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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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

For the quarterly period ended September 30, 2006

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 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)



---

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 October 30, 2006 was 4,928,780.



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##### Table of Contents

EASTERN VIRGINIA BANKSHARES, INC.

FORM 10-Q

For the Quarter Ended September 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 |  | 12
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 21
|Item 4.    |  | Controls and Procedures                                                               |  | 21
|           |  |                                                                                      
|Part II    |  | Other Information                                                                     |  |   
|Item 1.    |  | Legal Proceedings                                                                     |  | 21
|Item 1A.   |  | Risk Factors                                                                          |  | 21
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 22
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  | 22
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 22
|Item 5.    |  | Other Information                                                                     |  | 22
|Item 6.    |  | Exhibits                                                                              |  | 22
|Signatures |  | 23                                                                                   



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)



|                                                                                                                                   |  |                             |         |   |                          |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ------------------------ | - | ------- | -
|                                                                                                                                   |  | September 302006(unaudited) |         |   | December 312005(audited) |  
|Assets:                                                                                                                            |  |                             |         |   |                          |   |         |  
|Cash and due from banks                                                                                                            |  | $                           | 14,484  |   |                          | $ | 21,516  |  
|Federal funds sold                                                                                                                 |  |                             | 1,009   |   |                          |   |        |  
|Securities available for sale, at fair value                                                                                       |  |                             | 127,545 |   |                          |   | 135,420 |  
|Loans, net of unearned income                                                                                                      |  |                             | 637,133 |   |                          |   | 574,085 |  
|Allowance for loan losses                                                                                                          |  |                             | (6,880  | ) |                          |   | (6,601  | )
|                                                                                                                                   |  |                             |         |   |                          |   |         |  
|Total loans, net                                                                                                                   |  |                             | 630,253 |   |                          |   | 567,484 |  
|Deferred income taxes                                                                                                              |  |                             | 2,857   |   |                          |   | 2,820   |  
|Bank premises and equipment, net                                                                                                   |  |                             | 16,261  |   |                          |   | 15,147  |  
|Accrued interest receivable                                                                                                        |  |                             | 3,913   |   |                          |   | 3,583   |  
|Goodwill                                                                                                                           |  |                             | 5,725   |   |                          |   | 5,725   |  
|Other assets                                                                                                                       |  |                             | 13,781  |   |                          |   | 12,231  |  
|                                                                                                                                   |  |                             |         |   |                          |   |         |  
|Total assets                                                                                                                       |  | $                           | 815,828 |   |                          | $ | 763,926 |  
|                                                                                                                                   |  |                             |         |   |                          |   |         |  
|Liabilities and Shareholders Equity:                                                                                              |  |                             |         |   |                          |   |         |  
|Liabilities                                                                                                                        |  |                             |         |   |                          |   |         |  
|Noninterest-bearing demand accounts                                                                                                |  | $                           | 102,437 |   |                          | $ | 99,718  |  
|Interest-bearing deposits                                                                                                          |  |                             | 539,720 |   |                          |   | 528,625 |  
|                                                                                                                                   |  |                             |         |   |                          |   |         |  
|Total deposits                                                                                                                     |  |                             | 642,157 |   |                          |   | 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                                                                                                           |  |                             | 1,984   |   |                          |   | 1,264   |  
|Other liabilities                                                                                                                  |  |                             | 4,702   |   |                          |   | 3,385   |  
|                                                                                                                                   |  |                             |         |   |                          |   |         |  
|Total liabilities                                                                                                                  |  |                             | 750,367 |   |                          |   | 702,052 |  
|                                                                                                                                   |  |                            
|Shareholders Equity                                                                                                               |  |                             |         |   |                          |   |         |  
|Common stock of $2 par value per share, authorized 50,000,000 shares, issued and outstanding 4,928,780 and 4,905,701,
respectively |  |                             | 9,858   |   |                          |   | 9,812   |  
|Retained earnings                                                                                                                  |  |                             | 57,450  |   |                          |   | 53,838  |  
|Accumulated other comprehensive (loss), net                                                                                        |  |                             | (1,847  | ) |                          |   | (1,776  | )
|                                                                                                                                   |  |                             |         |   |                          |   |         |  
|Total shareholders equity                                                                                                         |  |                             | 65,461  |   |                          |   | 61,874  |  
|                                                                                                                                   |  |                             |         |   |                          |   |         |  
|Total liabilities and shareholders equity                                                                                         |  | $                           | 815,828 |   |                          | $ | 763,926 |  
|                                                                                                                                   |  |                             |         |   |                          |   |         |  

See Notes to Consolidated Financial Statements



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##### Table of Contents

Eastern Virginia Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income (Unaudited)

(Dollars in thousands except per share amounts)



|                                                    |      |                                |        |                               |      |        |      |   |        |  |   |       
|--------------------------------------------------- | ---- | ------------------------------ | ------ | ----------------------------- | ---- | ------ | ---- | - | ------ |  | - | ------
|                                                    |      | Three Months EndedSeptember 30 |        | Nine Months EndedSeptember 30
|                                                    | 2006 |                                | 2005   |                               | 2006 |        | 2005
|Interest and Dividend Income                        |      |                                |        |                               |      |        |      |   |        |  |   |       
|Loans                                               |      | $                              | 11,450 |                               | $    | 9,426  |      | $ | 32,422 |  | $ | 27,112
|Interest on investments                             |      |                                |        |                               |      |        |      |   |        |  |   |       
|Taxable interest income                             |      |                                | 1,073  |                               |      | 1,128  |      |   | 3,313  |  |   | 3,107 
|Tax exempt interest income                          |      |                                | 340    |                               |      | 374    |      |   | 1,070  |  |   | 1,167 
|Dividends                                           |      |                                | 155    |                               |      | 28     |      |   | 287    |  |   | 119   
|Interest on federal funds sold                      |      |                                | 119    |                               |      | 23     |      |   | 195    |  |   | 64    
|                                                    |      |                                |        |                               |      |        |      |   |        |  |   |       
|Total interest and dividend income                  |      |                                | 13,137 |                               |      | 10,979 |      |   | 37,287 |  |   | 31,569
|                                                    |      |                                |        |                              
|Interest Expense                                    |      |                                |        |                               |      |        |      |   |        |  |   |       
|Deposits                                            |      |                                | 3,959  |                               |      | 2,822  |      |   | 10,716 |  |   | 7,722 
|Federal funds purchased                             |      |                                | 3      |                               |      | 17     |      |   | 81     |  |   | 55    
|Interest on FHLB advances                           |      |                                | 990    |                               |      | 525    |      |   | 2,464  |  |   | 1,140 
|Interest on trust preferred debt                    |      |                                | 211    |                               |      | 159    |      |   | 598    |  |   | 445   
|                                                    |      |                                |        |                               |      |        |      |   |        |  |   |       
|Total interest expense                              |      |                                | 5,163  |                               |      | 3,523  |      |   | 13,859 |  |   | 9,362 
|                                                    |      |                                |        |                               |      |        |      |   |        |  |   |       
|Net interest income                                 |      |                                | 7,974  |                               |      | 7,456  |      |   | 23,428 |  |   | 22,207
|Provision for Loan Losses                           |      |                                | 204    |                               |      | 282    |      |   | 521    |  |   | 488   
|                                                    |      |                                |        |                               |      |        |      |   |        |  |   |       
|Net interest income after provision for loan losses |      | $                              | 7,770  |                               | $    | 7,174  |      | $ | 22,907 |  | $ | 21,719
|Other Income                                        |      |                                |        |                               |      |        |      |   |        |  |   |       
|Service charges and fees on deposit accounts        |      |                                | 839    |                               |      | 760    |      |   | 2,382  |  |   | 2,159 
|Gain on available for sale securities               |      |                                | 5      |                               |      | 103    |      |   | 36     |  |   | 224   
|Gain on sale of OREO or fixed assets                |      |                                |       |                               |      | 22     |      |   | 26     |  |   | 22    
|Other operating income                              |      |                                | 515    |                               |      | 428    |      |   | 1,369  |  |   | 1,183 
|                                                    |      |                                |        |                               |      |        |      |   |        |  |   |       
|Total other income                                  |      |                                | 1,359  |                               |      | 1,313  |      |   | 3,813  |  |   | 3,588 
|                                                    |      |                                |        |                               |      |        |      |   |        |  |   |       
|Other Expenses                                      |      |                                |        |                               |      |        |      |   |        |  |   |       
|Salaries and benefits                               |      |                                | 3,634  |                               |      | 3,522  |      |   | 10,958 |  |   | 10,655
|Net occupancy expense of premises                   |      |                                | 991    |                               |      | 982    |      |   | 2,948  |  |   | 2,727 
|Data processing                                     |      |                                | 91     |                               |      | 176    |      |   | 355    |  |   | 549   
|Consultant fees                                     |      |                                | 108    |                               |      | 150    |      |   | 549    |  |   | 694   
|Telephone                                           |      |                                | 138    |                               |      | 138    |      |   | 417    |  |   | 418   
|Marketing and advertising                           |      |                                | 249    |                               |      | 126    |      |   | 741    |  |   | 355   
|Other operating expenses                            |      |                                | 1,182  |                               |      | 1,050  |      |   | 3,361  |  |   | 3,149 
|                                                    |      |                                |        |                               |      |        |      |   |        |  |   |       
|Total other expenses                                |      |                                | 6,393  |                               |      | 6,144  |      |   | 19,329 |  |   | 18,547
|                                                    |      |                                |        |                               |      |        |      |   |        |  |   |       
|Income before income taxes                          |      |                                | 2,736  |                               |      | 2,343  |      |   | 7,391  |  |   | 6,760 
|Income Tax Expense                                  |      |                                | 767    |                               |      | 656    |      |   | 2,070  |  |   | 1,853 
|                                                    |      |                                |        |                               |      |        |      |   |        |  |   |       
|Net income                                          |      | $                              | 1,969  |                               | $    | 1,687  |      | $ | 5,321  |  | $ | 4,907 
|                                                    |      |                                |        |                               |      |        |      |   |        |  |   |       
|Earnings per share, basic and assuming dilution     |      | $                              | 0.40   |                               | $    | 0.34   |      | $ | 1.08   |  | $ | 1.00  
|Dividends per share                                 |      | $                              | 0.16   |                               | $    | 0.15   |      | $ | 0.47   |  | $ | 0.45  



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Eastern Virginia Bankshares, Inc. and Subsidiaries

Consolidated Statement of Cash Flows (Unaudited)

(Dollars in thousands)



|                                                                                                |      |                               |         |      |  |   |         |  
|----------------------------------------------------------------------------------------------- | ---- | ----------------------------- | ------- | ---- |  | - | ------- | -
|                                                                                                |      | Nine Months EndedSeptember 30 |        
|                                                                                                | 2006 |                               |         | 2005 | 
|Cash Flows from Operating Activities                                                            |      |                               |         |      |  |   |         |  
|Net income                                                                                      |      | $                             | 5,321   |      |  | $ | 4,907   |  
|Adjustments to reconcile net income to net cash provided by operating activities:               |      |                               |         |      |  |   |         |  
|Depreciation and investment amortization/accretion, net                                         |      |                               | 1,712   |      |  |   | 2,473   |  
|Provision for loan losses                                                                       |      |                               | 521     |      |  |   | 488     |  
|(Gain) realized on available for sale securities                                                |      |                               | (36     | )    |  |   | (224    | )
|(Gain) on sale of fully depreciated fixed assets                                                |      |                               | (26     | )    |  |   | (22     | )
|(Increase) in other assets                                                                      |      |                               | (1,878  | )    |  |   | (322    | )
|Increase in other liabilities                                                                   |      |                               | 2,036   |      |  |   | 2,187   |  
|                                                                                                |      |                               |         |      |  |   |         |  
|Net cash provided by operating activities                                                       |      |                               | 7,650   |      |  |   | 9,487   |  
|Cash Flows from Investing Activities                                                            |      |                               |         |      |  |   |         |  
|Proceeds from sales of securities available for sale                                            |      |                               | 4,746   |      |  |   | 11,067  |  
|Proceeds from maturities, calls, and paydowns of securities                                     |      |                               | 10,622  |      |  |   | 15,256  |  
|Purchase of debt securities                                                                     |      |                               | (6,375  | )    |  |   | (34,625 | )
|Purchase of restricted stock                                                                    |      |                               | (1,436  | )    |  |   | (1,547  | )
|Proceeds from sale of other real estate                                                         |      |                               |        |      |  |   | 256     |  
|Net increase in loans                                                                           |      |                               | (63,290 | )    |  |   | (44,946 | )
|Proceeds from sale of fixed assets                                                              |      |                               | 26      |      |  |   |        |  
|Purchases of bank premises and equipment                                                        |      |                               | (2,580  | )    |  |   | (1,511  | )
|                                                                                                |      |                               |         |      |  |   |         |  
|Net cash used in investing activities                                                           |      |                               | (58,287 | )    |  |   | (56,050 | )
|Cash Flows from Financing Activities                                                            |      |                               |         |      |  |   |         |  
|Net (decrease) in noninterest bearing and interest bearing demand deposits and savings accounts |      |                               | (28,204 | )    |  |   | (5,247  | )
|Net increase in certificates of deposit                                                         |      |                               | 42,018  |      |  |   | 31,182  |  
|Issuance of common stock under dividend reinvestment plan                                       |      |                               | 295     |      |  |   | 293     |  
|Stock based compensation                                                                        |      |                               | 146     |      |  |   | 128     |  
|Director stock grant                                                                            |      |                               | 191     |      |  |   | 125     |  
|Stock options exercised                                                                         |      |                               | 13      |      |  |   |        |  
|Dividends declared                                                                              |      |                               | (2,309  | )    |  |   | (2,200  | )
|Decrease in federal funds purchased                                                             |      |                               | (6,822  | )    |  |   | (690    | )
|Increase in FHLB advances                                                                       |      |                               | 39,286  |      |  |   | 29,786  |  
|                                                                                                |      |                               |         |      |  |   |         |  
|Net cash provided by financing activities                                                       |      |                               | 44,614  |      |  |   | 53,377  |  
|                                                                                                |      |                               |         |      |  |   |         |  
|Increase (decrease) in cash and cash equivalents                                                |      |                               | (6,023  | )    |  |   | 6,814   |  
|Cash and cash equivalents                                                                       |      |                               |         |      |  |   |         |  
|Beginning of period                                                                             |      |                               | 21,516  |      |  |   | 17,797  |  
|                                                                                                |      |                               |         |      |  |   |         |  
|End of period                                                                                   |      | $                             | 15,493  |      |  | $ | 24,611  |  
|                                                                                                |      |                               |         |      |  |   |         |  
|Supplemental Disclosures of Cash Flow Information                                               |      |                               |         |      |  |   |         |  
|Cash paid for:                                                                                  |      |                               |         |      |  |   |         |  
|Interest on deposits and other borrowings                                                       |      | $                             | 13,139  |      |  | $ | 8,997   |  
|Income taxes                                                                                    |      | $                             | 2,834   |      |  | $ | 1,420   |  
|Loans transferred to other real estate owned                                                    |      | $                             |        |      |  | $ | 300     |  

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 September 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. | The Company 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 the Company. 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, Virginia. On April 24, 2006, the Company completed the conversion to a one-bank holding company by merging the three banking subsidiaries. The new bank began operating under the name EVB on
April 24, 2006. All significant inter-company transactions and accounts have been eliminated in consolidation.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



|                                        |               |                    |                      |  |                       |     |                      |   |       |  |   |        
|--------------------------------------- | ------------- | ------------------ | -------------------- |  | --------------------- | --- | -------------------- | - | ----- |  | - | -------
|(dollars in thousands)                  |               | September 30, 2006
|                                        | AmortizedCost |                    | GrossUnrealizedGains |  | GrossUnrealizedLosses |     | Estimated Fair Value
|Available for Sale:                     |               |                    |                      |  |                       |     |                      |   |       |  |   |        
|Obligations of U.S. Government agencies |               | $                  | 31,839               |  | $                     | 33  |                      | $ | 605   |  | $ | 31,267 
|Mortgage-backed securities              |               |                    | 30,552               |  |                       | 2   |                      |   | 850   |  |   | 29,704 
|State and political subdivisions        |               |                    | 32,860               |  |                       | 412 |                      |   | 272   |  |   | 33,000 
|Corporate, CMO and other securities     |               |                    | 28,738               |  |                       | 39  |                      |   | 1,557 |  |   | 27,220 
|Restricted securities                   |               |                    | 6,354                |  |                       |    |                      |   |      |  |   | 6,354  
|                                        |               |                    |                      |  |                       |     |                      |   |       |  |   |        
|Total                                   |               | $                  | 130,343              |  | $                     | 486 |                      | $ | 3,284 |  | $ | 127,545
|                                        |               |                    |                      |  |                       |     |                      |   |       |  |   |        



|                                        |               |                   |                      |  |                       |     |                     |   |       |  |   |        
|--------------------------------------- | ------------- | ----------------- | -------------------- |  | --------------------- | --- | ------------------- | - | ----- |  | - | -------
|(dollars in thousands)                  |               | December 31, 2005
|                                        | 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 September 30, 2006, investments in an unrealized loss position that were temporarily impaired were as
follows:



|                                         |                     |                    |                   |  |            |     |                 |   |            |  |                 |       |  |   |        |  |   |      
|---------------------------------------- | ------------------- | ------------------ | ----------------- |  | ---------- | --- | --------------- | - | ---------- |  | --------------- | ----- |  | - | ------ |  | - | -----
|(dollars in thousands)                   |                     | September 30, 2006
|                                         | Less than 12 months |                    | 12 months or more |  | Total     
|                                         | Fair Value          |                    | Unrealized Loss   |  | Fair Value |     | Unrealized Loss |   | Fair Value |  | Unrealized Loss
|                                         |                     |                    |                   |  |           
|Description of Securities                |                     |                    |                   |  |            |     |                 |   |            |  |                 |       |  |   |        |  |   |      
|Obligations of U. S. Government agencies |                     | $                  | 250               |  | $          |    |                 | $ | 29,008     |  | $               | 605   |  | $ | 29,258 |  | $ | 605  
|Mortgage-backed securities               |                     |                    |                  |  |            |    |                 |   | 29,155     |  |                 | 850   |  |   | 29,155 |  |   | 850  
|State and political subdivisions         |                     |                    | 5,276             |  |            | 170 |                 |   | 3,822      |  |                 | 102   |  |   | 9,098  |  |   | 272  
|Corporate, CMOs and other securities    |                     |                    | 586               |  |            | 22  |                 |   | 22,194     |  |                 | 1,535 |  |   | 22,780 |  |   | 1,557
|                                         |                     |                    |                   |  |            |     |                 |   |            |  |                 |       |  |   |        |  |   |      
|                                         |                     | $                  | 6,112             |  | $          | 192 |                 | $ | 84,179     |  | $               | 3,092 |  | $ | 90,291 |  | $ | 3,284
|                                         |                     |                    |                   |  |            |     |                 |   |            |  |                 |       |  |   |        |  |   |      

Bonds with unrealized loss positions of less than 12 months duration at September 30, 2006
included 1 federal agency, 1 corporate bond and 13 municipal bonds. Securities with losses of one year or greater duration included 33 federal agencies, 40 mortgage-backed securities, 15 corporate bonds, 12 municipal bonds, 3 federal agency
preferred stocks and 6 collateralized mortgage obligations CMOs. The unrealized loss positions at September 30, 2006 were primarily related to interest rate movements. Holdings of GMAC and Ford Motor Credit Corporation
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 September 30, 2006, the Company held $3.30 million par
value in GMAC bonds and $250 thousand par value in Ford Motor Credit Corporation bonds. These holdings are monitored regularly by the Company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:



|                                         |                     |                   |                   |  |            |       |                 |   |            |  |                 |       |  |   |        |  |   |      
|---------------------------------------- | ------------------- | ----------------- | ----------------- |  | ---------- | ----- | --------------- | - | ---------- |  | --------------- | ----- |  | - | ------ |  | - | -----
|(dollars in thousands)                   |                     | December 31, 2005
|                                         | Less than 12 months |                   | 12 months or more |  | Total     
|                                         | Fair Value          |                   | Unrealized Loss   |  | Fair Value |       | Unrealized Loss |   | Fair Value |  | Unrealized Loss
|                                         |                     |                   |                   |  |           
|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
|                                         |                     |                   |                   |  |            |       |                 |   |            |  |                 |       |  |   |        |  |   |      



6



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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)September 302006 |         |   | (audited)December 312005 |   |         | (unaudited)September 302005 | 
|Commercial, industrial and agricultural loans |  | $                           | 59,068  |   |                          | $ | 55,732  |                             |  | $ | 52,846  |  
|Residential real estate mortgage loans        |  |                             | 278,791 |   |                          |   | 263,191 |                             |  |   | 258,502 |  
|Real estate construction loans                |  |                             | 81,237  |   |                          |   | 47,620  |                             |  |   | 41,006  |  
|Commercial real estate loans                  |  |                             | 167,369 |   |                          |   | 151,897 |                             |  |   | 143,790 |  
|Consumer loans                                |  |                             | 50,582  |   |                          |   | 55,680  |                             |  |   | 60,681  |  
|All other loans                               |  |                             | 216     |   |                          |   | 321     |                             |  |   | 349     |  
|                                              |  |                             |         |   |                          |   |         |                             |  |   |         |  
|Total loans                                   |  |                             | 637,263 |   |                          |   | 574,441 |                             |  |   | 557,174 |  
|Less unearned income                          |  |                             | (130    | ) |                          |   | (356    | )                           |  |   | (499    | )
|                                              |  |                             |         |   |                          |   |         |                             |  |   |         |  
|Total loans net of unearned discount          |  |                             | 637,133 |   |                          |   | 574,085 |                             |  |   | 556,675 |  
|Less allowance for loan losses                |  |                             | (6,880  | ) |                          |   | (6,601  | )                           |  |   | (6,643  | )
|                                              |  |                             |         |   |                          |   |         |                             |  |   |         |  
|Net loans                                     |  | $                           | 630,253 |   |                          | $ | 567,484 |                             |  | $ | 550,032 |  
|                                              |  |                             |         |   |                          |   |         |                             |  |   |         |  

The Company had $2.6 million in non-performing loans at September 30, 2006 that included $904
thousand in loans past due 90 days or more, but still accruing and $1.7 million in nonaccrual loans.



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



|                                 |  |                             |       |   |                          |   |        |                             |  |   |       |  
|-------------------------------- |  | --------------------------- | ----- | - | ------------------------ | - | ------ | --------------------------- |  | - | ----- | -
|(Dollars in thousands)           |  | (unaudited)September 302006 |       |   | (audited)December 312005 |   |        | (unaudited)September 302005 | 
|Balance January 1                |  | $                           | 6,601 |   |                          | $ | 6,676  |                             |  | $ | 6,676 |  
|Provision charged against income |  |                             | 521   |   |                          |   | 552    |                             |  |   | 488   |  
|Recoveries of loans charged off  |  |                             | 369   |   |                          |   | 491    |                             |  |   | 359   |  
|Loans charged off                |  |                             | (611  | ) |                          |   | (1,118 | )                           |  |   | (880  | )
|                                 |  |                             |       |   |                          |   |        |                             |  |   |       |  
|Balance at end of period         |  | $                           | 6,880 |   |                          | $ | 6,601  |                             |  | $ | 6,643 |  
|                                 |  |                             |       |   |                          |   |        |                             |  |   |       |  

Following is a summary pertaining to impaired loans:



|                                                        |  |                  |        |                 |   |       
|------------------------------------------------------- |  | ---------------- | ------ | --------------- | - | ------
|                                                        |  | September 302006 |        | December 312005
|                                                        |  | (in thousands)  
|Impaired loans for which an allowance has been provided |  | $                | 9,880  |                 | $ | 14,293
|                                                        |  |                  |        |                 |   |       
|Allowance related to impaired loans                     |  | $                | 1,468  |                 | $ | 1,849 
|                                                        |  |                  |        |                 |   |       
|Average balance of impaired loans                       |  | $                | 13,601 |                 | $ | 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 $812 thousand and $772 thousand at September 30, 2006 and December 31, 2005, respectively.



7



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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 funds for 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)September 302006 |        | (audited)December 312005 |   | (unaudited)September 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.



|      |  |                  |        |         |      |   |                |   |         |  |      |  
|----- |  | ---------------- | ------ | ------- | ---- | - | -------------- | - | ------- |  | ---- | -
|      |  | MaturitiesAmount |        | AvgRate |      |   | CallableAmount |   | AvgRate | 
|2006  |  | $                | 714    |         | 3.15 | % |                | $ | 5,000   |  | 5.92 | %
|2007  |  |                  | 1,428  |         | 3.15 | % |                |   | 57,000  |  | 4.00 | %
|2008  |  |                  | 1,429  |         | 3.15 | % |                |   | 10,000  |  | 4.85 | %
|2010  |  |                  | 16,429 |         | 4.31 | % |                |   | 13,500  |  | 3.87 | %
|2011  |  |                  | 10,714 |         | 4.89 | % |                |   |        |  |      |  
|2012  |  |                  | 5,000  |         | 4.68 | % |                |   |        |  |      |  
|2015  |  |                  | 20,500 |         | 3.78 | % |                |   |        |  |      |  
|2016  |  |                  | 35,000 |         | 4.04 | % |                |   |        |  |      |  
|      |  |                  |        |         |      |   |                |   |         |  |      |  
|Total |  | $                | 91,214 |         | 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 nine month periods ending September 30, 2006 and September 30, 2005.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                             |                    |                    |                    |   |        |  |           |  |   |     
|-------------------------------------------- | ------------------ | ------------------ | ------------------ | - | ------ |  | --------- |  | - | ----
|                                             |                    | Three Months Ended
|                                             | September 30, 2006 |                    | September 30, 2005
|                                             |                    |                    | Per Share          |   |        |  | Per Share
|                                             | Shares             |                    | Amount             |   | Shares |  | Amount   
|Basic earnings per share                     |                    | 4,923,556          |                    | $ | 0.40   |  | 4,897,641 |  | $ | 0.34
|Effect of dilutive securities, stock options |                    | 5,853              |                    |   | 0.00   |  | 5,034     |  |   | 0.00
|                                             |                    |                    |                    |   |        |  |           |  |   |     
|Diluted earnings per share                   |                    | 4,929,409          |                    | $ | 0.40   |  | 4,902,675 |  | $ | 0.34



|                                             |                    |                   |                    |   |        |  |           |  |   |     
|-------------------------------------------- | ------------------ | ----------------- | ------------------ | - | ------ |  | --------- |  | - | ----
|                                             |                    | Nine Months Ended
|                                             | September 30, 2006 |                   | September 30, 2005
|                                             |                    |                   | Per Share          |   |        |  | Per Share
|                                             | Shares             |                   | Amount             |   | Shares |  | Amount   
|Basic earnings per share                     |                    | 4,914,795         |                    | $ | 1.08   |  | 4,889,870 |  | $ | 1.00
|Effect of dilutive securities, stock options |                    | 6,456             |                    |   | 0.00   |  | 10,188    |  |   | 0.00
|                                             |                    |                   |                    |   |        |  |           |  |   |     
|Diluted earnings per share                   |                    | 4,921,251         |                    | $ | 1.08   |  | 4,900,058 |  | $ | 1.00



8



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##### Table of Contents

As of September 30, 2006 and 2005, respectively, options to acquire 128,012 shares and 89,862 shares
of common stock were not included in computing diluted earnings per common share because their effects were anti-dilutive.



|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 Companys 2003 Stock Incentive Plan, amending and restating the 2000 Plan while still authorizing the
issuance of up to the 400,000 original 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     |  
|Dividend rate:           |  | 2.76     | % |  | 2.78     | % |  | 2.81     | %
|Price Volatility:        |  | 23.61    | % |  | 24.99    | % |  | 23.07    | %
|Risk-free interest rate: |  | 4.13     | % |  | 4.95     | % |  | 4.69     | %
|Expected life:           |  | 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 nine months ended September 30, 2006, while there were 825 shares exercised and 5,025 shares forfeited during the second quarter and
1,000 shares forfeited during the third quarter and no forfeitures during the first quarter of 2006.

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 nine months ended September 30, 2006 was stock -based compensation expense of $47 thousand and $146 thousand, compared to $53 thousand and $128 thousand for the three and nine
month periods ended September 30, 2005, respectively. All options currently vesting are qualified options in which the Company does not receive a tax deduction.

Stock option plan activity for the nine months ended September 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                        |  | (6,025  | ) |  |                              | 21.19 |                                                    |     |                                                      |   |    
|                                 |  |         |   |  |                              |       |                                                    |     |                                                      |   |    
|Options outstanding September 30 |  | 152,957 |   |  |                              | 21.21 |                                                    | 7.6 |                                                      |   | 212
|                                 |  |         |   |  |                              |       |                                                    |     |                                                      |   |    
|Options exercisable September 30 |  | 24,945  |   |  |                              | 16.10 |                                                    | 5.5 |                                                      |   | 126
|                                 |  |         |   |  |                              |       |                                                    |     |                                                      |   |    

Subsequent to the date of this Form 10-Q, the Company issued on October 1, 2006, qualified
options for 60,875 shares at an exercise price of $21.16 per share, vesting in 4 years on October 1, 2010.



9



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##### Table of Contents

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



|                                             |                |                                |      |                |                               |   |      |   |  |      |       |   |  |   |      |  
|-------------------------------------------- | -------------- | ------------------------------ | ---- | -------------- | ----------------------------- | - | ---- | - |  | ---- | ----- | - |  | - | ---- | -
|                                             |                | Three Months EndedSeptember 30 |      |                | Nine Months EndedSeptember 30 |  
|                                             | 2006           |                                |      | 2005           |                               |   | 2006 |   |  | 2005 |      
|                                             | (in thousands) |                                |      | (in thousands) |                              
|Components of Net Periodic Benefit Cost      |                |                                |      |                |                               |   |      |   |  |      |       |   |  |   |      |  
|Service cost                                 |                | $                              | 350  |                |                               | $ | 274  |   |  | $    | 1,050 |   |  | $ | 822  |  
|Interest cost                                |                |                                | 179  |                |                               |   | 147  |   |  |      | 537   |   |  |   | 441  |  
|Expected return on plan assets               |                |                                | (163 | )              |                               |   | (129 | ) |  |      | (489  | ) |  |   | (387 | )
|Amortization of prior service cost           |                |                                | 5    |                |                               |   | 5    |   |  |      | 15    |   |  |   | 15   |  
|Amortization of net obligation at transition |                |                                | 1    |                |                               |   | 1    |   |  |      | 3     |   |  |   | 3    |  
|Recognized net actuarial loss                |                |                                | 33   |                |                               |   | 29   |   |  |      | 99    |   |  |   | 87   |  
|                                             |                |                                |      |                |                               |   |      |   |  |      |       |   |  |   |      |  
|Net periodic benefit cost                    |                | $                              | 405  |                |                               | $ | 327  |   |  | $    | 1,215 |   |  | $ | 981  |  
|                                             |                |                                |      |                |                               |   |      |   |  |      |       |   |  |   |      |  

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. The Company estimates that its 2006 contribution to the Plan will be approximately $1.62 million.



|11. | In September 2006, the Securities and Exchange Commission (SEC) released Staff Accounting Bulletin No. 108 (SAB 108). SAB 108 expresses the SEC staffs views regarding the
process of quantifying financial statement misstatements. These interpretations were issued to address diversity in practice and the potential under current practice for the build up of improper amounts on the balance sheet. SAB 108 expresses the
SEC staffs view that a registrants materiality evaluation of an identified unadjusted error should quantify the effects of the error on each financial statement and related financial statement disclosures and that prior year
misstatements should be considered in quantifying misstatements in current year financial statements. SAB 108 also states that correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended.
Such correction may be made the next time the registrant files the prior year financial statements. Registrants electing not to restate prior periods should reflect the effects of initially applying the guidance in SAB 108 in their annual financial
statements covering the first fiscal year ending after November 15, 2006. The cumulative effect of the initial application should be reported in the carrying amounts of assets and liabilities as of the beginning of that fiscal year and the
offsetting adjustment should be made to the opening balance of retained earnings for that year. Registrants should disclose the nature and amount of each individual error being corrected in the cumulative adjustment. The disclosure should also
include when and how each error arose and the fact that the errors had previously been considered immaterial. The SEC staff encourages early application of the guidance in SAB 108 for interim periods of the first fiscal year ending after
November 15, 2006. The Company does not expect adoption of SAB No. 108 to have a material impact on its operations or financial results.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



10



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##### Table of Contents

In March 2006, the FASB issued Statement of Financial Accounting Standards No. 156, Accounting
for Servicing of Financial Assets  an amendment of FASB Statement No. 140 (SFAS 156). SFAS 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial
asset by entering into certain servicing contracts. The Statement also requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable. SFAS 156 permits an entity to choose between
the amortization and fair value methods for subsequent measurements. At initial adoption, SFAS 156 permits a one-time reclassification of available for sale securities to trading securities by entities with recognized servicing rights. SFAS 156 also
requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing
liabilities. SFAS 156 is effective as of the beginning of an entitys first fiscal year that begins after September 15, 2006. The Company does not expect the implementation of SFAS 156 to have a material impact on its financial statements.

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

In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106, and 132(R) (SFAS 158). SFAS 158 requires an employer to recognize the
overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive
income. The funded status of a benefit plan will be measured as the difference between plan assets at fair value and the benefit obligation. For a pension plan, the benefit obligation is the projected benefit obligation. For any other postretirement
plan, the benefit obligation is the accumulated postretirement benefit obligation. SFAS 158 also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position. SFAS 158 also requires
additional disclosure in the notes to financial statements about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset
or obligation. The Company is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. The requirement to
measure plan assets and benefit obligations as of the date of the employers fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The Company does not expect the implementation of
SFAS No. 158 to have a material impact on its financial statements.

In June 2006, the FASB issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes: An Interpretation of FASBStatement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in
accordance with SFAS 109. The Interpretation prescribes a recognition threshold and measurement principles for the financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The Company does not expect the implementation of the Interpretation No. 48 of SFAS 159 to have a material impact on its financial statements.



11



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##### Table of Contents

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



|                                                                               |  |                                |       |   |                               |   |       |      |  |   |       |   |  |   |        |  
|------------------------------------------------------------------------------ |  | ------------------------------ | ----- | - | ----------------------------- | - | ----- | ---- |  | - | ----- | - |  | - | ------ | -
|                                                                               |  | Three Months EndedSeptember 30 |       |   | Nine Months EndedSeptember 30 |  
|(in thousands)                                                                 |  | 2006                           |       |   | 2005                          |   |       | 2006 |  |   | 2005  |  
|Net income                                                                     |  | $                              | 1,969 |   |                               | $ | 1,687 |      |  | $ | 5,321 |   |  | $ | 4,907  |  
|Unrealized gains (losses) on securities available for sale, net of tax expense |  |                                | 1,931 |   |                               |   | (785  | )    |  |   | (47   | ) |  |   | (1,446 | )
|Less: reclassification adjustment, net of tax                                  |  |                                | (3    | ) |                               |   | (68   | )    |  |   | (24   | ) |  |   | (148   | )
|                                                                               |  |                                |       |   |                               |   |       |      |  |   |       |   |  |   |        |  
|Total comprehensive income                                                     |  | $                              | 3,897 |   |                               | $ | 834   |      |  | $ | 5,250 |   |  | $ | 3,313  |  
|                                                                               |  |                                |       |   |                               |   |       |      |  |   |       |   |  |   |        |  

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 the Company. This 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.



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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 September 30, 2006 was $2.0 million, an increase of $282 thousand from third quarter 2005 net income of $1.7 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 $414 thousand or 8.4%, compared to the nine months ended September 30, 2005, impacted significantly by nonrecurring expenses in the
first five months of 2006 related to the April merger of the subsidiary banks. Net interest income increased $518 thousand for the quarter ended September 30, 2006, compared to the same period in 2005. This increase was the result of strong
loan growth that increased interest income on loans by $2.0 million and an increase in investment income on the securities portfolio of $134 thousand, compared to the third quarter of last year. These increases were largely offset by increases in
funding expenses, which increased $1.6 million compared to the same period last year. Core earnings (net income excluding realized gains on sale of securities and sale of fixed assets) were up $362 thousand or 22.6% over the third quarter of 2005
and up $535 thousand or 11.3% over the nine months ended September 30, 2005. A table showing the calculation of core earnings follows:



|                                  |      |                                |       |                               |      |       |      |   |       |  |   |      
|--------------------------------- | ---- | ------------------------------ | ----- | ----------------------------- | ---- | ----- | ---- | - | ----- |  | - | -----
|                                  |      | Three Months EndedSeptember 30 |       | Nine Months EndedSeptember 30
|                                  | 2006 |                                | 2005  |                               | 2006 |       | 2005
|Net Income                        |      | $                              | 1,969 |                               | $    | 1,687 |      | $ | 5,321 |  | $ | 4,907
|Less: realized gains, net of tax: |      |                                |       |                               |      |       |      |   |       |  |   |      
|Sale of AFS securities            |      |                                | 3     |                               |      | 68    |      |   | 24    |  |   | 148  
|Sale of fixed assets and OREO     |      |                                |      |                               |      | 15    |      |   | 17    |  |   | 14   
|                                  |      |                                |       |                               |      |       |      |   |       |  |   |      
|                                  |      |                                | 3     |                               |      | 83    |      |   | 41    |  |   | 162  
|                                  |      |                                |       |                               |      |       |      |   |       |  |   |      
|Core Earnings                     |      | $                              | 1,966 |                               | $    | 1,604 |      | $ | 5,280 |  | $ | 4,745
|                                  |      |                                |       |                               |      |       |      |   |       |  |   |      

A flat to sometimes-inverted yield curve has contributed to higher interest rates on deposits and increased
borrowings to fund loan growth. To address the challenging deposit environment, late in the quarter the Company introduced a core deposit product unique to its market. Reward Checking is a free checking product that offers a high
interest rate to checking customers who use our technology, including direct deposit, debit card transactions, electronic statements and internet banking. The initial results in producing new deposit customers have exceeded expectations. This
product is not only service charge free, but also refunds out-of-network ATM fees. With Reward Checking, the customer will enjoy all the benefits of free checking including a free Visa® check card, unlimited check-writing privileges and no minimum balance requirements as
well as no service charge. A $100 minimum opening deposit is required and technology utilization standards must be met each month to earn the monthly interest.

Total assets at September 30, 2006 were $815.8 million, up $60.6 million, or 8.0%, from $755.2 million at September 30, 2005 and up $51.9 million, or 6.8%, from $763.9 million at December 31, 2005. For the quarter, total
assets averaged $805.5 million, 8.4% above the third quarter 2005 average of $743.2 million. Total loans, net of unearned income, amounted to $637.1 million at September 30, 2006, an increase of $80.4 million, or 14.4%, from $556.7 million at
September 30, 2005, and an increase of $63.0 million, or 11.0%, from $574.1 million at December 31, 2005.



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Net loans as a percent of total assets were 77.3% at September 30, 2006, as compared to 72.8% at September 30,
2005 and 74.3% at 2005 year-end. Loan demand continues to be strong at a time when deposit growth is challenging.

At September 30, 2006, the
investment portfolio totaled $127.5 million, down $13.1 million from $140.7 million at September 30, 2005 and down $7.9 million, or 5.8%, 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 loan growth. Most of the funds that are invested in the investment portfolio are used to help to balance interest rate risk and to provide liquidity. There were $1.0 million of federal funds
sold at September 30, 2006, while there were no federal funds sold at either September 30, 2005 or at December 31, 2005. The Company was in a federal funds purchased position of $6.8 million at December 31, 2005.

Total deposits of $642.2 million at September 30, 2006 represented an increase of $26.3 million, or 4.3%, from $615.8 million one year ago and an increase of $13.8
million, or 2.2%, from $628.3 million at December 31, 2005. The Company 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
rate discount rate increases. At September 30, 2006, noninterest-bearing demand deposits were up $3.5 million or 3.6% and $2.7 million or 2.7%, compared to September 30, 2005 and December 31, 2005, respectively. For the same periods,
interest-bearing deposits were up $22.8 million, or 4.4%, and up $11.1 million, or 2.1%, respectively. Interest expense has increased as higher-cost certificates of deposit have grown $42.2 million year-to-date while non-maturity interest-bearing
and non interest-bearing deposits have decreased $28.2 million.

FHLB borrowings at September 30, 2006 totaled $91.2 million, a $38.6 million, or
73.3% increase over $52.6 million at September 30, 2005 and $39.3 million or 75.7% over $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 Statement 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 ($1.8 million) at September 30,
2006, a loss increase of $850 thousand from ($997 thousand) at September 30, 2005 and a loss increase of $71 thousand from ($1.8 million) at December 31, 2005. The unrealized loss position improved $1.9 million during the quarter ended
September 30, 2006 to ($1.8 million) from ($3.8 million) at June 30, 2006. The unrealized (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 16.7% to $2.0 million for the three months ended September 30, 2006, compared to $1.7 million for the same period in 2005. Diluted earnings
per share increased 17.6% to $0.40 for the third quarter of 2006, compared to $0.34 for the same quarter in 2005. Net interest income increased $518 thousand for the quarter ended September 30, 2006, when compared to the same period in 2005.
This third quarter increase in net interest income was the result of higher earnings on the loan portfolio, an increase in the loan portfolio balances and an increase in investment income, offset by an increase in funding costs. The loan loss
provision of $204 thousand for the quarter was down $78 thousand from $282 thousand in the third quarter of 2005, primarily due to a decline in potential problem loans and non performing assets. Noninterest income, excluding securities gains, was up
$144 thousand, or 11.9%, for the quarter when compared to the same period in 2005. This increase comes from a $79 thousand or 10.4% increase in service charge income, resulting from a higher volume of deposit accounts coupled with a checking account
overdraft fee increase and a $65 thousand or 14.4% increase in other noninterest income as the investment and mortgage functions had higher income than for the period ended September 30, 2005. Net gains on securities sales of $5 thousand for
the quarter were down $98 thousand compared to $103 thousand in the third quarter of 2005.

Noninterest expense for the three months ended
September 30, 2006 was up $249 thousand or 4.1% to $6.4 million compared to $6.1 million for the third quarter of 2005. Salaries and benefits were up $112 thousand or 3.2%, most of



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which is related to a $78 thousand increase in pension expense; occupancy expense was essentially flat at $991 thousand
compared to $982 thousand in the third quarter of 2005. Other expenses increased $128 thousand with $123 thousand of that increase representing marketing expenses related to merger of the three banks to create EVB in April 2006. Net income for the
nine months ended September 30, 2006 was up $414 thousand or 8.4%, as the increases in the second and third quarter were partially offset by a 7.2% decrease in the first quarter of this year, from first quarter 2005. Year-to-date net interest
income is up $1.2 million or 5.5%. The provision for loan losses is up $33 thousand, related completely to growth in the loan portfolio.

Noninterest
income excluding securities gains, was up $413 thousand or 12.3%; realized gains on securities sales were down $188 thousand; salaries and benefits were up $303 thousand or 2.8%, $234 thousand of which was the pension expense increase; occupancy and
equipment expense was up $221 thousand or 8.1% primarily due to additional space leased at the Glenns office in mid 2005; and marketing expense related to the merger of the three banks and the EVB name roll out was up $386 thousand. Consultant fees
were down $145 thousand or 20.9% and data processing expense was down $194 thousand or 35.3% as he Company began to realize some of the benefits of the second quarter merger of the banks.

Return on average assets increased to 0.97% for the three months ended September 30, 2006, compared to 0.90% in the third quarter of 2005. Return on average equity
increased to 12.21% for the third quarter, compared to 10.85% for the quarter ended September 30, 2005. Return on average assets and return on average equity for the first nine months of 2006 were 0.90% and 11.29%, respectively, compared to
0.92% and 10.83% 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 $503 thousand increase over the third quarter of 2005. Average earning assets for the quarter ended September 30, 2006
increased 9.8% to $757.1 million compared to $689.6 million for the same quarter of 2005. Average loans increased 14.2%, average securities decreased 11.3% and average federal funds sold increased 241.7% when comparing the third quarter of 2006 to
the same period in 2005. The fully tax equivalent net interest margin for the three-month period ended September 30, 2006 was 4.26% compared to 4.38% for the quarter ended September 30, 2005. For the quarter, the yield on earning assets
was up 55 basis points and the cost of interest bearing liabilities was up 82 basis points, narrowing the spread between the yield on earning assets and the cost of funds. The Companys increase in funding costs is more specifically related to
year-to-date movement of $28.2 million of deposits from low cost non-maturity deposits to higher cost certificates of deposit, $9.4 million of which occurred in the third quarter. The narrower spread reflects intense competition in loan pricing even
as the cost of funding is increasing.

The increases in both earning asset yield and funds cost are the result of discount rate increases by the Federal
Open Market Committee in the first half of 2006. 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.

Net interest income on a fully tax equivalent basis totaled $23.9 million for the first nine months of 2006, a $1.2 million increase over The
Companys performance for the first nine months of 2005. Average earning assets for the nine months ended September 30, 2006 increased 11.5% to $738.9 million, compared to $662.7 million for the first nine months of 2005. Average loans
increased 14.2%, average securities decreased 0.9% and average federal funds sold increased 75.7% when comparing the first nine months of 2006 to the same period in 2005. The fully tax equivalent net interest margin for the nine month period ended
September 30, 2006 was 4.32% compared to 4.56% for the year ended 2005 and 4.58% for the nine months ended September 30, 2005. For the nine months ended September 30, 2006, the yield on earning assets was up 36 basis points and the
cost of interest bearing liabilities was up 75 basis points, narrowing the spread between the yield on earning assets and the cost of funds as compared to the first nine months of 2005.

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



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##### Table of Contents

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



|                                                        |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|------------------------------------------------------- | -------------- | ------------------------------- | ------- | -------------- |  | ---------- | ------ |  | -------------- | - |  | -------------- | ------- | ---------- |  | - | ------ |  | ---- | -
|                                                        |                | Three Months Ended September 30 |        
|                                                        | 2006           |                                 |         | 2005           | 
|                                                        | AverageBalance |                                 |         | Income/Expense |  | Yield/Rate |        |  | AverageBalance |   |  | Income/Expense |         | Yield/Rate | 
|Assets:                                                 |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Securities                                              |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Taxable                                                 |                | $                               | 92,991  |                |  | $          | 1,229  |  | 5.24           | % |  | $              | 105,245 |            |  | $ | 1,156  |  | 4.36 | %
|Tax exempt (1)                                          |                |                                 | 32,930  |                |  |            | 489    |  | 5.89           | % |  |                | 36,710  |            |  |   | 539    |  | 5.83 | %
|                                                        |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total securities                                        |                |                                 | 125,921 |                |  |            | 1,718  |  | 5.41           | % |  |                | 141,955 |            |  |   | 1,695  |  | 4.74 | %
|Federal funds sold                                      |                |                                 | 8,866   |                |  |            | 119    |  | 5.33           | % |  |                | 2,595   |            |  |   | 23     |  | 3.52 | %
|Loans, net of unearned income (2)                       |                |                                 | 622,343 |                |  |            | 11,450 |  | 7.30           | % |  |                | 545,056 |            |  |   | 9,426  |  | 6.86 | %
|                                                        |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total earning assets                                    |                |                                 | 757,130 |                |  |            | 13,287 |  | 6.96           | % |  |                | 689,606 |            |  |   | 11,144 |  | 6.41 | %
|Less allowance for loan losses                          |                |                                 | (6,870  | )              |  |            |        |  |                |   |  |                | (6,575  | )          |  |   |        |  |      |  
|Total non-earning assets                                |                |                                 | 55,234  |                |  |            |        |  |                |   |  |                | 60,178  |            |  |   |        |  |      |  
|                                                        |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total assets                                            |                | $                               | 805,494 |                |  |            |        |  |                |   |  | $              | 743,209 |            |  |   |        |  |      |  
|                                                        |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Liabilities & Shareholders' Equity:                     |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Interest bearing deposits                               |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Checking                                                |                | $                               | 77,532  |                |  | $          | 74     |  | 0.38           | % |  | $              | 78,014  |            |  | $ | 96     |  | 0.49 | %
|Savings                                                 |                |                                 | 96,598  |                |  |            | 300    |  | 1.23           | % |  |                | 119,457 |            |  |   | 347    |  | 1.15 | %
|Money market savings                                    |                |                                 | 44,699  |                |  |            | 266    |  | 2.36           | % |  |                | 50,468  |            |  |   | 165    |  | 1.30 | %
|Large dollar certificates of deposit (3)                |                |                                 | 105,424 |                |  |            | 1,187  |  | 4.47           | % |  |                | 85,524  |            |  |   | 765    |  | 3.55 | %
|Consumer certificates of deposit                        |                |                                 | 208,372 |                |  |            | 2,132  |  | 4.06           | % |  |                | 181,219 |            |  |   | 1,449  |  | 3.17 | %
|                                                        |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total interest-bearing deposits                         |                |                                 | 532,625 |                |  |            | 3,959  |  | 2.95           | % |  |                | 514,682 |            |  |   | 2,822  |  | 2.18 | %
|Fed funds purchased                                     |                |                                 | 134     |                |  |            | 2      |  | 5.92           | % |  |                | 1,672   |            |  |   | 17     |  | 4.03 | %
|Other borrowings                                        |                |                                 | 100,593 |                |  |            | 1,202  |  | 4.74           | % |  |                | 62,953  |            |  |   | 684    |  | 4.31 | %
|                                                        |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total interest-bearing liabilities                      |                |                                 | 633,352 |                |  |            | 5,163  |  | 3.23           | % |  |                | 579,307 |            |  |   | 3,523  |  | 2.41 | %
|Noninterest-bearing liabilities                         |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Demand deposits                                         |                |                                 | 100,594 |                |  |            |        |  |                |   |  |                | 95,908  |            |  |   |        |  |      |  
|Other liabilities                                       |                |                                 | 7,563   |                |  |            |        |  |                |   |  |                | 6,308   |            |  |   |        |  |      |  
|                                                        |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total liabilites                                        |                |                                 | 741,509 |                |  |            |        |  |                |   |  |                | 681,523 |            |  |   |        |  |      |  
|Shareholders equity                                    |                |                                 | 63,985  |                |  |            |        |  |                |   |  |                | 61,686  |            |  |   |        |  |      |  
|                                                        |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total liabilities and shareholders' equity              |                | $                               | 805,494 |                |  |            |        |  |                |   |  | $              | 743,209 |            |  |   |        |  |      |  
|                                                        |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Net interest income                                     |                |                                 |         |                |  | $          | 8,124  |  |                |   |  |                |         |            |  | $ | 7,621  |  |      |  
|                                                        |                |                                 |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Interest rate spread (4)                                |                |                                 |         |                |  |            |        |  | 3.73           | % |  |                |         |            |  |   |        |  | 4.00 | %
|Interest expense as a percent of average earning assets |                |                                 |         |                |  |            |        |  | 2.71           | % |  |                |         |            |  |   |        |  | 2.03 | %
|Net interest margin (5)                                 |                |                                 |         |                |  |            |        |  | 4.26           | % |  |                |         |            |  |   |        |  | 4.38 | %

---

Notes:

|(1) | Income and yields are reported on a tax equivalent basis assuming a federal tax rate of 34%.
|--- | --------------------------------------------------------------------------------------------

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

|(3) | Large dollar certificates of deposit are certificates issued in amounts of $100,000 or greater.
|--- | -----------------------------------------------------------------------------------------------

|(4) | 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|                                                        |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|------------------------------------------------------- | -------------- | ------------------------------ | ------- | -------------- |  | ---------- | ------ |  | -------------- | - |  | -------------- | ------- | ---------- |  | - | ------ |  | ---- | -
|                                                        |                | Nine Months Ended September 30 |        
|                                                        | 2006           |                                |         | 2005           | 
|                                                        | AverageBalance |                                |         | Income/Expense |  | Yield/Rate |        |  | AverageBalance |   |  | Income/Expense |         | Yield/Rate | 
|Assets:                                                 |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Securities                                              |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Taxable                                                 |                | $                              | 95,654  |                |  | $          | 3,600  |  | 5.03           | % |  | $              | 93,641  |            |  | $ | 3,226  |  | 4.61 | %
|Tax exempt (1)                                          |                |                                | 34,600  |                |  |            | 1,541  |  | 5.95           | % |  |                | 37,817  |            |  |   | 1,680  |  | 5.94 | %
|                                                        |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total securities                                        |                |                                | 130,254 |                |  |            | 5,141  |  | 5.28           | % |  |                | 131,458 |            |  |   | 4,906  |  | 4.99 | %
|Federal funds sold                                      |                |                                | 5,146   |                |  |            | 195    |  | 5.07           | % |  |                | 2,929   |            |  |   | 64     |  | 2.92 | %
|Loans, net of unearned income (2)                       |                |                                | 603,467 |                |  |            | 32,422 |  | 7.18           | % |  |                | 528,290 |            |  |   | 27,112 |  | 6.86 | %
|                                                        |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total earning assets                                    |                |                                | 738,867 |                |  |            | 37,758 |  | 6.83           | % |  |                | 662,677 |            |  |   | 32,082 |  | 6.47 | %
|Less allowance for loan losses                          |                |                                | (6,759  | )              |  |            |        |  |                |   |  |                | (6,596  | )          |  |   |        |  |      |  
|Total non-earning assets                                |                |                                | 56,080  |                |  |            |        |  |                |   |  |                | 59,259  |            |  |   |        |  |      |  
|                                                        |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total assets                                            |                | $                              | 788,188 |                |  |            |        |  |                |   |  | $              | 715,340 |            |  |   |        |  |      |  
|                                                        |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Liabilities & Shareholders Equity:                     |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Interest bearing deposits                               |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Checking                                                |                | $                              | 78,683  |                |  | $          | 218    |  | 0.37           | % |  | $              | 77,558  |            |  | $ | 296    |  | 0.51 | %
|Savings                                                 |                |                                | 103,047 |                |  |            | 966    |  | 1.25           | % |  |                | 124,685 |            |  |   | 969    |  | 1.04 | %
|Money market savings                                    |                |                                | 46,252  |                |  |            | 690    |  | 1.99           | % |  |                | 52,297  |            |  |   | 422    |  | 1.08 | %
|Large dollar certificates of deposit (3)                |                |                                | 100,134 |                |  |            | 3,138  |  | 4.19           | % |  |                | 76,647  |            |  |   | 1,976  |  | 3.45 | %
|Consumer certificates of deposit                        |                |                                | 200,544 |                |  |            | 5,704  |  | 3.80           | % |  |                | 176,518 |            |  |   | 4,059  |  | 3.07 | %
|                                                        |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total interest-bearing deposits                         |                |                                | 528,660 |                |  |            | 10,716 |  | 2.71           | % |  |                | 507,705 |            |  |   | 7,722  |  | 2.03 | %
|Fed funds purchased                                     |                |                                | 2,243   |                |  |            | 81     |  | 4.83           | % |  |                | 2,234   |            |  |   | 55     |  | 3.29 | %
|Other borrowings                                        |                |                                | 89,825  |                |  |            | 3,062  |  | 4.56           | % |  |                | 48,034  |            |  |   | 1,585  |  | 4.41 | %
|                                                        |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total interest-bearing liabilities                      |                |                                | 620,728 |                |  |            | 13,859 |  | 2.99           | % |  |                | 557,973 |            |  |   | 9,362  |  | 2.24 | %
|Noninterest-bearing liabilities                         |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Demand deposits                                         |                |                                | 98,094  |                |  |            |        |  |                |   |  |                | 91,364  |            |  |   |        |  |      |  
|Other liabilities                                       |                |                                | 6,348   |                |  |            |        |  |                |   |  |                | 5,415   |            |  |   |        |  |      |  
|                                                        |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total liabilites                                        |                |                                | 725,170 |                |  |            |        |  |                |   |  |                | 654,752 |            |  |   |        |  |      |  
|Shareholders equity                                    |                |                                | 63,018  |                |  |            |        |  |                |   |  |                | 60,588  |            |  |   |        |  |      |  
|                                                        |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Total liabilities and shareholders equity              |                | $                              | 788,188 |                |  |            |        |  |                |   |  | $              | 715,340 |            |  |   |        |  |      |  
|                                                        |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Net interest income                                     |                |                                |         |                |  | $          | 23,899 |  |                |   |  |                |         |            |  | $ | 22,720 |  |      |  
|                                                        |                |                                |         |                |  |            |        |  |                |   |  |                |         |            |  |   |        |  |      |  
|Interest rate spread (4)                                |                |                                |         |                |  |            |        |  | 3.84           | % |  |                |         |            |  |   |        |  | 4.23 | %
|Interest expense as a percent of average earning assets |                |                                |         |                |  |            |        |  | 2.51           | % |  |                |         |            |  |   |        |  | 1.89 | %
|Net interest margin (5)                                 |                |                                |         |                |  |            |        |  | 4.32           | % |  |                |         |            |  |   |        |  | 4.58 | %

---

Notes:

|(1) | Income and yields are reported on a tax equivalent basis assuming a federal tax rate of 34%.
|--- | --------------------------------------------------------------------------------------------

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

|(3) | Large dollar certificates of deposit are certificates issued in amounts of $100,000 or greater.
|--- | -----------------------------------------------------------------------------------------------

|(4) | 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Noninterest Income

Noninterest income, excluding net realized gains on securities sales, was $1.4 million for the third quarter of 2006, compared to $1.2 million for the same quarter in 2005. Net realized gain on called or sold securities was $5 thousand for
the three months ended September 30, 2006, compared to $103 thousand for the same period of 2005. Service charges on deposit accounts were $839 thousand for the quarter, compared to $760 thousand for the comparable period in 2005. Other
operating income increased to $515 thousand for the quarter, compared to $428 thousand for the three months ended September 30, 2005.

For the
nine-month period ended September 30, 2006, noninterest income, excluding net realized gains on securities sales, was $3.8 million, compared to $3.4 million in the prior year. Net realized gains on called or sold securities was $36 thousand for
the first nine months of 2006, compared to $224 thousand for the same period in 2005. Service charges on deposit accounts were up $223 thousand and other operating income was up $186 thousand, both on a 2006 year-to-date basis, compared to the same
period in 2005. Service charge increases were from a combination of a larger deposit base and a fee increase for checking account overdrafts. Other operating income increases were primarily from EVB Investments income up $76 thousand and EVB
Mortgage income up $62 thousand, both on a year-to-date basis.

Noninterest Expense

Total noninterest expense increased $249 thousand, or 4.1%, from $6.1 million for the third quarter of 2005 to $6.4 million in the three months ended September 30, 2006. The increase in noninterest expense was
the result of overall growth of the Company and one-time expenses related to the merger of our bank subsidiaries. The expense increases included $123 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 merger of our bank subsidiaries and promotion of the image of the resulting bank EVB, management is pleased with the control of noninterest
expense.

Total salary and benefits expense of $3.6 million in the third quarter of 2006 represented an increase of $112 thousand, or 3.2%, compared to the
third quarter of 2005. Increased pension cost accounted for $78 thousand or 70% of the salary and benefit increase for the quarter. Net occupancy and equipment expense was flat when compared to the quarter ended September 30, 2005.

All other noninterest expenses increased $128 thousand to $1.8 million for the third quarter of 2006 from $1.6 million for the same period in 2005, primarily the
result of an increase in marketing/advertising of $123 thousand as the Company incurred such expenses to promote the EVB name and corporate image. Consulting fees, data processing, postage and director fees decreased, compared to the third quarter
of 2005 while supplies and printing, ATM processing expense and bank franchise tax increased with most of the changes related to one-time expenses related to one-time expenses related to the merger of the three banks.

For the nine-month period ended September 30, 2006, noninterest expense was up 4.2% to $19.3 million, compared to $18.5 million for the same period in 2005. Expense
increases have been incurred as follows: salaries and benefits up $303 thousand or 2.8%, occupancy and equipment up $221 thousand or 8.1% and marketing/advertising up $386 thousand or 109%. Material expense decreases year-to-date included data
processing, down $194 thousand, and consultant fees, down $145 thousand. Both the expense increases and decreases were primarily related to the merger of our subsidiary banks. Excluding year-to-date expenses related to the subsidiary banks
merger, management believes that noninterest expense would be relatively flat when compared to the prior year.

Income Taxes

Income tax expense for the quarter ended September 30, 2006 was $767 thousand, compared to $656 thousand for the same period in 2005. Income taxes reflected an
effective tax rate of 28.0% for the third quarter of both 2006 and 2005. For the nine months ended September 30, income tax expense was $2.1 million for 2006, compared to $1.9 million in the prior year, an effective tax rate of 28.01% and
27.41%, respectively.

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.



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##### Table of Contents

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 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 $2.6 million at September 30, 2006; $2.5 million at
December 31, 2005 and $4.2 million at September 30, 2005. Nonperforming assets are comprised largely (89.9%) 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 $116 thousand for the quarter and $242 thousand year-to-date representing an annualized ratio of net charge-offs to total average loans, net of unearned income, of 0.07% for the quarter and 0.05% for the nine months ended
September 30, 2006. Net charge-offs for the third quarter of 2005 and the first nine months of 2005 were $97 thousand and $521 thousand, respectively, with an annualized ratio of net charge-offs of 0.07% for the quarter, and 0.13% for the nine
month period. Full year 2005 net charge-offs were $627 thousand, or 0.12% of average loans. The 0.40% ratio of nonperforming loans to total loans at September 30, 2006 was down from 0.44% at December 31, 2005 and down from 0.76% at
September 30, 2005. This decrease results from improved loan quality with a significant decrease in impaired and nonperforming loans.

The allowance
for loan losses of $6.9 million at September 30, 2006 was up moderately when compared to $6.6 million at both September 30, 2005 and December 31, 2005. The allowance was up $279 thousand from year-end and up $237 thousand compared to
September 30, 2005. This reasonably flat balance in the allowance reflects strong asset quality over the past year as increases to the provision reflected the inherent strength of new loans as well as a decline in potential problem loans and
their associated specific reserves. The ratio of allowance for loan losses to total loans was 1.08% at September 30, 2006, compared to 1.15% at 2005 year-end and 1.19% at September 30, 2005. The allowance for loans losses at
September 30, 2006 included $1.5 million of specific potential problem loan reserves.

At September 30, 2006, the Company reported $9.9 million
in potential problem loans, a decrease of $4.4 million from $14.3 million at December 31, 2005. The average balance of potential problem loans for the three months ended September 30, 2006 was $12.1 million.

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



|                                                          |  |                  |        |   |                 |   |        |                  |  |   |        |  
|--------------------------------------------------------- |  | ---------------- | ------ | - | --------------- | - | ------ | ---------------- |  | - | ------ | -
|Nonperforming Assets (Dollars in thousands)               |  | September 302006 |        |   | December 312005 |   |        | September 302005 | 
|                                                          |  |                 
|Nonaccrual loans                                          |  | $                | 1,653  |   |                 | $ | 884    |                  |  | $ | 2,600  |  
|Restructured loans                                        |  |                  |       |   |                 |   |       |                  |  |   |       |  
|Loans past due 90 days and accruing interest              |  |                  | 906    |   |                 |   | 1,655  |                  |  |   | 1,555  |  
|                                                          |  |                  |        |   |                 |   |        |                  |  |   |        |  
|Total nonperforming loans                                 |  | $                | 2,559  |   |                 | $ | 2,539  |                  |  | $ | 4,155  |  
|Other real estate owned                                   |  |                  |       |   |                 |   |       |                  |  |   | 65     |  
|                                                          |  |                  |        |   |                 |   |        |                  |  |   |        |  
|Total nonperforming assets                                |  | $                | 2,559  |   |                 | $ | 2,539  |                  |  | $ | 4,220  |  
|Nonperforming assets to total loans and other real estate |  |                  | 0.40   | % |                 |   | 0.44   | %                |  |   | 0.76   | %
|Allowance for loan losses to nonaccrual loans             |  |                  | 416.21 | % |                 |   | 746.72 | %                |  |   | 255.50 | %
|Allowance for loan losses to nonperforming assets         |  |                  | 268.86 | % |                 |   | 259.98 | %                |  |   | 157.42 | %
|Net charge-offs to average loans for the year             |  |                  | 0.05   | % |                 |   | 0.12   | %                |  |   | 0.13   | %
|Allowance for loan losses to period end loans             |  |                  | 1.08   | % |                 |   | 1.15   | %                |  |   | 1.19   | %



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##### Table of Contents

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, the Company maintains cash reserves and has an
adequate flow of funds from maturing loans, securities and short-term investments. In addition, the Company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.

While there were no FHLB borrowings during the third quarter, in the
first six months of 2006, the Company borrowed an additional $45 million from the FHLB to fund loan growth and match the loan growth to rates lower than the current certificate of deposit rates. This continues a strategy that began during 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
acceptable 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. The Company has relied on FHLB borrowing to support its growth at
times in the past. The Company will continue to evaluate funding opportunities as necessary to support future growth. These were the only changes to our contractual obligations that would impact liquidity since the 2005 Form 10-K disclosure. At
September 30, 2006, The Company had immediate available credit with the FHLB of $78.9 million and with nonaffiliated banks of $20 million.

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

The Companys risk-based capital position at September 30, 2006 was $70.5 million, or 11.19% of risk-weighted assets, for Tier 1
capital and $77.3 million, or 12.28%, 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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##### Table of Contents

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 15.6% 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 September 30, 2006 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting. The Company
believes that the merger of its subsidiary banks will have a positive impact on internal controls.

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 the Company and its subsidiaries are involved pertains to collection suits involving delinquent loan accounts in the normal course of business.



21



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##### Table of Contents

Item 1A. Risk Factors

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

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

Item 3. Defaults Upon Senior Securities(not applicable)

Item 4. Submission of Matters to a Vote of Security Holders(not applicable)

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   



22



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##### Table of Contents

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: October 31, 2006



23



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##### Table of Contents

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   



24