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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, 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



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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 has (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 shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



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 November 10, 2005.



|                              |  |                                 
|----------------------------- |  | --------------------------------
|Class                         |  | Outstanding at November 10, 2005
|Common Stock, $5.00 par value |  | 1,195,763                       



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BOE Financial Services of Virginia, Inc.



FORM 10-Q



INDEX



|                                                                                                         |  |      
|-------------------------------------------------------------------------------------------------------- |  | -----
|                                                                                                         |  | Page 
|PART I - FINANCIAL INFORMATION                                                                           |  |      
|                                                                                                         | 
|Item 1.
Financial Statements                                                                             |  | 1-6  
|                                                                                                         | 
|Consolidated Balance Sheets September 30, 2005 and December 31, 2004                                     |  | 1-2  
|                                                                                                         | 
|Consolidated Statements of Income Three months ended September 30, 2005 and 2004                         |  | 3    
|                                                                                                         | 
|Consolidated Statements of Income Nine months ended September 30, 2005 and 2004                          |  | 4    
|                                                                                                         | 
|Consolidated Statements of Cash Flows Nine months ended September 30, 2005 and 2004                      |  | 5    
|                                                                                                         | 
|Consolidated Statements of Changes in Stockholders Equity Nine months ended September 30, 2005 and 2004 |  | 6    
|                                                                                                         | 
|Notes to Consolidated Financial Statements                                                               |  | 7-8  
|                                                                                                         | 
|Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations            |  | 9-13 
|                                                                                                         | 
|Item 3.
Quantitative and Qualitative Disclosures About Market Risk                                       |  | 14-15
|                                                                                                         | 
|Item 4.
Controls and Procedures                                                                          |  | 15   
|                                                                                                         | 
|PART II - OTHER INFORMATION                                                                              |  |      
|                                                                                                         | 
|Item 1.
Legal Proceedings                                                                                |  | 15   
|                                                                                                         | 
|Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds                                      |  | 15   
|                                                                                                         | 
|Item 3.
Defaults Upon Senior Securities                                                                  |  | 15   
|                                                                                                         | 
|Item 4.
Submission of Matters to a Vote of Security Holders                                              |  | 15   
|                                                                                                         | 
|Item 5.
Other Information                                                                                |  | 15   
|                                                                                                         | 
|Item 6.
Exhibits and Reports on Form 8-K                                                                 |  | 16   
|                                                                                                         | 
|Signatures                                                                                               |  | 17   



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PART I  FINANCIAL INFORMATION



Item 1.  FINANCIAL STATEMENTS



BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Balance Sheets

(in Thousands except share data)



|                                                                          |  |                   |         |   |                  |   |         |  
|------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                          |  | September 30,2005 |         |   | December 31,2004 |  
|                                                                          |  | (Unaudited)       |         |   |                  |  
|ASSETS                                                                    |  |                   |         |   |                  |   |         |  
|Cash and due from banks                                                   |  | $                 | 5,825   |   |                  | $ | 4,354   |  
|Federal funds sold                                                        |  |                   | 0       |   |                  |   | 5,064   |  
|Securities available for sale, at fair value                              |  |                   | 54,684  |   |                  |   | 54,955  |  
|Securities held to maturity(fair value $3,028 in 2005 and $3,000 in 2004) |  |                   | 3,000   |   |                  |   | 3,000   |  
|Equity Securities, restricted, at cost                                    |  |                   | 1,188   |   |                  |   | 833     |  
|Loans held for resale                                                     |  |                   | 218     |   |                  |   | 361     |  
|                                                                          |  |                  
|Loans                                                                     |  |                   | 180,316 |   |                  |   | 159,559 |  
|Less: Allowance for loan losses                                           |  |                   | (2,231  | ) |                  |   | (2,088  | )
|                                                                          |  |                   |         |   |                  |   |         |  
|Net loans                                                                 |  |                   | 178,085 |   |                  |   | 157,471 |  
|                                                                          |  |                  
|Bank premises and equipment, net                                          |  |                   | 6,337   |   |                  |   | 6,448   |  
|Accrued interest receivable                                               |  |                   | 1,315   |   |                  |   | 1,154   |  
|Intangible assets, net                                                    |  |                   | 682     |   |                  |   | 776     |  
|Other assets                                                              |  |                   | 8,098   |   |                  |   | 2,710   |  
|                                                                          |  |                   |         |   |                  |   |         |  
|Total assets                                                              |  | $                 | 259,432 |   |                  | $ | 237,126 |  
|                                                                          |  |                   |         |   |                  |   |         |  



See
accompanying notes to consolidated financial statements.



Page: 1



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Balance Sheets



|                                           |  |            |  |            |  |                   |         |                  |   |        
|------------------------------------------ |  | ---------- |  | ---------- |  | ----------------- | ------- | ---------------- | - | -------
|                                           |  |            |  |            |  | September 30,2005 |         | December 31,2004
|                                           |  |            |  |            |  | (Unaudited)       |         |                 
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |            |  |            |  |                   |         |                  |   |        
|                                           |  |            |  |           
|Deposits                                   |  |            |  |            |  |                   |         |                  |   |        
|Noninterest bearing deposits               |  |            |  |            |  | $                 | 29,495  |                  | $ | 25,605 
|Interest bearing deposits                  |  |            |  |            |  |                   | 188,221 |                  |   | 181,368
|                                           |  |            |  |            |  |                   |         |                  |   |        
|Total deposits                             |  |            |  |            |  |                   | 217,716 |                  |   | 206,973
|                                           |  |            |  |           
|Federal funds purchased                    |  |            |  |            |  |                   | 5,083   |                  |   | 0      
|Accrued interest payable                   |  |            |  |            |  |                   | 665     |                  |   | 319    
|Other liabilities                          |  |            |  |            |  |                   | 695     |                  |   | 1,029  
|Long  term debt                           |  |            |  |            |  |                   | 5,000   |                  |   | 0      
|Trust preferred capital notes              |  |            |  |            |  |                   | 4,124   |                  |   | 4,124  
|                                           |  |            |  |            |  |                   |         |                  |   |        
|Total liabilities                          |  |            |  |            |  |                   | 233,283 |                  |   | 212,445
|                                           |  |            |  |            |  |                   |         |                  |   |        
|Commitments and Contingent Liabilities     |  |            |  |            |  |                   |         |                  |   |        
|Stockholders equity                       |  |            |  |            |  |                   |         |                  |   |        
|Common stock, $5.00 par value              |  |            |  |            |  |                   | 5,979   |                  |   | 5,945  
|                                           |  |            |  |           
|                                           |  | 9/30/05    |  | 12/31/04   |  |                   |         |                 
|Shares authorized                          |  | 10,000,000 |  | 10,000,000 |  |                   |         |                  |   |        
|Shares outstanding                         |  | 1,195,702  |  | 1,188,951  |  |                   |         |                  |   |        
|Additional paid in capital                 |  |            |  |            |  |                   | 5,195   |                  |   | 5,111  
|Retained earnings                          |  |            |  |            |  |                   | 14,679  |                  |   | 12,831 
|Accumulated other comprehensive income,net |  |            |  |            |  |                   | 296     |                  |   | 794    
|                                           |  |            |  |            |  |                   |         |                  |   |        
|Total stockholders equity                 |  |            |  |            |  |                   | 26,149  |                  |   | 24,681 
|                                           |  |            |  |            |  |                   |         |                  |   |        
|Total liabilities and stockholders equity |  |            |  |            |  | $                 | 259,432 |                  | $ | 237,126
|                                           |  |            |  |            |  |                   |         |                  |   |        



See
accompanying notes to consolidated financial statements.



Page: 2



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Statements of Income

(In Thousands except per share data)



|                                                                 |  |                    |       |                   |   |      
|---------------------------------------------------------------- |  | ------------------ | ----- | ----------------- | - | -----
|                                                                 |  | Three Months Ended
|                                                                 |  | September 30,2005  |       | September 30,2004
|                                                                 |  | (Unaudited)       
|Interest Income                                                  |  |                    |       |                   |   |      
|Interest and fees on loans                                       |  | $                  | 3,175 |                   | $ | 2,877
|Interest on federal funds sold                                   |  |                    | 2     |                   |   | 2    
|Interest on U.S. Treasury securities and U.S. Agency Obligations |  |                    | 105   |                   |   | 117  
|Interest on obligations of state and political subdivisions      |  |                    | 352   |                   |   | 335  
|Interest on other securities                                     |  |                    | 110   |                   |   | 55   
|Other interest income                                            |  |                    | 3     |                   |   | 1    
|                                                                 |  |                    |       |                   |   |      
|Total interest income                                            |  |                    | 3,747 |                   |   | 3,387
|                                                                 |  |                    |       |                   |   |      
|Interest Expense                                                 |  |                    |       |                   |   |      
|Interest on savings and interest bearing deposits                |  |                    | 109   |                   |   | 102  
|Interest on certificates of deposit                              |  |                    | 928   |                   |   | 747  
|Interest on federal funds purchased                              |  |                    | 47    |                   |   | 9    
|Interest on long  term debt                                     |  |                    | 48    |                   |   | 0    
|Interest on trust preferred capital notes.                       |  |                    | 110   |                   |   | 49   
|                                                                 |  |                    |       |                   |   |      
|Total interest expense                                           |  |                    | 1,242 |                   |   | 907  
|                                                                 |  |                    |       |                   |   |      
|Net interest income                                              |  |                    | 2,505 |                   |   | 2,480
|Provision for loan losses                                        |  |                    | 5     |                   |   | 75   
|                                                                 |  |                    |       |                   |   |      
|Net interest income after provision for loan losses              |  |                    | 2,500 |                   |   | 2,405
|                                                                 |  |                    |       |                   |   |      
|Noninterest Income                                               |  |                    |       |                   |   |      
|Service charges on deposit accounts                              |  |                    | 260   |                   |   | 248  
|Gains on sale of loans                                           |  |                    | 34    |                   |   | 11   
|Other fee income                                                 |  |                    | 64    |                   |   | 40   
|All other noninterest income                                     |  |                    | 75    |                   |   | 92   
|                                                                 |  |                    |       |                   |   |      
|Total noninterest income                                         |  |                    | 433   |                   |   | 391  
|                                                                 |  |                    |       |                   |   |      
|Noninterest Expense                                              |  |                    |       |                   |   |      
|Salaries and employee benefits                                   |  |                    | 1,060 |                   |   | 944  
|Premises and fixed assets                                        |  |                    | 255   |                   |   | 278  
|Intangible premium amortization                                  |  |                    | 31    |                   |   | 31   
|Other expenses                                                   |  |                    | 541   |                   |   | 494  
|                                                                 |  |                    |       |                   |   |      
|Total noninterest expense                                        |  |                    | 1,887 |                   |   | 1,747
|                                                                 |  |                    |       |                   |   |      
|Income before income taxes                                       |  |                    | 1,046 |                   |   | 1,049
|Income taxes                                                     |  |                    | 240   |                   |   | 232  
|                                                                 |  |                    |       |                   |   |      
|Net income                                                       |  | $                  | 806   |                   | $ | 817  
|                                                                 |  |                    |       |                   |   |      
|Earnings per share, basic                                        |  | $                  | 0.67  |                   | $ | 0.69 
|Earnings per share, diluted                                      |  | $                  | 0.67  |                   | $ | 0.68 



See
accompanying notes to consolidated financial statements.





Page: 3



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Consolidated Statements of Income

(In Thousands except per share data)



|                                                                 |  |                   |        |                   |   |      
|---------------------------------------------------------------- |  | ----------------- | ------ | ----------------- | - | -----
|                                                                 |  | Nine Months Ended
|                                                                 |  | September 30,2005 |        | September 30,2004
|                                                                 |  | (Unaudited)      
|Interest Income                                                  |  |                   |        |                   |   |      
|Interest and fees on loans                                       |  | $                 | 8,817  |                   | $ | 8,135
|Interest on federal funds sold                                   |  |                   | 37     |                   |   | 8    
|Interest on U.S. Treasury securities and U.S. Agency Obligations |  |                   | 310    |                   |   | 363  
|Interest on obligations of state and political subdivisions      |  |                   | 1,009  |                   |   | 994  
|Interest on other securities                                     |  |                   | 394    |                   |   | 222  
|Other interest income                                            |  |                   | 8      |                   |   | 3    
|                                                                 |  |                   |        |                   |   |      
|Total interest income                                            |  |                   | 10,575 |                   |   | 9,725
|                                                                 |  |                   |        |                   |   |      
|Interest Expense                                                 |  |                   |        |                   |   |      
|Interest on savings and interest bearing deposits                |  |                   | 339    |                   |   | 310  
|Interest on certificates of deposit                              |  |                   | 2,477  |                   |   | 2,218
|Interest on federal funds purchased                              |  |                   | 62     |                   |   | 20   
|Interest on long  term debt                                     |  |                   | 71     |                   |   | 0    
|Interest on trust preferred capital notes.                       |  |                   | 244    |                   |   | 135  
|                                                                 |  |                   |        |                   |   |      
|Total interest expense                                           |  |                   | 3,193  |                   |   | 2,683
|                                                                 |  |                   |        |                   |   |      
|Net interest income                                              |  |                   | 7,382  |                   |   | 7,042
|Provision for loan losses                                        |  |                   | 160    |                   |   | 225  
|                                                                 |  |                   |        |                   |   |      
|Net interest income after provision for loan losses              |  |                   | 7,222  |                   |   | 6,817
|                                                                 |  |                   |        |                   |   |      
|Noninterest Income                                               |  |                   |        |                   |   |      
|Service charges on deposit accounts                              |  |                   | 728    |                   |   | 750  
|Securities gains - net                                           |  |                   | 8      |                   |   | 50   
|Gains on sale of loans                                           |  |                   | 65     |                   |   | 47   
|Other fee income                                                 |  |                   | 162    |                   |   | 162  
|All other noninterest income                                     |  |                   | 264    |                   |   | 265  
|                                                                 |  |                   |        |                   |   |      
|Total noninterest income                                         |  |                   | 1,227  |                   |   | 1,274
|                                                                 |  |                   |        |                   |   |      
|Noninterest Expense                                              |  |                   |        |                   |   |      
|Salaries and employee benefits                                   |  |                   | 3,129  |                   |   | 2,868
|Premises and fixed assets                                        |  |                   | 723    |                   |   | 751  
|Intangible premium amortization                                  |  |                   | 94     |                   |   | 94   
|Other expenses                                                   |  |                   | 1,555  |                   |   | 1,579
|                                                                 |  |                   |        |                   |   |      
|Total noninterest expense                                        |  |                   | 5,501  |                   |   | 5,292
|                                                                 |  |                   |        |                   |   |      
|Income before income taxes                                       |  |                   | 2,948  |                   |   | 2,799
|Income taxes                                                     |  |                   | 683    |                   |   | 665  
|                                                                 |  |                   |        |                   |   |      
|Net income                                                       |  | $                 | 2,265  |                   | $ | 2,134
|                                                                 |  |                   |        |                   |   |      
|Earnings per share, basic                                        |  | $                 | 1.90   |                   | $ | 1.80 
|Earnings per share, diluted                                      |  | $                 | 1.88   |                   | $ | 1.79 



See
accompanying notes to consolidated financial statements.



Page: 4



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BOE FINANCIAL SERVICES OF VIRGINIA, Inc.

Consolidated Statements of Cash Flows

(in Thousands)



|                                                                                  |  |                                |         |   |      |   |        |  
|--------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------ | -
|                                                                                  |  | Nine Months EndedSeptember 30, |        
|                                                                                  |  | 2005                           |         |   | 2004 |  
|                                                                                  |  | (Unaudited)                    |        
|Cash Flows from Operating Activities                                              |  |                                |         |   |      |   |        |  
|Net income                                                                        |  | $                              | 2,265   |   |      | $ | 2,134  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |         |   |      |   |        |  
|Depreciation and amortization                                                     |  |                                | 380     |   |      |   | 380    |  
|Origination of loans held for sale                                                |  |                                | (3,354  | ) |      |   | (5,220 | )
|Proceeds from sale of loans held for sale                                         |  |                                | 3,562   |   |      |   | 5,267  |  
|Provision for loan losses                                                         |  |                                | 160     |   |      |   | 225    |  
|Net amortization on securities                                                    |  |                                | 149     |   |      |   | 164    |  
|Net (gain)on sale of securities                                                   |  |                                | (8      | ) |      |   | (50    | )
|(Gain) on sale of loans                                                           |  |                                | (65     | ) |      |   | (47    | )
|Decrease in accrued interest receivable and other assets                          |  |                                | 208     |   |      |   | 178    |  
|Increase in accrued expenses and other liabilities                                |  |                                | 12      |   |      |   | 3      |  
|                                                                                  |  |                                |         |   |      |   |        |  
|Net cash provided by operating activities                                         |  |                                | 3,309   |   |      |   | 3,034  |  
|                                                                                  |  |                                |         |   |      |   |        |  
|Cash Flows from Investing Activities                                              |  |                                |         |   |      |   |        |  
|Proceeds from sale of securities available-for-sale                               |  |                                | 1,970   |   |      |   | 7,035  |  
|Proceeds from maturities and calls of securities available-for-sale               |  |                                | 5,120   |   |      |   | 3,049  |  
|Purchase of securities available for sale                                         |  |                                | (7,715  | ) |      |   | (7,788 | )
|Proceeds from redemption of restricted securities                                 |  |                                | 0       |   |      |   | 10     |  
|Purchase of restricted securities                                                 |  |                                | (355    | ) |      |   | 0      |  
|Net (increase) in loans to customers.                                             |  |                                | (20,774 | ) |      |   | (6,815 | )
|Decrease (increase) in federal funds sold                                         |  |                                | 5,064   |   |      |   | (1,996 | )
|Purchase of Bank Owned Life Insurance                                             |  |                                | (5,500  | ) |      |   | 0      |  
|Capital expenditures                                                              |  |                                | (175    | ) |      |   | (659   | )
|                                                                                  |  |                                |         |   |      |   |        |  
|Net cash (used in) investing activities                                           |  |                                | (22,365 | ) |      |   | (7,164 | )
|                                                                                  |  |                                |         |   |      |   |        |  
|Cash Flows from Financing Activities Net increase (decrease) in deposits          |  |                                | 10,743  |   |      |   | (714   | )
|Issuance of Common Stock                                                          |  |                                | 118     |   |      |   | 70     |  
|Increase in federal funds purchased                                               |  |                                | 5,083   |   |      |   | (361   | )
|Increase in long  term debt                                                      |  |                                | 5,000   |   |      |   | 0      |  
|Dividends paid                                                                    |  |                                | (417    | ) |      |   | (361   | )
|                                                                                  |  |                                |         |   |      |   |        |  
|Net cash provided by (used in) financing activities                               |  |                                | 20,527  |   |      |   | (1,005 | )
|Net increase in cash and cash equivalents                                         |  |                                | 1,471   |   |      |   | 5,135  |  
|Cash and Cash Equivalents                                                         |  |                                |         |   |      |   |        |  
|Beginning of period                                                               |  |                                | 4,354   |   |      |   | 8,948  |  
|                                                                                  |  |                                |         |   |      |   |        |  
|End of period                                                                     |  | $                              | 5,825   |   |      | $ | 3,813  |  
|                                                                                  |  |                                |         |   |      |   |        |  
|Supplemental disclosure of cash flow information Cash paid during the year        |  |                                |         |   |      |   |        |  
|Interest                                                                          |  | $                              | 2,847   |   |      | $ | 2,704  |  
|                                                                                  |  |                                |         |   |      |   |        |  
|Income Taxes                                                                      |  | $                              | 465     |   |      | $ | 620    |  
|                                                                                  |  |                                |         |   |      |   |        |  



See
accompanying notes to consolidated financial statements.



Page: 5



---

BOE Financial Services of Virginia, Inc.

Statement of Changes in Stockholders Equity

For the Nine Month Periods Ended September 30, 2005 and 2004

(in thousands)

(Unaudited)

|                                                                          |  |              |       |                            |   |                   |  |   |                                        |   |  |                      |       |   |       |   |       |   |  |   |        |  
|------------------------------------------------------------------------- |  | ------------ | ----- | -------------------------- | - | ----------------- |  | - | -------------------------------------- | - |  | -------------------- | ----- | - | ----- | - | ----- | - |  | - | ------ | -
|                                                                          |  | Common Stock |       | Additional Paid-In Capital |   | Retained Earnings |  |   | Accumulated Other Comprehensive Income |   |  | Comprehensive Income |       |   | Total |  
|Balance, December 31, 2003                                                |  | $            | 5,916 |                            | $ | 5,009             |  | $ | 10,693                                 |   |  | $                    | 1,304 |   |       |   |       |   |  | $ | 22,922 |  
|Comprehensive Income:                                                     |  |              |       |                            |   |                   |  |   |                                        |   |  |                      |       |   |       |   |       |   |  |   |        |  
|                                                                          |  |              |       |                            |   |                  
|Net income                                                                |  |              |       |                            |   |                   |  |   | 2,134                                  |   |  |                      |       |   |       | $ | 2,134 |   |  |   | 2,134  |  
|Other comprehensive loss, net of tax:                                     |  |              |       |                            |   |                   |  |   |                                        |   |  |                      |       |   |       |   |       |   |  |   |        |  
|Unrealized loss on securities available for sale, net of deferred taxes   |  |              |       |                            |   |                   |  |   |                                        |   |  |                      |       |   |       |   | (233  | ) |  |   |        |  
|Add: Reclassification adjustment, net of tax                              |  |              |       |                            |   |                   |  |   |                                        |   |  |                      |       |   |       |   | (33   | ) |  |   |        |  
|                                                                          |  |              |       |                            |   |                   |  |   |                                        |   |  |                      |       |   |       |   |       |   |  |   |        |  
|Other comprehensive loss, net of tax:                                     |  |              |       |                            |   |                   |  |   |                                        |   |  |                      | (266  | ) |       |   | (266  | ) |  |   | (266   | )
|                                                                          |  |              |       |                            |   |                   |  |   |                                        |   |  |                      |       |   |       |   |       |   |  |   |        |  
|Total comprehensive income                                                |  |              |       |                            |   |                   |  |   |                                        |   |  |                      |       |   |       | $ | 1,868 |   |  |   |        |  
|                                                                          |  |              |       |                            |   |                   |  |   |                                        |   |  |                      |       |   |       |   |       |   |  |   |        |  
|Cash dividends, $0.30 per share                                           |  |              |       |                            |   |                   |  |   | (361                                   | ) |  |                      |       |   |       |   |       |   |  |   | (361   | )
|                                                                          |  |              |       |                            |   |                  
|Issuance of common stock                                                  |  |              | 18    |                            |   | 52                |  |   |                                        |   |  |                      |       |   |       |   |       |   |  |   | 70     |  
|                                                                          |  |              |       |                            |   |                   |  |   |                                        |   |  |                      |       |   |       |   |       |   |  |   |        |  
|Balance, September 30, 2004                                               |  | $            | 5,934 |                            | $ | 5,061             |  | $ | 12,466                                 |   |  | $                    | 1,038 |   |       |   |       |   |  | $ | 24,499 |  
|                                                                          |  |              |       |                            |   |                   |  |   |                                        |   |  |                      |       |   |       |   |       |   |  |   |        |  
|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 |  
|                                                                          |  |              |       |                            |   |                   |  |   |                                        |   |  |                      |       |   |       |   |       |   |  |   |        |  



See
accompanying notes to consolidated financial statements.



Page: 6



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BOE FINANCIAL SERVICES OF VIRGINIA, INC.

Notes to Consolidated Financial Statements

(Unaudited)



1. The accounting and reporting policies of BOE Financial Services of Virginia, Inc. (the
Company) conform to accounting principles generally accepted in the United States of America and to the general practices within the banking industry. The interim financial statements have not been audited; however, in the opinion of
management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the consolidated financial statements have been included. Operating results for the three month and nine month periods ended September
30, 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 September 30, 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.



|                                                                                                                                  |  |                                |       |   |                                 |   |       |      |  |   |      |   |  |   |      |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ----- | - | ------------------------------- | - | ----- | ---- |  | - | ---- | - |  | - | ---- | -
|                                                                                                                                  |  | Nine months endedSeptember 30, |       |   | Three months endedSeptember 30, |  
|                                                                                                                                  |  | 2005                           |       |   | 2004                            |   |       | 2005 |  |   | 2004 |  
|Net income, as reported                                                                                                           |  | $                              | 2,265 |   |                                 | $ | 2,134 |      |  | $ | 806  |   |  | $ | 817  |  
|Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of tax
effect |  |                                | (53   | ) |                                 |   | (34   | )    |  |   | (18  | ) |  |   | (11  | )
|                                                                                                                                  |  |                                |       |   |                                 |   |       |      |  |   |      |   |  |   |      |  
|Pro forma net income                                                                                                              |  | $                              | 2,212 |   |                                 | $ | 2,100 |      |  | $ | 788  |   |  | $ | 806  |  
|                                                                                                                                  |  |                                |       |   |                                 |   |       |      |  |   |      |   |  |   |      |  
|Earnings per share:                                                                                                               |  |                                |       |   |                                 |   |       |      |  |   |      |   |  |   |      |  
|Basic-as reported                                                                                                                 |  | $                              | 1.90  |   |                                 | $ | 1.80  |      |  | $ | 0.67 |   |  | $ | 0.69 |  
|Basic-pro forma                                                                                                                   |  | $                              | 1.85  |   |                                 | $ | 1.77  |      |  | $ | 0.66 |   |  | $ | 0.68 |  
|Diluted-as reported                                                                                                               |  | $                              | 1.88  |   |                                 | $ | 1.79  |      |  | $ | 0.67 |   |  | $ | 0.68 |  
|Diluted-pro forma                                                                                                                 |  | $                              | 1.84  |   |                                 | $ | 1.76  |      |  | $ | 0.65 |   |  | $ | 0.67 |  



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, 2005 |  | September 30, 2004
|                                 |  | Shares             |  | Per Share          |      | Shares |           | Per Share
|Basic earnings per share         |  | 1,192,606          |  | $                  | 1.90 |        | 1,185,101 |           | $ | 1.80
|Effect of dilutive stock options |  | 10,746             |  |                    |      |        | 8,527     |           |   |     
|                                 |  |                    |  |                    |      |        |           |           |   |     
|Diluted earnings per share       |  | 1,203,352          |  | $                  | 1.88 |        | 1,193,628 |           | $ | 1.79
|                                 |  |                    |  |                    |      |        |           |           |   |     
|                                 | 
|                                 |  | Three months ended
|                                 |  | September 30, 2005 |  | September 30, 2004
|                                 |  | Shares             |  | Per Share          |      | Shares |           | Per Share
|Basic earnings per share         |  | 1,195,268          |  | $                  | 0.67 |        | 1,186,616 |           | $ | 0.69
|Effect of dilutive stock options |  | 9,292              |  |                    |      |        | 7,815     |           |   |     
|                                 |  |                    |  |                    |      |        |           |           |   |     
|Diluted earnings per share       |  | 1,204,560          |  | $                  | 0.67 |        | 1,194,431 |           | $ | 0.68
|                                 |  |                    |  |                    |      |        |           |           |   |     



Page: 7



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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 loans 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.



5. Defined Benefit Pension Plan



Components of Net Periodic Benefit Cost

(In Thousands)



|                                             |  |                                |      |   |                                 |   |      |      |  |   |      |   |  |   |     |  
|-------------------------------------------- |  | ------------------------------ | ---- | - | ------------------------------- | - | ---- | ---- |  | - | ---- | - |  | - | --- | -
|                                             |  | Pension Benefits               |     
|                                             |  | Nine Months EndedSeptember 30, |      |   | Three Months EndedSeptember 30, |  
|                                             |  | 2005                           |      |   | 2004                            |   |      | 2005 |  |   | 2004 |  
|Service cost                                 |  | $                              | 231  |   |                                 | $ | 185  |      |  | $ | 77   |   |  | $ | 62  |  
|Interest cost                                |  |                                | 159  |   |                                 |   | 148  |      |  |   | 53   |   |  |   | 49  |  
|Expected return on plan assets               |  |                                | (162 | ) |                                 |   | (126 | )    |  |   | (54  | ) |  |   | (42 | )
|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   |   |                                 |   | 29   |      |  |   | 14   |   |  |   | 10  |  
|                                             |  |                                |      |   |                                 |   |      |      |  |   |      |   |  |   |     |  
|Net periodic benefit cost                    |  | $                              | 270  |   |                                 | $ | 236  |      |  | $ | 90   |   |  | $ | 79  |  
|                                             |  |                                |      |   |                                 |   |      |      |  |   |      |   |  |   |     |  



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 September 30, 2005, no contributions have been made. The Company plans to make all required contributions to the plan.



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



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



CRITICAL ACCOUNTING POLICIES



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.



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.



Overview



On September
30, 2005 the Company had total assets of $259.4 million, an increase of $22.3 million, or 9.4%, from total assets of $237.1 million at December 31, 2004. Total assets at September 30, 2004 were $232.6 million. Total assets increased 11.5%, or $26.9
million over the twelve month comparison period. Total loans were $180.3 million on September 30, 2005, an increase of $20.8 million, or 13.0%, over December 31, 2004 total loans of $159.6 million. Total loans were $167.0 million on September 30,
2004. Total loans grew 8.0%, or $13.3 million over the twelve month comparison period. The increase in loan volume in 2005 is due to less loan payoff volume, management emphasis on quality loan growth and increased demand in 2005. The Companys
readily marketable securities portfolio decreased $271,000 from December 31, 2004 to September 30, 2005. Securities Available-For-Sale (AFS) were $54.7 million on September 30, 2005 compared to 55.0 million on December 31, 2004. Securities
AvailableForSale were $49.4 million on September 30, 2004. The increase over the twelve month comparison period was $5.3 million, or 10.7%. Securities HeldToMaturity were $3.0 million on September 30, 2005 and December 31,
2004. The Company had federal funds purchased of $5.1 million on September 30, 2005, a $10.1 million swing in liquidity for the federal funds sold position of $5.1 million at December 31, 2004 and federal funds sold of $2.3 million at September 30,
2005. The shift in liquidity represents a competitive environment in search of funding coupled with strong loan demand in the first nine months of 2005.



Page: 9



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Additionally, in the second quarter of 2005 the Bank of Essex borrowed $5 million from the Federal Home
Loan Bank of Atlanta. The Company is required to account for the effect of market changes in value of securities AFS under SFAS 115. 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, 2005, $447,000 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 $1.6 million at September 30, 2004. Total deposits at September 30 2005 were $217.7 million, an increase of 5.2%, or $10.7 million over total deposits at December 31, 2004 and $15.1 million, or 7.5% over total deposits at
September 30, 2005. Total stockholders equity at September 30, 2005 was $26.1 million and represented 10.1% of total assets. Stockholders equity was $24.7 million, or 10.4% of total assets at December 31, 2004 and was $24.5 million, or 10.5% of
total assets on September 30, 2004. On June 30, 2005 the company purchased $3,666,666 in Bank  Owned Life Insurance (BOLI). An Additional $1,333,333 was added on September 21, 2005. The Company does not foresee adding any additional BOLI in
the near future. It is the intention of the Board of Directors to use this investment to fund a Supplemental Executive Retirement Program for the Companys Executive Officers.



Results of Operations



Net income was $806,000 for the third quarter of 2005, or $0.67 per diluted share. This compares to net income of $817,000, or $0.68 per diluted share in
the third quarter of 2004.



This decrease in earnings for the
third quarter of 2005 compared to the same period in 2004 was primarily the result of recognizing nonrecurring income in the third quarter of 2004. During the third quarter 2004, $168,000 in interest income was recognized as the result of restoring
a previously nonaccuring loan to an interest accruing basis.



Also affecting net income in the third quarter of 2005 compared to the same period in 2004 was a $25,000 increase in net interest income a $70,000 reduction in provision for loan losses, due to improved loan quality, and a $42,000 increase
in noninterest income. Offsetting these increases was a $140,000 increase in noninterest expense and an $8,000 increase in income tax expense.



For the nine month period ended September 30, 2005 net income increased 6.1%, or $131,000. Net income was $2.3 million for the first nine months of 2005,
compared to $2.1 million for the same period in 2004. This increase in net income was primarily the result of an increase of $340,000, or 4.8% in net interest income, and improved asset quality, resulting in provision for loan losses to decrease
$65,000, or 28.9%. Provision for loan losses was $160,000 for the first nine months of 2005 and $225,000 for the first nine months of 2004. Additionally, offsetting these increases, noninterest income decreased $47,000, or 3.7% and there was an
additional $209,000 in noninterest expenses, $42,000 less in securities gains and $18,000 in additional income tax expenses recognized for the nine month period.



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, 2005, the Companys interest-earning assets exceeded its interest-bearing liabilities by approximately $35.4 million, compared with $34.5 million excess one year ago.
Net interest margins were 4.44% through September 30, 2005 compared to 4.43 % through September 30, 2004.



Annualized net interest income on a tax-equivalent basis through nine months of 2005 was $10.154 million. This represents an increase $628,000, or 6.7%.
The Companys tax equivalent yield on earning assets increased from 6.00% through nine months of 2004 to 6.16% through the same period in 2005. The cost of the Companys total interest bearing liabilities increased



Page: 10



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from 1.87% through nine months in 2004 to 2.09% through the same period in 2005. This resulted in a decease in the Companys net interest spread from
4.13% through nine months of 2004 to 4.07% through nine months of 2005. The Companys net interest margin increased slightly from 4.43% through nine months in 2004 to 4.44% through the same period in 2005. This increase, despite a reduction in
the spread, was the result of a slightly higher loan-todeposit ratio, on average, of 80.0% for the first nine months of 2005 compared to 79.3% for the same period in 2004.



Provision for Credit Losses



The Companys provision for credit losses was $5,000 through the first nine months of 2005 compared to $75,000 for the third quarter of 2004. This
reduction was the result of improved loan quality, in spite of an increase in loan balances. This loan quality improvement was identified in the Companys internal loan watchlist. Loans past due 90 days or more still accruing interest totaled
$520,000 on September 30, 2005 and nonaccruing loans were $222,000 on that date. Net charge-off loans were $17,000 for the first nine months of 2005 compared to $332,000 for the first nine months of 2004. The trend in loan quality and charge-off can
be further positively analyzed by revealing that net-charged-off loans were $486,000 for the first nine months of 2003. The allowance for loan losses as a percentage of total loan losses as a percentage of total loans was 1.24% on September 30,
2005, 1.31% on December 31, 2005 and 1.21% on September 30, 2004.



Noninterest Income



Noninterest income was
$433,000 in the third quarter of 2005, an increase of $42,000 or 10.7%, over noninterest income of $391,000 for the same period in 2004. Other fee income of $64,000 for the third quarter of 2005 was $24,000, or 60.0%, higher than other fee income of
$40,000 for the same period in 2004. Gain on sale of loans of $34,000 was $23,000, or 209.6%, higher in the third quarter of 2005 than the $11,000 in the third quarter of 2004. Service charges of 260,000 in the third quarter of 2005 were 4.8%, or
$12,000, higher than service charges of $248,000 for the same period in 2004. All other noninterest income of $75,000 decreased 17,000, or 18.5%, from all other noninterst income of $92,000 for the same period in 2004.



For the nine months period ended September 30, 2005 noninterest income was
$1,227,000 compared to $1,274,000 for the same period in 2004. This represents a decrease of $47,000, or 3.7%. Securities gains decreased $42,000, or 84.0%. Securities gains were $8,000 through nine months of 2005 compared to $50,000 for the first
three quarters of 2004. Service charges decreased $22,000, or 2.9%. Service charges were $728,000 for the first three quarters of 2005 compared to $750,000 in the same period in 2004.



Noninterest Expenses



Noninterest expenses were $1.887 million for the second quarter of 2005, $140,000, or 8.0% greater than noninterest expenses o $1.747 million for that
same period in 2004. Salaries and employee benefits represented the largest amount of this increase, $116,000, or 12.3 %. Salaries and employee benefits were $1.060 million for the second quarter of 2005 compared to $944,000 for the same period in
2004. Other expenses increased $47,000, or 9.5%. Other expenses were $541,000 in the second quarter of 2005 and were $494,000 for the same period in 2004. Expenses related to premises and fixed assets decreased 8.3%, or $23,000 and were $255,000 for
the third quarter of 2005 compared to $278,000 for the same period in 2004.



On a yeartodate basis noninterest expenses increased $209,000, or 3.9%, in 2005 compared to the same period in 2004. Noninterest expenses expense were 5.501 million through nine months in 2005 and $5.292
million through nine months in 2004. Salaries and employee benefits increased 9.1%, or $261,000, and were $3.129 million for the first nine months of 2005 compared to $2.868 million for the same period in 2004. Expenses associated with premises and
fixed assets were $723,000 for the first three quarters of 2005. This is a



Page: 11



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decrease of $28,000, or 3.7%, from premises and fixed asset expenses of $751,000 through nine months in 2004. Other expenses of $1.555 million in the first
three quarters were $24,000, or 1.5%, less than other expenses of $1.579 million for the same period in 2005.



Income Taxes



Income
tax expense for the second quarter of 2005 was $240,000. This represents an increase of $8,000, or 3.5%, from income tax expense of $232,000 in the second quarter of 2004.



On a yeartodate basis income tax expense was $683,000. This represents a 2.7%, or $18,000, increase over
$665,000 for the first nine months of 2004.



Asset Quality



The companys allowance for credit losses totaled $2.231 million on
September 30, 2005, or 1.24% of total loans. On December 31, 2004, the allowance for credit losses totaled $2.088 million and was 1.31% of total loans. On September 30, 2004 the allowance for credit losses was $2.021 million, or 1.21% of total
loans.



On September 30, 2005, the Company had loans past due
90 days or more still accruing interest of $520,000 compared to $222,000 on September 30, 2004. Net charged-off loans were $17,000 for the first nine months of 2005 compared to $332,000 for the same period in 2004. Nonaccrual loans were $222,000 on
September 30, 2005, $340,000 on December 31, 2004 and $376,000 on September 30, 2004.



Capital Requirements



The Companys ratio
of total capital to risk-weighted assets was 13.61% on September 30, 2005 compared to 15.57% on September 30, 2004. Its ratio of Tier 1 Capital to Risk-Weighted assets was 12.64% compared to 14.46% on September 30, 2004. The Companys leverage
ratio (Tier 1 capital to average adjusted total assets) was 9.94% on September 30, 2005 compared to 11.29% on September 30, 2004. The company issue 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 6.49% in the third quarter of 2005.



RECENT ACCOUNTING PRONOUNCEMENTS



In May 2005, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 154, Accounting Changes and Error Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3. The new standard changes the requirements for the accounting for and
reporting of a change in an accounting principle. Among other changes, SFAS No. 154 requires that a voluntary change in an accounting principle be applied retrospectively with all prior period financial statements presented based on the new
accounting principle, unless it is impracticable to do so. SFAS No. 154 also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was
effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a restatement.  The new standard is effective for accounting changes and corrections of errors made in
fiscal years beginning after December 15, 2005. The Company does not anticipate this revision will have a material effect on its financial statements.



On December 16, 2004, FASB issued SFAS No. 123R (revised 2004), Share-Based Payment, 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. SFAS No. 123R eliminates the ability to account for



Page: 12



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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 statement of income. The effective date of SFAS No. 123R (as amended by the SEC) is for annual periods beginning after June 15, 2005. The provisions of SFAS No. 123R are not anticipated to have a material impact on the
Companys results of operations.



In March 2005, the SEC
issued Staff Accounting Bulletin 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 is not anticipated to have a material impact on the Companys results of operations.



In November 2004, the Emerging Issues Task Force (EITF) published Issue 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments. The Task Force discussed the meaning of other-than-temporary impairment and its application to certain investments carried at cost. The EITF requested that the FASB staff consider other impairment models within U.S.
Generally Accepted Accounting Principles (GAAP) when developing its views. The EITF also requested that the scope of the impairment issue be expanded to include equity investments and investments subject to SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, and that the issue be addressed by the Task Force as a separate EITF issue. At the EITF meeting, the EITF reached a consensus on one issue that certain quantitative and qualitative disclosures should
be required for securities accounted for under SFAS No. 115 that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. The FASB ratified the consensus on that one issue at its November 25,
2004 meeting. In September 2004, FASB directed its staff to issue two proposed FASB Staff Positions (FSP): Proposed FSP EITF Issue 03-1-a, which provides guidance for the application of paragraph 16 of EITF Issue 03-1 to debt securities that are
impaired because of interest rate and/or sector spread increases, and Proposed FSP EITF Issue 03-1-b, which delays the effective date of Issue 03-1 for debt securities that are impaired because of interest rate and/or sector spread increases. In
June 2005, the FASB reach a decision whereby they declined to provide additional guidance on the meaning of other-than-temporary impairment. FASB directed the FASB staff to issue EITF 03-1a as final and to draft a new FSP that will replace EITF
03-01. The final FSP (retitled FAS 115-1, The Meaning of Other-Than-Temporary Impairment and it Application to Certain Investments) would be effective for other-than-temporary impairment analysis conducted in periods beginning after
September 15, 2005. The Company does not anticipate this revision will have a material effect on its financial statements.



OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS



Commitments to extend credit were $46.2 million at September 30, 2005 compared to $41.9 million at December 31, 2004. Commitments to extend credit are
agreements to lend to a customer as long as there is no violation of any condition established in the loan contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent expected future cash flows. Standby letters of credit were $3.7 million at September 30, 2005 and $3.9 million at December 30,
2004.



Additionally, in the second quarter of 2005 the Bank
borrowed $5 million from the Federal Home Loan Bank of Atlanta at 3.77%. This borrowing is for 10 years with a call feature at the end of four years. If called the Bank may pay off or refinance, otherwise it remains at the 3.77% rate for the
remaining six years of the borrowing.



Page: 13



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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.



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.



The Company uses its simulation model to estimate earnings in rate environments where rates ramp up or down around a
most likely rate scenario, based on implied forward rates. The analysis assesses the impact on net interest income over a 12 month time horizon by applying 12-month shock versus the implied forward rates of 200 basis points up and down.
The following table represents the interest rate sensitivity on net interest income for the Company across the rate paths modeled as of June 30, 2005: There was not a significant change at September 30, 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



Page: 14



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Economic Value Simulation



Economic value simulation is used to determine the estimated fair value of assets and liabilities over different interest
rate scenarios. Economic values are calculated based on discounted cash flow analysis. The net economic value of equity is the economic value of all assets minus the economic value of all liabilities. The change in net economic value over different
rate scenarios is an indication of the longer term earnings sensitivity capability of the balance sheet. The same assumptions are used in the economic value simulation as in the earnings simulation. The economic value simulation uses simultaneous
rate shocks to the balance sheet, whereas the earnings simulation uses rate shock over 12 months. The following chart reflects the estimated change in net economic value over different rate environments using economic value simulation as of June 30,
2005: There was not a significant change at September 30, 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.



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



Page: 15



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



|               |  |                                                                                                                                                                                                                                                                                   
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | 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 Dated November 1, 2005                                                                                                                                                                                                                                                   





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Signatures



Pursuant to the
requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





|                |  |                                          |  |                                                           
|--------------- |  | ---------------------------------------- |  | ----------------------------------------------------------
|                |  | BOE Financial Services of Virginia, Inc.
|                |  | (Registrant)                            
|                |  |                                         
|(Date) 11/14/05 |  | By:                                      |  | /s/ George M. Longest, Jr.                                
|                |  |                                          |  | (Signature)                                               
|                |  |                                          |  | George M. Longest, Jr.                                    
|                |  |                                          |  | President and Chief Executive Officer                     
|                |  |                                         
|(Date) 11/14/05 |  | By:                                      |  | /s/ Bruce E. Thomas                                       
|                |  |                                          |  | (Signature)                                               
|                |  |                                          |  | Bruce E. Thomas                                           
|                |  |                                          |  | Secretary, Senior Vice President & Chief Financial Officer





Page: 17