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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







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

For the quarterly period ended March 31, 2008

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





EASTERN VIRGINIA BANKSHARES, INC.

(Exact name of registrant as specified in
its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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, a non-accelerated filer or a smaller reporting company. See definition
of accelerated filer, non- accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                                                                          |  |                             
|------------------------------------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈                                                |  | Accelerated filer  x        
|Non-accelerated filer   ̈    (Do not check if a smaller reporting company) |  | Smaller reporting company   ̈

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 May 5, 2008 was 5,867,544.









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EASTERN VIRGINIA BANKSHARES, INC.

FORM 10-Q

For the Period Ended March 31, 2008



|           |  |                                                                                       |  |   
|---------- |  | ------------------------------------------------------------------------------------- |  | --
|Part I     |  | Financial Information                                                                 |  |   
|Item 1.    |  | Financial Statements                                                                  |  | 2 
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 14
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 23
|Item 4.    |  | Controls and Procedures                                                               |  | 23
|           |  |                                                                                      
|Part II    |  | Other Information                                                                     |  |   
|Item 1.    |  | Legal Proceedings                                                                     |  | 23
|Item 1A.   |  | Risk Factors                                                                          |  | 23
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 23
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  | 24
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 24
|Item 5.    |  | Other Information                                                                     |  | 24
|Item 6.    |  | Exhibits                                                                              |  | 24
|Signatures |  | 25                                                                                   



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)



|                                                                                                                                                        |  |                         |           |   |                 |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --------- | - | --------------- | - | ------- | -
|                                                                                                                                                        |  | March 312008(unaudited) |           |   | December 312007 |  
|Assets:                                                                                                                                                 |  |                         |           |   |                 |   |         |  
|Cash and due from banks                                                                                                                                 |  | $                       | 20,296    |   |                 | $ | 18,017  |  
|Federal funds sold                                                                                                                                      |  |                         |          |   |                 |   | 367     |  
|Securities available for sale, at fair value                                                                                                            |  |                         | 180,882   |   |                 |   | 160,865 |  
|Loans, net of unearned income                                                                                                                           |  |                         | 766,626   |   |                 |   | 708,817 |  
|Allowance for loan losses                                                                                                                               |  |                         | (8,743    | ) |                 |   | (7,888  | )
|                                                                                                                                                        |  |                         |           |   |                 |   |         |  
|Total loans, net                                                                                                                                        |  |                         | 757,883   |   |                 |   | 700,929 |  
|Deferred income taxes                                                                                                                                   |  |                         | 5,452     |   |                 |   | 4,584   |  
|Bank premises and equipment, net                                                                                                                        |  |                         | 18,840    |   |                 |   | 18,261  |  
|Accrued interest receivable                                                                                                                             |  |                         | 4,019     |   |                 |   | 4,124   |  
|Other real estate                                                                                                                                       |  |                         | 1,079     |   |                 |   | 1,056   |  
|Goodwill                                                                                                                                                |  |                         | 15,970    |   |                 |   | 5,725   |  
|Other assets                                                                                                                                            |  |                         | 13,129    |   |                 |   | 12,783  |  
|                                                                                                                                                        |  |                         |           |   |                 |   |         |  
|Total assets                                                                                                                                            |  | $                       | 1,017,550 |   |                 | $ | 926,711 |  
|                                                                                                                                                        |  |                         |           |   |                 |   |         |  
|Liabilities and Shareholders Equity:                                                                                                                   |  |                         |           |   |                 |   |         |  
|Liabilities                                                                                                                                             |  |                         |           |   |                 |   |         |  
|Noninterest-bearing demand accounts                                                                                                                     |  | $                       | 120,575   |   |                 | $ | 95,823  |  
|Interest-bearing deposits                                                                                                                               |  |                         | 642,829   |   |                 |   | 576,077 |  
|                                                                                                                                                        |  |                         |           |   |                 |   |         |  
|Total deposits                                                                                                                                          |  |                         | 763,404   |   |                 |   | 671,900 |  
|Federal funds purchased                                                                                                                                 |  |                         | 8,126     |   |                 |   | 17,099  |  
|Federal Home Loan Bank advances (FHLB)                                                                                                                  |  |                         | 136,071   |   |                 |   | 127,071 |  
|Trust preferred debt                                                                                                                                    |  |                         | 10,310    |   |                 |   | 10,310  |  
|Accrued interest payable                                                                                                                                |  |                         | 2,696     |   |                 |   | 3,539   |  
|Other liabilities                                                                                                                                       |  |                         | 7,114     |   |                 |   | 6,023   |  
|                                                                                                                                                        |  |                         |           |   |                 |   |         |  
|Total liabilities                                                                                                                                       |  |                         | 927,721   |   |                 |   | 835,942 |  
|                                                                                                                                                        |  |                        
|Shareholders Equity                                                                                                                                    |  |                         |           |   |                 |   |         |  
|Common stock of $2 par value per share, authorized 50,000,000 shares, issued and outstanding 5,867,985 and 5,947,443, including 15,000
nonvested shares |  |                         | 11,736    |   |                 |   | 11,865  |  
|Surplus                                                                                                                                                 |  |                         | 17,891    |   |                 |   | 18,811  |  
|Retained earnings                                                                                                                                       |  |                         | 65,338    |   |                 |   | 63,616  |  
|Accumulated other comprehensive (loss), net                                                                                                             |  |                         | (5,136    | ) |                 |   | (3,523  | )
|                                                                                                                                                        |  |                         |           |   |                 |   |         |  
|Total shareholders equity                                                                                                                              |  |                         | 89,829    |   |                 |   | 90,769  |  
|Total liabilities and shareholders equity                                                                                                              |  | $                       | 1,017,550 |   |                 | $ | 926,711 |  
|                                                                                                                                                        |  |                         |           |   |                 |   |         |  

See Notes to Consolidated Financial Statements



2



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Eastern Virginia Bankshares, Inc. and Subsidiaries

Consolidated Statements of Income (Unaudited)

(Dollars in thousands except per share amounts)



|                                                    |  |                            |        |   |      |   |       
|--------------------------------------------------- |  | -------------------------- | ------ | - | ---- | - | ------
|                                                    |  | Three Months EndedMarch 31
|                                                    |  | 2008                       |        |   | 2007
|Interest and Dividend Income                        |  |                            |        |   |      |   |       
|Loans and fees on loans                             |  | $                          | 12,765 |   |      | $ | 12,090
|Interest on investments:                            |  |                            |        |   |      |   |       
|Taxable interest income                             |  |                            | 1,471  |   |      |   | 1,100 
|Tax exempt interest income                          |  |                            | 410    |   |      |   | 329   
|Dividends                                           |  |                            | 111    |   |      |   | 82    
|Interest on federal funds sold                      |  |                            | 6      |   |      |   | 314   
|                                                    |  |                            |        |   |      |   |       
|Total interest and dividend income                  |  |                            | 14,763 |   |      |   | 13,915
|Interest Expense                                    |  |                            |        |   |      |   |       
|Deposits                                            |  |                            | 4,896  |   |      |   | 4,591 
|Federal funds purchased                             |  |                            | 37     |   |      |   |      
|Interest on FHLB advances                           |  |                            | 1,434  |   |      |   | 1,002 
|Interest on trust preferred debt                    |  |                            | 191    |   |      |   | 208   
|                                                    |  |                            |        |   |      |   |       
|Total interest expense                              |  |                            | 6,558  |   |      |   | 5,801 
|                                                    |  |                            |        |   |      |   |       
|Net interest income                                 |  |                            | 8,205  |   |      |   | 8,114 
|Provision for Loan Losses                           |  |                            | 450    |   |      |   | 153   
|                                                    |  |                            |        |   |      |   |       
|Net interest income after provision for loan losses |  | $                          | 7,755  |   |      | $ | 7,961 
|Noninterest Income                                  |  |                            |        |   |      |   |       
|Service charges and fees on deposit accounts        |  |                            | 965    |   |      |   | 830   
|Debit/ credit card fees                             |  |                            | 256    |   |      |   | 145   
|Gain on sale of available for sale securities, net  |  |                            | 42     |   |      |   |      
|Impairment - securities                             |  |                            | (300   | ) |      |   |      
|Actuarial gain - pension curtailment                |  |                            | 1,328  |   |      |   |      
|Gain on sale of OREO, fixed assets and LLC          |  |                            | 4      |   |      |   |      
|Other operating income                              |  |                            | 362    |   |      |   | 374   
|                                                    |  |                            |        |   |      |   |       
|Total noninterest income                            |  |                            | 2,657  |   |      |   | 1,349 
|                                                    |  |                            |        |   |      |   |       
|Noninterest Expenses                                |  |                            |        |   |      |   |       
|Salaries and benefits                               |  |                            | 3,689  |   |      |   | 3,664 
|Occupancy and equipment expense                     |  |                            | 1,091  |   |      |   | 1,010 
|Telephone                                           |  |                            | 214    |   |      |   | 147   
|Marketing and advertising                           |  |                            | 224    |   |      |   | 199   
|Other operating expenses                            |  |                            | 1,377  |   |      |   | 1,258 
|                                                    |  |                            |        |   |      |   |       
|Total noninterest expenses                          |  |                            | 6,595  |   |      |   | 6,278 
|                                                    |  |                            |        |   |      |   |       
|Income before income taxes                          |  |                            | 3,817  |   |      |   | 3,032 
|Income Tax Expense                                  |  |                            | 1,145  |   |      |   | 924   
|                                                    |  |                            |        |   |      |   |       
|Net income                                          |  | $                          | 2,672  |   |      | $ | 2,108 
|                                                    |  |                            |        |   |      |   |       
|Earnings per share, assuming dilution               |  | $                          | 0.45   |   |      | $ | 0.35  
|Dividends per share                                 |  | $                          | 0.16   |   |      | $ | 0.16  

See Notes to Consolidated Financial Statements



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Eastern Virginia Bankshares, Inc. and Subsidiaries

Consolidated Statement of Cash Flows (Unaudited)

(Dollars in thousands)



|                                                                                                         |  |                            |         |   |      |   |         |  
|-------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                         |  | Three Months EndedMarch 31 |        
|                                                                                                         |  | 2008                       |         |   | 2007 |  
|Cash Flows from Operating Activities                                                                     |  |                            |         |   |      |   |         |  
|Net income                                                                                               |  | $                          | 2,672   |   |      | $ | 2,108   |  
|Adjustments to reconcile net income to net cash provided by operating activities:                        |  |                            |         |   |      |   |         |  
|Depreciation                                                                                             |  |                            | 545     |   |      |   | 477     |  
|Investment amortization / (accretion), net                                                               |  |                            | 15      |   |      |   | 20      |  
|Provision for loan losses                                                                                |  |                            | 450     |   |      |   | 153     |  
|(Gain) realized on available for sale securities transactions, net                                      |  |                            | (42     | ) |      |   |        |  
|(Gain) on pension curtailment                                                                            |  |                            | (1,328  | ) |      |   |        |  
|Impairment charge on securities                                                                          |  |                            | 300     |   |      |   |        |  
|(Gain) on LLC investment                                                                                 |  |                            | (4      | ) |      |   |         |  
|Stock based compensation                                                                                 |  |                            | 74      |   |      |   | 63      |  
|Change in assets and liabilities:                                                                        |  |                            |         |   |      |   |         |  
|(Increase) decrease in other assets                                                                      |  |                            | 587     |   |      |   | 249     |  
|Increase (decrease) in other liabilities                                                                 |  |                            | (659    | ) |      |   | 1,154   |  
|                                                                                                         |  |                            |         |   |      |   |         |  
|Net cash provided by operating activities                                                                |  |                            | 2,610   |   |      |   | 4,224   |  
|Cash Flows from Investing Activities                                                                     |  |                            |         |   |      |   |         |  
|Proceeds from sales of securities available for sale                                                     |  |                            | 5,622   |   |      |   |        |  
|Proceeds from maturities, calls, and paydowns of securities                                              |  |                            | 30,504  |   |      |   | 1,761   |  
|Purchase of debt securities                                                                              |  |                            | (58,384 | ) |      |   | (2,500  | )
|Purchase/retirement of restricted stock, net                                                             |  |                            | (512    | ) |      |   | 43      |  
|Net increase in loans                                                                                    |  |                            | (8,485  | ) |      |   | (10,331 | )
|Acquisition of branches (See Note 12)                                                                    |  |                            | 33,995  |   |      |   |        |  
|Purchases of bank premises and equipment                                                                 |  |                            | (1,023  | ) |      |   | (574    | )
|                                                                                                         |  |                            |         |   |      |   |         |  
|Net cash provided by (used in) investing activities                                                      |  |                            | 1,717   |   |      |   | (11,601 | )
|Cash Flows from Financing Activities                                                                     |  |                            |         |   |      |   |         |  
|Net increase (decrease) in noninterest bearing and interest bearing demand deposits and savings accounts |  |                            | (1,972  | ) |      |   | 3,772   |  
|Net increase in certificates of deposit                                                                  |  |                            | 1,603   |   |      |   | 2,184   |  
|Repurchases and retirement of common stock                                                               |  |                            | (1,229  | ) |      |   |        |  
|Issuance of common stock under dividend reinvestment plan                                                |  |                            | 106     |   |      |   | 103     |  
|Stock options exercised                                                                                  |  |                            |        |   |      |   | 20      |  
|Dividends declared                                                                                       |  |                            | (950    | ) |      |   | (973    | )
|Decrease in federal funds purchased                                                                      |  |                            | (8,973  | ) |      |   |        |  
|Increase in FHLB advances                                                                                |  |                            | 9,000   |   |      |   |        |  
|                                                                                                         |  |                            |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                                                      |  |                            | (2,415  | ) |      |   | 5,106   |  
|                                                                                                         |  |                            |         |   |      |   |         |  
|(Decrease) in cash and cash equivalents                                                                  |  |                            | 1,912   |   |      |   | (2,271  | )
|Cash and cash equivalents                                                                                |  |                            |         |   |      |   |         |  
|Beginning of period                                                                                      |  |                            | 18,384  |   |      |   | 36,415  |  
|                                                                                                         |  |                            |         |   |      |   |         |  
|End of period                                                                                            |  |                            | 20,296  |   |      |   | 34,144  |  
|                                                                                                         |  |                            |         |   |      |   |         |  
|Supplemental Disclosures of Cash Flow Information                                                        |  |                            |         |   |      |   |         |  
|Cash paid for:                                                                                           |  |                            |         |   |      |   |         |  
|Interest on deposits and other borrowings                                                                |  | $                          | 6,943   |   |      | $ | 5,443   |  
|Income taxes                                                                                             |  | $                          |        |   |      | $ |        |  
|Unrealized gain/(loss) on securities available for sale                                                  |  | $                          | (1,612  | ) |      | $ | 982     |  

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. (we, us, our, or Company) at March 31, 2008. The
statements should be read in conjunction with the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2007 (the 2007 Form 10-K). Certain previously reported amounts
have been reclassified to conform to current period presentation.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Eastern Virginia Bankshares, Inc., based in Tappahannock,
VA, is the parent company of EVB. EVB operates 25 retail branches in the Virginia counties of Caroline, Essex, Gloucester, Hanover, Henrico, King William, Lancaster, Middlesex, Northumberland, Southampton, Surry, Sussex and the City of Colonial
Heights. Subsidiaries of EVB include EVB Investments, EVB Mortgage, EVB Insurance and EVB Title. The Companys stock trades on the NASDAQ Global Market under the symbol EVBS.

We were 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 our wholly owned subsidiaries. The transaction was accounted for using the pooling-of-interests method of accounting. We opened our third subsidiary in May 2000 when
Hanover Bank began operations in Hanover County, Virginia. On April 24, 2006, we 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.

In the first quarter of
2008, we completed the previously announced purchase of 2 branches in the Richmond market from Millennium Bank. These branches are in new markets for our company and added $92 million in deposits and $49 million in loans to our balance sheet. This
transaction should be accretive to earnings starting in the second quarter of 2008. (See Note 12) Earlier in the first quarter of 2008, we relocated our Village branch in Mechanicsville to a better location, the Windmill, which is right off Route
360 as you come into town. The visibility of the location has already brought new customers in the door. In addition, the building of an owned branch in the Quinton area of New Kent County, Virginia continues on schedule. We are constantly looking
for accretive ways to expand our franchise.

The results of operations for the three-month period ended March 31, 2008 are not
necessarily indicative of the results to be expected for the full year.



|2. | Our amortized cost and estimated fair values of securities at March 31, 2008 and December 31, 2007 were as follows:
|-- | -------------------------------------------------------------------------------------------------------------------



|                                        |  |                |         |                      |   |                       |  |                    |       |  |   |        
|--------------------------------------- |  | -------------- | ------- | -------------------- | - | --------------------- |  | ------------------ | ----- |  | - | -------
|                                        |  | March 31, 2008
|(dollars in thousands)                  |  | AmortizedCost  |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | EstimatedFairValue
|Available for Sale:                     |  |                |         |                      |   |                       |  |                    |       |  |   |        
|Obligations of U.S. Government agencies |  | $              | 35,640  |                      | $ | 476                   |  | $                  | 46    |  | $ | 36,070 
|Mortgage-backed securities              |  |                | 46,931  |                      |   | 122                   |  |                    | 128   |  |   | 46,925 
|State and political subdivisions        |  |                | 41,603  |                      |   | 513                   |  |                    | 733   |  |   | 41,383 
|Corporate, CMO and other securities     |  |                | 54,742  |                      |   | 300                   |  |                    | 7,472 |  |   | 47,570 
|Restricted securities                   |  |                | 8,934   |                      |   |                      |  |                    |      |  |   | 8,934  
|                                        |  |                |         |                      |   |                       |  |                    |       |  |   |        
|Total                                   |  | $              | 187,850 |                      | $ | 1,411                 |  | $                  | 8,379 |  | $ | 180,882
|                                        |  |                |         |                      |   |                       |  |                    |       |  |   |        



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|                                        |  |                   |         |                      |   |                       |  |                    |       |  |   |        
|--------------------------------------- |  | ----------------- | ------- | -------------------- | - | --------------------- |  | ------------------ | ----- |  | - | -------
|                                        |  | December 31, 2007
|(dollars in thousands)                  |  | AmortizedCost     |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | EstimatedFairValue
|Available for Sale:                     |  |                   |         |                      |   |                       |  |                    |       |  |   |        
|Obligations of U.S. Government agencies |  | $                 | 43,284  |                      | $ | 285                   |  | $                  | 54    |  | $ | 43,515 
|Mortgage-backed securities              |  |                   | 25,136  |                      |   | 7                     |  |                    | 282   |  |   | 24,861 
|State and political subdivisions        |  |                   | 41,137  |                      |   | 384                   |  |                    | 310   |  |   | 41,211 
|Corporate, CMO and other securities     |  |                   | 47,374  |                      |   | 184                   |  |                    | 4,702 |  |   | 42,856 
|Restricted securities                   |  |                   | 8,422   |                      |   |                      |  |                    |      |  |   | 8,422  
|                                        |  |                   |         |                      |   |                       |  |                    |       |  |   |        
|Total                                   |  | $                 | 165,353 |                      | $ | 860                   |  | $                  | 5,348 |  | $ | 160,865
|                                        |  |                   |         |                      |   |                       |  |                    |       |  |   |        

There are no securities classified as Held to Maturity or Trading.

At March 31, 2008, investments in an unrealized loss position that were temporarily impaired were as follows:



|                                         |  |                     |        |                   |   |           |  |                |        |           |   |                |  |   |        |  |   |      
|---------------------------------------- |  | ------------------- | ------ | ----------------- | - | --------- |  | -------------- | ------ | --------- | - | -------------- |  | - | ------ |  | - | -----
|                                         |  | March 31, 2008     
|                                         |  | Less than 12 months |        | 12 months or more |   | Total    
|(dollars in thousands)                   |  | FairValue           |        | UnrealizedLoss    |   | FairValue |  | UnrealizedLoss |        | FairValue |   | UnrealizedLoss
|Description of Securities                |  |                     |        |                   |   |           |  |                |        |           |   |                |  |   |        |  |   |      
|Obligations of U. S. Government agencies |  | $                   | 22,948 |                   | $ | 46        |  | $              |       |           | $ |               |  | $ | 22,948 |  | $ | 46   
|Mortgage-backed securities               |  |                     | 19,832 |                   |   | 111       |  |                | 4,136  |           |   | 17             |  |   | 23,968 |  |   | 128  
|States and political subdivisions        |  |                     | 12,336 |                   |   | 733       |  |                |       |           |   |               |  |   | 12,336 |  |   | 733  
|Corporate, CMO and other securities      |  |                     | 23,552 |                   |   | 3,868     |  |                | 12,423 |           |   | 3,604          |  |   | 35,975 |  |   | 7,472
|                                         |  |                     |        |                   |   |           |  |                |        |           |   |                |  |   |        |  |   |      
|                                         |  | $                   | 78,668 |                   | $ | 4,758     |  | $              | 16,559 |           | $ | 3,621          |  | $ | 95,227 |  | $ | 8,379
|                                         |  |                     |        |                   |   |           |  |                |        |           |   |                |  |   |        |  |   |      

Bonds with unrealized loss positions of less than 12 months duration at March 31, 2008
included 3 federal agencies, 10 corporate bonds, 15 mortgage-backed securities, 5 collateralized mortgage obligations (CMO), 1 federal agency preferred stock and 28 municipal bonds. Securities with losses of 12 months or greater duration
included 11 mortgage-backed securities, 10 corporate bonds, 1 collateralized mortgage obligation and 3 federal agency preferred stocks. The unrealized loss positions at March 31, 2008 were primarily related to the widened market spreads for
corporate securities. Holdings of GMAC and Ford Motor Credit Corp. 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 March 31, 2008, we held $3.0 million in GMAC bonds and $250 thousand in Ford Motor Credit Corp. bonds. These holdings are monitored regularly by our Chief Financial Officer and reported to the EVB Board on a monthly basis. Based on
this analysis, we recorded a $300 thousand impairment charge on the GMAC holdings in March 2008. Given the attractive yield, our ability and intent to hold until maturity or principal recovery and the belief that the risk of default is remote, we
have not recommended sale of the holdings and believe the remaining unrealized loss is temporary.

The 10 corporate issues with losses of
less than 12 months include 5 pooled trust preferred securities packaged by FTN Financial and Keefe Bruyette and Woods secured by debt of banks and insurance companies, primarily banks, and 1 similar issue packaged by Suntrust Robinson Humphrey and
Bear Stearns consisting solely of bank borrowings. We believe that these pooled trust preferred securities are high quality investments that have seen their market value decline as the spread between corporate and government bonds have widened to
near record levels. None of these issues has been downgraded by rating agencies. As we have the positive intent and ability to hold these securities until maturity or a recovery in value, no decline was deemed to be other than temporary.



6



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##### Table of Contents

At December 31, 2007 investments in an unrealized loss position that were temporarily impaired were
as follows:



|                                         |  |                     |        |                   |   |           |  |                |        |           |   |                |  |   |        |  |   |      
|---------------------------------------- |  | ------------------- | ------ | ----------------- | - | --------- |  | -------------- | ------ | --------- | - | -------------- |  | - | ------ |  | - | -----
|                                         |  | December 31, 2007  
|                                         |  | Less than 12 months |        | 12 months or more |   | Total    
|(dollars in thousands)                   |  | FairValue           |        | UnrealizedLoss    |   | FairValue |  | UnrealizedLoss |        | FairValue |   | UnrealizedLoss
|Description of Securities                |  |                     |        |                   |   |           |  |                |        |           |   |                |  |   |        |  |   |      
|Obligations of U. S. Government agencies |  | $                   | 14,275 |                   | $ | 22        |  | $              | 5,873  |           | $ | 32             |  | $ | 20,148 |  | $ | 54   
|Mortgage-backed securities               |  |                     | 668    |                   |   | 2         |  |                | 21,199 |           |   | 280            |  |   | 21,867 |  |   | 282  
|States and political subdivisions        |  |                     | 5,650  |                   |   | 51        |  |                | 5,026  |           |   | 259            |  |   | 10,676 |  |   | 310  
|Corporate, CMO and other securities      |  |                     | 18,989 |                   |   | 2,180     |  |                | 14,471 |           |   | 2,522          |  |   | 33,460 |  |   | 4,702
|                                         |  |                     |        |                   |   |           |  |                |        |           |   |                |  |   |        |  |   |      
|                                         |  | $                   | 39,582 |                   | $ | 2,255     |  | $              | 46,569 |           | $ | 3,093          |  | $ | 86,151 |  | $ | 5,348
|                                         |  |                     |        |                   |   |           |  |                |        |           |   |                |  |   |        |  |   |      



|3. | Our loan portfolio was composed of the following at the dates indicated:
|-- | ------------------------------------------------------------------------



|                                              |  |              |         |   |                 |   |         |              |  |   |         |  
|--------------------------------------------- |  | ------------ | ------- | - | --------------- | - | ------- | ------------ |  | - | ------- | -
|                                              |  | (unaudited)  |         |   | (audited)       |   |         | (unaudited)  | 
|(Dollars in thousands)                        |  | March 312008 |         |   | December 312007 |   |         | March 312007 | 
|Commercial, industrial and agricultural loans |  | $            | 74,183  |   |                 | $ | 60,778  |              |  | $ | 59,449  |  
|Residential real estate mortgage loans        |  |              | 339,777 |   |                 |   | 317,767 |              |  |   | 295,710 |  
|Real estate construction loans                |  |              | 113,434 |   |                 |   | 98,877  |              |  |   | 83,713  |  
|Commercial real estate loans                  |  |              | 186,318 |   |                 |   | 178,011 |              |  |   | 171,893 |  
|Consumer loans                                |  |              | 50,879  |   |                 |   | 52,170  |              |  |   | 49,619  |  
|All other loans                               |  |              | 2,058   |   |                 |   | 1,243   |              |  |   | 415     |  
|                                              |  |              |         |   |                 |   |         |              |  |   |         |  
|Total loans                                   |  |              | 766,649 |   |                 |   | 708,846 |              |  |   | 660,799 |  
|Less unearned income                          |  |              | (23     | ) |                 |   | (29     | )            |  |   | (67     | )
|                                              |  |              |         |   |                 |   |         |              |  |   |         |  
|Total loans net of unearned discount          |  |              | 766,626 |   |                 |   | 708,817 |              |  |   | 660,732 |  
|Less allowance for loan losses                |  |              | (8,743  | ) |                 |   | (7,888  | )            |  |   | (7,113  | )
|                                              |  |              |         |   |                 |   |         |              |  |   |         |  
|Net loans                                     |  | $            | 757,883 |   |                 | $ | 700,929 |              |  | $ | 653,619 |  
|                                              |  |              |         |   |                 |   |         |              |  |   |         |  

We had $5.3 million in non-performing assets at March 31, 2008 that included $734 thousand in
loans past due 90 days or more but still accruing, $3.5 million in nonaccrual loans and $1.08 million classified as OREO.



|4. | Our allowance for loan losses was as follows at the dates indicated:
|-- | --------------------------------------------------------------------



|                                 |  |              |       |   |                 |   |       |              |  |   |       |  
|-------------------------------- |  | ------------ | ----- | - | --------------- | - | ----- | ------------ |  | - | ----- | -
|                                 |  | (unaudited)  |       |   | (audited)       |   |       | (unaudited)  | 
|(in thousands)                   |  | March 312008 |       |   | December 312008 |   |       | March 312007 | 
|Balance at beginning of year     |  | $            | 7,888 |   |                 | $ | 7,051 |              |  | $ | 7,051 |  
|Reserve on loans acquired        |  |              | 488   |   |                 |   |      |              |  |   |      |  
|Provision charged against income |  |              | 450   |   |                 |   | 1,238 |              |  |   | 153   |  
|Recoveries of loans charged off  |  |              | 144   |   |                 |   | 460   |              |  |   | 143   |  
|Loans charged off                |  |              | (227  | ) |                 |   | (861  | )            |  |   | (234  | )
|                                 |  |              |       |   |                 |   |       |              |  |   |       |  
|Balance at end of year           |  | $            | 8,743 |   |                 | $ | 7,888 |              |  | $ | 7,113 |  
|                                 |  |              |       |   |                 |   |       |              |  |   |       |  



7



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##### Table of Contents

Following is a summary pertaining to impaired loans:



|                                                        |  |                |       |                 |   |      
|------------------------------------------------------- |  | -------------- | ----- | --------------- | - | -----
|                                                        |  | March 312008   |       | December 312007
|                                                        |  | (in thousands)
|Impaired loans for which an allowance has been provided |  | $              | 6,446 |                 | $ | 4,365
|                                                        |  |                |       |                 |   |      
|Allowance related to impaired loans                     |  | $              | 1,895 |                 | $ | 1,054
|                                                        |  |                |       |                 |   |      
|Average balance of impaired loans                       |  | $              | 5,010 |                 | $ | 3,810
|                                                        |  |                |       |                 |   |      

No additional funds are committed to be advanced in connection with impaired loans. Nonaccrual
loans excluded from impaired loan disclosure under Statement of Financial Accounting Standards (SFAS) No. 114 amounted to $ 2.0 million and $1.4 million at March 31, 2008 and December 31, 2007, respectively.



|5. | Borrowings from the Federal Home Loan Bank of Atlanta are disclosed below. We utilize 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)  |         | (audited)       |   | (unaudited) 
|                        |  | March 312008 |         | December 312007 |   | March 312007
|Amortizing advances     |  | $            | 3,571   |                 | $ | 3,571        |  | $ | 5,000 
|LIBOR floating advances |  |              | 10,000  |                 |   | 10,000       |  |   |      
|Convertible advances    |  |              | 122,500 |                 |   | 113,500      |  |   | 85,500
|                        |  |              |         |                 |   |              |  |   |       
|Total advances          |  | $            | 136,071 |                 | $ | 127,071      |  | $ | 90,500
|                        |  |              |         |                 |   |              |  |   |       

The table presented below shows the maturities and potential call dates of FHLB advances. All but
$13.6 million of the FHLB borrowings are convertible advances that have a call provision.



|      |  |                  |         |          |      |   |                |   |          |  |      |  
|----- |  | ---------------- | ------- | -------- | ---- | - | -------------- | - | -------- |  | ---- | -
|      |  | MaturitiesAmount |         | Avg Rate |      |   | CallableAmount |   | Avg Rate | 
|2008  |  | $                | 1,429   |          | 3.15 | % |                | $ | 55,000   |  | 4.62 | %
|2009  |  |                  | 11,429  |          | 3.74 | % |                |   | 30,000   |  | 4.32 | %
|2010  |  |                  | 5,713   |          | 5.57 | % |                |   | 28,500   |  | 4.20 | %
|2011  |  |                  | 10,000  |          | 5.01 | % |                |   | 9,000    |  | 2.44 | %
|2015  |  |                  | 13,500  |          | 3.87 | % |                |   |         |  |      |  
|2016  |  |                  | 10,000  |          | 4.85 | % |                |   |         |  |      |  
|2017  |  |                  | 75,000  |          | 4.30 | % |                |   |         |  |      |  
|2018  |  |                  | 9,000   |          | 2.44 | % |                |   |         |  |      |  
|      |  |                  |         |          |      |   |                |   |          |  |      |  
|Total |  | $                | 136,071 |          | 4.22 | % |                | $ | 122,500  |  | 4.29 | %
|      |  |                  |         |          |      |   |                |   |          |  |      |  



|6. | 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 month periods ended March 31, 2008 and March 31, 2007.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



8



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##### Table of Contents

|                               |  |                    |  |                 |      |        |           |                 |   |     
|------------------------------ |  | ------------------ |  | --------------- | ---- | ------ | --------- | --------------- | - | ----
|                               |  | Three Months Ended
|                               |  | March 31, 2008     |  | March 31, 2007 
|                               |  | Shares             |  | Per ShareAmount |      | Shares |           | Per ShareAmount
|Basic earnings per share       |  | 5,909,425          |  | $               | 0.45 |        | 6,085,857 |                 | $ | 0.35
|Effect of dilutive securities, |  |                    |  |                 |      |        |           |                 |   |     
|stock options                  |  | 1,997              |  |                 |     |        | 9,096     |                 |   |    
|restricted stock               |  |                   |  |                 |     |        |          |                 |   |    
|                               |  |                    |  |                 |      |        |           |                 |   |     
|Diluted earnings per share     |  | 5,911,422          |  | $               | 0.45 |        | 6,094,953 |                 | $ | 0.35
|                               |  |                    |  |                 |      |        |           |                 |   |     

At March 31, 2008 and 2007, respectively, options to acquire 235,637 shares and 146,612 shares
of common stock were not included in computing diluted earnings per common share because their effects were anti-dilutive.



|7. | On September 21, 2000, we adopted the Eastern Virginia Bankshares, Inc. 2000 Stock Option Plan (the 2000 Plan) to provide a means for selected key employees and
directors to increase their personal financial interest in our company, thereby stimulating their efforts and strengthening their desire to remain with us. Under the 2000 Plan, up to 400,000 shares of Company common stock may be granted. No options
may be granted under the 2000 Plan after September 21, 2010. On April 17, 2003, the shareholders approved the 2003 Stock Incentive Plan, amending and restating the 2000 Plan (the 2003 Plan) while still authorizing the issuance
of up to 400,000 shares of common stock. There are 84,993 shares still available under the 2003 Plan.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On April 19, 2007,
our shareholders approved the Eastern Virginia Bankshares, Inc. 2007 Equity Compensation Plan (the 2007 Plan) to enhance our ability to recruit and retain officers, directors and employees with ability and initiative and to encourage
such persons to have a greater financial interest in the company. The 2007 Plan authorizes the Company to issue up to 400,000 additional shares of common stock. No awards have been issued under the 2007 Plan.

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R, Share-Based Payment. SFAS 123R
requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, such as stock options, based on the fair value of those awards at the date of grant. We had already adopted SFAS No. 123 in
2002 and began recognizing compensation expense for stock option grants in that year, as all such grants had an exercise price not less than the fair market value on the date of the grant.

SFAS 123R also requires that new awards to employees eligible for retirement prior to the awards becoming fully vested be recognized as compensation cost
over the period through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn the award. Our stock options granted to eligible participants prior to the adoption of SFAS 123R that had an
accelerated vesting feature associated with employee retirement are being recognized, as required, as compensation cost over the vesting period except in the instance of participants actual retirement.

For the three-month periods ended March 31, 2008 and 2007, stock option compensation expense of $67 thousand and $63 thousand was included in salary
and benefit expense.

Stock option compensation expense is the estimated fair value of options granted, amortized on a straight-line basis
over the requisite service period for each stock grant award. Through March 31, there have been no awards issued in 2008. The weighted average estimated fair value of stock options granted in the years 2007, 2006 and 2005 was $5.95, $5.40 and
$5.31, respectively. Fair value is estimated using the Black-Scholes option-pricing model with the assumptions indicated in the table below:



|                        |  |         |   |  |          |   |  |          |  
|----------------------- |  | ------- | - |  | -------- | - |  | -------- | -
|                        |  | 2007    |   |  | 2006     |   |  | 2005     |  
|Dividend rate           |  | 2.82    | % |  | 2.97     | % |  | 2.76     | %
|Price Volatility        |  | 32.89   | % |  | 22.94    | % |  | 23.61    | %
|Risk-free interest rate |  | 4.56    | % |  | 4.65     | % |  | 4.13     | %
|Expected life           |  | 7 Years |   |  | 10 Years |   |  | 10 Years |  



9



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##### Table of Contents

The dividend rate is calculated as the average quarterly dividend yield on our stock for the past seven
years by dividing the quarterly dividend by the average daily closing price of the stock for the period. Volatility is a measure of the standard deviation of the daily closing stock price plus dividend yield for the same period. The risk-free
interest rate is the seven-year Treasury strip rate on the date of the grant. The expected life of options granted in 2007 was calculated using the simplified method whereby the vesting period and the contractual period are averaged.

Stock option plan activity for the quarter ended March 31, 2008 is summarized below:



|                                      |  |         |   |  |                              |       |                                                  |      |                                                               |   |   
|------------------------------------- |  | ------- | - |  | ---------------------------- | ----- | ------------------------------------------------ | ---- | ------------------------------------------------------------- | - | --
|                                      |  | Shares  |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualLife(in
yeas) |      | IntrinsicValue ofUnexercisedIn-the MoneyOptions(in thousands)
|Outstanding at beginning of year      |  | 259,762 |   |  | $                            | 20.87 |                                                  |      |                                                               |   |   
|Granted                               |  |        |   |  |                              |      |                                                  |      |                                                               |   |   
|Exercised                             |  |        |   |  |                              |      |                                                  |      |                                                               |   |   
|Forfeited                             |  | (1,500  | ) |  |                              | 20.33 |                                                  |      |                                                               |   |   
|                                      |  |         |   |  |                              |       |                                                  |      |                                                               |   |   
|Oustanding at March 31, 2008          |  | 258,262 |   |  |                              | 20.87 |                                                  | 7.33 |                                                               | $ | 35
|Options exercisable at March 31, 2008 |  | 52,150  |   |  |                              | 23.18 |                                                  | 4.92 |                                                               | $ | 35

As of March 31, 2008, there was $509 thousand of unrecognized compensation expense related to
stock options that will be recognized over the remaining requisite service period of approximately 1.55 years. There were no options granted in the three month periods ended March 31, 2008 or 2007. There were no shares exercised in the three
months ended March 31, 2008. There were 1,125 shares exercised in the first three months of 2007 at an average price of $16.10 providing cash proceeds of $20 thousand, with an intrinsic value of $9 thousand.

We awarded 15,000 shares of restricted stock to employees on December 20, 2007. One half of these shares are subject to time vesting at 20% per
year over a five year vesting. At March 31, 2008 there was $122 thousand of total unrecognized compensation related to the time-vested awards. The other half of the restricted share award is performance based and will vest on
June 30, 2010 if, and only if, 2009 financial achievements of the Company meet very aggressive targets. Given the aggressive targets for the performance based award, compensation expense will be recognized only if the award vests. Compensation
is accounted for using the fair market value of our common stock on the date the restricted shares were awarded, which was $17.25 per share. For the three months ended March 31, 2008, restricted stock compensation expense of $7 thousand was
included in salary and benefit expense.



10



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##### Table of Contents

|8. | Components of net periodic benefit cost were as follows for the periods indicated:
|-- | ----------------------------------------------------------------------------------



|                                             |  |                            |        |   |      |   |      |  
|-------------------------------------------- |  | -------------------------- | ------ | - | ---- | - | ---- | -
|                                             |  | Three Months EndedMarch 31 |       
|                                             |  | 2008                       |        |   | 2007 |  
|                                             |  | (in thousands)             |       
|Components of Net Periodic Benefit Cost      |  |                            |        |   |      |   |      |  
|Service cost                                 |  | $                          | 229    |   |      | $ | 373  |  
|Interest cost                                |  |                            | 192    |   |      |   | 196  |  
|Expected return on plan assets               |  |                            | (267   | ) |      |   | (189 | )
|Amortization of prior service cost           |  |                            | 5      |   |      |   | 5    |  
|Amortization of net obligation at transition |  |                            | 1      |   |      |   | 1    |  
|*Recognized net actuarial gain               |  |                            | (1,328 | ) |      |   | 20   |  
|                                             |  |                            |        |   |      |   |      |  
|Net periodic benefit cost                    |  | $                          | (1,168 | ) |      | $ | 406  |  
|                                             |  |                            |        |   |      |   |      |  



|* | Note: $1.3 million was booked as an extraordinary gain in the non interest income category while $160 thousand was booked as pension expense in the quarter.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

We made our required 2007 fiscal year contribution to the pension plan in December 2007 in the amount of $1.63 million. While
we project that we will recognize $642 thousand of pension expense in 2008, no contribution will be required because of the pension curtailment gain discussed above.



|9. | SFAS No. 157, Fair Value Measurements, defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure
of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are
defined as follows:
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2  inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for
the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3  inputs to the valuation methodology are unobservable and significant to the fair value measurement.
| | - |  | -------------------------------------------------------------------------------------------------------------

Following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such
instruments pursuant to the valuation hierarchy:

Securities

Where quoted prices are available in an active market, securities are classified within level 1 of the valuation hierarchy. Level 1 securities would
include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or
discounted cash flow. Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there
is limited activity or less transparency around inputs to the valuation, securities are classified within level 3 of the valuation hierarchy. Currently, all of the Companys securities are considered to be Level 2 securities.

Loans held for sale

Loans held for
sale which is required to be measured in a lower of cost or fair value. Under SFAS No. 157, market value is to represent fair value. Management obtains quotes or bids on all or part of these loans directly from the purchasing financial
institutions. Premiums received or to be received on the quotes or bids are indicative of the fact that cost is lower than fair value. At March 31, 2008, our company had no loans held for sale.



11



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##### Table of Contents

Impaired loans

SFAS No. 157 applies to loans measured for impairment using the practical expedients permitted by SFAS No. 114, Accounting by Creditors for Impairment of a Loan, including impaired loans measured at
an observable market price (if available), or at the fair value of the loans collateral (if the loan is collateral dependent). Fair value of the loans collateral, when the loan is dependent on collateral, is determined by appraisals or
independent valuation which is then adjusted for the cost related to liquidation of the collateral.

Other Real Estate Owned

Certain assets such as other real estate owned (OREO) are measured at fair value less cost to sell. We believe that the fair value
component in its valuation follows the provisions of SFAS No. 157.



|10. | Recent Accounting Pronouncements
|--- | --------------------------------

In December 2007, the
Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 141(R), Business Combinations (SFAS 141(R)). The Standard will significantly change the financial accounting and reporting of
business combination transactions. SFAS 141(R) establishes the criteria for how an acquiring entity in a business combination recognizes the assets acquired and liabilities assumed in the transaction; establishes the acquisition date fair value as
the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business
combination. Acquisition related costs including finders fees, advisory, legal, accounting valuation and other professional and consulting fees are required to be expensed as incurred. SFAS 141(R) is effective for fiscal years beginning after
December 15, 2008 and early implementation is not permitted. We do not expect the implementation to have a material impact on our consolidated financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No.160, Noncontrolling Interests in Consolidated Financial Statements (SFAS 160). SFAS 160 requires us to establish accounting
and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15,
2008. Earlier adoption is prohibited. We do not expect the implementation of SFAS 160 to have a material impact on our consolidated financial statements.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. No. 161, Disclosures about Derivative Instruments and Hedging Activities  an amendment of FASB Statement
No. 133 (SFAS 161). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments,
(b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entitys financial position,
financial performance and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We do not expect the implementation of SFAS 161 to have a material impact on
our consolidated financial statements.



12



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##### Table of Contents

|11. | The following table displays detail of comprehensive income for the three-month periods ended March 31, 2008 and 2007:
|--- | ----------------------------------------------------------------------------------------------------------------------



|                                                                              |  |                            |        |   |      |   |      
|----------------------------------------------------------------------------- |  | -------------------------- | ------ | - | ---- | - | -----
|                                                                              |  | Three Months EndedMarch 31
|                                                                              |  | 2008                       |        |   | 2007
|Net income                                                                    |  | $                          | 2,672  |   |      | $ | 2,108
|Unrealized gains (losses on securities available for sale, net of tax expense |  |                            | (1,585 | ) |      |   | 982  
|Less: reclassification adjustment, net of tax                                 |  |                            | (27    | ) |      |   |     
|                                                                              |  |                            |        |   |      |   |      
|Total comprehensive income                                                    |  | $                          | 1,060  |   |      | $ | 3,090
|                                                                              |  |                            |        |   |      |   |      



|12. | On March 14, 2008, we purchased two branches from Millennium Bank, N. A. The purchase price of $8.5 million represented a 9.25% premium on the deposits assumed at the date of
consummation.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The acquisition included the assumption of certain deposit accounts and purchase of selected loans and fixed
assets as follows:



|                                      |  |   |       
|------------------------------------- |  | - | ------
|Assets purchased (at fair value):     |  |   |       
|Cash                                  |  | $ | 275   
|Loans                                 |  |   | 48,896
|Furniture, fixtures and equipment     |  |   | 102   
|Other assets                          |  |   | 173   
|Goodwill                              |  |   | 10,245
|Core deposit intangibles              |  |   | 20    
|                                      |  |   |       
|Total assets acquired                 |  | $ | 59,711
|                                      |  |   |       
|Liabilities acquired (at fair value): |  |   |       
|Deposit accounts                      |  | $ | 93,499
|Other liabilities                     |  |   | 207   
|                                      |  |   |       
|Total liabilities assumed             |  | $ | 93,706
|                                      |  |   |       
|Net liabilities assumed               |  | $ | 33,995
|                                      |  |   |       

Of the acquired intangible assets, $20 thousand was assigned to core deposit intangibles to be
amortized over a period of 28.5 months. The unamortized balance of accumulated core deposit intangibles, including previous branch acquisitions, was $719 thousand and $980 thousand at March 31, 2008 and 2007, respectively. The estimated
aggregate amortization expense for core deposit intangibles for the next 30 months is $24 thousand per month.

In addition, $1.6 million was
assigned as a discount on the certificates of deposit assumed, while $438 thousand was assigned as a premium on the loans purchased. Weighted average lives for the certificates of deposit and loans receivable were 1.05 years and 7.0 years,
respectively. The unamortized balance of the CD discount was $1.6 million and $0.0 at March 31, 2008 and 2007, respectively. The unamortized balance of the loan premium was $438 thousand and $0.0 at March 31, 2008 and 2007, respectively.
The estimated aggregate CD discount on a monthly basis through March 2009 is $130 thousand per month. The estimated aggregate loan premium amortization on a monthly basis for the 84 months beginning April 2008 is $5 thousand.

We have also booked to Goodwill $488 thousand of loan loss reserve on the acquired loans and $84 thousand of acquisition costs including legal fees,
conversion fees, legal advertising and legal mailings.



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

We present managements discussion and analysis of financial information to aid the reader in understanding and evaluating our financial condition and results of operations. This discussion provides information
about our major components of the results of operations, financial condition, liquidity and capital resources. 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 2007 Form 10-K. Operating results include those of all our operating entities combined for all periods presented.

We provide a broad range of personal and commercial banking services including commercial, consumer and real estate loans. We complement our lending operations with an array of retail and commercial deposit products and fee-based services.
Our services are delivered locally by well-trained and experienced bankers, whom we empower to make decisions at the local level so that they can provide timely lending decisions and respond promptly to customer inquiries. We believe that, by
offering our customers personalized service and a breadth of products, we can compete effectively as we expand within our existing markets and into new markets.

CRITICAL ACCOUNTING POLICIES

General

Our 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 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) SFAS No. 5, Accounting for Contingencies, which requires that losses be accrued when their
occurrence is probable 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.

We evaluate non-performing loans individually for impairment
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, we make 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 estimates of losses for groups of loans
are adjusted for relevant environmental factors and other conditions of the portfolio of loans including: borrower or industry concentrations; levels and trends in delinquencies, charge-offs and recoveries; changes in risk selection; level of
experience, ability and depth of lending staff; and national and economic conditions.

The amounts of estimated losses for loans individually evaluated for
impairment and groups of loans are added together for a total estimate of loan losses. The estimate of losses is compared to our allowance for loan losses as of the evaluation date and, if the estimate of losses is greater than the allowance, an
additional provision to the allowance would be evaluated to determine whether an addition to the allowance is needed. 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 would be necessary. While management uses the best



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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.

Goodwill and Intangible Assets

SFAS No. 141, Business Combinations, requires the purchase method
of accounting be used for all business combinations initiated after June 30, 2001. For purchase acquisitions, we are required to record assets acquired, including identifiable intangible assets, and liabilities at their fair value, which in
many instances involves estimates based on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analysis or other valuation techniques. Effective January 1, 2001, we adopted SFAS No. 142
Goodwill and Other Intangible Assets (SFAS 142) which prescribes the accounting for goodwill and intangible assets subsequent to initial recognition. The provisions of SFAS No. 142 discontinue the amortization of goodwill and
intangible assets with indefinite lives, but require at least an annual impairment review and more frequently if certain impairment indicators are in evidence. Additionally, we adopted SFAS No. 147 Acquisitions of Certain Financial
Institutions, on January 1, 2002, and determined that core deposit intangibles will continue to be amortized over their estimated useful lives.

Goodwill totaled $16.0 million and $5.7 million as of March 31, 2008 and December 31, 2007, respectively. Based on the testing of goodwill for impairment, no impairment charges have been recorded. As described in Note 12, this
increase was due to our acquisition in the first quarter of 2008. Core deposit intangible assets are being amortized over the period of expected benefit, which ranges from 2.39 to 7.0 years. Core deposit intangibles, net of amortization, amounted to
$719 thousand and $770 thousand, respectively.

OVERVIEW

Net income for the quarter ended March 31, 2008 increased $564 thousand or 26.8% when compared to the same period in 2007. Increases in net interest income of 1.1% and noninterest income of 97.0% fueled the income growth, while an
increase in noninterest expenses of 5.0% and provision expense of 194% negatively impacted net income for the quarter. Net interest income increased $91 thousand reflecting the economic impact of the FOMCs aggressive lowering of the target
federal funds rate during the first quarter. Interest income was up $848 thousand, or 6.1%, as loans and investments provided strong returns on the asset growth of 2007. Interest expense increased $757 thousand, or 13.0%, reflecting the slower
change in funding cost when rates decline so quickly. Provision for loan losses increased $297 thousand over the 2007 level, as management continued preparation for the effects of a possible recessionary market. Noninterest income increased $1.3
million as a result of increases in most of the categories but more importantly, due to a $1.3 million gain from pension curtailment as our pension liability decreased and a $300 thousand impairment charge we applied to our investment portfolio.
Without the gain, noninterest income would have declined $20 thousand and with out either of the nonrecurring items this income would have been up $280 thousand or 20.8%. Noninterest expense increased $317 thousand, or 5.0% as a result of our
expansion with the purchase of the Millennium branches, the relocation in Mechanicsville to the new Windmill location, increased regulatory expense and infrastructure improvements.

Management is excited about our growth in income, assets and locations but recognizes the tough economic environment we have been and will continue working in for 2008. The yield curve has returned to a more normal
slope as a result of the Federal Reserves rate cuts. These changes in rates have caused a large portion of our loan portfolio to re-price instantly, while our deposits have longer maturity terms and will not re-price until later in the year.
Management sees three areas of concentration in 2008: (1) bring the deposit cost down by re-pricing new deposits at then current market rates; (2) prepare for potential loan problems as a result of the weak economy by building up our loan
loss reserve; and (3) continue to grow our earning assets in order to benefit from the long term effects of a lower rate environment. We believe our core earnings are strong and growing. Many of the expense increases in the first quarter were
nonrecurring which should help in the next two quarters. We anticipate opening a new branch in the fourth quarter of 2008 which will potentially create some drag on earnings. While subprime lending was not and is not part of our growth strategy and
we do not see the huge write-downs that have made headlines over the last six months, we recognize that we will be impacted by the fallout. Our securities impairment charge is an indirect effect of the securitization of bonds with mortgages. With
job growth declining, the potential for more slow pays and defaults on loans increases. We are a community bank in diversified markets which requires different skills to help our customers in these markets. The year, 2008 offers challenges which
will test our strategies and our ability to deal with our economic environment. We look forward to the year.



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Total assets at March 31, 2008 were $1.0 billion, up $90.8 million, or 9.8%, from $926.7 million at year end 2007
and up $156.7 million, or 18.2% from March 31, 2007, when total assets were $860.8 million. This is the result of strong growth and the acquisition of the Millennium branches which added over $90 million to our footings. These branches place
the company in new and growing markets for our franchise and going forward, we anticipate strong growth from them. For the quarter, total assets averaged $931.4 million, 8.6% above the first quarter 2007 average of $857.3 million. At March 31,
2008, total loans, net of unearned income, amounted to $766.6 million an increase of $57.8 million, or 8.2%, from $708.8 million at December 31, 2007. Average loans for the first quarter 2008, increased $64.6 million to $719.9 million compared
to $655.3 million for the same period in 2007. At March 31, 2008, net loans as a percent of total assets were 75.3%, as compared to 76.5% at December 31, 2007 reflecting greater growth in the investment portfolio from funds acquired in the
Millennium branches acquisition. Loan demand has been good in the first quarter of 2008, but there are signs that it could slow as the economy gets worse and conservatism toward growth takes over our customers business thinking.

At March 31, 2008, the investment portfolio totaled $180.9 million, an increase of $51.5 million from $129.3 million at March 31, 2007 and up $20.0 million, or
12.4%, from $160.9 million at December 31, 2007. During the first quarter of 2008, with rates dropping rapidly resulting in numerous calls on bonds, we prefunded some investments at relatively strong rates in anticipation of the extra funding
we received from the Millennium transaction in late March. If the Federal Reserve continues lowering rates, as most economic indicators imply will happen, we expect calls to continue at an above normal pace. The funds from these potential
transactions will be used to fund loans or purchase new bonds based on what the current market situation dictates. Most of the funds that are invested in the investment portfolio are part of managements effort to balance interest rate risk and
to provide liquidity. We were in a funds purchased position at the end of the first quarter 2008 with $8.1 million of federal funds purchased at March 31, 2008, while there was $17.1 million in federal funds purchased at December 31, 2007
and $17.6 million in federal funds sold at March 31, 2007. The stock offering in December 2006 and the acquisition in March 2008 have funded our growth and minimized the need to borrow over the last 15 months.

Total deposits of $763.4 million at March 31, 2008 represented an increase of $91.5 million, or 13.6%, from $671.9 million at year-end 2007 and an increase of
$103.5 million, or 15.7%, from $659.9 million at March 31, 2007. The branch acquisitions added approximately $91.9 million to our deposit base. Year-over-year, all deposit categories were up except savings. Noninterest-bearing demand deposits
of $120.6 million at March 31, 2008 increased $24.8 million when compared to $95.8 million at December 31, 2007 and up $23.0 million from $97.6 million at the end of the same quarter in 2007. Interest-bearing deposits at March 31,
2008, increased $66.8 million, or 11.6%, to $642.8 million compared to $576.1 million at December 31, 2007 and up $80.5 million, or 14.3%, compared to $562.3 million at March 31, 2007. These last two statistics highlight the importance of
the acquisition because with out the inflow, noninterest bearing deposits would have been down and interest bearing deposits would have increased minimally compared to the prior periods. While some of the time deposits from the Millennium branches
were priced higher than our existing base, the influx of noninterest bearing deposits and our effort to lower our cost of funds should minimize any impact on the margin as we go through the year. All deposit prices are evaluated frequently,
especially at the point when rates are decreased, to adjust them to the new rate environment. Even our signature growth deposit product, Reward Checking, had its rate decreased from 5.01% to a still above market 4.01%.

FHLB borrowings at March 31, 2008 totaled $136.1 million, a $45.6 million, or 50.4%, increase over $90.5 million at March 31, 2007 and up $9.0 million from
$127.1 million at December 31, 2007. Loan demand continued to outpace deposit growth for most of the first quarter of 2008, requiring management to obtain alternative low cost funding for the loan growth early in the quarter. Going through the
current year, we expect to attract lower cost deposits to match with loans that will be repricing at lower rates and to cover loan growth. We do not anticipate additional borrowing this year, but that is dictated by the markets and the economic
environment.

SFAS No. 115, discussed in the 2007 Form 10-K, 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. The securities portion was a negative $4.5 million at March 31, 2008, an increase of $1.6 million from a negative $2.9 million at



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December 31, 2007 and an increase of $3.0 million from a negative $1.5 million at March 31, 2007. Also included in this line item is a $606
thousand negative amount related to the pension plan (SFAS No. 158). 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 26.8% to $2.7 million for the three months ended March 31, 2008, compared to $2.1 million for the same period in 2007. Diluted earnings per
share increased 28.6% to $0.45 for the first quarter of 2008, compared to $0.35 for the same quarter in 2007. Net interest income increased $91 thousand for the quarter ended March 31, 2008, when compared to the same period in 2007. This
increase in net interest income for 2008s first quarter was the result of higher earnings on the loan portfolio despite lower rates, higher earnings on the investment portfolio which more than offset a $308 thousand decline in funds sold
income and an increase of $757 thousand in total funding costs. This increase in interest income was more than offset by a $297 thousand increase in provision for loan loss, as we increased our reserve in anticipation of the potential economic
impact on our loan portfolio and increased the classification of loans designated as impaired. Noninterest income excluding securities gains was up $1.3 million, or 94.8%, for the quarter when compared to the same period in 2007. Of this increase,
$1.0 million resulted from two extraordinary items (1) a $1.3 million, one-time gain on pension curtailment as we implemented changes in the pension plan, and (2) a $300 thousand impairment charge taken on the GMAC holdings in our
investment portfolio.

Noninterest expense rose $317 thousand, or 5.0%, for the three months ended March 31, 2008, compared to the comparable period
in 2007, as all categories increased. Salaries and benefits increased $25 thousand or 0.7%, as increases in salaries and other benefit increases were nearly offset by a $246 thousand decrease in pension expense. Net occupancy expense rose $81
thousand to $1.1 million compared to $1.0 million for the quarter ended March 31, 2007. Occupancy expense was impacted primarily by increased costs associated with the relocation to the new Windmill office. Other expenses increased $211
thousand as telephone expense increased $67 thousand due to infrastructure changes, marketing and advertising increased $25 thousand as a result of branch opening costs, and other operating expenses rose $119 thousand. Other operating expense was
primarily impacted by a $75 thousand increase in FDIC insurance expense.

Return on average assets (ROA) increased to 1.15% in the first quarter of 2008,
compared to 1.00% in the same quarter of 2007, and return on average equity (ROE) increased to 11.63% compared to 9.66% for the quarters ended March 31, 2008 and 2007, respectively.

Net Interest Income

Our primary source of income is net interest income which on a fully tax equivalent basis
totaled $8.4 million for the first quarter of 2008, a $126 thousand increase over the first quarter of 2007. Average earning assets for the first quarter 2008 were $877.7 million an increase of $71.4 million compared to $806.3 for the period ended
March 31, 2007. Average loans increased $64.6 million, or 9.9%. Average securities increased $29.4 million, or 23.0%. Average federal funds sold decreased $22.6 million, or 96.3% as funds on hand in the first quarter of 2007 from the December
2006 stock offering were redeployed to higher yielding assets. The fully tax equivalent net interest margin for the three-month period ended March 31, 2008 was 3.84% compared to 4.15% for the same quarter ended in 2007. For the quarter, the
yield on earning assets declined 22 basis points to 6.85%, compared to 7.07% for the first quarter of 2007, and the cost of interest bearing liabilities was up 5 basis points to 3.60% from 3.55% in the same period in 2007, narrowing the spread
between the yield on earning assets and the cost of funds. This decline in earning assets yield reflects the impact of multiple rate cuts by the Federal Reserve beginning in the second half of 2007 and the intense competition in loan pricing. Our
increase in funding costs is more specifically related to a year-over-year increase in interest checking of 68 basis points. Interest checking also displayed the largest growth of any category at $28.1 million, or 29.6%. The cost of money market
savings increased 6 basis points while the average balances increased $1.3 million. Savings deposit average balances fell $9.7 million while the cost decreased 24 basis points. Large certificates of deposit average balances rose $7.9 million while
the cost dropped 12 basis points. Consumer certificates of deposits average balances increased $790 thousand while the cost decreased 8 basis points.



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Seeing some declines in cost of funds, we believe, are the first sign that our adjustment to market deposit pricing is
having an impact on the margin. We are well aware of the challenge that we face and believe that wholesale funding and development/implementation of new deposit products are ways to manage the margin. Depositors are still undecided on where to place
their money. They want yield and security. They are worried about the economy, their jobs and the future. Our goal is to convince them that our products meet their needs and if they do not, then develop products that will. To achieve this goal, we
have developed the position of deposit manager to monitor our deposits from a marketing stand point, and to make concerted efforts to enhance our products. With the rapid rate cuts by the Federal Reserve, many loans with variable rates re-price
immediately while fixed rate deposits reprice more slowly. Deposits will re-price but it will take some time to get the margin back to our accustomed levels. We anticipate that a positively sloping yield curve will enhance the margin. Other factors
are harder to gauge in this up and down market which changed almost daily in the first quarter. Monitoring the markets, listening to our customers and utilizing our market models should help us adjust quickly to all challenges.

Tables that disclose fully tax equivalent net interest income calculations for the three-month periods ended March 31, 2008 and 2007 follow:



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



|                                                        |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|------------------------------------------------------- |  | ---------------------------- | ------- | - | -------------- | - | ---------- |  | ---- | -------------- |  | - | -------------- | - | ---------- | - | ------ |  | ---- | -
|                                                        |  | Three Months Ended March 31, |        
|                                                        |  | 2008                         |         |   | 2007           |  
|                                                        |  | AverageBalance               |         |   | Income/Expense |   | Yield/Rate |  |      | AverageBalance |  |   | Income/Expense |   | Yield/Rate |  
|Assets:                                                 |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Securities                                              |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Taxable                                                 |  | $                            | 115,657 |   |                | $ | 1,581      |  | 5.50 | %              |  | $ | 95,835         |   |            | $ | 1,182  |  | 5.00 | %
|Tax exempt (1)                                          |  |                              | 41,233  |   |                |   | 591        |  | 5.77 | %              |  |   | 31,699         |   |            |   | 474    |  | 6.06 | %
|                                                        |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total securities                                        |  |                              | 156,890 |   |                |   | 2,172      |  | 5.57 | %              |  |   | 127,534        |   |            |   | 1,656  |  | 5.27 | %
|Federal funds sold                                      |  |                              | 875     |   |                |   | 6          |  | 2.76 | %              |  |   | 23,456         |   |            |   | 314    |  | 5.43 | %
|Loans, net of unearned income (2)                       |  |                              | 719,924 |   |                |   | 12,765     |  | 7.13 | %              |  |   | 655,335        |   |            |   | 12,090 |  | 7.48 | %
|                                                        |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total earning assets                                    |  |                              | 877,689 |   |                |   | 14,943     |  | 6.85 | %              |  |   | 806,325        |   |            |   | 14,060 |  | 7.07 | %
|Less allowance for loan losses                          |  |                              | (8,139  | ) |                |   |            |  |      |                |  |   | (7,115         | ) |            |   |        |  |      |  
|Total non-earning assets                                |  |                              | 61,809  |   |                |   |            |  |      |                |  |   | 58,102         |   |            |   |        |  |      |  
|                                                        |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total assets                                            |  | $                            | 931,359 |   |                |   |            |  |      |                |  | $ | 857,312        |   |            |   |        |  |      |  
|                                                        |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Liabilities & Shareholders Equity:                     |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Interest bearing deposits                               |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Checking                                                |  | $                            | 122,931 |   |                | $ | 627        |  | 2.05 | %              |  | $ | 94,857         |   |            | $ | 320    |  | 1.37 | %
|Savings                                                 |  |                              | 75,851  |   |                |   | 185        |  | 0.98 | %              |  |   | 85,581         |   |            |   | 257    |  | 1.22 | %
|Money market savings                                    |  |                              | 42,800  |   |                |   | 259        |  | 2.43 | %              |  |   | 41,484         |   |            |   | 243    |  | 2.38 | %
|Large dollar certificates of deposit (3)                |  |                              | 127,431 |   |                |   | 1,485      |  | 4.69 | %              |  |   | 119,484        |   |            |   | 1,417  |  | 4.81 | %
|Other certificates of deposit                           |  |                              | 217,819 |   |                |   | 2,340      |  | 4.32 | %              |  |   | 217,029        |   |            |   | 2,354  |  | 4.40 | %
|                                                        |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total interest-bearing deposits                         |  |                              | 586,832 |   |                |   | 4,896      |  | 3.36 | %              |  |   | 558,435        |   |            |   | 4,591  |  | 3.33 | %
|Federal funds purchased                                 |  |                              | 4,413   |   |                |   | 36         |  | 3.28 | %              |  |   |               |   |            |   |       |  |      |  
|Other borrowings                                        |  |                              | 141,337 |   |                |   | 1,626      |  | 4.63 | %              |  |   | 104,421        |   |            |   | 1,210  |  | 4.70 | %
|                                                        |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total interest-bearing liabilities                      |  |                              | 732,582 |   |                |   | 6,558      |  | 3.60 | %              |  |   | 662,856        |   |            |   | 5,801  |  | 3.55 | %
|Noninterest-bearing liabilities                         |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Demand deposits                                         |  |                              | 99,045  |   |                |   |            |  |      |                |  |   | 95,478         |   |            |   |        |  |      |  
|Other liabilities                                       |  |                              | 7,556   |   |                |   |            |  |      |                |  |   | 10,504         |   |            |   |        |  |      |  
|                                                        |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total liabilities                                       |  |                              | 839,183 |   |                |   |            |  |      |                |  |   | 768,838        |   |            |   |        |  |      |  
|Shareholders equity                                    |  |                              | 92,176  |   |                |   |            |  |      |                |  |   | 88,474         |   |            |   |        |  |      |  
|                                                        |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Total liabilities and shareholders equity              |  | $                            | 931,359 |   |                |   |            |  |      |                |  | $ | 857,312        |   |            |   |        |  |      |  
|                                                        |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Net interest income                                     |  |                              |         |   |                | $ | 8,385      |  |      |                |  |   |                |   |            | $ | 8,259  |  |      |  
|                                                        |  |                              |         |   |                |   |            |  |      |                |  |   |                |   |            |   |        |  |      |  
|Interest rate spread (4)                                |  |                              |         |   |                |   |            |  | 3.25 | %              |  |   |                |   |            |   |        |  | 3.52 | %
|Interest expense as a percent of average earning assets |  |                              |         |   |                |   |            |  | 3.01 | %              |  |   |                |   |            |   |        |  | 2.92 | %
|Net interest margin (5)                                 |  |                              |         |   |                |   |            |  | 3.84 | %              |  |   |                |   |            |   |        |  | 4.15 | %

Notes:

|(1) | Income and yields are reported on a tax equivalent basis assuming a federal tax rate of 35%.
|--- | --------------------------------------------------------------------------------------------

The tax equivalent adjustment for the quarter is $180 thousand, compared to $145 thousand in the prior year.

|(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
|--- | ----------------------------------------------------------------------------------------------------------------------



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Noninterest Income

This category includes all income not related to interest on investments and interest and fees on loans. Noninterest income excluding net realized gains on securities sales and all other one time gains or losses in the quarter was $1.6
million for the first quarter of 2008 compared to $1.3 million for the same quarter in 2007. Service charges on deposit accounts for the quarter ended March 31, 2008 were $965 thousand, compared to $830 thousand for the comparable period in
2007. Debit and credit card fees increased $111 thousand or 76.6% for the first quarter 2008 to $256 thousand compared to $145 thousand in the first quarter 2007. For the quarter ended March 31, 2008, investment subsidiary fees were $91
thousand, an increase of $19 thousand or 25.9% compared to $72 thousand for the same period in 2007. Service charge increases were from a combination of rate and volume increases. Debit and credit card increases were the result of more usage of
debit cards which raised the fees related to these transactions and more fee and interchange income from credit card transactions. Part of the volume is a direct result of our Reward Checking product which requires a minimum number of transactions.
The increase in investment services income is the result of better sales in the first quarter 2008 compared to 2007. Other operating income without debit and credit card fees or investment services fees decreased $31 thousand in the first quarter as
a result of lower mortgage fees in 2008 compared to 2007 first quarter.

Noninterest Expense

This category includes all expenses other than interest paid on deposits and borrowings. Total noninterest expense increased $317 thousand with increases in all the
identified categories when comparing 2008 and 2007 first quarter results. Salaries and benefits increased $25 as a result of an increase in salary and wages of $242 thousand offset by a net decrease of $218 thousand in the other personnel categories
with the decrease in pension plan expense being the largest contributor. Occupancy expense increased $81 thousand from increased depreciation for new locations, higher rent and higher custodial costs. Telephone expense is up as a result of
infrastructure changes which have some upfront cost and required the running of 2 systems in parallel. Marketing and advertising increased from higher expense for branch openings. Other operating expenses increased $119 thousand with FDIC expense up
$56 thousand and miscellaneous loan expenses up $59 thousand from new loans and higher collection expense.

Income Taxes

Income tax expense for the quarter ended March 31, 2008 was $1.1 million, compared to $924 thousand for the same period in 2007. This increase was primarily the
result of higher income and our effort to control tax expense. The effective tax rate for the quarter was 30.0%. The primary source of the increase for the quarter was the tax on the pension curtailment gain.

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 $5.3 million at March 31, 2008, $2.9 million at December 31, 2007 and $2.4 million at March 31, 2007.
Nonperforming assets are composed largely (94.1%) of loans secured by real estate in the Companys market area or Other Real Estate Owned (OREO). In the first quarter of 2008, OREO increased $23 thousand which represents improvements on
the homes securing this credit, incurred in an effort to ready the properties for sale. Even with the slow real estate markets, home values in our markets are holding up better than the nationwide averages. We still anticipate selling these
properties to recover the full value that we have in them.



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Total loan charge-offs, less recoveries, amounted to $83 thousand for the first quarter of 2008 compared to $91 thousand
for the same quarter in 2007, while the annualized ratio of net charge-offs to total average loans, net of unearned income, was 0.05% for the first quarter of 2008 compared to 0.06% for the same quarter in 2007. These strong numbers reflect the
emphasis that management places on credit quality management, especially in an environment with increasing credit risk in the financial services industry. Due to the economic environment, we expect an increase in problem loans during 2008.

The allowance for loan losses of $8.7 million at March 31, 2008 increased $1.6 million when compared to $7.1 million at March 31, 2007 and was
up $855 thousand, compared to $7.9 million at December 31, 2007. The increase in allowance over the last year has been largely a matter of management increasing the reserve in anticipation of potential economic problems in later 2008 and as a
result of an increase in impaired loans. Management believes the balance in the allowance reflects what an economic downturn may do to our current strong asset quality. Management has directed higher than historical additions to the allowance to
better prepare the company for the impact of a potential recessionary economic environment. The ratio of allowance for loan losses to total loans was 1.14% at March 31, 2008, 1.11% at 2007 year-end and 1.08% at March 31, 2007. The
allowance for loan losses at March 31, 2008 included $1.9 million of specific impaired loan reserves.

At March 31, 2008, the Company reported
$6.4 million in impaired loans, an increase of $2.1 million from $4.4 million at December 31, 2007 and an increase of $2.1 million from $4.3 million at March 31, 2007. The average balance of impaired loans for the three months ended
March 31, 2008 was $5.0 million.

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



|                                                          |  |              |        |   |                 |   |        |              |  |   |        |  
|--------------------------------------------------------- |  | ------------ | ------ | - | --------------- | - | ------ | ------------ |  | - | ------ | -
|Nonperforming Assets (Dollars in
thousands)               |  | March 312008 |        |   | December 312007 |   |        | March 312007 | 
|Nonaccrual loans                                          |  | $            | 3,533  |   |                 | $ | 1,449  |              |  | $ | 1,414  |  
|Restructured loans                                        |  |              |       |   |                 |   |       |              |  |   |       |  
|Loans past due 90 days and accruing interest              |  |              | 734    |   |                 |   | 358    |              |  |   | 977    |  
|                                                          |  |              |        |   |                 |   |        |              |  |   |        |  
|Total nonperforming loans                                 |  | $            | 4,267  |   |                 | $ | 1,807  |              |  | $ | 2,391  |  
|Other real estate owned                                   |  |              | 1,079  |   |                 |   | 1,056  |              |  |   |       |  
|                                                          |  |              |        |   |                 |   |        |              |  |   |        |  
|Total nonperforming assets                                |  | $            | 5,346  |   |                 | $ | 2,863  |              |  | $ | 2,391  |  
|Nonperforming assets to total loans and other real estate |  |              | 0.70   | % |                 |   | 0.40   | %            |  |   | 0.36   | %
|Allowance for loan losses to nonaccrual loans             |  |              | 247.49 | % |                 |   | 544.37 | %            |  |   | 503.22 | %
|Net charge-offs to average loans for the year             |  |              | 0.05   | % |                 |   | 0.06   | %            |  |   | 0.06   | %
|Allowance for loan losses to period end loans             |  |              | 1.14   | % |                 |   | 1.11   | %            |  |   | 1.08   | %

LIQUIDITY

Liquidity represents our ability to meet present and future deposit withdrawals, to fund loans, to maintain reserve requirements and to operate the organization. To meet our liquidity needs, we maintain cash reserves and have an adequate
flow of funds from maturing loans, securities and short-term investments. In addition, our subsidiary bank maintains borrowing arrangements with major regional banks and with the Federal Home Loan Bank (FHLB). We consider our sources of
liquidity to be sufficient to meet our estimated liquidity needs.

During the first quarter of 2008, we executed net new FHLB borrowings of $9 million to
take advantage of attractive rates in prefunding the expected inflow of funds from our purchase of the Millennium branches. The average rate on the new fixed-rate borrowings is 2.44%. We have made it a practice to fund growth at times with FHLB
borrowings if the rates were below our interest bearing deposit costs. These borrowings have some potential long-term interest risk if rates fall significantly, but overall give us an acceptable spread and funding rate. We have relied on FHLB
borrowings to support our growth at times in the past and 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 2007
Form 10-K disclosure. At March 31, 2008, we had immediate available credit with the FHLB of $8.7 million and with nonaffiliated banks of $14.0 million. See Note 5 to the Consolidated Financial Statements in the 2007 Form 10-K for further FHLB
information.



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There have been no material changes in off-balance sheet arrangements since the 2007 Form 10-K disclosure.

Management believes that we maintain overall liquidity sufficient to satisfy our depositors requirements and meet our customers credit needs.

CAPITAL RESOURCES

Our risk-based capital position at March 31,
2008 was $88.3 million, or 11.47% of risk-weighted assets, for Tier 1 capital and $95.7 million, or 12.43%, for total risk based capital. Our Tier 1 leverage ratio at March 31, 2008 was 9.67%. Our year-end 2007 ratios were 13.82%, 14.75% and
10.80%, respectively. Enhancing our capital ratios to support future growth was the primary reason for the December 2006 stock offering. At March 31, 2007, these ratios were 15.06%, 16.17% and 11.40%, respectively.

Tier 1 capital consists primarily of common shareholders equity, while total risk based capital adds our trust preferred borrowing and 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
are required to have a Tier 1 capital of at least 4% and a total capital ratio 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.

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. We caution you to be aware of the speculative nature of forward-looking statements. These statements are not guarantees
of performance or results. Statements that are not historical in nature, including statements that include the words may, anticipate, estimate, could, should, would,
will, plan, predict, project, potential, expect, believe, intend, continue, assume and similar expressions, are intended to
identify forward-looking statements. Although these statements reflect our good faith belief based on current expectations, estimates and projections about (among other things) the industry and the markets in which we operate, they are not
guarantees of future performance. Whether actual results will conform to our expectations and predictions is subject to a number of known and unknown risks and uncertainties, including the risks and uncertainties discussed in this Form 10-Q,
including the following:



| |  |  | changes in the quality or composition of our loan or investment portfolios, including adverse developments in borrower industries, decline in real estate values in
our markets, or in the repayment ability of individual borrowers or issuers;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the interest rates affecting our deposits and our loans;
| | - |  | -------------------------------------------------------------------



| |  |  | the loss of any of our key employees;
| | - |  | -------------------------------------



| |  |  | the strength of the economy in our target market area, as well as general economic, market, or business conditions;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | changes in our competitive position, competitive actions by other financial institutions and the competitive nature of the financial services industry and our
ability to compete effectively against other financial institutions in our banking markets;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an insufficient allowance for loan losses as a result of inaccurate assumptions;
| | - |  | --------------------------------------------------------------------------------



| |  |  | our ability to manage growth;
| | - |  | -----------------------------



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| |  |  | our potential growth, including our entrance or expansion into new markets, the opportunities that may be presented to and pursued by us and the need for sufficient
capital to support that growth;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to assess and manage our asset quality;
| | - |  | ---------------------------------------------------



| |  |  | changes in government monetary policy, interest rates, deposit flow, the cost of funds, and demand for loan products and financial services;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to maintain internal control over financial reporting;
| | - |  | ------------------------------------------------------------------



| |  |  | our ability to raise capital as needed by our business;
| | - |  | -------------------------------------------------------



| |  |  | our reliance on secondary sources, such as Federal Home Loan Bank advances, sales of securities and loans, federal funds lines of credit from correspondent banks
and out-of-market time deposits, to meet our liquidity needs;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in laws, regulations and the policies of federal or state regulators and agencies; and
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | other circumstances, many of which are beyond our control.
| | - |  | ----------------------------------------------------------

All of the forward-looking statements made in this filing are qualified by these factors, and there can be no assurance that the actual results anticipated by us will be realized or, even if substantially realized, that they will have the
expected consequences to, or effects on, us or our business or operations. You should also refer to risks detailed under the Risk Factors section included in the 2007 Form 10-K and otherwise included in our periodic and current reports
filed with the Securities and Exchange Commission for specific factors that could cause our actual results to be significantly different from those expressed or implied by our forward-looking statements.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

There
have been no material changes in market risk since 2007 year end as disclosed in the 2007 Form 10-K.



|Item 4. | Controls and Procedures
|------- | -----------------------

We maintain disclosure controls and
procedures that are designed to provide assurance that the information required to be disclosed by us in the reports that we file or submit 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 our 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 our Chief Executive Officer and Chief Financial Officer. Based on such evaluation, such officers concluded that our disclosure controls and procedures were effective as of the end of
such period. In addition, while we have reorganized and centralized many functions over the last year, we have maintained the control points that had been previously established.

There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting. We believe that the merger of our subsidiary banks has had a positive impact on internal controls by decreasing the number of banks, accounts and internal processes and procedures.

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



|Item 1A. | Risk Factors
|-------- | ------------

There have been no material changes
in our risk factors from those disclosed in the 2007 Form 10-K.



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

In January 2001, the Board of Directors gave the authority to management to repurchase up to 5% of the outstanding shares of the companys stock per calendar year based on the number of shares outstanding on December 31, of the
preceding year. This authority has been reaffirmed each year and was most recently reaffirmed in June of 2007. There is no stated expiration date for the Plan. The table below highlights the number of shares eligible and purchased in 2008.



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##### Table of Contents

Issuer Purchases of Equity Securities



|                       |  |                                           |  |                            |       |                                                                   |        |                                                                |        
|---------------------- |  | ----------------------------------------- |  | -------------------------- | ----- | ----------------------------------------------------------------- | ------ | -------------------------------------------------------------- | -------
|                       |  | For the three months ended March 31, 2008
|                       |  | (a)                                       |  | (b)                        |       | (c)                                                               |        | (d)                                                           
|Period                 |  | Totalnumber ofsharespurchased             |  | Averageprice paidper share |       | Total number ofshares purchased aspart of publiclyannounced plans |        | Maximumnumber of sharesthat may yet bepurchased underthe plans
|2008 Beginning balance |  |                                           |  |                            |       |                                                                   |        |                                                                | 297,372
|Jan 1 - Jan 31         |  | 12,010                                    |  | $                          | 16.90 |                                                                   | 12,010 |                                                                | 285,362
|Feb 1 - Feb 29         |  | 19,111                                    |  | $                          | 18.47 |                                                                   | 19,111 |                                                                | 266,251
|Mar 1 - Mar 31         |  | 38,984                                    |  | $                          | 17.27 |                                                                   | 38,984 |                                                                | 227,267
|                       |  |                                           |  |                            |       |                                                                   |        |                                                                |        
|Quarter 1              |  | 70,105                                    |  | $                          | 17.54 |                                                                   | 70,105 |                                                                | 227,267
|                       |  |                                           |  |                            |       |                                                                   |        |                                                                |        
|Total 2008             |  | 70,105                                    |  | $                          | 17.54 |                                                                   | 70,105 |                                                                | 227,267



|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   3.1 |  |  |  | Bylaws of Eastern Virginia Bankshares, Inc., as amended February 21, 2008, attached as Exhibit 3.1 to the Companys current report on Form 8-K filed February 27, 2008,
incorporated herein by reference.
|              |  |  
|Exhibit 31.1  |  |  |  | Rule 13a-14(a) Certification of Chief Executive Officer                                                                                                                                                  
|              |  |  
|Exhibit 31.2  |  |  |  | Rule 13a-14(a) Certification of Chief Financial Officer                                                                                                                                                  
|              |  |  
|Exhibit 32.1  |  |  |  | Section 906 Certification of Chief Executive Officer                                                                                                                                                     
|              |  |  
|Exhibit 32.2  |  |  |  | Section 906 Certification of Chief Financial Officer                                                                                                                                                     



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##### 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: May 5, 2008



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##### Table of Contents

Exhibit Index



|              |  |   |  |                                                                                                                                                                                                          
|------------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit   3.1 |  |  |  | Bylaws of Eastern Virginia Bankshares, Inc., as amended February 21, 2008, attached as Exhibit 3.1 to the Companys current report on Form 8-K filed February 27, 2008,
incorporated herein by reference.
|              |  |  
|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                                                                                                                                                     



26