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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



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



For the quarterly period ended March 31, 2005



| ̈ | 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



BOE FINANCIAL SERVICES OF VIRGINIA, INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|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)



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 an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ̈No x



State the number of shares
outstanding of each of the issuers classes of common equity as of April 25, 2005.



|                              |  |                              
|----------------------------- |  | -----------------------------
|Class                         |  | Outstanding at April 25, 2005
|Common Stock, $5.00 par value |  | 1,192,246                    



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##### Table of Contents

BOE Financial Services of Virginia, Inc.



FORM 10-Q



INDEX



|                                                                                                      |  |      
|----------------------------------------------------------------------------------------------------- |  | -----
|                                                                                                      |  | Page 
|                                                                                                      | 
|PART I - FINANCIAL INFORMATION                                                                        |  |      
|                                                                                                      | 
|Item 1. Financial Statements                                                                          |  | 1-5  
|                                                                                                      | 
|Consolidated Balance Sheets March 31, 2005 and December 31, 2004                                      |  | 1-2  
|                                                                                                      | 
|Consolidated Statements of Earnings Three months ended March 31, 2005 and 2004                        |  | 3    
|                                                                                                      | 
|Consolidated Statements of Cash Flows Three months ended March 31, 2005 and 2004                      |  | 4    
|                                                                                                      | 
|Consolidated Statements of Changes in Stockholders Equity Three months ended March 31, 2005 and 2004 |  | 5    
|                                                                                                      | 
|Notes to Consolidated Financial Statements                                                            |  | 6-7  
|                                                                                                      | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations         |  | 8-11 
|                                                                                                      | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                    |  | 12-13
|                                                                                                      | 
|Item 4. Controls and Procedures                                                                       |  | 13   
|                                                                                                      | 
|PART II - OTHER INFORMATION                                                                           |  |      
|                                                                                                      | 
|Item 1. Legal Proceedings                                                                             |  | 14   
|                                                                                                      | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                   |  | 14   
|                                                                                                      | 
|Item 3. Defaults Upon Senior Securities                                                               |  | 14   
|                                                                                                      | 
|Item 4. Submission of Matters to a Vote of Security Holders                                           |  | 14   
|                                                                                                      | 
|Item 5. Other Information                                                                             |  | 14   
|                                                                                                      | 
|Item 6. Exhibits and Reports on Form 8-K                                                              |  | 15   
|                                                                                                      | 
|Signatures                                                                                            |  | 16   





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##### Table of Contents

PART I  FINANCIAL INFORMATION



Item 1.    FINANCIAL STATEMENTS



BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Balance Sheets

(in Thousands except share data)



|                                                                          |  |               |         |   |                  |   |         |  
|------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                          |  | March 31,2005 |         |   | December 31,2004 |  
|                                                                          |  | (Unaudited)   |         |   |                  |  
|ASSETS                                                                    |  |               |         |   |                  |   |         |  
|Cash and due from banks                                                   |  | $             | 5,543   |   |                  | $ | 4,354   |  
|Federal funds sold                                                        |  |               | 841     |   |                  |   | 5,064   |  
|Securities available for sale, at fair value                              |  |               | 53,856  |   |                  |   | 54,955  |  
|Securities held to maturity(fair value $2,978 in 2005 and $3,000 in 2004) |  |               | 3,000   |   |                  |   | 3,000   |  
|Equity Securities, restricted, at cost                                    |  |               | 843     |   |                  |   | 833     |  
|Loans held for resale                                                     |  |               | 131     |   |                  |   | 361     |  
|Loans                                                                     |  |               | 162,101 |   |                  |   | 159,559 |  
|Less: Allowance for loan losses                                           |  |               | (2,192  | ) |                  |   | (2,088  | )
|                                                                          |  |               |         |   |                  |   |         |  
|Net loans                                                                 |  |               | 159,909 |   |                  |   | 157,471 |  
|Bank premises and equipment, net                                          |  |               | 6,397   |   |                  |   | 6,448   |  
|Accrued interest receivable                                               |  |               | 1,226   |   |                  |   | 1,154   |  
|Intangible assets, net                                                    |  |               | 744     |   |                  |   | 776     |  
|Other assets                                                              |  |               | 2,899   |   |                  |   | 2,710   |  
|                                                                          |  |               |         |   |                  |   |         |  
|Total assets                                                              |  | $             | 235,389 |   |                  | $ | 237,126 |  
|                                                                          |  |               |         |   |                  |   |         |  



See
accompanying notes to consolidated financial statements.



Page: 1



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Balance Sheets



|                                            |  |            |  |            |  |               |         |                  |   |        
|------------------------------------------- |  | ---------- |  | ---------- |  | ------------- | ------- | ---------------- | - | -------
|                                            |  |            |  |            |  | March 31,2005 |         | December 31,2004
|                                            |  |            |  |            |  | (Unaudited)   |         |                 
|LIABILITIES AND STOCKHOLDERS EQUITY        |  |            |  |            |  |               |         |                  |   |        
|Deposits                                    |  |            |  |            |  |               |         |                  |   |        
|Noninterest bearing deposits                |  |            |  |            |  | $             | 25,772  |                  | $ | 25,605 
|Interest bearing deposits                   |  |            |  |            |  |               | 179,059 |                  |   | 181,368
|                                            |  |            |  |            |  |               |         |                  |   |        
|Total deposits                              |  |            |  |            |  |               | 204,831 |                  |   | 206,973
|Accrued interest payable                    |  |            |  |            |  |               | 314     |                  |   | 319    
|Other liabilities                           |  |            |  |            |  |               | 1,260   |                  |   | 1,029  
|Trust preferred capital notes               |  |            |  |            |  |               | 4,124   |                  |   | 4,124  
|                                            |  |            |  |            |  |               |         |                  |   |        
|Total liabilities                           |  |            |  |            |  |               | 210,529 |                  |   | 212,445
|                                            |  |            |  |            |  |               |         |                  |   |        
|Commitments and Contingent Liabilities      |  |            |  |            |  |               |         |                  |   |        
|Stockholders equity                        |  |            |  |            |  |               |         |                  |   |        
|Common stock, $5.00 par value               |  |            |  |            |  |               | 5,960   |                  |   | 5,945  
|                                            |  |            |  |           
|                                            |  | 3/31/05    |  | 12/31/04   |  |               |         |                 
|Shares authorized                           |  | 10,000,000 |  | 10,000,000 |  |               |         |                  |   |        
|Shares outstanding                          |  | 1,191,895  |  | 1,188,951  |  |               |         |                  |   |        
|Paid in capital                             |  |            |  |            |  |               | 5,134   |                  |   | 5,111  
|Accumulated other comprehensive Income, net |  |            |  |            |  |               | 214     |                  |   | 794    
|Retained earnings                           |  |            |  |            |  |               | 13,552  |                  |   | 12,831 
|                                            |  |            |  |            |  |               |         |                  |   |        
|Total stockholders equity                  |  |            |  |            |  |               | 24,860  |                  |   | 24,681 
|                                            |  |            |  |            |  |               |         |                  |   |        
|Total liabilities and stockholders equity  |  |            |  |            |  | $             | 235,389 |                  | $ | 237,126
|                                            |  |            |  |            |  |               |         |                  |   |        



See
accompanying notes to consolidated financial statements.



Page: 2



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Statements of Earnings

(In Thousands except per share data)



|                                                                 |  |                    |       |               |   |      
|---------------------------------------------------------------- |  | ------------------ | ----- | ------------- | - | -----
|                                                                 |  | Three Months Ended
|                                                                 |  | March 31,2005      |       | March 31,2004
|                                                                 |  | (Unaudited)       
|Interest Income                                                  |  |                    |       |               |   |      
|Interest and fees on loans                                       |  | $                  | 2,731 |               | $ | 2,618
|Interest on federal funds sold                                   |  |                    | 15    |               |   | 3    
|Interest on U.S. Treasury securities and U.S. Agency Obligations |  |                    | 103   |               |   | 117  
|Interest on obligations of state and political subdivisions      |  |                    | 321   |               |   | 327  
|Interest on other securities                                     |  |                    | 149   |               |   | 86   
|Other interest income                                            |  |                    | 2     |               |   | 1    
|                                                                 |  |                    |       |               |   |      
|Total interest income                                            |  |                    | 3,321 |               |   | 3,152
|                                                                 |  |                    |       |               |   |      
|Interest Expense                                                 |  |                    |       |               |   |      
|Interest on savings and interest bearing deposits                |  |                    | 116   |               |   | 104  
|Interest on certificates of deposit                              |  |                    | 746   |               |   | 735  
|Interest on federal funds purchased                              |  |                    | 0     |               |   | 4    
|Interest on trust preferred capital notes.                       |  |                    | 57    |               |   | 44   
|                                                                 |  |                    |       |               |   |      
|Total interest expense                                           |  |                    | 919   |               |   | 887  
|                                                                 |  |                    |       |               |   |      
|Net interest income                                              |  |                    | 2,402 |               |   | 2,265
|Provision for loan losses                                        |  |                    | 80    |               |   | 75   
|                                                                 |  |                    |       |               |   |      
|Net interest income after provision for loan losses              |  |                    | 2,322 |               |   | 2,190
|                                                                 |  |                    |       |               |   |      
|Noninterest Income                                               |  |                    |       |               |   |      
|Service charges on deposit accounts                              |  |                    | 221   |               |   | 245  
|Securities gains - net                                           |  |                    | 5     |               |   | 10   
|Gains on sale of loans                                           |  |                    | 16    |               |   | 16   
|Other fee income                                                 |  |                    | 62    |               |   | 57   
|All other noninterest income                                     |  |                    | 90    |               |   | 83   
|                                                                 |  |                    |       |               |   |      
|Total noninterest income                                         |  |                    | 394   |               |   | 411  
|                                                                 |  |                    |       |               |   |      
|Noninterest Expense                                              |  |                    |       |               |   |      
|Salaries and employee benefits                                   |  |                    | 1,023 |               |   | 965  
|Premises and fixed assets                                        |  |                    | 228   |               |   | 239  
|Other expenses                                                   |  |                    | 528   |               |   | 577  
|                                                                 |  |                    |       |               |   |      
|Total noninterest expense                                        |  |                    | 1,779 |               |   | 1,781
|                                                                 |  |                    |       |               |   |      
|Income before income taxes                                       |  |                    | 937   |               |   | 820  
|Income taxes                                                     |  |                    | 216   |               |   | 199  
|                                                                 |  |                    |       |               |   |      
|Net income                                                       |  | $                  | 721   |               | $ | 621  
|                                                                 |  |                    |       |               |   |      
|Earnings per share, basic                                        |  | $                  | 0.61  |               | $ | 0.52 
|Earnings per share, diluted                                      |  | $                  | 0.60  |               | $ | 0.52 



See
accompanying notes to consolidated financial statements.



Page: 3



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BOE FINANCIAL SERVICES OF VIRGINIA, Inc.

Consolidated Statements of Cash Flows

(in Thousands)



|                                                                                  |  |                             |        |   |      |   |        |  
|--------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                  |  | Three Months EndedMarch 31, |       
|                                                                                  |  | 2005                        |        |   | 2004 |  
|                                                                                  |  | (Unaudited)                 |        |   |      |  
|Cash Flows from Operating Activities                                              |  |                             |        |   |      |   |        |  
|Net income                                                                        |  | $                           | 721    |   |      | $ | 621    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |        |   |      |   |        |  
|Depreciation and amortization                                                     |  |                             | 126    |   |      |   | 126    |  
|Origination of loans held for sale                                                |  |                             | (243   | ) |      |   | (1,046 | )
|Proceeds from sale of loans held for sale                                         |  |                             | 489    |   |      |   | 870    |  
|Provision for loan losses                                                         |  |                             | 80     |   |      |   | 75     |  
|Net amortization on securities                                                    |  |                             | 47     |   |      |   | 51     |  
|Net (gain) on sale of securities                                                  |  |                             | (5     | ) |      |   | (10    | )
|(Gain) on sale of loans                                                           |  |                             | (16    | ) |      |   | (16    | )
|(Increase) decrease in accrued interest receivable and other assets               |  |                             | (272   | ) |      |   | 186    |  
|Increase in accrued expenses and other liabilities                                |  |                             | 539    |   |      |   | 42     |  
|                                                                                  |  |                             |        |   |      |   |        |  
|Net cash provided by operating activities                                         |  |                             | 1,466  |   |      |   | 899    |  
|                                                                                  |  |                             |        |   |      |   |        |  
|Cash Flows from Investing Activities                                              |  |                             |        |   |      |   |        |  
|Proceeds from sale of securities available-for-sale                               |  |                             | 0      |   |      |   | 2,011  |  
|Proceeds from maturities and calls of securities available-for-sale               |  |                             | 4,069  |   |      |   | 765    |  
|Purchase of securities available for sale                                         |  |                             | (3,894 | ) |      |   | (1,200 | )
|Proceeds from redemption of restricted securities                                 |  |                             | 0      |   |      |   | 10     |  
|Purchase of restricted securities                                                 |  |                             | (10    | ) |      |   | 0      |  
|Net (increase) decrease in loans to customers                                     |  |                             | (2,518 | ) |      |   | 2,169  |  
|(Increase) decrease in federal funds sold                                         |  |                             | 4,223  |   |      |   | (5,672 | )
|Capital expenditures                                                              |  |                             | (43    | ) |      |   | (49    | )
|                                                                                  |  |                             |        |   |      |   |        |  
|Net cash provided by (used in) investing activities                               |  |                             | 1,827  |   |      |   | (1,966 | )
|                                                                                  |  |                             |        |   |      |   |        |  
|Cash Flows from Financing Activities                                              |  |                             |        |   |      |   |        |  
|Net increase (decrease) in deposits                                               |  |                             | (2,142 | ) |      |   | 2,010  |  
|Issuance of Common Stock                                                          |  |                             | 38     |   |      |   | 19     |  
|                                                                                  |  |                             |        |   |      |   |        |  
|Net cash provided by used in financing activities                                 |  |                             | (2,104 | ) |      |   | 2,029  |  
|Net increase in cash and cash equivalents                                         |  |                             | 1,189  |   |      |   | 962    |  
|Cash and Cash Equivalents                                                         |  |                             |        |   |      |   |        |  
|Beginning of period                                                               |  |                             | 4,354  |   |      |   | 8,948  |  
|                                                                                  |  |                             |        |   |      |   |        |  
|End of period                                                                     |  | $                           | 5,543  |   |      | $ | 9,910  |  
|                                                                                  |  |                             |        |   |      |   |        |  
|Supplemental disclosure of cash flow information Cash paid during the year        |  |                             |        |   |      |   |        |  
|Interest                                                                          |  | $                           | 924    |   |      | $ | 903    |  
|                                                                                  |  |                             |        |   |      |   |        |  
|Income Taxes                                                                      |  | $                           | 0      |   |      | $ | 0      |  
|                                                                                  |  |                             |        |   |      |   |        |  



See
accompanying notes to consolidated financial statements.



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BOE Financial Services of Virginia, Inc.

Statement of Changes in Stockholders Equity

For the Three Month Periods Ended March 31, 2005 and 2004

(in thousands)

(Unaudited)



|                                                                        |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|----------------------------------------------------------------------- |  | ----------- | ----- | -------------- | - | ---------------- |  | ----------------------------------- | ------ |  | ------------------- | ----- | - | ----- | - | ---- | - |  | - | ------ | -
|                                                                        |  | CommonStock |       | Paid-InCapital |   | RetainedEarnings |  | AccumulatedOtherComprehensiveIncome |        |  | ComprehensiveIncome |       |   | Total |  
|Balance, December 31, 2003                                              |  | $           | 5,916 |                | $ | 5,009            |  | $                                   | 10,693 |  | $                   | 1,304 |   |       |   |      |   |  | $ | 22,922 |  
|Comprehensive Income:                                                   |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|Net income                                                              |  |             |       |                |   |                  |  |                                     | 621    |  |                     |       |   |       | $ | 621  |   |  |   | 621    |  
|Other comprehensive income, net of tax:                                 |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|Unrealized gain on securities                                           |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|available for sale, net of deferred taxes                               |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   | 342  |   |  |   |        |  
|Less: Reclassification adjustment, net of tax                           |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   | (7   | ) |  |   |        |  
|                                                                        |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|Other comprehensive income, net of tax:                                 |  |             |       |                |   |                  |  |                                     |        |  |                     | 335   |   |       |   | 335  |   |  |   | 335    |  
|                                                                        |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|Total comprehensive income                                              |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       | $ | 956  |   |  |   |        |  
|                                                                        |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|Issuance of common stock                                                |  |             | 7     |                |   | 12               |  |                                     |        |  |                     |       |   |       |   |      |   |  |   | 19     |  
|                                                                        |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|Balance, March 31, 2004                                                 |  | $           | 5,923 |                | $ | 5,021            |  | $                                   | 11,314 |  | $                   | 1,639 |   |       |   |      |   |  | $ | 23,897 |  
|                                                                        |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|Balance, December 31, 2004                                              |  | $           | 5,945 |                | $ | 5,111            |  | $                                   | 12,831 |  | $                   | 794   |   |       |   |      |   |  | $ | 24,681 |  
|Comprehensive Income:                                                   |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|Net income                                                              |  |             |       |                |   |                  |  | $                                   | 721    |  |                     |       |   |       | $ | 721  |   |  | $ | 721    |  
|Other comprehensive loss, net of tax:                                   |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|Unrealized loss on securities available for sale, net of deferred taxes |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   | (577 | ) |  |   |        |  
|Less: Reclassification adjustment, net of tax                           |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   | (3   | ) |  |   |        |  
|                                                                        |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|Other comprehensive loss, net of tax:                                   |  |             |       |                |   |                  |  |                                     |        |  |                     | (580  | ) |       |   | (580 | ) |  |   | (580   | )
|Total comprehensive income                                              |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       | $ | 141  |   |  |   |        |  
|                                                                        |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|Issuance of common stock                                                |  |             | 15    |                |   | 23               |  |                                     |        |  |                     |       |   |       |   |      |   |  |   | 38     |  
|                                                                        |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  
|Balance, March 31, 2004                                                 |  | $           | 5,960 |                | $ | 5,134            |  | $                                   | 13,552 |  | $                   | 214   |   |       |   |      |   |  | $ | 24,860 |  
|                                                                        |  |             |       |                |   |                  |  |                                     |        |  |                     |       |   |       |   |      |   |  |   |        |  



See
accompanying notes to consolidated financial statements.



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##### Table of Contents

BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Notes to Consolidated Financial Statements

(Unaudited)



1. The accounting and reporting policies of BOE Financial Services of Virginia, Inc. (the
Company) conform to accounting principles generally accepted in the United States of America and to the general practices within the banking industry. The interim financial statements have not been audited; however, in the opinion of
management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the consolidated financial statements have been included. Operating results for the three month period ended March 31, 2005 are not
necessarily indicative of the results that may be expected for the year ended December 31, 2005.



These financial statements should be read in conjunction with the financial statements and the footnotes included in the Companys 2004 Annual Report
to Shareholders.



2. At March 31, 2005, the Company had a stock-based employee
compensation plan. The Company accounts 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.



|                                                                                                                                  |  |      |      |   |      |   |      |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | -
|Periods Ended March 31,                                                                                                           |  | 2005 |      |   | 2004 |  
|Net income, as reported                                                                                                           |  | $    | 721  |   |      | $ | 621  |  
|Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of tax
effect |  |      | (17  | ) |      |   | (15  | )
|                                                                                                                                  |  |      |      |   |      |   |      |  
|Pro forma net income                                                                                                              |  | $    | 704  |   |      | $ | 606  |  
|                                                                                                                                  |  |      |      |   |      |   |      |  
|Earnings per share:                                                                                                               |  |      |      |   |      |   |      |  
|Basic-as reported                                                                                                                 |  | $    | 0.61 |   |      | $ | 0.52 |  
|                                                                                                                                  |  |      |      |   |      |   |      |  
|Basic-pro forma                                                                                                                   |  | $    | 0.59 |   |      | $ | 0.51 |  
|                                                                                                                                  |  |      |      |   |      |   |      |  
|Diluted-as reported                                                                                                               |  | $    | 0.60 |   |      | $ | 0.52 |  
|                                                                                                                                  |  |      |      |   |      |   |      |  
|Diluted-pro forma                                                                                                                 |  | $    | 0.59 |   |      | $ | 0.51 |  
|                                                                                                                                  |  |      |      |   |      |   |      |  



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.



|                                 |  |                |  |                |      |        |           |           |   |     
|-------------------------------- |  | -------------- |  | -------------- | ---- | ------ | --------- | --------- | - | ----
|                                 |  | March 31, 2005 |  | March 31, 2004
|                                 |  | Shares         |  | Per Share      |      | Shares |           | Per Share
|Basic earnings per share         |  | 1,190,113      |  | $              | 0.61 |        | 1,183,924 |           | $ | 0.52
|Effect of dilutive stock options |  | 13,272         |  |                |      |        | 9,152     |           |   |     
|                                 |  |                |  |                |      |        |           |           |   |     
|Diluted earnings per share       |  | 1,203,385      |  | $              | 0.60 |        | 1,193,076 |           | $ | 0.52
|                                 |  |                |  |                |      |        |           |           |   |     



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



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5. Defined Benefit Pension Plan



Components of Net Periodic Benefit Cost

Three months ended March 31,

(In Thousands)



|                                             |  |                  |     |   |      |   |     |  
|-------------------------------------------- |  | ---------------- | --- | - | ---- | - | --- | -
|                                             |  | Pension Benefits |    
|                                             |  | 2005             |     |   | 2004 |  
|Service cost                                 |  | $                | 77  |   |      | $ | 61  |  
|Interest cost                                |  |                  | 53  |   |      |   | 50  |  
|Expected return on plan assets               |  |                  | (54 | ) |      |   | (53 | )
|Amortization of prior service cost           |  |                  | 1   |   |      |   | 1   |  
|Amortization of net obligation at transition |  |                  | (1  | ) |      |   | (1  | )
|Amortization of net (gain) loss              |  |                  | 14  |   |      |   | 9   |  
|                                             |  |                  |     |   |      |   |     |  
|Net periodic benefit cost                    |  | $                | 90  |   |      | $ | 67  |  
|                                             |  |                  |     |   |      |   |     |  



Employer Contributions



The Company previously disclosed in its
financial statements for the year ended December 31, 2004, that it expected to contribute $212,000 to its pension plan in 2005. As of March 31, 2005, no contributions have been made.



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##### Table of Contents

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



General



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



CRITICAL ACCOUNTING POLICIES



Allowance for Loan Losses



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



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



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



Overview



On March 31, 2005, the Company had total assets of $235.3 million, a
decrease of $1.7 million or 0.7% from $237.1 million at December 31, 2004. Total assets at March 31, 2004 were $234.6 million. The March 31, 2005 total assets figure represents an increase of 0.3% or $770,000 over one year ago. Total loans amounted
to $162.1 million on March 31, 2005, an increase of $2.5 million or 1.6% over December 31, 2004 total loans of $159.6 million. The March 31, 2005 figure represents an increase of $4.0 million or 2.5% over total loans of $158.2 million on March 31,
2004. The Companys securities portfolio decreased $1.1 million or 1.9% from $58.0 million at December 31, 2004 to $56.9 million at March 31, 2005. Total securities were $51.1 million on March 31, 2004. Federal funds sold were $841,000 on March
31, 2005. At December 31, 2004, the Company had sold $5.1 million in federal funds.



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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 March 31, 2005 securities AFS portfolio was $53.9 million compared to $55.0 million at December 31, 2004 and $51.1 million at March 31, 2004. 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 March 31, 2005, $324,000 represented the Companys net unrealized gain on
AFS securities compared to $1.2 million at December 31, 2004 and a net unrealized gain of $2.5 million at March 31, 2004.



Total deposits at March 31, 2005 were $204.8 million. This $2.1 million decrease is 1.0% less than total deposits of $207.0 million at December 31, 2004
and $460,000, or 0.22% less than total deposits of $205.3 million at March 31, 2004.



Stockholders equity at March 31, 2005 was $24.9 million and represented 10.6% of total assets. Stockholders equity was $24.7 million, or 10.4% of total assets at December 31, 2004 and $23.9 million, or
10.2% of total assets at March 31, 2004.



Results of Operations



Net Income



Net income was $721,000 for the first quarter of 2005, or $0.60 per diluted
share. This compares to net income of $621,000, or $0.52 per diluted share in the first quarter of 2004. The increase in earnings through one quarter of 2005 over 2004 was $100,000, or 16.1%.



The increase in earnings in the first quarter of 2005 as compared to the same
period in 2004 was primarily attributable to an increase of 5.1% or $162,000 in interest income. This resulted in an increase of 6.0%, or $137,000, in net interest income. Net interest income after provision for loan losses of $2,322,000 in the
first quarter of 2005 compared to net interest income after provision for loan losses of $2,190,000 for the same period in 2004. This represents an increase of 6.0%, or $132,000. Also contributing to the increase in net income for the first quarter
of 2005 compared to the same period in 2004 was a $2,000 decrease in noninterest expenses. Noninterest expenses were $1,779,000 in the first quarter of 2005 compared to $1,781,000 for the same period in 2004. This is a decrease of 0.1%.



Increases to net interest income were offset by a decrease of 4.1%, or
$17,000 in noninterest income and a $17,000 increase in income tax expenses for the first quarter of 2005 versus the same period in 2004.



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 March 31, 2005, the Companys interest-earning assets exceeded its interest-bearing liabilities by approximately $36.6 million, compared with a $31.8 million excess one year ago. Net
interest margins on a fully tax equivalent basis were 4.47% through March 31, 2005 compared to 4.38% through March 31, 2004. The improvement in net



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interest margin was the result of an improvement of 5 basis points in yield on total earning assets coupled with a decrease of 4 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 6.02% for the first three months of 2005 compared to 5.97% for the first three months of 2004. Total sources of funds
were 1.55% for the first three months of 2005 compared to 1.59% for the same period in 2004. As interest rates have risen, management does not believe this margin improvement will continue throughout 2005, and is beginning to experience competitive
pressures on obtaining funding to continue asset growth.



The
Companys loan-to-deposit ratio was 77.9%, on average, through the first three months of 2005 compared to 78.8% for the same period in 2004. On March 31, 2005, the Companys loan-to-deposit ratio was 79.1% compared to 77.1% on December 31,
2004 and 77.0% on March 31, 2004.



Provision
for Credit Losses



The Companys provision for credit
losses increased $5,000 to $80,000 for the first quarter of 2005 compared to $75,000 in the first quarter of 2004. Net recoveries on loans were $24,000 in the first quarter of 2005 as compared to net charge-offs of $190,000 in the first quarter of
2004.



Noninterest Income



Noninterest income, including net gains and losses on securities, was
$394,000 in the first quarter of 2005 compared to $411,000 in the same period of 2004. This represents a decrease of 4.1%, or $17,000. Service charges on deposit accounts were $221,000 in the first quarter of 2005 and $245,000 in the first quarter
of 2004. This is a decrease of 9.8%, or $24,000. The decrease was the result of lower levels of demand deposit accounts utilizing the Companys automated program for overdrafts, which provides fee income. Securities gains also decreased in the
first quarter of 2005 to $5,000 compared to $10,000 for the first quarter of 2004. All other noninterest income increased 8.4% or $7,000, from $83,000 in the first quarter of 2004 to $90,000 in the first quarter of 2005. Other fee income increased
8.8%, from $57,000 in the first quarter of 2004 to $62,000 in the first quarter of 2005.



Noninterest Expenses



Noninterest expenses remained constant at $1.8 million in the first quarter of 2004 and 2005. Other expenses decreased $49,000, from $577,000 in the first
quarter of 2004 to $528,000 in the first quarter of 2005. Salaries and employee benefits increased $58,000, or 6.0%, from $965,000 in the first quarter of 2004 to $1.0 million in the first quarter of 2005. Premises and fixed assets decreased
$11,000, or 4.6%, from $239,000 in the first quarter of 2004 to $228,000 in the first quarter of 2005.



Income Taxes



Income tax expense through March 31, 2005 was $216,000. This represents a $17,000, or 8.5% increase over $199,000 in income tax expense for the same
period in 2004.



Asset Quality



The Companys allowance for credit losses totaled $2.192 million on
March 31, 2005 or 1.35% of total loans. On December 31, 2004, the allowance for credit losses totaled $2.088 million and was 1.31% of total loans. On March 31, 2004, the allowance for credit losses was $2.013 million and was 1.27% of total loans.



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On March 31, 2005, the Company had nonaccruing assets of $139,000 compared to $1.6 million on March 31, 2004. Loans past
due and still accruing interest totaled $164,000 on March 31, 2005 compared to $189,000 on March 31, 2004.



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.



The Companys ratio of total capital to risk-weighted assets was 17.12%
on March 31, 2005 compared to 15.44 on March 31, 2004. Its ratio of Tier 1 Capital to risk-weighted assets was 15.88% on March 31, 2004 and 14.13% on March 31, 2004. The Companys leverage ratio (Tier I capital to average adjusted total assets)
was 11.87% on March 31, 2005 and 11.08% on March 31, 2004. 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        % in the first quarter of 2005.



RECENT ACCOUNTING PRONOUNCEMENTS



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



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



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|Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------



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



Earnings Simulation Analysis



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



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



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 March 31, 2005:



|                          |  |                               |   |  |                  |     
|------------------------- |  | ----------------------------- | - |  | ---------------- | ----
|                          |  | Change in Net Interest Income
|Change in Yield Curve     |  | (Percent)                     |   |  | ($ in thousands)
|+200 basis points         |  | 0.51                          | % |  | $                | 54  
|Most likely rate scenario |  | 0.00                          | % |  |                  |    
|-200 basis points         |  | -2.36                         | % |  |                  | -248



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 schock over 12 months. The following chart reflects the estimated change in net economic value over different
rate environments using economic value simulation as of March 31, 2005:



|                          |  |                                    |   |  |                  |       
|------------------------- |  | ---------------------------------- | - |  | ---------------- | ------
|                          |  | Change in Economic Value of Equity
|Change in Yield Curve     |  | (Percent)                          |   |  | ($ in thousands)
|+200 basis points         |  | 14.83                              | % |  | $                | 4,947 
|Most likely rate scenario |  | 0.00                               | % |  |                  |      
|-200 basis points         |  | -6.18                              | % |  |                  | -2,062



|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 Companys internal
controls or in other factors that could significantly affect those controls subsequent to the date of their evaluation.



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##### Table of Contents

PART II - OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------



None



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



None



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------



None



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



None



|Item 5. | Other Information
|------- | -----------------



None



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##### Table of Contents

|Item 6. | Exhibits and Reports on Form 8-K.
|------- | ---------------------------------



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)                                                                                                                      



|(b) | Form 8-K
|--- | --------



None



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##### Table of Contents

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)
|        |  |  | 
|5/11/05 |  |  |  | By:                                                   |  | /s/    George M. Longest, Jr.
|(Date)  |  |  |  |                                                       |  | (Signature)                  
|        |  |  |  |                                                       |  |                               |  | George M. Longest, Jr.                             
|        |  |  |  |                                                       |  |                               |  | President and Chief Executive Officer              
|        |  |  | 
|5/11/05 |  |  |  | By:                                                   |  | /s/    Bruce E. Thomas       
|(Date)  |  |  |  |                                                       |  | (Signature)                  
|        |  |  |  |                                                       |  |                               |  | Bruce E. Thomas                                    
|        |  |  |  |                                                       |  |                               |  | Secretary, Vice President & Chief Financial Officer



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