                                 |   | 3    |      |  |   | 1    |   |  |   | 1   |  
|Amortization of net obligation at transition |  |                                | (3   | ) |                                 |   | (3   | )    |  |   | (1   | ) |  |   | (1  | )
|Amortization of net (gain) loss              |  |                                | 42   |   |                                 |   | 42   |      |  |   | 14   |   |  |   | 14  |  
|                                             |  |                                |      |   |                                 |   |      |      |  |   |      |   |  |   |     |  
|Net periodic benefit cost                    |  | $                              | 303  |   |                                 | $ | 270  |      |  | $ | 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 September 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 uncollectible 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)September 30,2006 |         |   | December 31,2005 |   |         | (unaudited)September 30,2005 | 
|Loans:                         |  |                              |         |   |                  |   |         |                              |  |   |         |  
|Commercial                     |  | $                            | 24,672  |   |                  | $ | 22,873  |                              |  | $ | 23,486  |  
|Real Estate                    |  |                              | 126,578 |   |                  |   | 121,296 |                              |  |   | 120,730 |  
|Real Estateconstruction       |  |                              | 32,328  |   |                  |   | 32,084  |                              |  |   | 29,683  |  
|Installment & other loans      |  |                              | 6,142   |   |                  |   | 6,203   |                              |  |   | 6,417   |  
|                               |  |                              |         |   |                  |   |         |                              |  |   |         |  
|Total loans                    |  |                              | 189,720 |   |                  |   | 182,456 |                              |  |   | 180,316 |  
|Less allowance for loan losses |  |                              | (2,366  | ) |                  |   | (2,249  | )                            |  |   | (2,231  | )
|                               |  |                              |         |   |                  |   |         |                              |  |   |         |  
|Net loans                      |  | $                            | 187,354 |   |                  | $ | 180,207 |                              |  | $ | 178,085 |  
|                               |  |                              |         |   |                  |   |         |                              |  |   |         |  



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



|                                 |  |                              |       |   |              |   |       |                              |  |   |       |  
|-------------------------------- |  | ---------------------------- | ----- | - | ------------ | - | ----- | ---------------------------- |  | - | ----- | -
|(Dollars in thousands)           |  | (unaudited)September 30,2006 |       |   | December2005 |   |       | (unaudited)September 31,2005 | 
|Balance January 1                |  | $                            | 2,249 |   |              | $ | 2,088 |                              |  | $ | 2,088 |  
|Provision charged against income |  |                              | 125   |   |              |   | 240   |                              |  |   | 160   |  
|Recoveries of loans charged off  |  |                              | 81    |   |              |   | 80    |                              |  |   | 97    |  
|Loans charged off                |  |                              | (89   | ) |              |   | (159  | )                            |  |   | (114  | )
|                                 |  |                              |       |   |              |   |       |                              |  |   |       |  
|Balance at end of period         |  | $                            | 2,366 |   |              | $ | 2,249 |                              |  | $ | 2,231 |  
|                                 |  |                              |       |   |              |   |       |                              |  |   |       |  



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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 the Companys consolidated financial
statements and accompanying notes included elsewhere in this report.

Overview

At September 30, 2006, the Company had total assets of $278.0 million, an increase of $16.0 million, or 6.1%, from $261.9 million at
December 31, 2005. Total assets at September 30, 2005 were $259.4 million. The September 30, 2006 total assets figure represents an increase of 7.1%, or $18.5 million, over one year ago. Total loans amounted to $189.7 million on
September 30, 2006, an increase of $7.3 million, or 4.0%, over December 31, 2005 total loans of $182.5 million. The September 30, 2006 figure represents an increase of $9.4 million, or 5.2%, over total loans of $180.3 million on
September 30, 2005. The Companys securities portfolio increased $1.5 million or 2.8%, from $55.4 million at December 31, 2005 to $56.9 million at September 30, 2006. Total securities were $57.7 million on September 30,
2005. The Company had Federal Funds sold of $6.0 million on September 30, 2006 and Federal Funds purchased of $1.8 million on December 31, 2005 and $5.1 million on September 30, 2005.



Page: 11



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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 September 30, 2006 securities AFS portfolio was $53.9 million compared to $52.4 million at December 31, 2005 and $54.7 million at September 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. On September 30, 2006, $181,000 represented the
Companys net unrealized loss on AFS securities compared to $121,000 at December 31, 2005 and a net unrealized gain of $447,000 at September 30, 2005.

Total deposits at September 30, 2006 were $232.1 million. This $9.0 million increase is 4.0% greater than total deposits of $223.1 million at December 31, 2005 and $14.4 million, or 6.6% greater than total
deposits of $217.7 million at September 30, 2005.

Stockholders equity at September 30, 2006 was $28.1 million and
represented 10.1% of total assets. Stockholders equity was $26.2 million, or 10.0% of total assets at December 31, 2005 and $26.1 million, or 10.1% of total assets at September 30, 2005.

Additionally, on June 12, 2006 the Company, through the Bank, opened a new corporate headquarters building and main office branch banking facility
in the Town of Tappahannock, Virginia. The former main office was designated a branch of the Bank and the Tappahannock Towne Center Office, located adjacent to the new headquarters, was closed.

Results of Operations

Net Income

Net income for the third quarter of 2006 was $706,000, a 12.4%, or $100,000, decrease from 2005
third quarter income of $806,000. Fully diluted earnings per common share were $0.58 in the third quarter of 2006 compared to $0.67 in the third quarter of 2005. Tangible book value increased $1.62 to $22.92 per common share on September 30,
2006 compared to $21.30 on September 30, 2005.

This decrease in quarterly earnings was primarily attributable to a $120,000, or 6.4%,
increase in noninterest expenses and a $23,000 decrease in net interest income. Noninterest expenses were $2.007 million in the third quarter of 2006 compared to $1.887 million in the same period in 2005. Net interest income decreased 0.9%, or
$23,000, from $2.505 million in the third quarter of 2006, to $2.482 million in the third quarter of 2006. Offsetting these decreases to net income was an increase of $32,000, or 7.4%, in total noninterest income, a decrease of $6,000 in income tax
expenses and a decrease of $5,000 in provision for loan losses.

For the nine month period ended September 30, 2006, the Company
reported net income of $2,210,000 compared to $2,265,000 for the same period in 2005. This is a decrease of $55,000, or 2.4%, primarily due to an increase of $359,000, or 6.5%, in total noninterest expenses. Offsetting this decrease to net income
were increases of $135,000 in total noninterest income, an increase of $123,000 to net interest income and decreases of $35,000 to provision for loan losses and $11,000 to income tax expenses for the third quarter of 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 September 30, 2006, the Companys interest-earning assets exceeded its interest-bearing liabilities by approximately $33.6 million, compared with a $33.5 million excess one year
ago. Net interest margins on a fully tax equivalent basis were 4.24% through September 30, 2006 compared to 4.43% through September 30, 2005. The decrease in net interest margin was the result of an increase 80 basis points in yield on
total earning assets coupled with an increase of 99 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 6.80% for the first nine months of 2006
compared to 6.00% for the first nine months of 2005. Total sources of funds were 2.56% for the first nine months of 2006 compared to 1.57% for the same period in 2005.

The Companys loan-to-deposit ratio was 84.1%, on average, through the first nine months of 2006 compared to 79.3% for the same period in 2005. On September 30, 2006, the Companys loan-to-deposit ratio
was 81.7% compared to 81.8% on December 31, 2005.

Provision for Credit Losses

The Companys provision for credit losses decreased $5,000 to $0 for the third quarter of 2006 compared to $5,000 in the third quarter of 2005. Net
charge-offs of $16,000 in the third quarter of 2006 compared to net charge-offs on loans of $8,000 in the third quarter of 2005. For the nine month period ended September 30, 2006 provision for credit losses was $125,000, a decrease of 21.9%,
or $35,000, from provision for credit losses of $160,000 through nine months in 2005. Through nine months in 2006 net charge-offs were $8,000, represented by charge-offs of $89,000 and recoveries of $81,000.

Noninterest Income

Noninterest income, including net gains and losses on securities, was $465,000 in the third quarter of 2006 compared to $433,000 in the same period of 2005. This represents an increase of 7.4%, or $32,000. All other noninterest income
increased $55,000, or 73.3%, and was $130,000 in the third quarter of 2006 compared to $75,000 for the same period in 2005. Other fee income decreased $16,000, or 25.0%, from $64,000 in the third quarter of 2005 to $48,000 for the same period in
2005. Service charges on deposit accounts decreased $3,000 from $260,000 in the third quarter of 2005 to $257,000 in the third quarter of 2006 and gains on sale of loans decreased $3,000 from $34,000 to $31,000 for the comparison period. Securities
gains/(losses) were a $1,000 loss in the third quarter of 2006 and $0 for the same period in 2005.

For the nine month period ended
September 30, 2006 noninterest income of $1,362,000 increased $135,000, or 11.0%, from noninterest income of $1,227,000 for the first nine months of 2005. Service charges on deposit accounts were $779,000 for the period compared to $728,000 in
2005. This was an increase 7.0%, or $51,000. All other noninterest income increased $109,000, or 41.3% and was $373,000 for the first nine months of 2006 compared to $264,000 for the same period in 2005. Gains on sales of loans was $80,000 for the
first nine months of 2006 compared to $65,000 for the same period in 2005, representing an increase of 23.1%, or $15,000. Other fee income decreased 8.0%, or $13,000, and was $149,000 for the first nine months of 2006 compared to $162,000 for the
same period in 2005. Securities gains/(losses) resulted in a loss of $19,000 in the first nine months of 2006 compared to a gain of $8,000 for the first nine months of 2005.



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Noninterest Expenses

Total noninterest expenses increased $120,000, or 6.4%, from the third quarter of 2005 to the third quarter of 2006. Noninterest expenses were $2.007
million for the third quarter of 2006 compared to $1.887 million for the same period in 2005. This increase was comprised of a $69,000, or 6.5%, increase in salaries and employee benefits and a $60,000, or 23.5%, increase in premises and fixed
assets expenses. The increase in premises and fixed assets expenses was primarily the result of the opening of the new headquarters in June 2006. Salaries and employee benefits were $1.129 million for the third quarter of 2006 compared to $1.060
million for the same period in 2005. Premises and fixed asset expenses were $315,000 for the three months ended September 30, 2006 compared to $255,000 for the same period in 2005.

For the nine month period ended September 30, 2006, salaries and employee benefits increased $171,000, or 5.5%, and were $3.300 million for then
nine month period ended September 30, 2006 compared to $3.129 million for the nine month period ended September 30, 2005. Other expenses increased $111,000, or 7.1%, and were $1.666 million for the third quarter of 2006 compared to $1.555
million for the third quarter of 2005. Premises and fixed asset expenses increased 10.7%, or $77,000, from $723,000 in the third quarter of 2005 to $800,000 for the third quarter of 2006.

Income Taxes

Income tax
expense was $234,000 in the third quarter of 2006. This represents a decrease of $6,000, or 2.5%, compared to $240,000 of income tax expense in the third quarter of 2005. Income tax expense for the nine month period ended September 30, 2006 was
$672,000 compared to $683,000 for the same period in 2005. This represents a decrease of $11,000, or 1.6%.

Asset Quality

The Companys allowance for credit losses totaled $2,366,000 on September 30, 2006 or 1.25% of total loans. On December 31,
2005, the allowance for credit losses totaled $2,249,000 and was 1.23% of total loans. On September 30, 2005, the allowance for credit losses was $2,231,000 and was 1.24% of total loans.

On September 30, 2006, the Company had nonaccruing assets of $34,000 compared to $222,000 on September 30, 2005. Loans past due 90 days or more
and still accruing interest totaled $78,000 on September 30, 2006 compared to $520,000 on September 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 14.45% on September 30, 2006
compared to 13.61% on September 30, 2005. Its ratio of Tier 1 Capital to risk-weighted assets was 13.49% on September 30, 2006 and 12.64% on September 30, 2005. The Companys leverage ratio (Tier I capital to average adjusted
total assets) was 10.21% on September 30, 2006 and 9.94% on September 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 8.49875% in the third quarter of 2006.

RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the Securities and Exchange Commission (SEC) released Staff Accounting Bulletin No. 108 (SAB 108). SAB 108 expresses the SEC staffs views regarding the process of quantifying financial statement misstatements.
These interpretations were issued to address diversity in practice and the potential under current practice for the build up of improper amounts on the balance sheet. SAB 108 expresses the SEC staffs view that a registrants materiality
evaluation of an identified unadjusted error should quantify the effects of the error on each financial statement and related financial statement disclosures and that prior year misstatements should be considered in quantifying misstatements in
current year financial statements. SAB 108 also states that correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. Such correction may be made the next time the registrant files the
prior year financial statements. Registrants electing not to restate prior periods should reflect the effects of initially applying the guidance in SAB 108 in their annual financial statements covering the first fiscal year ending after
November 15, 2006. The cumulative effect of the initial application should be reported in the carrying amounts of assets and liabilities as of the beginning of that fiscal year and the offsetting adjustment should be made to the opening balance
of retained earnings for that year. Registrants should disclose the nature and amount of each individual error being corrected in the cumulative adjustment. The disclosure should also include when and how each error arose and the fact that the
errors had previously been considered immaterial. The SEC staff encourages early application of the guidance in SAB 108 for interim periods of the first fiscal year ending after November 15, 2006.

In February 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 155,
Accounting for Certain Hybrid Financial Instruments  an amendment of FASB Statements No. 133 and 140 (SFAS 155). SFAS 155 permits fair value measurement of any hybrid financial instrument that contains an embedded derivative
that otherwise would require bifurcation. The Statement also clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133. It establishes a requirement to evaluate interests in securitized
financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation. SFAS 155 also clarifies that concentrations of credit risk in the form of
subordination are not embedded derivatives. Finally, SFAS 155 amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than
another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. The Company does not expect the
implementation of SFAS 155 to have a material impact on its financial statements.



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In March 2006, the FASB issued Statement of Financial Accounting Standards No. 156, Accounting
for Servicing of Financial Assets  an amendment of FASB Statement No. 140 (SFAS 156). SFAS 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial
asset by entering into certain servicing contracts. The Statement also requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable. SFAS 156 permits an entity to choose between
the amortization and fair value methods for subsequent measurements. At initial adoption, the Statement permits a one-time reclassification of available for sale securities to trading securities by entities with recognized servicing rights. SFAS 156
also requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing
liabilities. This Statement is effective as of the beginning of an entitys first fiscal year that begins after September 15, 2006.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements but may change current practice for some entities. This Statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods within those years. The Company does not expect the implementation of SFAS 157 to have a material impact on its financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106, and 132(R) (SFAS 158). SFAS 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an
asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. The funded status of a benefit plan will be measured as the difference
between plan assets at fair value and the benefit obligation. For a pension plan, the benefit obligation is the projected benefit obligation. For any other postretirement plan, the benefit obligation is the accumulated postretirement benefit
obligation. SFAS 158 also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position. The Statement also requires additional disclosure in the notes to financial statements about
certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. The Company is required to initially recognize the
funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. The Company is required to initially recognize the funded status of a defined
benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. FOR ALL COMPANIES  The requirement to measure plan assets and benefit obligations as of the date of the
employers fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The Company is in the process of evaluating the impact SFAS 158 will have on the December 31, 2006 Financial
Statements.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes: An
Interpretation of FASB Statement No. 109(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance with SFAS 109. The Interpretation prescribes a
recognition threshold and



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measurement principles for the financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return. FIN 48 is
effective for fiscal years beginning after December 15, 2006.

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.

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 measures 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.

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.



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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 September 30, 2006:



|                          |  |                               |   |  |                  |      |  
|------------------------- |  | ----------------------------- | - |  | ---------------- | ---- | -
|                          |  | Change in Net Interest Income |  
|Change in Yield Curve     |  | (Percent)                     |   |  | ($ in thousands) |     
|+200 basis points         |  | 2.32                          | % |  | $                | 266  |  
|Most likely rate scenario |  | 0.00                          | % |  | $                |     |  
|-200 basis points         |  | -3.12                         | % |  | $                | (356 | )

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 September 30, 2006:



|                          |  |                                    |   |  |                  |        |  
|------------------------- |  | ---------------------------------- | - |  | ---------------- | ------ | -
|                          |  | Change in Economic Value of Equity |  
|Change in Yield Curve     |  | (Percent)                          |   |  | ($ in thousands) |       
|+200 basis points         |  | -11.29                             | % |  | $                | (4,285 | )
|Most likely rate scenario |  | 0.00                               | % |  | $                |       |  
|-200 basis points         |  | 4.71                               | % |  | $                | 1,789  |  

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.



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PART II - OTHER INFORMATION

Item 1.
Legal Proceedings

None

Item 1A.
There have been no material changes in risk factors from those disclosed in the 2005 Form 10-K.

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

None

Item 5.
Other Information

None



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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)                            
|         |  |                                         
|11/09/06 |  | By:                                      |  | /s/ George M. Longest, Jr.                                
|(Date)   |  |                                          |  | (Signature)                                               
|         |  |                                          |  | George M. Longest, Jr.                                    
|         |  |                                          |  | President and Chief Executive Officer                     
|         |  |                                         
|11/09/06 |  | By:                                      |  | /s/ Bruce E. Thomas                                       
|(Date)   |  |                                          |  | (Signature)                                               
|         |  |                                          |  | Bruce E. Thomas                                           
|         |  |                                          |  | Secretary, Senior Vice President & Chief Financial Officer



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