BSXT Boe Fin Serv of Virginia (MM)

- Total Assets increased 6.0% in Quarter TAPPAHANNOCK, Va., Oct. 29 /PRNewswire-FirstCall/ -- BOE Financial Services of Virginia, Inc. (the "Company") (NASDAQ:BSXT) reported net income was $640,000 for the quarter ended September 30, 2007 compared to $706,000 for the third quarter in 2006. Net income for third quarter of 2007 declined by $66,000, or 9.4%. Earnings per share, on a diluted basis, were $0.53 per share for the third quarter of 2007 compared to $0.58 per share for the same period in 2006. The decrease in earnings was primarily attributable to a $284,000, or 14.6%, increase in noninterest expenses for the third quarter of 2007. Noninterest expenses were $2.233 million for the third quarter of 2007 compared to $1.949 million for the same period in 2006. Salaries were the largest component of this increase, up $140,000, or 16.9%, for the third quarter of 2007 compared to the same period in 2006. This increase in salaries was largely composed of adding additional banking staff to operate two new branches in Northumberland County, Virginia. The Burgess Office opened on October 15, 2007 and the Callao office will open later in the fourth quarter of 2007. Offsetting this decrease to net income for the quarter ended September 30, 2007 was an increase of $138,000, or 5.6%, to net interest income, an increase of $9,000 to total noninterest income and a decrease of $71,000 to income tax expense. "We are excited for our customers and employees to enter the Northern Neck banking market," said George M. Longest, Jr., President and Chief Executive Officer. "Northumberland County represents an opportunity for growth in a contiguous market which possesses what we feel are outstanding demographics for the small-bank personal customer service we provide. Expansion brings increases in noninterest expenses, which we saw in the third quarter of 2007, but we expect to have these offices quickly on their way to providing a positive return to shareholders. With the opening of these two offices, Bank of Essex will be staffed by local employees, all on a mission of listening to customers and providing top shelf quality service." For the nine months ended September 30, 2007, net income was $2.012 million, down 9.0%, or $198,000, from net income of $2.210 million for the same period in 2006. This represents a decrease in earnings per share, on a diluted basis of $0.17, or 9.3%, from $1.83 to $1.66. Noninterest expenses increased 12.2%, or $694,000, primarily due to a full year of expenses associated with the Company's new headquarters and branch banking facility opened mid-year 2006 and from additional staffing and operating expense mentioned above in relation to entering new banking markets. Total noninterest expenses were $6.378 million through nine months of 2007 compared to $5.684 million for the same period in 2006. Offsetting this decrease to net income was an increase of $28,000 to net interest income, an increase of $134,000 to total noninterest income, a decrease of $125,000 to provision for loan losses and a reduction of income tax expense of $209,000 for the nine month period ended September 30, 2007. Mr. Longest added, "There are positives we carry into the fourth quarter of 2007 although they come with guarded optimism. Higher loan volumes have been posted thus far, although anticipated loan demand for the industry is expected to lessen. Bank of Essex has outstanding loan quality even though the industry is showing signs of posting higher delinquency ratios. Additionally, in the third quarter the Bank realized a recovery in the amount of $400,000 of a loan charged-off a number of years ago which has bolstered the Company's allowance for loan losses." BOE Financial Services of Virginia, Inc. currently operates seven Bank of Essex offices in Essex, King William, Hanover, Henrico and Northumberland counties. As of September 30, 2007, the Company had $294.767 million in total assets and offers a broad range of financial services to consumers and businesses. BOE Financial Services of Virginia, Inc. stock trades on the NASDAQ under the symbol BSXT and closed at a price of $25.75 on October 24, 2007. Certain statements in the document are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in BOE Financial Services of Virginia, Inc.'s filings with the Securities and Exchange Commission. BOE FINANCIAL SERVICES OF VIRGINIA, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) Sept. 30, Dec. 31, Sept. 30, 2007 2006 2006 Assets (Unaudited) (Audited) (Unaudited) Cash and due from banks $4,619 $5,520 $5,265 Federal funds sold 966 - 6,016 Securities available for sale, at fair value 49,382 55,963 53,937 Securities held to maturity 3,000 3,000 3,000 Equity securities, restricted, at cost 1,761 1,553 1,553 Loans, net of allowance for loan losses of 2,672 on 9/30/07, 2,400 on 12/31/06 and 2,366 on 9/30/06 213,500 194,491 187,354 Bank premises and equipment, net 10,577 10,454 10,760 Accrued interest receivable 1,526 1,363 1,422 Intangible assets, net 430 524 556 Other assets 9,006 8,510 8,225 Total assets $294,767 $281,378 $278,088 Liabilities and Stockholders' Equity Liabilities Deposits: Noninterest-bearing $28,968 $27,809 $29,807 Interest-bearing 212,022 203,056 202,284 Total deposits $240,990 $230,865 $232,091 Federal funds purchased - 3,207 0 Federal Home Loan Bank advances 17,000 12,000 12,000 Trust preferred capital notes 4,124 4,124 4,124 Accrued interest payable 911 851 883 Other liabilities 2,394 2,284 889 Total liabilities $265,419 $253,331 $249,987 Commitments and Contingent Liabilities Stockholders' Equity Preferred stock $5 par value, authorized 1,000,000 shares; no shares issued and outstanding $- $- $- Common stock, $5 par value, authorized 10,000,000 shares; issued and outstanding, 1,211,267 shares, 1,208,109 shares, and 1,203,857 shares, respectively 6,056 6,041 6,019 Additional paid-in capital 5,551 5,477 5,387 Retained earnings 18,542 17,256 16,814 Accumulated other comprehensive loss, net (801) (727) (119) Total stockholders' equity $29,348 $28,047 $28,101 Total liabilities and stockholders' equity $294,767 $281,378 $278,088 CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 30 September 30 Interest and Dividend Income 2007 2006 2007 2006 Interest and fees on loans $4,179 $3,652 $11,980 $10,536 Interest and dividends on securities: U.S. Treasury 4 10 12 31 U.S. Government agencies 178 155 575 472 State and political subdivisions, nontaxable 324 344 1,017 1,025 State and political subdivisions, taxable 33 34 84 104 Other securities 43 47 134 139 Interest on federal funds sold 19 28 45 41 Total interest and dividend income 4,780 4,270 13,847 12,348 Interest Expense Interest on deposits 1,909 1,588 5,579 4,264 Interest on borrowings 280 229 838 682 Total interest expense 2,189 1,817 6,417 4,946 Net interest income 2,591 2,453 7,430 7,402 Provision for Loan Losses - - - 125 Net interest income after provision for loan losses 2,591 2,453 7,430 7,277 Noninterest income Service charge income 284 258 797 779 Net security gains (losses) (39) - (42) (19) Net gains on sales of loans 18 12 21 45 Net gains (losses) on sale of premises and equipment - - - (10) Other income 183 167 647 494 Total noninterest income 446 437 1,423 1,289 Noninterest expenses Salaries 967 827 2,717 2,408 Employee benefits and costs 271 252 818 731 Occupancy expenses 126 131 373 309 Furniture and equipment related expenses 119 121 340 330 Data processing 162 146 453 415 Stationery and printing 51 35 135 120 Postage 50 31 140 135 Bank franchise tax 61 60 183 178 Other operating expenses 426 346 1,219 1,058 Total noninterest expenses 2,233 1,949 6,378 5,684 Net income before income taxes 804 941 2,475 2,882 Income taxes 164 235 463 672 Net income $640 $706 $2,012 $2,210 Earnings Per Share, basic $0.53 $0.59 $1.66 $1.84 Earnings Per Share, diluted $0.53 $0.58 $1.66 $1.83 DATASOURCE: BOE Financial Services of Virginia, Inc. CONTACT: Bruce E. Thomas, Sr. Vice President-Chief Financial Officer of BOE Financial Services of Virginia, Inc., +1-804-443-4343 Web site: http://www.bankofessex.com/

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