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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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

For the quarterly period ended June 30, 2006

or



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

For the transition period from  to

Commission File Number: 000-23565



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EASTERN VIRGINIA BANKSHARES, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|VIRGINIA                                                       |  | 54-1866052                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|330 Hospital Road, Tappahannock, Virginia                      |  | 22560                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(804) 443-8423

(Registrants telephone number, including area code)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

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



|                         |  |                      |  |                       
|------------------------ |  | -------------------- |  | ----------------------
|Large accelerated filer ̈ |  | Accelerated filer  x |  | Non-accelerated filer ̈

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

The number of shares of the registrants Common Stock outstanding as of August 4, 2006 was 4,923,900.



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##### Table of Contents

EASTERN VIRGINIA BANKSHARES, INC.

FORM 10-Q

For the Quarter Ended June 30, 2006



|           |  |                                                                                       |  |   
|---------- |  | ------------------------------------------------------------------------------------- |  | --
|Part I     |  | Financial Information                                                                 |  |   
|Item 1.    |  | Financial Statements                                                                  |  | 2 
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 10
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 19
|Item 4.    |  | Controls and Procedures                                                               |  | 19
|           |  |                                                                                      
|Part II    |  | Other Information                                                                     |  |   
|Item 1.    |  | Legal Proceedings                                                                     |  | 19
|Item 1A.   |  | Risk Factors                                                                          |  | 19
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 20
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  | 20
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 20
|Item 5.    |  | Other Information                                                                     |  | 20
|Item 6.    |  | Exhibits                                                                              |  | 20
|Signatures |  | 21                                                                                   



1



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##### Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Eastern Virginia Bankshares, Inc. and Subsidiaries

Consolidated Balance Sheets

(Dollars in
thousands)



|                                                                                                                                   |  |                        |         |   |                          |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | - | ------------------------ | - | ------- | -
|                                                                                                                                   |  | June 302006(unaudited) |         |   | December 312005(audited) |  
|Assets:                                                                                                                            |  |                        |         |   |                          |   |         |  
|Cash and due from banks                                                                                                            |  | $                      | 18,091  |   |                          | $ | 21,516  |  
|Federal funds sold                                                                                                                 |  |                        | 2,298   |   |                          |   |        |  
|Securities available for sale, at fair value                                                                                       |  |                        | 127,048 |   |                          |   | 135,420 |  
|Loans, net of unearned income                                                                                                      |  |                        | 611,889 |   |                          |   | 574,085 |  
|Allowance for loan losses                                                                                                          |  |                        | (6,792  | ) |                          |   | (6,601  | )
|                                                                                                                                   |  |                        |         |   |                          |   |         |  
|Total loans, net                                                                                                                   |  |                        | 605,097 |   |                          |   | 567,484 |  
|Deferred income taxes                                                                                                              |  |                        | 3,850   |   |                          |   | 2,820   |  
|Bank premises and equipment, net                                                                                                   |  |                        | 14,840  |   |                          |   | 15,147  |  
|Accrued interest receivable                                                                                                        |  |                        | 3,688   |   |                          |   | 3,583   |  
|Other real estate                                                                                                                  |  |                        |        |   |                          |   |        |  
|Goodwill                                                                                                                           |  |                        | 5,725   |   |                          |   | 5,725   |  
|Other assets                                                                                                                       |  |                        | 13,342  |   |                          |   | 12,231  |  
|                                                                                                                                   |  |                        |         |   |                          |   |         |  
|Total assets                                                                                                                       |  | $                      | 793,979 |   |                          | $ | 763,926 |  
|                                                                                                                                   |  |                        |         |   |                          |   |         |  
|Liabilities and Shareholders Equity:                                                                                              |  |                        |         |   |                          |   |         |  
|Liabilities                                                                                                                        |  |                        |         |   |                          |   |         |  
|Noninterest-bearing demand accounts                                                                                                |  | $                      | 103,490 |   |                          | $ | 99,718  |  
|Interest-bearing deposits                                                                                                          |  |                        | 521,314 |   |                          |   | 528,625 |  
|                                                                                                                                   |  |                        |         |   |                          |   |         |  
|Total deposits                                                                                                                     |  |                        | 624,804 |   |                          |   | 628,343 |  
|Federal funds purchased                                                                                                            |  |                        |        |   |                          |   | 6,822   |  
|Federal Home Loan Bank advances                                                                                                    |  |                        | 91,214  |   |                          |   | 51,928  |  
|Trust preferred capital notes                                                                                                      |  |                        | 10,310  |   |                          |   | 10,310  |  
|Accrued interest payable                                                                                                           |  |                        | 1,568   |   |                          |   | 1,264   |  
|Other liabilities                                                                                                                  |  |                        | 4,071   |   |                          |   | 3,385   |  
|                                                                                                                                   |  |                        |         |   |                          |   |         |  
|Total liabilities                                                                                                                  |  |                        | 731,967 |   |                          |   | 702,052 |  
|                                                                                                                                   |  |                       
|Shareholders Equity                                                                                                               |  |                        |         |   |                          |   |         |  
|Common stock of $2 par value per share, authorized 50,000,000 shares, issued and outstanding 4,915,200 and 4,905,701,
respectively |  |                        | 9,830   |   |                          |   | 9,812   |  
|Retained earnings                                                                                                                  |  |                        | 55,957  |   |                          |   | 53,838  |  
|Accumulated other comprehensive (loss), net                                                                                        |  |                        | (3,775  | ) |                          |   | (1,776  | )
|                                                                                                                                   |  |                        |         |   |                          |   |         |  
|Total shareholders equity                                                                                                         |  |                        | 62,012  |   |                          |   | 61,874  |  
|                                                                                                                                   |  |                        |         |   |                          |   |         |  
|Total liabilities and shareholders equity                                                                                         |  | $                      | 793,979 |   |                          | $ | 763,926 |  
|                                                                                                                                   |  |                        |         |   |                          |   |         |  

See Notes to Consolidated Financial Statements



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Eastern Virginia Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income(Unaudited)

(Dollars in thousands except per share amounts)



|                                                    |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|--------------------------------------------------- |  | ------------------------- | ------ | ---- | ----------------------- | ------ | ---- |  | ---- | ------ |  | - | ------
|                                                    |  | Three Months EndedJune 30 |        |      | Six Months EndedJune 30
|                                                    |  | 2006                      |        | 2005 |                         |        | 2006 |  | 2005
|Interest and Dividend Income                        |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Loans                                               |  | $                         | 10,876 |      | $                       | 9,032  |      |  | $    | 20,972 |  | $ | 17,686
|Interest on investments                             |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Taxable interest income                             |  |                           | 1,106  |      |                         | 1,016  |      |  |      | 2,240  |  |   | 1,978 
|Tax exempt interest income                          |  |                           | 364    |      |                         | 382    |      |  |      | 731    |  |   | 792   
|Dividends                                           |  |                           | 87     |      |                         | 53     |      |  |      | 131    |  |   | 92    
|Interest on federal funds sold                      |  |                           | 36     |      |                         | 28     |      |  |      | 76     |  |   | 42    
|                                                    |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Total interest and dividend income                  |  |                           | 12,469 |      |                         | 10,511 |      |  |      | 24,150 |  |   | 20,590
|                                                    |  |                           |        |     
|Interest Expense                                    |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Deposits                                            |  |                           | 3,481  |      |                         | 2,525  |      |  |      | 6,757  |  |   | 4,900 
|Federal funds purchased                             |  |                           | 39     |      |                         | 14     |      |  |      | 79     |  |   | 38    
|Interest on FHLB advances                           |  |                           | 782    |      |                         | 341    |      |  |      | 1,474  |  |   | 615   
|Interest on trust preferred debt                    |  |                           | 204    |      |                         | 150    |      |  |      | 386    |  |   | 286   
|                                                    |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Total interest expense                              |  |                           | 4,506  |      |                         | 3,030  |      |  |      | 8,696  |  |   | 5,839 
|                                                    |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Net interest income                                 |  |                           | 7,963  |      |                         | 7,481  |      |  |      | 15,454 |  |   | 14,751
|Provision for Loan Losses                           |  |                           | 204    |      |                         | 198    |      |  |      | 317    |  |   | 206   
|                                                    |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Net interest income after provision for loan losses |  | $                         | 7,759  |      | $                       | 7,283  |      |  | $    | 15,137 |  | $ | 14,545
|                                                    |  |                           |        |     
|Other Income                                        |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Service charges and fees on deposit accounts        |  |                           | 825    |      |                         | 746    |      |  |      | 1,543  |  |   | 1,431 
|Gain (loss) on available for sale securities        |  |                           | 27     |      |                         | (5     | )    |  |      | 31     |  |   | 121   
|Other operating income                              |  |                           | 453    |      |                         | 391    |      |  |      | 880    |  |   | 723   
|                                                    |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Total other income                                  |  |                           | 1,305  |      |                         | 1,132  |      |  |      | 2,454  |  |   | 2,275 
|                                                    |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Other Expenses                                      |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Salaries and benefits                               |  |                           | 3,591  |      |                         | 3,574  |      |  |      | 7,324  |  |   | 7,133 
|Net occupancy expense of premises                   |  |                           | 986    |      |                         | 856    |      |  |      | 1,957  |  |   | 1,745 
|Data processing                                     |  |                           | 112    |      |                         | 196    |      |  |      | 264    |  |   | 378   
|Consultant fees                                     |  |                           | 188    |      |                         | 287    |      |  |      | 441    |  |   | 544   
|Telephone                                           |  |                           | 138    |      |                         | 148    |      |  |      | 279    |  |   | 284   
|Marketing and advertising                           |  |                           | 345    |      |                         | 157    |      |  |      | 492    |  |   | 229   
|Other operating expenses                            |  |                           | 1,203  |      |                         | 1,058  |      |  |      | 2,179  |  |   | 2,090 
|                                                    |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Total other expenses                                |  |                           | 6,563  |      |                         | 6,276  |      |  |      | 12,936 |  |   | 12,403
|                                                    |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Income before income taxes                          |  |                           | 2,501  |      |                         | 2,139  |      |  |      | 4,655  |  |   | 4,417 
|Income Tax Expense                                  |  |                           | 700    |      |                         | 590    |      |  |      | 1,303  |  |   | 1,197 
|                                                    |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Net income                                          |  | $                         | 1,801  |      | $                       | 1,549  |      |  | $    | 3,352  |  | $ | 3,220 
|                                                    |  |                           |        |      |                         |        |      |  |      |        |  |   |       
|Earnings per share, basic and assuming dilution     |  | $                         | 0.37   |      | $                       | 0.32   |      |  | $    | 0.68   |  | $ | 0.66  
|Dividends per share                                 |  | $                         | 0.16   |      | $                       | 0.15   |      |  | $    | 0.31   |  | $ | 0.30  

See Notes to Consolidated Financial Statements



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Eastern Virginia Bankshares, Inc. and Subsidiaries

Consolidated Statement of Cash Flows (Unaudited)

(Dollars in thousands)



|                                                                                                |  |                         |         |   |      |   |         |  
|----------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                |  | Six Months EndedJune 30 |        
|                                                                                                |  | 2006                    |         |   | 2005 |  
|Cash Flows from Operating Activities                                                            |  |                         |         |   |      |   |         |  
|Net income                                                                                      |  | $                       | 3,352   |   |      | $ | 3,220   |  
|Adjustments to reconcile net income to net cash provided by operating activities:               |  |                         |         |   |      |   |         |  
|Depreciation and investment amortization/accretion, net                                         |  |                         | 1,215   |   |      |   | 1,457   |  
|Provision for loan losses                                                                       |  |                         | 317     |   |      |   | 206     |  
|(Gain) realized on available for sale securities                                                |  |                         | (31     | ) |      |   | (121    | )
|(Gain) on sale of fully depreciated fixed assets                                                |  |                         | (26     | ) |      |   |        |  
|(Increase) in other assets                                                                      |  |                         | (1,216  | ) |      |   | (381    | )
|Increase in other liabilities                                                                   |  |                         | 990     |   |      |   | 484     |  
|                                                                                                |  |                         |         |   |      |   |         |  
|Net cash provided by operating activities                                                       |  |                         | 4,601   |   |      |   | 4,865   |  
|                                                                                                |  |                        
|Cash Flows from Investing Activities                                                            |  |                         |         |   |      |   |         |  
|Proceeds from sales of securities available for sale                                            |  |                         | 1,298   |   |      |   | 9,437   |  
|Proceeds from maturities, calls, and paydowns of securities                                     |  |                         | 5,288   |   |      |   | 9,501   |  
|Purchase of debt securities                                                                     |  |                         |        |   |      |   | (24,884 | )
|Purchase of restricted stock                                                                    |  |                         | (1,436  | ) |      |   | (969    | )
|Net increase in loans                                                                           |  |                         | (37,930 | ) |      |   | (24,126 | )
|Sale of fixed assets                                                                            |  |                         | 26      |   |      |   |        |  
|Purchases of bank premises and equipment                                                        |  |                         | (684    | ) |      |   | (1,420  | )
|                                                                                                |  |                         |         |   |      |   |         |  
|Net cash used in investing activities                                                           |  |                         | (33,438 | ) |      |   | (32,461 | )
|                                                                                                |  |                        
|Cash Flows from Financing Activities                                                            |  |                         |         |   |      |   |         |  
|Net (decrease) in noninterest bearing and interest bearing demand deposits and savings accounts |  |                         | (18,791 | ) |      |   | (6,161  | )
|Net increase in certificates of deposit                                                         |  |                         | 15,252  |   |      |   | 19,129  |  
|Issuance of common stock under dividend reinvestment plan                                       |  |                         | 194     |   |      |   | 196     |  
|Stock based compensation                                                                        |  |                         | 100     |   |      |   | 75      |  
|Stock options exercised                                                                         |  |                         | 13      |   |      |   |        |  
|Dividends declared                                                                              |  |                         | (1,522  | ) |      |   | (1,465  | )
|Decrease in federal funds purchased                                                             |  |                         | (6,822  | ) |      |   | (8,400  | )
|Increase in FHLB advances                                                                       |  |                         | 39,286  |   |      |   | 29,786  |  
|                                                                                                |  |                         |         |   |      |   |         |  
|Net cash provided by financing activities                                                       |  |                         | 27,710  |   |      |   | 33,160  |  
|                                                                                                |  |                         |         |   |      |   |         |  
|Increase (decrease) in cash and cash equivalents                                                |  |                         | (1,127  | ) |      |   | 5,564   |  
|Cash and cash equivalents                                                                       |  |                         |         |   |      |   |         |  
|Beginning of period                                                                             |  |                         | 21,516  |   |      |   | 17,797  |  
|                                                                                                |  |                         |         |   |      |   |         |  
|End of period                                                                                   |  | $                       | 20,389  |   |      | $ | 23,361  |  
|                                                                                                |  |                         |         |   |      |   |         |  
|Supplemental Disclosures of Cash Flow Information                                               |  |                         |         |   |      |   |         |  
|Cash paid for:                                                                                  |  |                         |         |   |      |   |         |  
|Interest on deposits and other borrowings                                                       |  | $                       | 8,801   |   |      | $ | 5,604   |  
|Income taxes                                                                                    |  | $                       | 1,832   |   |      | $ | 689     |  
|Loans transferred to other real estate owned                                                    |  | $                       |        |   |      | $ | 65      |  

See Notes to Consolidated Financial Statements



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EASTERN VIRGINIA BANKSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



|1. | The accompanying unaudited consolidated financial statements, prepared in accordance with instructions for Form 10-Q, do not include all of the information and notes required by
accounting principles generally accepted in the United States of America (GAAP) for complete financial statements. However, in the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments
(consisting of normal recurring accruals) considered necessary to present fairly the financial position of Eastern Virginia Bankshares, Inc. (the Company) at June 30, 2006. The statements should be read in conjunction with the Notes
to Consolidated Financial Statements included in the Companys Annual Report on Form 10-K for the year ended December 31, 2005 (the 2005 Form 10-K). Certain previously reported amounts have been reclassified to conform to
current period presentation.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2. | EVB was organized and chartered under the laws of the Commonwealth of Virginia on September 5, 1997 and commenced operations effective December 29, 1997 when Southside
Bank and Bank of Northumberland, Inc. became wholly owned subsidiaries of EVB. The transaction was accounted for using the pooling-of-interest method of accounting. The Company opened its third subsidiary in May 2000 when Hanover Bank began
operations in Hanover County, VA. All significant inter-company transactions and accounts have been eliminated in consolidation. On April 24, 2006, the Company completed the conversion to a one-bank holding company by consolidating the three
banking subsidiaries. The new bank began operating under the name EVB on April 24, 2006.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. | The results of operations for the three and six month periods ending June 30, 2006 are not necessarily indicative of the results to be expected for the full year.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. | EVBs amortized cost and estimated fair values of securities at June 30, 2006 and December 31, 2005 were as follows:
|-- | --------------------------------------------------------------------------------------------------------------------



|                                        |  |                   |         |                      |   |                       |  |                     |       |  |   |        
|--------------------------------------- |  | ----------------- | ------- | -------------------- | - | --------------------- |  | ------------------- | ----- |  | - | -------
|                                        |  | June 30, 2006    
|(dollars in thousands)                  |  | AmortizedCost     |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | EstimatedFair Value
|Available for Sale:                     |  |                   |         |                      |   |                       |  |                     |       |  |   |        
|Obligations of U.S. Government agencies |  | $                 | 29,856  |                      | $ |                      |  | $                   | 1,237 |  | $ | 28,619 
|Mortgage-backed securities              |  |                   | 32,990  |                      |   | 1                     |  |                     | 1,690 |  |   | 31,301 
|State and political subdivisions        |  |                   | 34,660  |                      |   | 199                   |  |                     | 707   |  |   | 34,152 
|Corporate, CMO and other securities     |  |                   | 28,906  |                      |   | 14                    |  |                     | 2,299 |  |   | 26,621 
|Restricted securities                   |  |                   | 6,355   |                      |   |                      |  |                     |      |  |   | 6,355  
|                                        |  |                   |         |                      |   |                       |  |                     |       |  |   |        
|Total                                   |  | $                 | 132,767 |                      | $ | 214                   |  | $                   | 5,933 |  | $ | 127,048
|                                        |  |                   |         |                      |   |                       |  |                     |       |  |   |        
|                                        | 
|                                        |  | December 31, 2005
|(dollars in thousands)                  |  | AmortizedCost     |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | EstimatedFair Value
|Available for Sale:                     |  |                   |         |                      |   |                       |  |                     |       |  |   |        
|Obligations of U.S. Government agencies |  | $                 | 29,849  |                      | $ | 1                     |  | $                   | 549   |  | $ | 29,301 
|Mortgage-backed securities              |  |                   | 36,010  |                      |   | 23                    |  |                     | 811   |  |   | 35,222 
|State and political subdivisions        |  |                   | 35,373  |                      |   | 584                   |  |                     | 162   |  |   | 35,795 
|Corporate, CMO and other securities     |  |                   | 31,959  |                      |   | 36                    |  |                     | 1,812 |  |   | 30,183 
|Restricted securities                   |  |                   | 4,919   |                      |   |                      |  |                     |      |  |   | 4,919  
|                                        |  |                   |         |                      |   |                       |  |                     |       |  |   |        
|Total                                   |  | $                 | 138,110 |                      | $ | 644                   |  | $                   | 3,334 |  | $ | 135,420
|                                        |  |                   |         |                      |   |                       |  |                     |       |  |   |        



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At June 30, 2006, investments in an unrealized loss position that were temporarily impaired were as
follows:



|                                         |  |                     |        |                   |   |           |  |                |        |            |   |                |  |   |         |  |   |      
|---------------------------------------- |  | ------------------- | ------ | ----------------- | - | --------- |  | -------------- | ------ | ---------- | - | -------------- |  | - | ------- |  | - | -----
|                                         |  | June 30, 2006      
|                                         |  | Less than 12 months |        | 12 months or more |   | Total    
|(dollars in thousands)                   |  | FairValue           |        | UnrealizedLoss    |   | FairValue |  | UnrealizedLoss |        | Fair Value |   | UnrealizedLoss
|Description of Securities                |  |                     |        |                   |   |           |  |                |        |            |   |                |  |   |         |  |   |      
|Obligations of U. S. Government agencies |  | $                   | 4,104  |                   | $ | 139       |  | $              | 24,515 |            | $ | 1,098          |  | $ | 28,619  |  | $ | 1,237
|Mortgage-backed securities               |  |                     | 4,650  |                   |   | 201       |  |                | 26,521 |            |   | 1,489          |  |   | 31,171  |  |   | 1,690
|State and political subdivisions         |  |                     | 16,367 |                   |   | 545       |  |                | 3,000  |            |   | 162            |  |   | 19,367  |  |   | 707  
|Corporate, CMOs and other securities    |  |                     | 7,611  |                   |   | 349       |  |                | 16,118 |            |   | 1,950          |  |   | 23,729  |  |   | 2,299
|                                         |  |                     |        |                   |   |           |  |                |        |            |   |                |  |   |         |  |   |      
|                                         |  | $                   | 32,732 |                   | $ | 1,234     |  | $              | 70,154 |            | $ | 4,699          |  | $ | 102,886 |  | $ | 5,933
|                                         |  |                     |        |                   |   |           |  |                |        |            |   |                |  |   |         |  |   |      

Bonds with unrealized loss positions of less than 12 months duration at June 30, 2006 included
6 federal agencies, 11 mortgage-backed securities, 6 corporate bonds, 58 municipal bonds, and 4 CMOs. Securities with losses of one year or greater duration included 27 federal agencies, 39 mortgage-backed securities, 12 corporate bonds, 9
municipal bonds, 3 federal agency preferred stocks and 3 CMOs. The unrealized loss positions at June 30, 2006 were primarily related to interest rate movements. Holdings of GMAC and Ford Motor Credit contained unrealized loss positions
because these securities have been downgraded by Moodys and Standard & Poors rating agencies to levels below investment grade. As of June 30, 2006, the Company held $3.30 million par value in GMAC bonds and $250 thousand
par value in Ford Motor Credit Corp bonds. These holdings are monitored regularly by EVBs Chief Financial Officer and reported to the bank board on a monthly basis. Given the attractive yield and the belief that the risk of default is remote,
management has not recommended sale of the holdings.

At December 31, 2005, investments in an unrealized loss position that were
temporarily impaired were as follows:



|                                         |  |                     |        |                   |   |           |  |                |        |           |   |                |  |   |        |  |   |      
|---------------------------------------- |  | ------------------- | ------ | ----------------- | - | --------- |  | -------------- | ------ | --------- | - | -------------- |  | - | ------ |  | - | -----
|                                         |  | December 31, 2005  
|                                         |  | Less than 12 months |        | 12 months or more |   | Total    
|(dollars in thousands)                   |  | FairValue           |        | UnrealizedLoss    |   | FairValue |  | UnrealizedLoss |        | FairValue |   | UnrealizedLoss
|Description of Securities                |  |                     |        |                   |   |           |  |                |        |           |   |                |  |   |        |  |   |      
|Obligations of U. S. Government agencies |  | $                   | 17,448 |                   | $ | 255       |  | $              | 10,601 |           | $ | 294            |  | $ | 28,049 |  | $ | 549  
|Mortgage-backed securities               |  |                     | 23,925 |                   |   | 520       |  |                | 9,986  |           |   | 291            |  |   | 33,911 |  |   | 811  
|State and political subdivisions         |  |                     | 7,566  |                   |   | 53        |  |                | 3,120  |           |   | 109            |  |   | 10,686 |  |   | 162  
|Corporate, CMOs and other securities    |  |                     | 16,218 |                   |   | 460       |  |                | 7,229  |           |   | 1,352          |  |   | 23,447 |  |   | 1,812
|                                         |  |                     |        |                   |   |           |  |                |        |           |   |                |  |   |        |  |   |      
|                                         |  | $                   | 65,157 |                   | $ | 1,288     |  | $              | 30,936 |           | $ | 2,046          |  | $ | 96,093 |  | $ | 3,334
|                                         |  |                     |        |                   |   |           |  |                |        |           |   |                |  |   |        |  |   |      



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##### Table of Contents

|5. | The Companys loan portfolio was composed of the following at the dates indicated:
|-- | ----------------------------------------------------------------------------------



|                                              |  |                        |         |   |                          |   |         |                        |  |   |         |  
|--------------------------------------------- |  | ---------------------- | ------- | - | ------------------------ | - | ------- | ---------------------- |  | - | ------- | -
|(Dollars in thousands)                        |  | (unaudited)June 302006 |         |   | (audited)December 312005 |   |         | (unaudited)June 302005 | 
|Commercial, industrial and agricultural loans |  | $                      | 58,792  |   |                          | $ | 55,732  |                        |  | $ | 53,843  |  
|Residential real estate mortgage loans        |  |                        | 267,323 |   |                          |   | 263,191 |                        |  |   | 257,272 |  
|Real estate construction loans                |  |                        | 71,173  |   |                          |   | 47,620  |                        |  |   | 27,670  |  
|Commercial real estate loans                  |  |                        | 162,824 |   |                          |   | 151,897 |                        |  |   | 141,598 |  
|Consumer loans                                |  |                        | 51,717  |   |                          |   | 55,680  |                        |  |   | 56,118  |  
|All other loans                               |  |                        | 240     |   |                          |   | 321     |                        |  |   | 388     |  
|                                              |  |                        |         |   |                          |   |         |                        |  |   |         |  
|Total loans                                   |  |                        | 612,069 |   |                          |   | 574,441 |                        |  |   | 536,889 |  
|Less unearned income                          |  |                        | (180    | ) |                          |   | (356    | )                      |  |   | (702    | )
|                                              |  |                        |         |   |                          |   |         |                        |  |   |         |  
|Total loans net of unearned discount          |  |                        | 611,889 |   |                          |   | 574,085 |                        |  |   | 536,187 |  
|Less allowance for loan losses                |  |                        | (6,792  | ) |                          |   | (6,601  | )                      |  |   | (6,459  | )
|                                              |  |                        |         |   |                          |   |         |                        |  |   |         |  
|Net loans                                     |  | $                      | 605,097 |   |                          | $ | 567,484 |                        |  | $ | 529,728 |  
|                                              |  |                        |         |   |                          |   |         |                        |  |   |         |  

The Company had $1.8 million in non-performing loans at June 30,2006 that included $1.4
million in loans past due 90 days but still accruing and $412 thousand in nonaccrual loans.



|6. | The Companys allowance for loan losses was as follows at the dates indicated:
|-- | ------------------------------------------------------------------------------



|                                 |  |                        |       |   |                          |   |        |                        |  |   |       |  
|-------------------------------- |  | ---------------------- | ----- | - | ------------------------ | - | ------ | ---------------------- |  | - | ----- | -
|(Dollars in thousands)           |  | (unaudited)June 302006 |       |   | (audited)December 312005 |   |        | (unaudited)June 302005 | 
|Balance January 1                |  | $                      | 6,601 |   |                          | $ | 6,676  |                        |  | $ | 6,676 |  
|Provision charged against income |  |                        | 317   |   |                          |   | 552    |                        |  |   | 206   |  
|Recoveries of loans charged off  |  |                        | 265   |   |                          |   | 491    |                        |  |   | 233   |  
|Loans charged off                |  |                        | (391  | ) |                          |   | (1,118 | )                      |  |   | (656  | )
|                                 |  |                        |       |   |                          |   |        |                        |  |   |       |  
|Balance at end of period         |  | $                      | 6,792 |   |                          | $ | 6,601  |                        |  | $ | 6,459 |  
|                                 |  |                        |       |   |                          |   |        |                        |  |   |       |  

Following is a summary pertaining to impaired loans:



|                                                        |  |                |        |                 |   |       
|------------------------------------------------------- |  | -------------- | ------ | --------------- | - | ------
|                                                        |  | June 302006    |        | December 312005
|                                                        |  | (in thousands)
|Impaired loans for which an allowance has been provided |  | $              | 13,130 |                 | $ | 14,293
|                                                        |  |                |        |                 |   |       
|Allowance related to impaired loans                     |  | $              | 2,046  |                 | $ | 1,849 
|                                                        |  |                |        |                 |   |       
|Average balance of impaired loans                       |  | $              | 14,366 |                 | $ | 17,175
|                                                        |  |                |        |                 |   |       

No additional funds are committed to be advanced in connection with impaired loans. Nonaccrual
loans excluded from impaired loan disclosure under FASB Statement No. 114 amounted to $140 thousand and $772 thousand at June 30, 2006 and December 31, 2005, respectively.



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##### Table of Contents

|7. | Borrowings from the Federal Home Loan Bank of Atlanta are disclosed below. The Company utilizes FHLB borrowings for two purposes (a) to match fund specific loans or investments
as an interest rate risk management tool and (b) for general funding of loan growth when the cost of borrowing is substantially below that of aggressive deposit funding.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                     |  |                         |        |                           |   |                         |  |   |       
|-------------------- |  | ----------------------- | ------ | ------------------------- | - | ----------------------- |  | - | ------
|                     |  | (unaudited) June 302006 |        | (audited) December 312005 |   | (unaudited) June 302005
|Amortizing advances  |  | $                       | 5,714  |                           | $ | 6,428                   |  | $ | 7,143 
|Convertible advances |  |                         | 85,500 |                           |   | 45,500                  |  |   | 45,500
|                     |  |                         |        |                           |   |                         |  |   |       
|Total advances       |  | $                       | 91,214 |                           | $ | 51,928                  |  | $ | 52,643
|                     |  |                         |        |                           |   |                         |  |   |       

The table presented below shows the maturities and potential call dates of FHLB advances. All but
$5.7 million of the FHLB borrowings are convertible advances that have a call provision.



|      |  |            |        |          |          |   |        |   |          |  |      |  
|----- |  | ---------- | ------ | -------- | -------- | - | ------ | - | -------- |  | ---- | -
|      |  | Maturities |        |          | Callable |  
|      |  | Amount     |        | Avg Rate |          |   | Amount |   | Avg Rate | 
|2006  |  | $          |       |          |          |   |        | $ | 5,000    |  | 5.92 | %
|2007  |  |            |       |          |          |   |        |   | 57,000   |  | 4.00 | %
|2008  |  |            |       |          |          |   |        |   | 10,000   |  | 4.85 | %
|2010  |  |            | 20,700 |          | 4.07     | % |        |   | 13,500   |  | 3.87 | %
|2011  |  |            | 10,000 |          | 5.01     | % |        |   |         |  |      |  
|2012  |  |            | 5,000  |          | 4.68     | % |        |   |         |  |      |  
|2015  |  |            | 20,500 |          | 3.78     | % |        |   |         |  |      |  
|2016  |  |            | 35,000 |          | 4.04     | % |        |   |         |  |      |  
|      |  |            |        |          |          |   |        |   |          |  |      |  
|Total |  | $          | 91,200 |          | 4.13     | % |        | $ | 85,500   |  | 4.19 | %
|      |  |            |        |          |          |   |        |   |          |  |      |  



|8. | The following table shows the weighted average number of shares used in computing per share earnings and the effect on the weighted average number of shares of diluted potential
common stock. Potential dilutive common stock had no effect on earnings per share otherwise available to shareholders for the three and six month periods ending June 30, 2006 and June 30, 2005.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                             |  |                    |  |                 |      |        |           |                 |   |     
|-------------------------------------------- |  | ------------------ |  | --------------- | ---- | ------ | --------- | --------------- | - | ----
|                                             |  | Three Months Ended
|                                             |  | June 30, 2006      |  | June 30, 2005  
|                                             |  | Shares             |  | Per ShareAmount |      | Shares |           | Per ShareAmount
|Basic earnings per share                     |  | 4,912,868          |  | $               | 0.37 |        | 4,888,062 |                 | $ | 0.32
|Effect of dilutive securities, stock options |  | 15,036             |  |                 | 0.00 |        | 11,840    |                 |   | 0.00
|                                             |  |                    |  |                 |      |        |           |                 |   |     
|Diluted earnings per share                   |  | 4,927,904          |  | $               | 0.37 |        | 4,899,902 |                 | $ | 0.32
|                                             | 
|                                             |  | Six Months Ended  
|                                             |  | June 30, 2006      |  | June 30, 2005  
|                                             |  | Shares             |  | Per ShareAmount |      | Shares |           | Per ShareAmount
|Basic earnings per share                     |  | 4,910,342          |  | $               | 0.68 |        | 4,885,905 |                 | $ | 0.66
|Effect of dilutive securities, stock options |  | 14,443             |  |                 | 0.00 |        | 12,765    |                 |   | 0.00
|                                             |  |                    |  |                 |      |        |           |                 |   |     
|Diluted earnings per share                   |  | 4,924,785          |  | $               | 0.68 |        | 4,898,670 |                 | $ | 0.66

As of June 30, 2006 and 2005, respectively, options to acquire 29,525 shares and 30,150
shares of common stock were not included in computing diluted earnings per common share because their effects were anti-dilutive.



8



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##### Table of Contents

|9. | On September 21, 2000, the Company adopted the Eastern Virginia Bankshares, Inc. 2000 Stock Option Plan to provide a means for selected key employees and directors of the
Company and its subsidiaries to increase their personal financial interest in the Company, thereby stimulating their efforts and strengthening their desire to remain with the Company. Under the Plan, up to 400,000 shares of Company common stock may
be granted. No options may be granted under the Plan after September 21, 2010. On April 17, 2003, the shareholders approved the 2003 Stock Incentive Plan, amending and restating the 2000 Plan while still authorizing the issuance of up to
400,000 shares of common stock.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The fair value of each grant is estimated at the grant date using the Black-Scholes
option-pricing model with the following weighted-average assumptions for grants in 2005, 2004 and 2003:



|                         |  |          |   |  |          |   |  |          |   |  |          |  
|------------------------ |  | -------- | - |  | -------- | - |  | -------- | - |  | -------- | -
|                         |  | 2005     |   |  | 2004     |   |  | 2003     |   |  | 2002     |  
|Dividend rate:           |  | 2.76     | % |  | 2.78     | % |  | 2.81     | % |  | 2.97     | %
|Price Volatility:        |  | 23.61    | % |  | 24.99    | % |  | 23.07    | % |  | 20.76    | %
|Risk-free interest rate: |  | 4.13     | % |  | 4.95     | % |  | 4.69     | % |  | 5.54     | %
|Expected life:           |  | 10 Years |   |  | 10 Years |   |  | 10 Years |   |  | 10 Years |  

Stock option compensation expense is the estimated fair value of options granted amortized on a
straight-line basis over the requisite service period for the award. There were no options granted, in the six months ended June 30, 2006 while there were 825 shares exercised and 5,025 shares forfeited during the second quarter and no
exercises or forfeitures during the first quarter of 2006. Fair value is estimated using the Black-Scholes option pricing model with the following assumptions for the most recent grant in 2005: option term until exercise of 4 years, volatility of
23.61%, risk free interest rate 4.13% and an expected dividend yield of 2.76%.

The Company granted stock options for the first time in the
second quarter of 2002, and in the fourth quarter of the same year adopted a policy to expense stock options.

Included within salaries and
benefits for the three and six months ended June 30, 2006 was stock -based compensation expense of $47 thousand and $100 thousand, compared to $38 thousand and $75 thousand for the three and six month periods ended June 30, 2005. All
options currently vesting are qualified options in which the Company does not receive a tax deduction.

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



|                              |  |         |   |  |                              |       |                                                   |     |                                                     |   |    
|----------------------------- |  | ------- | - |  | ---------------------------- | ----- | ------------------------------------------------- | --- | --------------------------------------------------- | - | ---
|                              |  | Shares  |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualLife(in years) |     | Value ofUnexercisedIn-TheMoneyOptions(in thousands)
|Options outstanding January 1 |  | 159,807 |   |  | $                            | 21.18 |                                                   | 8.4 |                                                     | $ | 231
|Granted                       |  |        |   |  |                              |       |                                                   |     |                                                     |   |    
|Exercised                     |  | (825    | ) |  |                              | 16.10 |                                                   |     |                                                     |   |    
|Forfeited                     |  | (5,025  | ) |  |                              | 22.03 |                                                   |     |                                                     |   |    
|                              |  |         |   |  |                              |       |                                                   |     |                                                     |   |    
|Options outstanding June 30   |  | 153,957 |   |  |                              | 21.20 |                                                   | 7.9 |                                                     |   | 331
|Options exercisable June 30   |  | 24,945  |   |  |                              | 16.10 |                                                   | 5.9 |                                                     |   | 150



9



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##### Table of Contents

|10. | Components of net periodic benefit cost were as follows for the periods indicated:
|--- | ----------------------------------------------------------------------------------



|                                             |  |                           |      |   |                         |   |      |      |  |   |      |   |  |   |      |  
|-------------------------------------------- |  | ------------------------- | ---- | - | ----------------------- | - | ---- | ---- |  | - | ---- | - |  | - | ---- | -
|                                             |  | Three Months EndedJune 30 |      |   | Six Months EndedJune 30 |  
|                                             |  | 2006                      |      |   | 2005                    |   |      | 2006 |  |   | 2005 |  
|                                             |  | (in thousands)            |      |   | (in thousands)          |  
|Components of Net Periodic Benefit Cost      |  |                           |      |   |                         |   |      |      |  |   |      |   |  |   |      |  
|Service cost                                 |  | $                         | 350  |   |                         | $ | 274  |      |  | $ | 700  |   |  | $ | 548  |  
|Interest cost                                |  |                           | 179  |   |                         |   | 147  |      |  |   | 358  |   |  |   | 294  |  
|Expected return on plan assets               |  |                           | (163 | ) |                         |   | (129 | )    |  |   | (326 | ) |  |   | (258 | )
|Amortization of prior service cost           |  |                           | 5    |   |                         |   | 5    |      |  |   | 10   |   |  |   | 10   |  
|Amortization of net obligation at transition |  |                           | 1    |   |                         |   | 1    |      |  |   | 2    |   |  |   | 2    |  
|Recognized net actuarial loss                |  |                           | 33   |   |                         |   | 29   |      |  |   | 66   |   |  |   | 58   |  
|                                             |  |                           |      |   |                         |   |      |      |  |   |      |   |  |   |      |  
|Net periodic benefit cost                    |  | $                         | 405  |   |                         | $ | 327  |      |  | $ | 810  |   |  | $ | 654  |  
|                                             |  |                           |      |   |                         |   |      |      |  |   |      |   |  |   |      |  

The Company made its required 2006 fiscal year contribution to the pension plan in December 2005
in the amount of $1.31 million. The Company anticipates that it will make its 2007 contribution in December 2006. The pension plan has a fiscal year ending September 30, providing the Company flexibility as to the calendar year in which it
makes pension plan contributions.



|11. | In March 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No.156, Accounting for Servicing of Financial Assets an amendment of
FASB Statement 140 (Statement 156). Statement 156 amends Statement 140 with respect to separately recognized servicing assets and liabilities. Statement 156 requires an entity to recognize a servicing asset or liability each time it
undertakes an obligation to service a financial asset by entering into a servicing contract and requires all servicing assets and liabilities to be initially measured at fair value, if practicable. Statement 156 also permits entities
to subsequently measure servicing assets and liabilities using an amortization method or fair value measurement method. Under the amortization method, servicing assets and liabilities are amortized in proportion to and over the
estimated period of servicing. Under the fair value measurement method, servicing assets are measured at fair value at each reporting date and changes in fair value are reported in net income for the period the change occurs.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

The Company does not expect the adoption of Statement 156 at the beginning of 2007 to have a material impact on its operations or financial results.



|12. | The following table displays detail of comprehensive income for the three and six month periods ended June 30, 2006 and 2005:
|--- | -----------------------------------------------------------------------------------------------------------------------------



|                                                                               |  |                           |        |                         |      |   |       |  |   |        |   |  |   |       |  
|------------------------------------------------------------------------------ |  | ------------------------- | ------ | ----------------------- | ---- | - | ----- |  | - | ------ | - |  | - | ----- | -
|                                                                               |  | Three Months EndedJune 30 |        | Six Months EndedJune 30 |     
|(in thousands)                                                                 |  | 2006                      |        |                         | 2005 |   | 2006  |  |   | 2005   |  
|Net income                                                                     |  | $                         | 1,801  |                         |      | $ | 1,549 |  | $ | 3,352  |   |  | $ | 3,220 |  
|Unrealized gains (losses) on securities available for sale, net of tax expense |  |                           | (1,578 | )                       |      |   | 740   |  |   | (1,979 | ) |  |   | (661  | )
|Less: reclassification adjustment, net of tax                                  |  |                           | (18    | )                       |      |   | 3     |  |   | (20    | ) |  |   | (80   | )
|                                                                               |  |                           |        |                         |      |   |       |  |   |        |   |  |   |       |  
|Total comprehensive income                                                     |  | $                         | 205    |                         |      | $ | 2,292 |  | $ | 1,353  |   |  | $ | 2,479 |  
|                                                                               |  |                           |        |                         |      |   |       |  |   |        |   |  |   |       |  

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Managements
discussion and analysis of financial information is presented to aid the reader in understanding and evaluating the financial condition and results of operations of Eastern Virginia Bankshares, Inc. (the Company. This



10



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##### Table of Contents

discussion provides information about the major components of the results of operations, financial condition, liquidity and capital resources of the Company.
This discussion should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements presented elsewhere in this report and in the Annual Report on Form 10-K for the year ended December 31,
2005. Operating results include those of the Company and subsidiaries combined for all periods presented.

CRITICAL ACCOUNTING POLICIES

General

The Companys financial statements are
prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The financial information contained within our 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. For
example, we use historical loss factors as one factor in determining the inherent loss that may be present in our loan portfolio. Actual losses, however, could differ substantially from the historical factors that we use. In addition, GAAP itself
may change from one previously acceptable method to another method. Although the economics of our transactions would be the same, the timing of events that would impact our transactions could change.

Allowance for Loan Losses

The allowance for loan losses is an
estimate of the losses that may be sustained in our loan portfolio. The allowance is based on two basic principles of accounting: (i) Statement of Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies, which
requires that losses be accrued when they are probable of occurring and estimable and (ii) SFAS No. 114, Accounting by Creditors for Impairment of a Loan, which requires that losses be accrued based on the differences between the
value of the collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.

The Company
evaluates loans individually for impairment, including loans on nonaccrual, loans past due 90 days or more, restructured loans and other loans selected by management as required by SFAS No. 114. The evaluations are based upon discounted
expected cash flows or collateral valuations. If the evaluation shows that a loan is individually impaired, then a specific reserve is established for the amount of the impairment. If a loan evaluated individually is not impaired, then the loan is
assessed for impairment under SFAS No. 5.

For loans without individual measures of impairment, the Company makes estimates of losses for groups of
loans as required by SFAS No. 5. Loans are grouped by similar characteristics, including the type of loan, the assigned loan grade and general collateral type. A loss rate reflecting the expected loss inherent in a group of loans is derived
based upon historical loss rates for each loan type, the predominant collateral type for the group and the terms of the loan. The resulting estimate of losses for groups of loans are adjusted for relevant environmental factors and other conditions
of the portfolio of loans including: borrower or industry concentrations; levels and trends in delinquencies, charge-offs and recoveries; changes in risk selection; level of experience, ability and depth of lending staff; and national and economic
conditions.

The amounts of estimated losses for loans individually evaluated for impairment and groups of loans are added together for a total estimate of
loan losses. The estimate of losses is compared to the allowance for loan losses of the Company as of the evaluation date and, if the estimate of losses is greater than the allowance, an additional provision to the allowance is made. If the estimate
of losses is less than the allowance, the degree to which the allowance exceeds the estimate is evaluated to determine whether a reduction to the allowance is necessary. While management uses the best information available to establish the allowance
for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the valuations. Such adjustments would be made in the relevant period and may be material to the
Consolidated Financial Statements.

EXECUTIVE OVERVIEW

Net income for the quarter ended June 30, 2006 was $1.8 million, an increase of $252 thousand from second quarter 2005 net income of $1.5 million. This increase is the result of increases in both net interest income and noninterest
income that exceeded the increase in noninterest expense. Year-to-date, net income is up $132 thousand or 4.1%,



11



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##### Table of Contents

impacted significantly by nonrecurring expenses in the first five months of the year related to the April consolidation to a one-bank holding company. Net
interest income increased $482 thousand for the quarter ended June 30, 2006, compared to the same period in 2005. This increase was the result of strong loan growth that increased interest income on loans of $1.8 million and an increase in
investment income of $114 thousand compared to the second quarter of last year. These increases were largely offset by increases in funding expenses which increased $1.5 million compared to the same period last year. A flat to sometimes inverted
yield curve has contributed to higher interest rates on deposits and increased borrowings to fund loan growth.

Total assets at June 30, 2006 were
$794.0 million, up $61.5 million, or 8.4%, from $732.5 million at June 30, 2005 and up $30.1 million, or 3.9%, from $763.9 million at December 31, 2005. For the quarter, total assets averaged $783.0 million, 10.4% above the second quarter
2005 average of $709.5 million. Total loans, net of unearned income, amounted to $611.9 million at June 30, 2006, an increase of $75.7 million, or 14.1%, from $536.2 million at June 30, 2005, and an increase of $37.8 million, or 6.6%, from
$574.1 million at December 31, 2005. Net loans as a percent of total assets were 76.2% at June 30, 2006, as compared to 72.3% at June 30, 2005 and 74.3% at 2005 year-end. Loan demand continues to be strong at a time that deposits are
not growing.

At June 30, 2006, the securities portfolio totaled $127.0 million, down $12.1 million, or 8.7%, from $139.2 million at June 30,
2005 and down $8.4 million, or 6.2%, from $135.4 million at December 31, 2005. The decrease in the investment portfolio is primarily related to using investment portfolio cash flow to fund strong loan growth. Most of the funds that are invested
in the securities portfolio are part of managements effort to balance interest rate risk and to provide liquidity. There were $2.3 million of federal funds sold at June 30, 2006, while there were no federal funds sold at either
June 30, 2005 or December 31, 2005, when the Company was in a purchased position of $6.8 million at 2005 year end.

Total deposits of $624.8
million at June 30, 2006 represented an increase of $22.0 million, or 3.6%, from $602.8 million one year ago and a decrease of $3.5 million, or less than 1.0%, from $628.3 million at December 31, 2005. EVB offers attractive, yet
competitive, rates to maintain a strong stable deposit base. However, the cost of deposits has continued to rise in step with the Federal Reserve interest increases. At June 30, 2006, noninterest-bearing demand deposits were up $10.7 million or
11.6% and $3.8 million or 3.8% compared to June 30, 2005 and December 31, 2005, respectively. For the same dates, interest-bearing deposits were up $11.2 million, or 2.2%, and down $7.3 million, or 1.4%, respectively.

FHLB borrowings at June 30, 2006 totaled $91.2 million, a $38.6 million, or 73.3% increase over $52.6 million at June 30, 2005 and $39.3 million or 75.7% above
$51.9 million at December 31, 2005. This change reflects managements continued strategy to take advantage of interest rate spreads that benefit the Company by locking in the interest rate spread over the life of the liability. With loan
demand outpacing deposit growth, management believes that this is a reasonable approach to control funding costs.

FASB Pronouncement No. 115 requires
the Company to show the effect of market changes in the value of securities available for sale. The effect of the change in market value of securities, net of income taxes, is reflected in a line titled Accumulated other comprehensive (loss),
net in the Shareholders Equity section of the Consolidated Balance Sheets and was negative $3.8 million at June 30, 2006, a decrease of $3.6 million from June 30, 2005 and a decrease of $2.0 million from December 31, 2005.
The unrealized gain or (loss) on securities is presented as a value at one specific point in time but fluctuates significantly over time depending on interest rate changes.

RESULTS OF OPERATIONS

Net Income

Net income increased 16.3% to $1.8 million for the three months ended June 30, 2006, compared to $1.5 million for the same period in 2005. Diluted earnings per share increased 15.6% to $0.37 for the second
quarter of 2006, compared to $0.32 for the same quarter in 2005. Net interest income increased $482 thousand for the quarter ended June 30, 2006, when compared to the same period in 2005. This second quarter increase in net interest income was
the result of higher earnings on the loan portfolio and an increase in investment income, offset by an increase in funding costs. Loan loss provision was essentially flat at $204 thousand for the quarter, compared to $198 thousand in the second
quarter of 2005. Noninterest income excluding securities gains or losses was up $142 thousand, or 12.4%, for the quarter when compared to the same period in 2005. This increase comes from a $79 thousand or 10.6% increase in service charge



12



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##### Table of Contents

income resulting from both rate and volume increases and a $62 thousand or 15.9% increase in other noninterest income as the investment and mortgage
functions had higher income than for the period ended June 30, 2005. Securities gains of $27 thousand for the quarter compared favorably to a $5 thousand loss in the second quarter of 2005. Noninterest expense for the three months ended
June 30, 2006 was up $287 thousand or 4.6% to $6.6 million compared to $6.3 million for the second quarter of 2005. Salaries and benefits were up $17 thousand or 0.5%, all of which is related to a $78 thousand increase in pension expense;
occupancy was up $130 thousand or 15.2%, mostly from increased lease expenses. Other expenses increased $140 thousand with all of that increase being marketing expenses related to the consolidation of the three former banks to create EVB in April
2006.

Net income for the six months ended June 30, 2006 was up $132 thousand or 4.1% as the second quarter increase was partially offset by the first
quarter decrease from first quarter 2005 of 7.2% related to the bank consolidation project. Year-to-date net interest income is up $703 thousand or 4.8%. Provision for loan losses is up $111 thousand or 53.9%, primarily related to growth in the loan
portfolio. Noninterest income excluding securities gains and losses was up $269 thousand or 12.5%, realized gains on securities sales was down $90 thousand, salaries and benefits was up $191 thousand or 2.7% of which $156 thousand was the pension
expense increase, occupancy and equipment expense was up $212 thousand or 12.1%, marketing expense related to the bank consolidation and EVB name roll out was up $263 thousand. Consultant fees were down $103 thousand or 18.9% and data processing
expense was down $114 thousand or 30.2% as the Company began to realize some of the benefits of consolidation of three banks into a one-bank holding company.

Yield on earning assets was 6.89% for the quarter ended June 30, 2006 compared to 6.54% for the same period in 2005. The cost of interest bearing liabilities was 2.94% for the quarter ended June 30, 2006, up 74 basis points when
compared to 2.20% for the quarter ended June 30, 2005. Increases in both earning asset yield and funds cost are the result of interest rate increases by the Federal Open Market Committee. The resulting flat to inverted yield curve created a
much more competitive rate environment that has increased the cost of funds by a greater extent than the increased income from earning assets. Return on average assets increased to 0.92%, compared to 0.88% in the second quarter of 2005, and return
on average equity increased to 11.54% compared to 10.40% for the quarters ended June 30, 2006 and 2005, respectively.

Return on average assets and
return on average equity for the first six months of 2006 were 0.87% and 10.81%, respectively compared to 0.93% and 10.82% for the same period in 2005.

Net Interest Income

Net interest income on a fully tax equivalent basis totaled $8.1 million for the quarter, a $472 thousand increase over
the second quarter of 2005. Average earning assets for the quarter ended June 30, 2006 increased 12.1% to $734.7 million compared to $655.4 million for the same quarter of 2005. Average loans increased 14.7%, average securities increased 2.4%
and average federal funds sold decreased 18.4% when comparing the second quarter of 2006 to the same period in 2005. The fully tax equivalent net interest margin for the three-month period ended June 30, 2006 was 4.43% compared to 4.68% for the
quarter ended June 30, 2005. For the quarter, the yield on earning assets was up 35 basis points and the cost of interest bearing liabilities was up 74 basis points, substantially narrowing the spread between the yield on earning assets and the
cost of funds. This reflects intense competition in loan pricing even as the cost of funding is increasing.

Net interest income on a fully tax equivalent
basis totaled $15.8 million for the first six months of 2006, a $676 thousand increase over the Companys performance for the first half of 2005. Average earning assets for the six months ended June 30, 2006 increased 12.4% to $729.6
million compared to $649.0 million for the first six months of 2005. Average loans increased 14.3%, average securities increased 5.0% and average federal funds sold increased 5.1% when comparing the first six months of 2006 to the same period in
2005. The fully tax equivalent net interest margin for the six-month period ended June 30, 2006 was 4.36% compared to 4.56% for the year ended 2005 and 4.69% for the six months ended June 30, 2005. For the six months ended June 30,
2006, the yield on earning assets was up 25 basis points and the cost of interest bearing liabilities was up 71 basis points, substantially narrowing the spread between the yield on earning assets and the cost of funds as compared to the first six
months of 2005.

Tables that disclose fully tax equivalent net interest income calculations for the quarter and six months ended June 30, 2006 and
2005 follow.



13



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##### Table of Contents

Average Balances, Income and Expense, Yields and Rates (1)



|                                                        |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|------------------------------------------------------- |  | -------------------------- | ------- | - | -------------- | - | ---------- |  | ---- | -------------- |  | - | -------------- | - | ---------- | - | ------ |  | ---- | -
|                                                        |  | Three Months Ended June 30 |        
|                                                        |  | 2006                       |         |   | 2005           |  
|                                                        |  | AverageBalance             |         |   | Income/Expense |   | Yield/Rate |  |      | AverageBalance |  |   | Income/Expense |   | Yield/Rate |  
|Assets:                                                 |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Securities                                              |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Taxable                                                 |  | $                          | 94,833  |   |                | $ | 1,193      |  | 5.05 | %              |  | $ | 89,935         |   |            | $ | 1,069  |  | 4.77 | %
|Tax exempt (1)                                          |  |                            | 35,158  |   |                |   | 524        |  | 5.98 | %              |  |   | 37,017         |   |            |   | 550    |  | 5.96 | %
|                                                        |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total securities                                        |  |                            | 129,991 |   |                |   | 1,717      |  | 5.30 | %              |  |   | 126,952        |   |            |   | 1,619  |  | 5.12 | %
|Federal funds sold                                      |  |                            | 3,075   |   |                |   | 36         |  | 4.70 | %              |  |   | 3,769          |   |            |   | 28     |  | 2.98 | %
|Loans, net of unearned income (2)                       |  |                            | 601,623 |   |                |   | 10,876     |  | 7.25 | %              |  |   | 524,701        |   |            |   | 9,032  |  | 6.90 | %
|                                                        |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total earning assets                                    |  |                            | 734,689 |   |                |   | 12,629     |  | 6.89 | %              |  |   | 655,422        |   |            |   | 10,679 |  | 6.54 | %
|Less allowance for loan losses                          |  |                            | (6,723  | ) |                |   |            |  |      |                |  |   | (6,501         | ) |            |   |        |  |      |  
|Total non-earning assets                                |  |                            | 55,079  |   |                |   |            |  |      |                |  |   | 60,581         |   |            |   |        |  |      |  
|                                                        |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total assets                                            |  | $                          | 783,045 |   |                |   |            |  |      |                |  | $ | 709,502        |   |            |   |        |  |      |  
|                                                        |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Liabilities & Shareholders Equity:                     |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Interest bearing deposits                               |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Checking                                                |  | $                          | 78,588  |   |                | $ | 60         |  | 0.31 | %              |  | $ | 77,103         |   |            | $ | 97     |  | 0.50 | %
|Savings                                                 |  |                            | 103,455 |   |                |   | 325        |  | 1.26 | %              |  |   | 125,363        |   |            |   | 312    |  | 1.00 | %
|Money market savings                                    |  |                            | 45,800  |   |                |   | 242        |  | 2.12 | %              |  |   | 52,260         |   |            |   | 137    |  | 1.05 | %
|Large dollar certificates of deposit (5)                |  |                            | 97,909  |   |                |   | 1,005      |  | 4.12 | %              |  |   | 75,383         |   |            |   | 634    |  | 3.37 | %
|Consumer certificates of deposit                        |  |                            | 198,215 |   |                |   | 1,849      |  | 3.74 | %              |  |   | 175,814        |   |            |   | 1,345  |  | 3.07 | %
|                                                        |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total interest-bearing deposits                         |  |                            | 523,967 |   |                |   | 3,481      |  | 2.66 | %              |  |   | 505,923        |   |            |   | 2,525  |  | 2.00 | %
|Federal funds purchased                                 |  |                            | 3,026   |   |                |   | 39         |  | 5.17 | %              |  |   |               |   |            |   |       |  |     |  
|Other borrowings                                        |  |                            | 87,747  |   |                |   | 986        |  | 4.51 | %              |  |   | 45,728         |   |            |   | 505    |  | 4.43 | %
|                                                        |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total interest-bearing liabilities                      |  |                            | 614,740 |   |                |   | 4,506      |  | 2.94 | %              |  |   | 551,651        |   |            |   | 3,030  |  | 2.20 | %
|Noninterest-bearing liabilities                         |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Demand deposits                                         |  |                            | 99,306  |   |                |   |            |  |      |                |  |   | 92,667         |   |            |   |        |  |      |  
|Other liabilities                                       |  |                            | 6,393   |   |                |   |            |  |      |                |  |   | 5,417          |   |            |   |        |  |      |  
|                                                        |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total liabilities                                       |  |                            | 720,439 |   |                |   |            |  |      |                |  |   | 649,735        |   |            |   |        |  |      |  
|                                                        |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Shareholders equity                                    |  |                            | 62,606  |   |                |   |            |  |      |                |  |   | 59,767         |   |            |   |        |  |      |  
|                                                        |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total liabilities and shareholders equity              |  | $                          | 783,045 |   |                |   |            |  |      |                |  | $ | 709,502        |   |            |   |        |  |      |  
|                                                        |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Net interest income                                     |  |                            |         |   |                | $ | 8,123      |  |      |                |  |   |                |   |            | $ | 7,649  |  |      |  
|                                                        |  |                            |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Interest rate spread (3)                                |  |                            |         |   |                |   |            |  | 3.95 | %              |  |   |                |   |            |   |        |  | 4.33 | %
|Interest expense as a percent of average earning assets |  |                            |         |   |                |   |            |  | 2.46 | %              |  |   |                |   |            |   |        |  | 1.85 | %
|Net interest margin (4)                                 |  |                            |         |   |                |   |            |  | 4.43 | %              |  |   |                |   |            |   |        |  | 4.68 | %

---

|Notes: | 
|------ | 



|(1) | Income and yields are reported on a tax equivalent basis assuming a federal tax rate of 34%. The tax equivalent adjustment for the quarter is $160 thousand, compared to $168
thousand in the prior year.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Nonaccrual loans have been included in the computations of average loan balances.
|--- | ---------------------------------------------------------------------------------

|(3) | Interest rate spread is the average yield on earning assets, calculated on a fully taxable basis, less the average rate incurred on interest-bearing liabilities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Net interest margin is the net interest income, calculated on a fully taxable basis assuming a federal income tax rate of 34%, expressed as a percentage of average earning assets.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Large dollar certificates of deposit are certificates issued in amounts of $100,000 or greater.
|--- | -----------------------------------------------------------------------------------------------



14



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##### Table of Contents

Average Balances, Income and Expense, Yields and Rates (1)



|                                                        |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|------------------------------------------------------- |  | ------------------------ | ------- | - | -------------- | - | ---------- |  | ---- | -------------- |  | - | -------------- | - | ---------- | - | ------ |  | ---- | -
|                                                        |  | Six Months Ended June 30 |        
|                                                        |  | 2006                     |         |   | 2005           |  
|                                                        |  | AverageBalance           |         |   | Income/Expense |   | Yield/Rate |  |      | AverageBalance |  |   | Income/Expense |   | Yield/Rate |  
|Assets:                                                 |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Securities                                              |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Taxable                                                 |  | $                        | 97,009  |   |                | $ | 2,371      |  | 4.93 | %              |  | $ | 87,885         |   |            | $ | 2,070  |  | 4.75 | %
|Tax exempt (1)                                          |  |                          | 35,448  |   |                |   | 1,052      |  | 5.98 | %              |  |   | 38,238         |   |            |   | 1,140  |  | 6.01 | %
|                                                        |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total securities                                        |  |                          | 132,457 |   |                |   | 3,423      |  | 5.21 | %              |  |   | 126,123        |   |            |   | 3,210  |  | 5.13 | %
|Federal funds sold                                      |  |                          | 3,255   |   |                |   | 76         |  | 4.71 | %              |  |   | 3,098          |   |            |   | 42     |  | 2.73 | %
|Loans, net of unearned income (2)                       |  |                          | 593,873 |   |                |   | 20,972     |  | 7.12 | %              |  |   | 519,769        |   |            |   | 17,686 |  | 6.86 | %
|                                                        |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total earning assets                                    |  |                          | 729,585 |   |                |   | 24,471     |  | 6.76 | %              |  |   | 648,990        |   |            |   | 20,938 |  | 6.51 | %
|Less allowance for loan losses                          |  |                          | (6,703  | ) |                |   |            |  |      |                |  |   | (6,607         | ) |            |   |        |  |      |  
|Total non-earning assets                                |  |                          | 56,513  |   |                |   |            |  |      |                |  |   | 58,791         |   |            |   |        |  |      |  
|                                                        |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total assets                                            |  | $                        | 779,395 |   |                |   |            |  |      |                |  | $ | 701,174        |   |            |   |        |  |      |  
|                                                        |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Liabilities & Shareholders Equity:                     |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Interest bearing deposits                               |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Checking                                                |  | $                        | 79,268  |   |                | $ | 144        |  | 0.37 | %              |  | $ | 77,327         |   |            | $ | 200    |  | 0.52 | %
|Savings                                                 |  |                          | 106,325 |   |                |   | 666        |  | 1.26 | %              |  |   | 127,342        |   |            |   | 622    |  | 0.98 | %
|Money market savings                                    |  |                          | 47,041  |   |                |   | 424        |  | 1.82 | %              |  |   | 53,226         |   |            |   | 257    |  | 0.97 | %
|Large dollar certificates of deposit (5)                |  |                          | 97,444  |   |                |   | 1,951      |  | 4.04 | %              |  |   | 72,135         |   |            |   | 1,211  |  | 3.39 | %
|Consumer certificates of deposit                        |  |                          | 196,566 |   |                |   | 3,572      |  | 3.66 | %              |  |   | 174,128        |   |            |   | 2,610  |  | 3.02 | %
|                                                        |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total interest-bearing deposits                         |  |                          | 526,644 |   |                |   | 6,757      |  | 2.59 | %              |  |   | 504,158        |   |            |   | 4,900  |  | 1.96 | %
|Federal funds purchased                                 |  |                          | 3,316   |   |                |   | 79         |  | 4.80 | %              |  |   |               |   |            |   |       |  |      |  
|Other borrowings                                        |  |                          | 83,878  |   |                |   | 1,860      |  | 4.47 | %              |  |   | 42,971         |   |            |   | 939    |  | 4.41 | %
|                                                        |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total interest-bearing liabilities                      |  |                          | 613,838 |   |                |   | 8,696      |  | 2.86 | %              |  |   | 547,129        |   |            |   | 5,839  |  | 2.15 | %
|Noninterest-bearing liabilities                         |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Demand deposits                                         |  |                          | 96,823  |   |                |   |            |  |      |                |  |   | 89,054         |   |            |   |        |  |      |  
|Other liabilities                                       |  |                          | 6,201   |   |                |   |            |  |      |                |  |   | 4,960          |   |            |   |        |  |      |  
|                                                        |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total liabilities                                       |  |                          | 716,862 |   |                |   |            |  |      |                |  |   | 641,143        |   |            |   |        |  |      |  
|                                                        |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Shareholders equity                                    |  |                          | 62,533  |   |                |   |            |  |      |                |  |   | 60,031         |   |            |   |        |  |      |  
|                                                        |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total liabilities and shareholders equity              |  | $                        | 779,395 |   |                |   |            |  |      |                |  | $ | 701,174        |   |            |   |        |  |      |  
|                                                        |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Net interest income                                     |  |                          |         |   |                | $ | 15,775     |  |      |                |  |   |                |   |            | $ | 15,099 |  |      |  
|                                                        |  |                          |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Interest rate spread (3)                                |  |                          |         |   |                |   |            |  | 3.91 | %              |  |   |                |   |            |   |        |  | 4.35 | %
|Interest expense as a percent of average earning assets |  |                          |         |   |                |   |            |  | 2.40 | %              |  |   |                |   |            |   |        |  | 1.81 | %
|Net interest margin (4)                                 |  |                          |         |   |                |   |            |  | 4.36 | %              |  |   |                |   |            |   |        |  | 4.69 | %

---

|Notes: | 
|------ | 



|(1) | Income and yields are reported on a tax equivalent basis assuming a federal tax rate of 34%. The tax equivalent adjustment year-to-date 2006 is $321 thousand, compared to $348 in
the prior year.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Nonaccrual loans have been included in the computations of average loan balances.
|--- | ---------------------------------------------------------------------------------

|(3) | Interest rate spread is the average yield on earning assets, calculated on a fully taxable basis, less the average rate incurred on interest-bearing liabilities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Net interest margin is the net interest income, calculated on a fully taxable basis assuming a federal income tax rate of 34%, expressed as a percentage of average earning assets.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Large dollar certificates of deposit are certificates issued in amounts of $100,000 or greater.
|--- | -----------------------------------------------------------------------------------------------



15



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##### Table of Contents

Noninterest Income

Noninterest income excluding net realized gains/(losses) on securities sales was $1.3 million for the second quarter of 2006 compared to $1.1 million for the same quarter in 2005. Net realized gain on called or sold securities was $27
thousand for the three months ended June 30, 2006, compared to a realized loss of $5 thousand for the same period of 2005. Service charges on deposit accounts were $825 thousand for the quarter, compared to $746 thousand for the comparable
period in 2005. Other operating income increased to $453 thousand for the quarter, compared to $391 thousand for the three months ended June 30, 2005. For the six-month period ended June 30, noninterest income excluding net realized gains
on securities sales was $2.4 million compared to $2.2 million in the prior year. Net realized gains on called or sold securities was $31 thousand for the first six months of 2006, compared to $121 thousand for the same period in 2005. Service
charges on deposit accounts were up $112 thousand and other operating income is up $157 thousand, both on a 2006 year-to-date basis, compared to the same period in 2005.

Noninterest Expense

Total noninterest expense increased $287 thousand, or 4.6%, from $6.3 million for the second
quarter of 2005 to $6.6 million in the three months ended June 30, 2006. The increase in noninterest expense was the result of overall growth of the Company and organization/consolidation costs related to the one bank holding company
reorganization. The expense increases included $130 thousand in occupancy and equipment and $188 thousand in marketing, partially offset by decreases in data processing, consultant fees and telephone. Given the heavy marketing and operational
expenses in the quarter related to the consolidation into a one-bank holding company, management is pleased with the control of noninterest expense.

Total
salary and benefits expense of $3.6 million in the second quarter of 2006 represented an increase of $17 thousand, or 0.5%, compared to the second quarter of 2005. Net occupancy and equipment expense increased 15.2% compared to the quarter ended
June 30, 2005, from $856 thousand in 2005 to $986 thousand in 2006, with $70 thousand of the increase directly related to the cost of the Glenns office that opened in June 2005.

All other noninterest expenses increased $140 thousand to $2.0 million for the second quarter of 2006 from $1.9 million for the same period in 2005. Most of the expense categories were down with only
marketing/advertising up $188 thousand. The marketing/advertising expense was incurred to promote the new bank name and corporate image. Despite heavy consultant fees related to the consolidation to a one-bank holding company, consulting fee expense
was down $99 thousand, compared to the second quarter of 2005 when the Company was using a consultant to assist with consolidation of loan and deposit operations.

For the six-month period ended June 30, 2006 noninterest expense was up 4.3% to $12.9 million, compared to $12.4 million for the same period in 2005. Expense increases have been incurred as follows: salaries and benefits $191 thousand
or 2.7%, occupancy and equipment $212 thousand or 12.1% and marketing/advertising $263 thousand or 115%. Material expense decreases year-to-date include data processing $114 thousand and consultant fees $103 thousand. Excluding year-to-date expenses
related to the one-bank holding company consolidation, management believes that noninterest expense would be relatively flat to the prior year.

Income
Taxes

Income tax expense for the quarter ended June 30, 2006 was $700 thousand, compared to $590 thousand for the same period in 2005. Income
taxes reflected an effective tax rate of 28.0% for the second quarter of 2006 compared to 27.6% for the second quarter 2005 and 27.8% for the full year 2005. For the six months ended June 30, income tax expense was $1.3 million for 2006,
compared to $1.2 million in the prior year.

Also impacting the effective tax rate is a decrease in tax exempt income as the Company decreased the
percentage of the investment portfolio invested in tax free municipal bonds.

ASSET QUALITY

The Companys allowance for loan losses is an estimate of the amount needed to provide for possible losses in the loan portfolio. In determining adequacy of the
allowance, management considers the Companys historical loss experience, the size and composition of the loan portfolio, specific impaired loans, the overall level of nonperforming loans, the value and adequacy of collateral and guarantors,
experience and depth of lending staff, effects of credit concentrations and economic conditions. The allowance is increased by a provision for loan losses, which is charged to expense and



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reduced by charge offs, net of recoveries. Because the risk of loan loss includes general economic trends as well as conditions affecting individual
borrowers, the allowance for loan losses can only be an estimate. (See the Allowance for Loan Losses discussion under Critical Accounting Policies earlier in this section.)

Total nonperforming assets, which consist of nonaccrual loans, loans past due 90 days and still accruing interest and foreclosed properties were $1.8 million at June 30, 2006, $2.5 million at December 31,
2005 and $3.2 million at June 30, 2005. Nonperforming assets are composed largely (85.8%) of loans secured by real estate in the Companys market area. Based on estimated fair values of the related real estate, management considers
these amounts recoverable, with any individual deficiency covered by the allowance for loan losses. Total loan charge-offs, less recoveries, amounted to $39 thousand for the quarter and $126 thousand year-to-date representing an annualized ratio of
net charge-offs to total average loans, net of unearned income, of 0.03% for the quarter and 0.04% for the six months ended June 30, 2006. Net charge-offs for the second quarter 2005 and the first half of 2005 net charge-offs were $183 thousand
and $423 thousand, respectively, with an annualized ratio of net charge-offs of 0.14% for the quarter, and 0.16% for the six month period. 2005 full year net charge-offs were $627 thousand, or 0.12% of average loans. The 0.30% ratio of nonperforming
loans to total loans at June 30, 2006 was down from 0.44% at December 31, 2005 and from 0.59% at June 30, 2005. This decrease results from improved loan quality with a significant decrease in impaired and nonperforming loans as the
nonaccrual ratio reached another historical low at June 30, 2006.

The allowance for loan losses of $6.8 million at June 30, 2006 is up
moderately when compared to $6.6 million at December 31, 2005 and $6.5 million at June 30, 2005. The allowance is up $191 thousand from year-end and up $333 thousand compared to June 30, 2005. This reasonably flat balance in the
allowance reflects strong asset quality over the last year as increases to the provision reflected the inherent strength of new loans. The ratio of allowance for loan losses to total loans was 1.11% at June 30, 2006, compared to 1.15% at 2005
year-end and 1.20% at June 30, 2005. The allowance for loans losses at June 30, 2006 includes $2.05 million of specific impaired loan reserves.

At June 30, 2006, the Company reported $13.1 million in impaired loans, a decrease of $1.2 million from $14.3 million at December 31, 2005. The average balance of impaired loans for the three months ended June 30, 2006 was
$14.4 million.

The following table summarizes the Companys nonperforming assets at the dates indicated.



|                                                          |  |             |         |   |                 |   |        |             |  |   |        |  
|--------------------------------------------------------- |  | ----------- | ------- | - | --------------- | - | ------ | ----------- |  | - | ------ | -
|Nonperforming Assets (Dollars in thousands)               |  | June 302006 |         |   | December 312005 |   |        | June 302005 | 
|Nonaccrual loans                                          |  | $           | 412     |   |                 | $ | 884    |             |  | $ | 1,289  |  
|Restructured loans                                        |  |             |        |   |                 |   |       |             |  |   |       |  
|Loans past due 90 days and accruing interest              |  |             | 1,395   |   |                 |   | 1,655  |             |  |   | 1,824  |  
|                                                          |  |             |         |   |                 |   |        |             |  |   |        |  
|Total nonperforming loans                                 |  | $           | 1,807   |   |                 | $ | 2,539  |             |  | $ | 3,113  |  
|Other real estate owned                                   |  |             |        |   |                 |   |       |             |  |   | 65     |  
|                                                          |  |             |         |   |                 |   |        |             |  |   |        |  
|Total nonperforming assets                                |  | $           | 1,807   |   |                 | $ | 2,539  |             |  | $ | 3,178  |  
|Nonperforming assets to total loans and other real estate |  |             | 0.30    | % |                 |   | 0.44   | %           |  |   | 0.59   | %
|Allowance for loan losses to nonaccrual loans             |  |             | 1647.26 | % |                 |   | 746.72 | %           |  |   | 501.09 | %
|Net charge-offs to average loans for the year             |  |             | 0.04    | % |                 |   | 0.12   | %           |  |   | 0.16   | %
|Allowance for loan losses to period end loans             |  |             | 1.11    | % |                 |   | 1.15   | %           |  |   | 1.20   | %

LIQUIDITY

Liquidity represents the Companys ability to meet present and future deposit withdrawals, to fund loans, to maintain reserve requirements and to operate the organization. To meet its liquidity needs, EVB maintains cash reserves and
has an adequate flow of funds from maturing loans, securities and short-term investments. In addition, EVBs subsidiary bank maintains borrowing arrangements with major regional banks and with the Federal Home Loan Bank. Management considers
its sources of liquidity to be sufficient to meet its estimated liquidity needs.

In the second quarter 2006, the Company borrowed an additional $15
million from the FHLB to fund loan growth and match the growth to rates lower than the current certificate of deposit rates. This continues a strategy that began during



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the first half of 2005 when the Company entered into three transactions with the FHLB in order to fund loan growth and take advantage of interest spreads
between the Companys deposit interest rates and the FHLB rates. The Company has made it a practice to fund growth at times with FHLB borrowings if the rates were below the Companys interest bearing deposit costs. These borrowings have
some potential long-term interest risk if rates fall significantly but overall give the Company an excellent spread and funding rate. The first and second quarter transactions increased the Companys contractual borrowings by $39.3 million from
$51.9 million at year-end 2005. Management will continue to look for funding opportunities while operating in a rising rate environment. These were the only changes to our contractual obligations that would impact liquidity since the 2005 Form 10-K
disclosure.

There have been no material changes in off-balance sheet arrangements that would impact liquidity since the 2005 Form 10-K disclosure.

Management believes that the Company maintains overall liquidity sufficient to satisfy its depositors requirements and meets its customers credit needs.

CAPITAL RESOURCES

EVBs strong capital position
provides the resources and flexibility to support asset growth, to absorb potential losses and to expand the Companys franchise when appropriate. The Companys risk-based capital position at June 30, 2006 was $68.9 million, or 11.57%
of risk-weighted assets, for Tier 1 capital and $75.7 million, or 12.72%, for total risk based capital. The risk-based capital position is up slightly in total dollars but the ratio itself is down slightly when compared to year end 2005, when the
Company reported $66.6 million, or 12.04%, for Tier 1 risk based capital and $73.2 million, or 13.23%, for total risk based capital. The lower ratio is primarily impacted by the continued growth in risk-based assets.

Tier 1 capital consists primarily of common shareholders equity, while total risk based capital adds a portion of the allowance for loan losses to Tier 1. Risk
weighted assets are determined by assigning various levels of risk to different categories of assets and off-balance sheet activities. Under current risk based capital standards, all banks and bank holding companies, including the Company, are
required to have Tier 1 capital of at least 4% and total capital of at least 8%.

INFLATION

In financial institutions, unlike most other industries, virtually all of the assets and liabilities are monetary in nature. As a result, interest rates have a more
significant impact on a banks performance than the effects of general levels of inflation. While interest rates are significantly impacted by inflation, neither the timing nor the magnitude of the changes are directly related to price level
movements. The impact of inflation on interest rates, loan demand, and deposits is reflected in the Consolidated Financial Statements.



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FORWARD-LOOKING STATEMENTS

Certain information contained in this discussion may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. These forward-looking statements are generally identified by phrases such as the Company expects, the Company believes or words of similar import. Such forward-looking statements involve known and unknown
risks including, but not limited to:



| |  |  | Interest rate fluctuations and the Companys ability to successfully manage that risk
| | - |  | -------------------------------------------------------------------------------------



| |  |  | Risk inherent in making loans such as repayment risks and fluctuating collateral values
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | Funding cost in an increasingly competitive environment
| | - |  | -------------------------------------------------------



| |  |  | Risk inherent in the investment portfolio which comprises approximately 17.0% of the Companys total assets
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | Changes in general economic and business conditions
| | - |  | ---------------------------------------------------



| |  |  | Competition within and from outside the banking industry
| | - |  | --------------------------------------------------------



| |  |  | Maintaining capital levels adequate to support the Companys growth
| | - |  | -------------------------------------------------------------------



| |  |  | The ability to successfully manage the Companys growth or implement its growth strategies if the Company is unable to identify attractive markets, locations or opportunities
to expand in the future
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reliance on the Companys management team, including its ability to attract and retain key personnel
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | New products and services in the banking industry
| | - |  | -------------------------------------------------



| |  |  | Problems with technology utilized by the Company
| | - |  | ------------------------------------------------



| |  |  | Changing trends in customer profiles
| | - |  | ------------------------------------



| |  |  | Integration of newly acquired branches or businesses, including maintaining cost controls and asset quality
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | Changes in laws and regulations applicable to the Company
| | - |  | ---------------------------------------------------------

Although the
Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance
or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risk
since 2005 year end as disclosed in the 2005 Form 10-K.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to provide
assurance that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods required by the
Securities and Exchange Commission. An evaluation of the effectiveness of the design and operations of the Companys disclosure controls and procedures as of the end of the period covered by this report was carried out under the supervision and
with the participation of management, including the Companys Chief Executive Officer and Chief Financial Officer. Based on such evaluation, such officers concluded that the Companys disclosure controls and procedures were effective as of
the end of such period. In addition, while the Company has reorganized and centralized many functions over the last year, it has maintained the control points that have been established. There was no negative change in the Companys internal
control over financial reporting that occurred during the quarter ended June 30, 2006 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There are no material pending legal proceedings to which the registrant or any of its
subsidiaries is a party. The only litigation in which EVB and its subsidiaries are involved pertains to collection suits involving delinquent loan accounts in the normal course of business.

Item 1A. Risk Factors

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



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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds(not applicable)

Item 3. Defaults Upon Senior Securities(not applicable)

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

The Company held its annual meeting of shareholders on
April 20, 2006. At this meeting, the shareholders approved the following proposal by the margins indicated:

To elect 10 directors to serve for terms
of one year each expiring at the 2007 annual meeting of shareholders



|                         |  |                  |  |                   
|------------------------ |  | ---------------- |  | ------------------
|                         |  | Number of Shares
|                         |  | For              |  | Withhold Authority
|W. Rand Cook             |  | 3,774,160        |  | 72,978            
|F. L. Garrett, III       |  | 3,662,947        |  | 184,191           
|Ira C. Harris            |  | 3,768,810        |  | 78,328            
|F. Warren Haynie, Jr.    |  | 3,770,989        |  | 76,149            
|William L. Lewis         |  | 3,770,597        |  | 76,542            
|Charles R. Revere        |  | 3,772,695        |  | 74,443            
|Joe A. Shearin           |  | 3,773,855        |  | 73,283            
|Howard R. Straughan, Jr. |  | 3,773,254        |  | 73,884            
|Leslie E. Taylor         |  | 3,745,070        |  | 102,068           
|J. T. Thompson, III      |  | 3,754,831        |  | 92,307            

Item 5. Other Information(not applicable)

Item 6. Exhibits

Exhibit 31.1  Rule 13a-14(a) Certification of Chief Executive Officer

Exhibit 31.2  Rule 13a-14(a) Certification of Chief Financial Officer

Exhibit 32.1Section 906 Certification of Chief Executive Officer

Exhibit 32.2  Section 906 Certification of Chief Financial Officer



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SIGNATURES

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



|                                     
|-------------------------------------
|Eastern Virginia Bankshares, Inc.    
|                                     
|/s/ Joe A. Shearin                   
|Joe A. Shearin                       
|President and Chief Executive Officer
|                                     
|/s/ Ronald L. Blevins                
|Ronald L. Blevins                    
|Chief Financial Officer              

Date: August 7, 2006



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Exhibit Index



|Exhibit | 31.1  Rule 13a-14(a) Certification of Chief Executive Officer
|------- | --------------------------------------------------------------



|Exhibit | 31.2  Rule 13a-14(a) Certification of Chief Financial Officer
|------- | --------------------------------------------------------------



|Exhibit | 32.1Section 906 Certification of Chief Executive Officer
|------- | ---------------------------------------------------------



|Exhibit | 32.2  Section 906 Certification of Chief Financial Officer
|------- | -----------------------------------------------------------



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