**SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        DC 20549**
 
 **FORM
        10-QSB**
  x
              QUARTERLY
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
 
 For
        the
        Quarterly Period Ended September 30, 2005
 
 o
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE
                  ACT
 
 Commission
        File No. 000-33355
 
 **TRANSCOMMUNITY
        FINANCIAL**
 **CORPORATION**
 (Exact
        name of small business issuer as specified in its charter)
 
 Virginia
              
              54-2032355(State
                  or other jurisdiction of incorporation
                  or organization)
              
              (I.R.S.
                  Employer Identification
                  No.)
 
 4235
        Innslake Drive
 Glen
        Allen, Virginia 23060
 (Address
        of principal executive offices)
 
 (804)
        934-9999
 (Issuer’s
        Telephone Number)
  Check
        whether the issuer: (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days. Yes x Noo
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).  Yes oNo x
  State
        the
        number of shares outstanding of each of the issuer's classes of common equity,
        as of the latest practicable date.
 
 Class
              
              Outstanding
                  at November 10, 2005Common
                  Stock, par value - $0.01
              
              4,593,241
                  shares
  Transitional
        Small Business Disclosure Format (Check One): Yes o No x
 
 
 
 **TRANSCOMMUNITY
        FINANCIAL CORPORATION**
 
 INDEX
  PagePART
                    I
                
                FINANCIAL
                    INFORMATIONItem
                    1.
                
                Financial
                    Statements (Unaudited)
                
                
                2Consolidated
                    Balance Sheets -September 30, 2005 and December 31,
                    2004
                
                
                2Consolidated
                    Statements of Operations -Three and Nine Months Ended September 30,
                    2005 and 2004
                
                
                3Consolidated
                    Statements of Changes in Stockholders' Equity -Nine Months Ended
                    September 30, 2005 and 2004
                
                
                4Consolidated
                    Statements of Cash Flows -Nine Months Ended September 30, 2005 and
                    2004
                
                
                5Notes
                    to Consolidated Financial Statements
                
                
                6Item
                    2.
                
                Management’s
                    Discussion and Analysis or Plan of Operation
                
                
                12Item
                    3.
                
                Controls
                    and Procedures
                
                
                22PART
                    II
                
                OTHER
                    INFORMATIONItem
                    1.
                
                Legal
                    Proceedings
                
                
                24Item
                    2.
                
                Unregistered
                    Sales of Equity Securities and Use of Proceeds
                
                
                24Item
                    3.
                
                Defaults
                    Upon Senior Securities
                
                
                24Item
                    4.
                
                Submission
                    of Matters to a Vote of Security Holders
                
                
                24Item
                    5.
                
                Other
                    Information
                
                
                24Item
                    6.
                
                Exhibits
                
                
                24SIGNATURES
                
                
                25
 
  Page
        2
 **Part
        I**  **Financial
        Information**
 
 **Item
        1.**  **Financial
        Statements (Unaudited)**
  **TRANSCOMMUNITY
                    FINANCIAL CORPORATION****CONSOLIDATED
                    BALANCE SHEETS****SEPTEMBER
                    30, 2005 AND DECEMBER 31, 2004**September
                    30, 2005
                  Unaudited
                
                December
                    31, 2004**Assets**Cash
                    and due from banks
                
                $
                5,378,830
                
                $
                3,617,266Federal
                    funds sold
                
                
                8,862,512
                
                
                143,000Total
                    cash and cash equivalents
                
                
                14,241,342
                
                
                3,760,266Securities
                    available for sale, at fair value
                
                
                13,342,309
                
                
                17,876,464Securities
                    held to maturity
                
                
                22,564,844
                
                
                9,899,035Loans
                
                
                116,019,302
                
                
                104,914,700Allowance
                    for loan losses
                
                
                (1,641,072
                )
                
                (1,422,078
                )Total
                    loans, net
                
                
                114,378,230
                
                
                103,492,622Premises
                    and equipment, net
                
                
                7,086,504
                
                
                6,142,819Federal
                    Reserve bank stock (restricted)
                
                
                507,300
                
                
                507,300Other
                    assets
                
                
                1,658,033
                
                
                1,369,244Total
                    assets
                
                $
                173,778,562
                
                $
                143,047,750**Liabilities**Deposits:Demand:Noninterest
                    bearing
                
                $
                21,316,192
                
                $
                15,549,428Interest
                    bearing
                
                
                40,209,537
                
                
                36,603,311Savings
                
                
                9,637,756
                
                
                8,502,482Time
                
                
                70,375,073
                
                
                63,006,695Total
                    deposits
                
                
                141,538,558
                
                
                123,661,916Federal
                    funds purchased
                
                
                208,000
                
                
                2,277,000Note
                    payable
                
                
                —
                
                
                1,450,000Accrued
                    interest payable
                
                
                260,282
                
                
                205,879Accrued
                    expenses and other liabilities
                
                
                416,452
                
                
                514,447Total
                    liabilities
                
                
                142,423,292
                
                
                128,109,242**Stockholders'
                    Equity**Common
                    stock (25,000,000 shares authorized $.01 par value) 4,593,241
                    and
                    2,250,508 sharesissued
                    and outstanding at September 30, 2005 and December 31,
                    2004
                
                
                45,932
                
                
                22,505Additional
                    paid in capital
                
                
                40,097,813
                
                
                22,566,921Accumulated
                    deficit
                
                
                (8,754,627
                )
                
                (7,607,270
                )Accumulated
                    other comprehensive income (loss)
                
                
                (33,848
                )
                
                (43,648
                )Total
                    stockholders' equity
                
                
                31,355,270
                
                
                14,938,508Total
                    liabilities and stockholders' equity
                
                $
                173,778,562
                
                $
                143,047,750
 
 *See
        accompanying notes to consolidated financial statements.*
  
 Page
        3
  **TRANSCOMMUNITY
                    FINANCIAL CORPORATION****CONSOLIDATED
                    STATEMENTS OF OPERATIONS****FOR
                    THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND
                    2004****(UNAUDITED)**Three
                    months ended
                
                Nine
                    months endedSeptember
                    30, 2005
                
                September
                    30, 2004
                
                September
                    30, 2005
                
                September
                    30, 2004**Interest
                    and dividend income**Interest
                    on loans, including fees
                
                $
                2,407,213
                
                $
                1,718,604
                
                $
                6,551,175
                
                $
                4,329,350Interest
                    on federal funds sold
                
                
                200,054
                
                
                12,174
                
                
                451,612
                
                
                49,129Dividends
                    on equity securities
                
                
                —
                
                
                —
                
                
                19,719
                
                
                —Interest
                    on debt securities
                
                
                187,654
                
                
                117,841
                
                
                350,472
                
                
                307,022Total
                    interest income
                
                
                2,794,921
                
                
                1,848,619
                
                
                7,372,978
                
                
                4,685,501**Interest
                    expense**Interest
                    on deposits
                
                
                765,872
                
                
                454,261
                
                
                2,065,693
                
                
                1,223,958Interest
                    on other borrowed funds
                
                
                5,987
                
                
                38,383
                
                
                58,484
                
                
                71,531Total
                    interest expense
                
                
                771,859
                
                
                492,644
                
                
                2,124,177
                
                
                1,295,489**Net
                    interest income**
                
                
                2,023,062
                
                
                1,355,975
                
                
                5,248,801
                
                
                3,390,012**Provision
                    for loan losses**
                
                
                104,777
                
                
                162,711
                
                
                259,236
                
                
                426,964**Net
                    interest income after provision for loan losses**
                
                
                1,918,285
                
                
                1,193,264
                
                
                4,989,565
                
                
                2,963,048**Noninterest
                    income**Bank
                    service charges and fees
                
                
                220,224
                
                
                202,370
                
                
                670,873
                
                
                652,321Commissions
                    and fees from loan originations
                
                
                973,690
                
                
                916,104
                
                
                3,060,934
                
                
                2,273,610Total
                    noninterest income
                
                
                1,193,914
                
                
                1,118,474
                
                
                3,731,807
                
                
                2,925,931**Noninterest
                    expense**Salaries
                    and employee benefits
                
                
                2,014,772
                
                
                1,662,106
                
                
                6,096,804
                
                
                4,786,460Occupancy
                    expenses
                
                
                210,882
                
                
                183,544
                
                
                652,901
                
                
                531,739Equipment
                    expenses
                
                
                184,002
                
                
                168,880
                
                
                523,275
                
                
                479,680Other
                    operating expenses
                
                
                774,833
                
                
                780,501
                
                
                2,595,749
                
                
                2,210,813Total
                    noninterest expense
                
                
                3,184,489
                
                
                2,795,031
                
                
                9,868,729
                
                
                8,008,692**Net
                    loss**
                
                $
                (72,290
                )
                $
                (483,293
                )
                $
                (1,147,357
                )
                $
                (2,119,713
                )Net
                    loss per share (basic and diluted)
                
                $
                (0.02
                )
                $
                (0.23
                )
                $
                (0.40
                )
                $
                (1.02
                )Weighted
                    average number of shares outstanding
                
                
                4,068,241
                
                
                2,134,134
                
                
                2,886,436
                
                
                2,083,472
 
  *See
        accompanying notes to consolidated financial statements.*
  
 
  Page
          4
 
 **TRANSCOMMUNITY
                    FINANCIAL CORPORATION****CONSOLIDATED
                    STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY****FOR
                    THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND
                    2004****(UNAUDITED)**Shares
                    of Common Stock
                
                Common
                    Stock Subscriptions
                
                Common
                    Stock
                
                Additional
                    Paid in Capital
                
                Accumulated
                    Deficit
                
                Accumulated
                    Other Comprehensive Income (Loss)
                
                Total**Balance,****December
                    31, 2004**
                
                
                2,250,508
                
                $
                —
                
                $
                22,505
                
                $
                22,566,921
                
                $
                (7,607,270
                )
                $
                (43,648
                )
                $
                14,938,508Net
                    loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (1,147,357
                )
                
                —
                
                
                (1,147,357
                )Unrealized
                    loss on securities available
                    for sale
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                9,800
                
                
                9,800Total
                    comprehensive loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (1,137,557
                )Subscriptions
                    received
                
                
                —
                
                
                19,040,495
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                19,040,495Common
                    stock issued
                
                
                2,342,733
                
                
                (19,040,495
                )
                
                23,427
                
                
                17,459,694
                
                
                —
                
                
                —
                
                
                (1,557,374
                )Deferred
                    compensation expense
                
                
                —
                
                
                —
                
                
                —
                
                
                71,198
                
                
                —
                
                
                —
                
                
                71,198**Balance,****September
                    30, 2005**
                
                
                4,593,241
                
                $
                —
                
                $
                45,932
                
                $
                40,097,813
                
                $
                (8,754,627
                )
                $
                (33,848
                )
                $
                31,355,270**Balance,****December
                    31, 2003**
                
                
                2,067,613
                
                $
                —
                
                $
                20,676
                
                $
                19,916,482
                
                $
                (5,025,853
                )
                $
                (9,863
                )
                $
                14,901,442Net
                    loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (2,119,713
                )
                
                —
                
                
                (2,119,713
                )Unrealized
                    loss on securities available
                    for sale
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (5,843
                )
                
                (5,843
                )Total
                    comprehensive loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (2,125,556
                )Subscriptions
                    received
                
                
                —
                
                
                1,661,775
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                1,661,775Common
                    stock issued
                
                
                106,385
                
                
                (1,595,775
                )
                
                1,064
                
                
                1,464,195
                
                
                —
                
                
                —
                
                
                (130,516
                )Deferred
                    compensation expense
                
                
                —
                
                
                —
                
                
                —
                
                
                71,195
                
                
                —
                
                
                —
                
                
                71,195**Balance,****September
                    30, 2004**
                
                
                2,173,998
                
                $
                66,000
                
                $
                21,740
                
                $
                21,451,872
                
                $
                (7,145,566
                )
                $
                (15,706
                )
                $
                14,378,340
 *See
        accompanying notes to consolidated financial statements.*
  
  Page
        5
 **TRANSCOMMUNITY
                    FINANCIAL CORPORATION****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS****FOR
                    THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND
                    2004****(UNAUDITED)**Nine
                    months endedSeptember
                    30, 2005
                
                September
                    30, 2004**Operating
                    activities:**Net
                    loss
                
                $
                (1,147,357
                )
                $
                (2,119,713
                )Adjustments
                    to reconcile net loss to net cash provided by (used in) operating
                    activities:Provision
                    for loan losses
                
                
                259,236
                
                
                426,964Ammortization
                    of security premiums and accretion of discounts, net
                
                
                25,933
                
                
                (97,293
                )Depreciation
                
                
                397,243
                
                
                313,403Loss
                    (gain) on disposition of property
                
                
                2,064
                
                
                (967
                )Deferred
                    compensation expense
                
                
                71,198
                
                
                71,195Net
                    change in:Other
                    assets
                
                
                (288,789
                )
                
                (662,981
                )Interest
                    payable
                
                
                54,403
                
                
                28,646Accrued
                    expenses and other liabilities
                
                
                (97,995
                )
                
                35,773Net
                    cash used in operating activities
                
                
                (724,064
                )
                
                (2,004,973
                )**Investing
                    activities:**Purchase
                    of securities held to maturity
                
                
                (53,700,000
                )
                
                (18,112,548
                )Purchase
                    of securities available for sale
                
                
                (6,947,787
                )
                
                (11,975,042
                )Proceeds
                    from maturities of securities held to maturity
                
                
                41,000,000
                
                
                21,999,685Proceeds
                    from maturities of securities available for sale
                
                
                11,500,000
                
                
                4,016,468Purchase
                    of Federal Reserve bank stock
                
                
                —
                
                
                (150,000
                )Net
                    change in loans
                
                
                (11,144,844
                )
                
                (30,282,219
                )Proceeds
                    from the sale of property
                
                
                —
                
                
                2,500Payments
                    for the purchase of premises and equipment
                
                
                (1,342,992
                )
                
                (850,959
                )Net
                    cash used in investing activities
                
                
                (20,635,623
                )
                
                (35,352,115
                )**Financing
                    activities:**Net
                    change in federal funds purchased
                
                
                (2,069,000
                )
                
                2,232,000Net
                    proceeds from offering of common stock
                
                
                17,483,121
                
                
                1,531,259Net
                    borrowings (repayments) of note payable
                
                
                (1,450,000
                )
                
                600,000Curtailment
                    of debt
                
                
                —
                
                
                (348,000
                )Net
                    change in:Demand
                    deposits
                
                
                9,372,990
                
                
                17,173,778Savings
                    deposits
                
                
                1,135,274
                
                
                2,772,186Time
                    deposits
                
                
                7,368,378
                
                
                11,290,483Net
                    cash provided by financing activities
                
                
                31,840,763
                
                
                35,251,706**Net
                    increase (decrease) in cash and cash equivalents**
                
                
                10,481,076
                
                
                (2,105,382
                )**Cash
                    and cash equivalents:**Beginning
                    of the period
                
                
                3,760,266
                
                
                8,099,777End
                    of the period
                
                $
                14,241,342
                
                $
                5,994,395Supplemental
                    disclosures of cash flow information:Interest
                    paid
                
                $
                2,069,774
                
                $
                1,266,843
 
 *See
        accompanying notes to consolidated financial statements.*
 
 
  Page
        6
 
 **TRANSCOMMUNITY
        FINANCIAL CORPORATION**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        1**  **ACCOUNTING
        PRINCIPLES:**
 
 The
        consolidated financial statements of TransCommunity Financial Corporation
        (“TransCommunity” or the “Company”) conform to accounting principles generally
        accepted in the United States of America and to general industry practices.
        In
        the opinion of management, the accompanying unaudited consolidated financial
        statements contain all adjustments (consisting of only normal recurring
        accruals) necessary to present fairly the financial position as of September
        30,
        2005, and the results of operations for the three and nine month periods
        ended
        September 30, 2005 and 2004. The Consolidated Balance Sheet at December 31,
        2004
        was derived from audited financial data. The preparation of financial statements
        requires management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and contingent assets and liabilities in
        the
        financial statements, and the disclosure of revenue and expense during the
        reporting period. The assumptions are based on information available as of
        the
        date of the financial statements and could differ from actual results. The
        results for the interim periods are not necessarily indicative of annual
        performance. The notes included herein should be read in conjunction with
        the
        notes to financial statements included in the audited December 31, 2004
        financial statements for TransCommunity, which statements were included in
        the
        Company’s annual report on Form 10-KSB/A filed with the Securities and Exchange
        Commission.
 
 **Consolidation
        Policy**
 
 The
        consolidated financial statements include TransCommunity headquarters, Bank
        of
        Powhatan, N.A. (“Bank of Powhatan”), Bank of Goochland, N.A. (“Bank of
        Goochland”), Bank of Louisa, N.A. (“Bank of Louisa”); Main Street Mortgage and
        Investment Corporation (“Main Street Mortgage”), a wholly owned subsidiary of
        Bank of Powhatan; TransCommunity Investment Advisors, Inc. and TransCommunity
        Investment Services, Inc. (collectively, “Financial Services”). All significant
        intercompany balances and transactions have been eliminated.
 
 **NOTE
        2**  **INVESTMENT
        SECURITIES:**
 
 The
        carrying values, unrealized gains, unrealized losses and approximate fair
        values
        of investment securities at September 30, 2005 are shown in the table below.
        As
        of September 30, 2005 U.S. Agency Securities with a carrying value of
        $10,801,602 were pledged as collateral for public deposits.
  **September
                    30, 2005**
                
                AmortizedCost
                
                Gross
                    Unrealized
                  Gains
                
                Gross
                    Unrealized
                  Losses
                
                Fair
                    ValueSecurities
                    Available for Sale:US
                    Agency discount notes
                
                $
                6,946,603
                
                $
                23,685
                
                $
                (1,517
                )
                $
                6,968,771US
                    Agency notes
                
                
                6,429,554
                
                
                —
                
                
                (56,016
                )
                
                6,373,538Securities
                    Held to Maturity:US
                    Agency discount notes
                
                
                16,164,944
                
                
                —
                
                
                (2,468
                )
                
                16,162,476US
                    Agency notes
                
                
                6,399,900
                
                
                —
                
                
                (101,431
                )
                
                6,298,469Total
                
                $
                35,941,001
                
                $
                23,685
                
                $
                (161,432
                )
                $
                35,803,254
  
 
  Page
        7
 **TRANSCOMMUNITY
        FINANCIAL CORPORATION**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        2**  **INVESTMENT
        SECURITIES (CONTINUED):**
  **December
                    31, 2004**
                
                AmortizedCost
                
                Gross
                    Unrealized
                  Gains
                
                Gross
                    Unrealized
                  Losses
                
                Fair
                    ValueSecurities
                    Available for Sale:US
                    Agency discount notes
                
                $
                9,490,176
                
                $
                —
                
                $
                (6,733
                )
                $
                9,483,443US
                    Agency notes
                
                
                8,430,130
                
                
                —
                
                
                (36,915
                )
                
                8,393,215Securities
                    Held to Maturity:US
                    Agency discount notes
                
                
                4,999,158
                
                
                355
                
                
                (1,124
                )
                
                4,998,389US
                    Agency notes
                
                
                4,899,877
                
                
                1,875
                
                
                (31,158
                )
                
                4,870,594Total
                
                $
                27,819,341
                
                $
                2,230
                
                $
                (75,930
                )
                $
                27,745,641
 
 Securities
        in an unrealized loss position at September 30, 2005 are shown below. The
        unrealized loss positions were primarily related to interest rate movements
        as
        there is minimal credit risk exposure in these investments. All securities
        are
        investment grade or better.
  Less
                    than 12 months
                
                12
                    months or more
                
                Total**September
                    30, 2005**
                
                Fair
                    Value
                
                Unrealized
                    Loss
                
                Fair
                    Value
                
                Unrealized
                    Loss
                
                Fair
                    Value
                
                Unrealized
                    LossDescription
                    of securities:US
                    Agency notes
                
                $
                10,672,006
                
                $
                157,447
                
                
                —
                
                $
                —
                
                $
                10,672,006
                
                $
                157,447US
                    Agency discount notes
                
                
                6,364,040
                
                
                3,985
                
                
                —
                
                
                —
                
                
                6,364,040
                
                
                3,985Total
                
                $
                17,036,046
                
                $
                161,432
                
                $
                —
                
                $
                —
                
                $
                17,036,046
                
                $
                161,432
  The
        unrealized loss is the aggregate of 17 U.S. Agency notes, all of which have
        a
        continuous loss period of less than 12 months. No impairment has been recognized
        on these securities because management has both the intent and the ability
        to
        hold these securities until maturity or call dates.
 
  Page
        8
 
 **TRANSCOMMUNITY
        FINANCIAL CORPORATION**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **NOTE
        3**  **STOCK
        OPTION PLAN:**
 
 A
        stock
        option plan was adopted by the Board of Directors of the Bank of Powhatan
        on May
        8, 2001. This Plan was adopted by TransCommunity effective August 15, 2001
        in
        connection with the Reorganization whereby the Bank of Powhatan, became a
        subsidiary of TransCommunity. The purpose of the Plan is to reward employees
        and
        directors for services rendered and investment risks undertaken to date and
        to
        promote the success of TransCommunity and its subsidiaries by providing
        incentives to employees and directors that will align their personal interest
        with the long-term financial success of TransCommunity, its subsidiaries
        and
        with growth in shareholder value. The Plan provides that options for up to
        330,000 shares of TransCommunity common stock may be issued. The exercise
        price
        may not be less than 100% of the fair market value of the shares on the award
        date.
 
 Unless
        the Stock Option Committee determines otherwise, one-third of an award becomes
        vested and exercisable on each of the first three anniversaries of the award
        date. Each award becomes fully vested and exercisable in the event of a change
        in control of TransCommunity. All options are subject to exercise or forfeiture
        if TransCommunity’s capital falls below its minimum requirements, as determined
        by its primary regulator, and TransCommunity’s primary regulator so directs. The
        Plan will expire on May 7, 2011, unless terminated sooner by the Board of
        Directors. On May 16, 2001 and April 15, 2003, options to acquire 45,575
        and
        222,700 shares, respectively, were awarded under the Plan; these options
        have an
        exercise price of $10 per share and a term of ten years. In addition, on
        April
        15, 2003, options were awarded to executive officers, under existing employments
        agreements, to acquire 51,000 shares. These options were fully exercisable
        at
        December 31, 2003.
 
 The
        fair
        value of each option granted on April 15, 2003 was $3.30 using the “Black
        Scholes Option Pricing” method with the following assumptions: risk free
        interest rate 4.00%, expected life - 10 years, expected volatility - zero
        and
        expected dividends of zero. A total of 1,300 options have expired as of
        September 30, 2005, and 700 options have been exercised pursuant to the
        Plan.
 
 A
        summary
        of the options granted is shown in the following table:
  For
                    the Nine Months Ended September
                    302005
                
                2004Outstanding
                    at beginning of the year
                
                
                317,375
                
                
                318,675GrantedExercised
                
                
                (100
                )
                
                —Terminated
                
                
                —
                
                
                —Outstanding
                    at September 30
                
                
                317,275
                
                
                318,675Options
                    exercisable at September 30
                
                
                243,153
                
                
                170,808Exercise
                    Price
                
                $
                10.00
                
                $
                10.00Weighted
                    average remaining contracted lifeat
                    September 30, 2005
                
                
                87
                    Months
 TransCommunity
        accounts for the Plan under the recognition and measurement principles of
        APB
        Opinion No. 25, Accounting for Stock Issued to Employees, and related
        Interpretations. No stock-based employee compensation cost is reflected in
        the
        net loss, as all options granted under the Plan had an exercise price equal
        to
        the market value of the underlying common stock on the date of grant.
 
  Page
        9
 
 **TRANSCOMMUNITY
        FINANCIAL CORPORATION**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **NOTE
        3**  **STOCK
        OPTION PLAN (CONTINUED):**
 
 The
        following table illustrates the effect on net loss and loss per share as
        if
        TransCommunity had applied the fair value recognition provisions of FASB
        Statement No. 123, Accounting for Stock-Based Compensation, to the Plan.
  Three
                    Months EndedSeptember
                    30
                
                Nine
                    Months EndedSeptember
                    302005
                
                2004
                
                2005
                
                2004Net
                    loss, as reported
                
                $
                (72,290
                )
                $
                (483,293
                )
                $
                (1,147,357
                )
                $
                (2,119,713
                )Deduct:
                    Total stock-basedemployee
                    compensationexpense
                    determined underfair
                    value based method
                
                
                (36,066
                )
                
                (67,723
                )
                
                (108,197
                )
                
                (283,216
                )Pro
                    Forma Net Loss
                
                $
                (108,356
                )
                $
                (546,016
                )
                $
                (1,255,554
                )
                $
                (2,402,929
                )Loss
                    per Share:Basic
                    - as reported
                
                $
                (.02
                )
                $
                (.23
                )
                $
                (.40
                )
                $
                (1.02
                )Basic
                    - pro forma
                
                $
                (.03
                )
                $
                (.26
                )
                $
                (.44
                )
                $
                (1.15
                )
 **NOTE
        4**  **LOSS
        PER SHARE:**
 
 Since
        TransCommunity continues to incur losses, the effect on loss per share of
        TransCommunity’s outstanding stock options would be antidilutive. Therefore,
        basic and dilutive losses per share are identical.
 
 **NOTE
        5**  **BUSINESS
        SEGMENTS:**
 
 TransCommunity
        conducts its business through four reportable business segments including:
        TransCommunity’s three commercial bank subsidiaries (the “Banks”); Main Street
        Mortgage, a mortgage banking company that TransCommunity owns through Bank
        of
        Powhatan; Financial Services which offers insurance and securities brokerage
        services to clients; and the operations of our corporate headquarters.
  Three
                    Months Ended September 30, 2005(In
                    Thousands)Banks
                
                Main
                    Street
                
                Financial
                    Services
                
                Trans-Community
                
                Eliminations
                
                ConsolidatedNet
                    interest income
                
                $
                1,976
                
                $
                (11
                )
                $
                —
                
                $
                58
                
                $
                —
                
                $
                2,023Provision
                    for loan losses
                
                
                (88
                )
                
                (17
                )
                
                —
                
                
                —
                
                
                —
                
                
                (105
                )Noninterest
                    income
                
                
                160
                
                
                974
                
                
                96
                
                
                62
                
                
                (98
                )
                
                1,194Noninterest
                    expense
                
                
                (1,458
                )
                
                (932
                )
                
                (148
                )
                
                (744
                )
                
                98
                
                
                (3,184
                )Income
                    (Loss) from subsidiaries
                
                
                14
                
                
                —
                
                
                —
                
                
                552
                
                
                (566
                )
                
                —Net
                    Income (Loss)
                
                $
                604
                
                $
                14
                
                $
                (52
                )
                $
                (72
                )
                $
                (566
                )
                $
                (72
                )Total
                    Assets
                
                $
                161,157
                
                $
                1,308
                
                $
                26
                
                $
                31,355
                
                $
                (20,068
                )
                $
                173,778
  
 Page
        10
 
 **TRANSCOMMUNITY
        FINANCIAL CORPORATION**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **NOTE
        5**  **BUSINESS
        SEGMENTS (CONTINUED):**
 Three
                        Months Ended September 30, 2004(In
                        Thousands)Banks
                    
                    Main
                        Street
                    
                    Financial
                        Services
                    
                    Trans-Community
                    
                    Elimi-nations
                    
                    ConsolidatedNet
                        interest income
                    
                    $
                    1,383
                    
                    $
                    (8
                    )
                    $
                    —
                    
                    $
                    (19
                    )
                    $
                    —
                    
                    $
                    1,356Provision
                        for loan losses
                    
                    
                    (163
                    )
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (163
                    )Noninterest
                        income
                    
                    
                    117
                    
                    
                    916
                    
                    
                    —
                    
                    
                    107
                    
                    
                    (21
                    )
                    
                    1,119Noninterest
                        expense
                    
                    
                    (1,242
                    )
                    
                    (873
                    )
                    
                    —
                    
                    
                    (701
                    )
                    
                    21
                    
                    
                    (2,795
                    )Income
                        (Loss) from subsidiaries
                    
                    
                    35
                    
                    
                    —
                    
                    
                    —
                    
                    
                    130
                    
                    
                    (165
                    )
                    
                    —Net
                        Income (Loss)
                    
                    $
                    130
                    
                    $
                    35
                    
                    $
                    —
                    
                    $
                    (483
                    )
                    $
                    (165
                    )
                    $
                    (483
                    )Total
                        Assets
                    
                    $
                    132,682
                    
                    $
                    1,413
                    
                    $
                    —
                    
                    $
                    15,886
                    
                    $
                    (16,967
                    )
                    $
                    133,014
 Nine
                      Months Ended September 30, 2005(In
                      Thousands)Banks
                  
                  Main
                      Street
                  
                  Financial
                      Services
                  
                  Trans-Community
                  
                  Elimi-nations
                  
                  ConsolidatedNet
                      interest income
                  
                  $
                  5,263
                  
                  $
                  (32
                  )
                  $
                  —
                  
                  $
                  17
                  
                  $
                  —
                  
                  $
                  5,248Provision
                      for loan losses
                  
                  
                  (195
                  )
                  
                  (64
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (259
                  )Noninterest
                      income
                  
                  
                  513
                  
                  
                  3,061
                  
                  
                  273
                  
                  
                  211
                  
                  
                  (327
                  )
                  
                  3,731Noninterest
                      expense
                  
                  
                  (4,297
                  )
                  
                  (2,914
                  )
                  
                  (561
                  )
                  
                  (2,422
                  )
                  
                  327
                  
                  
                  (9,867
                  )Income
                      (Loss) from subsidiaries
                  
                  
                  51
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,047
                  
                  
                  (1,098
                  )
                  
                  —Net
                      Income (Loss)
                  
                  $
                  1,335
                  
                  $
                  51
                  
                  $
                  (288
                  )
                  $
                  (1,147
                  )
                  $
                  (1,098
                  )
                  $
                  (1,147
                  )Total
                      Assets
                  
                  $
                  161,157
                  
                  $
                  1,308
                  
                  $
                  26
                  
                  $
                  31,355
                  
                  $
                  (20,068
                  )
                  $
                  173,778
  Nine
                      Months Ended September 30, 2004(In
                      Thousands)Banks
                  
                  Main
                      Street
                  
                  Financial
                      Services
                  
                  Trans-Community
                  
                  Elimi-nations
                  
                  ConsolidatedNet
                      interest income
                  
                  $
                  3,448
                  
                  $
                  (26
                  )
                  $
                  —
                  
                  $
                  (32
                  )
                  $
                  —
                  
                  $
                  3,390Provision
                      for loan losses
                  
                  
                  (427
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (427
                  )Noninterest
                      income
                  
                  
                  611
                  
                  
                  2,274
                  
                  
                  —
                  
                  
                  410
                  
                  
                  (369
                  )
                  
                  2,926Noninterest
                      expense
                  
                  
                  (4,007
                  )
                  
                  (2,284
                  )
                  
                  —
                  
                  
                  (2,087
                  )
                  
                  369
                  
                  
                  (8,009
                  )Income
                      (Loss) from subsidiaries
                  
                  
                  (36
                  )
                  
                  —
                  
                  
                  —
                  
                  
                  (411
                  )
                  
                  447
                  
                  
                  —Net
                      Income (Loss)
                  
                  $
                  (411
                  )
                  $
                  (36
                  )
                  $
                  —
                  
                  $
                  (2,120
                  )
                  $
                  447
                  
                  $
                  (2,120
                  )Total
                      Assets
                  
                  $
                  132,682
                  
                  $
                  1,413
                  
                  $
                  —
                  
                  $
                  15,886
                  
                  $
                  (16,967
                  )
                  $
                  133,014
 
 
 Page
        11
 
 **TRANSCOMMUNITY
        FINANCIAL CORPORATION**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **NOTE
        6**  **CAPITAL
        STOCK:**
 
 In
        February 2005, TransCommunity terminated a non-underwritten public offering
        through which it sold 225,528 shares and received proceeds of $3,197,403
        which
        is net of offering expenses totaling $187,017. Of the 225,628 shares sold,
        42,633 were issued in 2005.
 
 On
        July
        22, 2005, TransCommunity completed the sale of 2,300,000 shares of its common
        stock at $8.00 per share in a registered public offering to a limited number
        of
        institutional investors. The minimum share purchase in the offering was 25,000
        shares. The offering was made through a firm commitment underwriting in which
        Sandler O’Neill & Partners, L.P. served as the sole manager. TransCommunity
        received net proceeds from the offering of approximately $16.8 million after
        deducting underwriting discounts and estimated expenses. A portion of the
        net
        proceeds from the offering was used to repay the outstanding principal balance
        of $1.45 million and accrued interest on TransCommunity’s line of credit.
        TransCommunity anticipates that a portion of the remaining proceeds, estimated
        to be approximately $8.0 million, will be used to provide the initial capital
        for Bank of Rockbridge, a new bank TransCommunity seeks to establish in
        Rockbridge County, Virginia. Additionally, TransCommunity has used $2.0 million
        of the proceeds from this offering to strengthen the capital position of
        two of
        its subsidiary banks by infusing $1.0 million into each of Bank of Goochland
        and
        Bank of Louisa. The remaining proceeds will be used to accommodate future
        growth
        and for general corporate purposes which may include, among other things,
        operating expenses of the holding company headquarters and the Financial
        Services division.
 
 At
        September 30, 2005, the Company had a leverage ratio of 19.39%, a Tier 1
        risk-based capital ratio of 22.06% and a total risk-based capital ratio of
        23.22%.
 
 **NOTE
        7**  **SUBSEQUENT
        EVENTS:**
  On
        November 2, 2005, TransCommunity submitted an application to the Bureau of
        Financial Institutions of the Virginia State Corporation Commission and the
        Federal Deposit Insurance Corporation to organize an insured bank, Bank of
        Rockbridge, at 744 North Lee Highway in Rockbridge County, Virginia.
 
  Page
        12
 
 **Item
        2.**  **Management’s
        Discussion and Analysis or Plan of Operation**
 
 **** **Forward
        Looking Statements**
 
 The
        following discussion contains statements that refer to future expectations,
        contain projections of the results of operations or of financial condition
        or
        state other information that is “forward-looking.”  “Forward-looking”
        statements are identified by the use of words such as “could,” 
“anticipate,”  “estimate,”  “believe,” and similar words that refer to
        the future outlook. There is always a degree of uncertainty associated with
        “forward-looking” statements. The Company’s management believes that the
        expectations reflected in such statements are based upon reasonable assumptions
        and on the facts and circumstances existing at the time of these disclosures.
        Actual results could differ significantly from those anticipated.
 
 Many
        factors could cause the Company’s actual results to differ materially from the
        results contemplated by the forward-looking statements. Some factors, which
        could negatively affect the results, include:
 
 ·
              General
                  economic conditions, either nationally or within the Company’s markets,
                  could be less favorable than
                  expected;
 ·
              Changes
                  in market interest rates could affect interest margins and
                  profitability;
 ·
              Ability
                  to successfully execute our growth
                  strategies;
 ·
              Regulatory
                  changes could affect the Company;
 ·
              Competitive
                  pressures could be greater than anticipated;
                  and
 ·
              Legal
                  or accounting changes could affect the Company’s
                  results.
 
 **Critical
        Accounting Policies**
 
 Certain
        critical accounting policies reflect significant judgments and estimates
        used in
        the preparation of our consolidated financial statements. Our single most
        critical accounting policy relates to our allowance for loan losses, which
        reflects the estimated losses resulting from the inability of our borrowers
        to
        make required payments. If the financial condition of our borrowers were
        to
        deteriorate, resulting in an impairment of their ability to make payments,
        our
        estimates would be updated, and additional allowances might be required.
        For
        further discussion of the estimates used in determining the allowance for
        loan
        losses, we refer you to the discussion on “Provision for Loan Losses”
        below.
 
 **Overview**
 
 TransCommunity
        Financial Corporation is a financial services holding company headquartered
        in
        Richmond, Virginia. The Company was organized in 2001 under the name
        TransCommunity Bankshares Incorporated and changed its name to TransCommunity
        Financial Corporation during 2004. Currently, our banking business is conducted
        through the Bank of Powhatan, N.A., the Bank of Goochland, N.A. and the Bank
        of
        Louisa, N.A. (together, the “Banks”) all of which are wholly-owned bank
        subsidiaries located in central Virginia. TransCommunity, through its ownership
        of Bank of Powhatan, owns Main Street Mortgage & Investment Corporation, a
        mortgage banking company. Additionally, TransCommunity runs and operates
        TransCommunity Investment Services, Inc., an insurance agency and investment
        broker, and TransCommunity Investment Advisors, Inc., a registered investment
        advisor as wholly-owned subsidiaries. These non-banking affiliates of
        TransCommunity offer their services through each of TransCommunity’s bank
        subsidiaries, as well as through a network of non-bank offices located
        throughout the Commonwealth of Virginia.
  
 
 Page
        13
 
 TransCommunity
        offers a broad range of banking products to individuals, professionals and
        small- to medium-sized businesses, with an emphasis on providing superior,
        personalized service and local decision-making authority. We attract experienced
        local management teams and local independent boards of directors with strong
        community affiliations and extensive business backgrounds and business
        development potential in our primary market areas. We support our banks by
        providing product development, marketing, technology, financial, regulatory,
        managerial, and other back-office support through our common operating platform.
        We believe that the rapid decision-making and high level of customer service
        inherent in our business model provide us with a competitive advantage in
        meeting customers’ needs. As a result, our banks have been able to generate
        strong net interest margins. For the nine month period ended September 30,
        2005,
        our consolidated net interest margin was 4.79%, an improvement of 48 basis
        points over the results achieved during the same period in 2004.
 
 **Consolidated
        Results**
 
 For
        the
        quarter ended September 30, 2005, net losses decreased 85% to $72,290 as
        compared with losses of $483,293 during the same period in 2004. On a
        year-to-date basis, net losses decreased 46% to $1,147,357 as compared with
        losses of $2,119,713 during the same period in 2004. Net interest income
        increased $667,087, or 49%, for the quarter ended September 30, 2005, as
        compared to the same period in 2004. On a year-to-date basis, net interest
        income increased $1,858,789, or 55%, when compared with the same period in
        2004.
 
 The
        reduction in consolidated losses for both the quarter and nine month period
        is
        driven by increased earnings from our loan and investment portfolios.
        Noninterest income increased slightly for the quarter ended September 30,
        2005
        to $1,193,914, an increase of 7% when compared to the same period in 2004.
        On a
        year-to-date comparison, noninterest income increased 28% to $3,731,807 from
        $2,925,931 for the same period in 2004. The increase in noninterest income
        during the year is the result of increased loan production at our mortgage
        banking affiliate and increased deposit-related fees at our subsidiary banks.
        Noninterest expense for the three months ended September 30, 2005 increased
        $389,458 or 14%, and $1,860,037 or 23% on a year-to-date basis, over 2004
        results, respectively.
 
 At
        September 30, 2005, TransCommunity had total assets of $173.8 million, up
        from
        $143.0 million at December 31, 2004. At September 30, 2005, loans totaled
        $116.0, an increase of $11.1 million since December 31, 2004. Total deposits
        at
        September 30, 2005 were $141.5 million, as compared with $123.7 million at
        December 31, 2004.
 
 **Business
        Segment Results**
 
 ***Banks***
  Our
        Banks
        focus on lending to individuals and small- to medium-sized businesses and
        professional firms that are located in or conduct a substantial portion of
        their
        businesses in our market area. We offer a range of lending services, including
        residential real estate loans, commercial real estate loans, construction
        loans,
        commercial business loans and commercial lines of credit, as well as a variety
        of consumer loans. We believe we have a competitive market advantage over
        larger
        national and regional banking institutions because we provide borrowers with
        a
        wide variety of lending products in the range of approximately $250,000 to
        $1.5
        million that these larger banks may not want to offer, because of the size
        or
        characteristics of the loan, or may not be able to deliver as expeditiously
        as
        we can.
 
  Page
        14
 
 Our
        Banks
        offer a full range of commercial and retail deposit services, including checking
        accounts, savings accounts, money market accounts and other time deposits
        of
        varying types. At September 30, 2005, our noninterest bearing checking accounts
        equaled 15% of total deposits. By focusing on core deposits generated in
        our
        local market areas, we are able to keep the overall cost of our deposits
        low and
        thereby benefit from favorable net interest margins.
 
 Our
        Banks
        also offer a variety of other financial services, including insurance and
        securities brokerage services, safe deposit boxes, ATMs worldwide, VISA check
        cards, direct deposit, United States savings bonds, telephone banking and
        internet banking with bill payment.
 
 ***Bank
        of Powhatan***
 
 Net
        income increased to $319,729 for the quarter ended September 30, 2005, compared
        with $246,129 for the same period in 2004. On a year-to-date basis, net income
        increased to $891,599 as compared to $587,756 for the same period in 2004.
        Net
        interest income increased by $92,703 for the quarter ended September 30,
        2005
        when compared to the same period in 2004. On a year-to-date basis, net interest
        income increased by $321,865 when compared to the same period in 2004. Increased
        earnings on the loan portfolio of $107,716 for the quarter ended September
        30,
        2005 and $458,151 on a year-to-date basis has been the primary driver for
        the
        earnings improvement over 2004 results. Noninterest income increased slightly
        for the quarter ended September 30, 2005 to $1,053,367, an increase of 7%
        when
        compared to the same period in 2004. On a year-to-date comparison, noninterest
        income increased 20% to $3,329,390 from $2,776,335 for the same period in
        2004.
        The increase in noninterest income during the year is the result of increased
        loan production at the Bank’s wholly-owned subsidiary, Main Street Mortgage as
        well as increased deposit service fees. Noninterest expense for the three
        months
        ended September 30, 2005 was up $95,925 or 7% and up $626,967 or 16% on a
        year-to-date basis. The increase in noninterest expense is the result of
        increased commissions resulting from higher loan production at Main Street
        Mortgage, and has also been positively influenced by focused management efforts
        on cost containment measures.
 
 At
        September 30, 2005, Bank of Powhatan had $71.1 million in total assets, total
        loans of $48.5 million and $63.4 million in total deposits.
 
 ***Bank
        of Goochland***
 
 Net
        income increased to $321,383 for the quarter ended September 30, 2005, compared
        with $66,530 for the same period in 2004. On a year-to-date basis, net income
        increased to $718,429 as compared with a net loss of $104,927 for the same
        period in 2004. Net interest income increased by $338,909 for the quarter
        ended
        September 30, 2005 when compared to the same period in 2004. On a year-to-date
        basis, net interest income was up $931,287, an increase of 73% when compared
        to
        the same period in 2004.
 
 Increased
        earnings on the loan portfolio of $352,286 for the quarter ended September
        30,
        2005, and $1,029,766 on a year-to-date basis is primarily responsible for
        the
        earnings improvement over 2004 results. Noninterest income increased for
        the
        quarter ended September 30, 2005 to $67,190, a 79% improvement as compared
        with
        results for the same period in 2004. On a year-to-date comparison, noninterest
        income increased 109% to $200,823 from $95,944 for the same period in 2004.
        The
        increase in noninterest income during both the quarter and nine month period
        is
        the result of deposit growth and increased deposit service fees. Noninterest
        expense for the three months ended September 30, 2005 was up $111,985 or
        26% and
        up $267,157 or 21% on a year-to-date basis.
 
  Page
        15
 
 At
        September 30, 2005, Bank of Goochland had $61.3 million in total assets,
        total
        loans of $49.5 million and $55.0 million in total deposits.
 
 ***Bank
        of Louisa***
 
 Net
        losses decreased 72% to $51,908 for the quarter ended September 30, 2005,
        compared to losses of $182,779 for the same period in 2004. On a year-to-date
        basis, net losses decreased 64% to $319,152 as compared to losses of $893,958
        for the same period in 2004. Net interest income increased $158,624, or 125%,
        for the quarter ended September 30, 2005 when compared to the same period
        in
        2004. On a year-to-date basis, net interest income was up $555,708, or 319%,
        compared to the same period in 2004.
 
 The
        reduction in consolidated losses for the periods reported is driven by increased
        earnings from the Bank’s loan portfolio and continued asset growth at the bank
        since its spin-off as a separately-chartered bank in April 2004. Noninterest
        income increased 75% during the quarter ended September 30, 2005 to $13,201
        as
        compared with the same period in 2004. On a year-to-date basis, noninterest
        income increased 276% to $44,135 from $11,723 during the same period in 2004.
        The increase in noninterest income during both the quarter and nine month
        period
        results from continued growth of the Bank’s deposit base and increased
        deposit-related fees. Noninterest expense for the three months ended September
        30, 2005 was up $81,858 or 33% and up $70,804 or 7% on a year-to-date basis.
 
 At
        September 30, 2005, Bank of Louisa had $28.4 million in total assets, total
        loans of $18.0 million and $23.6 million in total deposits.
 
 ***Main
        Street Mortgage***
  For
        the
        quarter ended September 30, 2005, Main Street Mortgage, a wholly-owned
        subsidiary of Bank of Powhatan, earned net income of $13,848, as compared
        with
        net income of $34,914 for the same period in 2004. The reduction in earnings
        for
        the quarter is the result of a 10% increase in noninterest expenses while
        noninterest income only grew by 6%. On a year-to-date basis, Main Street
        Mortgage reported net income of $50,944, a 242% improvement when compared
        with a
        net loss of $35,817 during the same period in 2004. This overall positive
        trend
        during the nine month period ended September 30, 2005 is due to increased
        fees
        from mortgage loan originations, as well as the impact of certain cost control
        measures implemented by management during the third and fourth quarters of
        2004.
        Commissions and fees from loan originations for the quarter ended September
        30,
        2005 were up $57,586 or 6%, and up $787,324 or 35% on a year-to-date basis,
        over
        2004 results, respectively.
 
 ***Financial
        Services***
 
 For
        the
        quarter ended September 30, 2005, Financial Services reported a net loss
        of
        $52,725, as compared with a loss of $174,247 during the same period during
        2004.
        On a year-to-date basis, Financial Services reported a net loss of $288,350.
        Financial Services did not commence operations until July 1, 2004; however,
        during the last six months of 2004, Financial Services incurred operating
        losses
        of $362,575. Revenues generated by Financial Services amounted to $95,736
        for
        the quarter ended September 30, 2005 and $273,390 on a year-to-date basis.
        Management plans to implement certain cost control measures during the fourth
        quarter of 2005. We expect to realize the benefit of focusing our efforts
        on the
        insurance and brokerage product lines during 2006.
 
  Page
        16
 
 **Net
        Interest Income**
 
 For
        the
        quarter ended September 30, 2005, net interest income totaled $2,023,062,
        a
        $667,087 or 49% increase over TransCommunity’s performance for the same period
        during 2004. For the nine month period ended September 30, 2005, net interest
        income totaled $5,248,801, up $1,858,789 or 55% as compared with the similar
        period in 2004. Average earning assets increased 39% to $146,658,591 during
        the
        nine month period ended September 30, 2005 as compared to the same period
        for
        2004.
 
 Average
        loans increased 35%, to $107,995,157 while average investments declined by
        $1,744,348 during the nine month period ended September 30, 2005. The average
        federal funds sold position increased $15,144,428 or 228% primarily as a
        result
        of TransCommunity’s capital raising efforts. The net interest margin for the
        nine month period ended September 30, 2005 was 4.79%, a 48 basis point increase
        over 2004 results during the same period. The yield on loans increased 12%
        to
        8.11% for the nine month period ended September 30, 2005, compared to 7.24%
        for
        the same period during 2004. The yield on total earning assets increased
        77
        basis points, while the yield on total interest bearing liabilities experienced
        an increase of 41 basis points. These favorable results continue to demonstrate
        management’s ability to reprice earning assets faster than liabilities,
        benefiting TransCommunity’s net interest margin in a rising interest rate
        environment. TransCommunity’s consolidated net interest margin compares
        favorably with the experience of many other commercial banks in our market
        area.
  TransCommunity's
        net interest margin analysis and average balance sheets are shown in Schedule
        I
        on page 20.
 
 **Provision
        for Loan Losses**
 
 The
        provision for loan losses for the first nine months of 2005 was $259,236,
        resulting in an allowance for loan losses of $1,641,072, or 1.41% of total
        loans
        at September 30, 2005. The calculation of the allowance for loan losses is
        considered a critical accounting policy. The allowance for loan losses is
        evaluated on a regular basis by management and is based upon management’s
        periodic review of the probability of collection, industry historical
        experience, the nature and volume of the loan portfolio, adverse situations
        that
        may affect the borrower’s ability to repay, estimated value
 of
        any
        underlying collateral and prevailing economic conditions. An adequate allowance
        is calculated using risk factors depending on the type of borrower and whether
        the loan is secured or unsecured. Loans that are classified adversely are
        assigned a risk percentage based on the classification to which they are
        assigned. Unclassified commercial loans secured by real estate and secured
        consumer loans are assigned a risk factor of 1%. Unclassified other commercial
        loans and unsecured consumer loans are assigned a risk factor of 2%. As
        TransCommunity’s subsidiary banks mature, the factors will be adjusted to
        reflect actual experience. In addition, an allowance would be established
        for
        problem loans individually or by grouping. The allowance for loan loss
        evaluation is inherently subjective as it requires estimates that are
        susceptible to significant revision as more information becomes available.
 
 **Noninterest
        Income**
 
 **** For
        the
        quarter ended September 30, 2005 TransCommunity reported noninterest income
        of
        $1,193,914, a 7% increase from $1,118,474 during the same period in 2004.
        Fees
        from loan originations represent 82% of noninterest income earned during
        the
        quarter, with deposit related service fees accounting for the balance. On
        a
        year-to-date basis, the Company reported $3,731,807 in noninterest income,
        an
        increase of 28% over results achieved during the same period in 2004. The
        increase in noninterest income achieved during both the quarter and nine
        month
        period ending September 30, 2005 over the similar periods during 2004 is
        attributable principally to growth of loan originations at Main Street Mortgage,
        which account for more than 80% of total noninterest income, as well as
        continued growth of service fee revenue at the Banks.
  
 Page
        17
 **Noninterest
        Expense**
 
 *Quarter
        ended September 30, 2005:* Total
        noninterest expense increased $389,458 or 14% to $3,184,489, as compared
        with
        the same period during 2004. Almost all of the increase in noninterest expense
        resulted from increases in salary and benefits costs. Total personnel costs
        increased $352,666, or 21%, to $2,014,772, from $1,662,106 during the same
        period of 2004. This increase is attributable to increased staffing costs
        in
        connection with our efforts to establish the proposed Bank of Rockbridge;
        the
        addition of two positions at the holding company (a marketing officer in
        January
        and a controller in April); and annual merit adjustments to salary. Net
        occupancy expenses increased 15% to $210,882 as compared to the same period
        in
        2004. Office space for the proposed Bank of Rockbridge accounts for 71% of
        the
        total increase in occupancy costs. Equipment costs increased by $15,122 or
        9%.
        Other operating expenses actually declined by $5,668 as compared with the
        same
        period during 2004.
 
 *Year-to-date
        September 30, 2005:* Total
        noninterest expense increased $1,860,037 or 23%, as compared with the same
        period during 2004. Salary and benefits costs increased $1,310,344, or 27%,
        to
        $6,096,804 from $4,786,460 for the same period during 2004. The increase
        in
        personnel costs is attributable to staffing costs in connection with our
        efforts
        to establish the proposed Bank of Rockbridge; the addition of two positions
        at
        the holding company; and annual merit adjustments to salary. Net occupancy
        expenses increased 23% to $652,901 when compared to the same period in 2004.
        Office space for the proposed Bank of Rockbridge accounts for nearly half
        of the
        increase in occupancy expense during this period. Equipment costs increased
        by
        $43,595 or 9% while other operating expenses increased by $384,936 or 17%
        as
        compared to the same period in 2004. Professional services, such as legal
        and
        accounting, represent a significant portion of the increase in other operating
        costs.
 
 Management
        is aware that noninterest expenses are having an impact on the Company’s
        profitability. However, as our subsidiary banks continue to grow, we believe
        the
        leverage provided by our common operating platform of shared services should
        position us to grow revenues while holding overhead expenses relatively
        constant.
  **Income
        Taxes**
 
 The
        deferred tax benefit is fully offset by a valuation allowance because there
        is
        insufficient evidence to conclude that TransCommunity will produce taxable
        income in the future which can be offset by loss carryforwards from the current
        and prior periods.
 
 **Loans**
 
 Total
        loans increased $11,104,602 during the first nine months of 2005 to $116,019,302
        as a result of the growth of our subsidiary banks.
 
 Loans
        by
        type are shown in the following schedule:
 September
                    30,2005
                
                December
                    31,2004Real
                    estate:Construction
                
                $
                16,059,010
                
                $
                17,472,345Residential
                
                
                23,415,313
                
                
                21,721,425Commercial
                
                
                46,233,967
                
                
                41,481,954Commercial,
                    industrial and agricultural
                
                
                21,886,206
                
                
                17,424,992Consumer
                    and Installment
                
                
                7,338,867
                
                
                6,616,012All
                    other
                
                
                1,085,939
                
                
                197,972Total
                    Loans
                
                $
                116,019,302
                
                $
                104,914,700
  
 Page
        18
 **Allocation
        for the Allowance for Loan Losses**
 
 The
        following table shows the allocation for the allowance for loan losses
        at:
  September
                    30, 2005
                
                December
                    31, 2004Balance
                      applicable to
                
                Amount
                
                Percent
                    of loans
                    in eachcategory
                    tototal
                    loans
                
                Amount
                
                Percent
                    ofloans
                    in eachcategory
                    tototal
                    loansReal
                    Estate:Construction
                
                $
                $
                    229,750
                
                
                14
                %
                $
                $
                      241,753
                
                
                17
                %Residential
                
                
                328,214
                
                
                20
                %
                
                298,636
                
                
                21
                %Commercial
                
                
                656,429
                
                
                40
                %
                
                568,831
                
                
                40
                %Commercial,
                    industrial and agricultural
                
                
                311,804
                
                
                19
                %
                
                227,532
                
                
                16
                %Consumer
                    and installment
                
                
                98,464
                
                
                6
                %
                
                71,104
                
                
                5
                %All
                    other
                
                
                16,411
                
                
                1
                %
                
                14,222
                
                
                1
                %Total
                      Allowance forLoan
                      Losses
                
                $
                1,641,072
                
                
                100
                %
                $
                $
                    1,422,078
                
                
                100
                %
 **Nonaccrual,
        Past Due and Restructured Loans**
 
 At
        September 30, 2005, TransCommunity had $182,359 in loans classified as
        restructured or past due more than 90 days, which includes a single nonaccrual
        loan in the amount of $25,291. Loans are placed in a nonaccrual status when,
        in
        the opinion of management, the accrued interest income will not be
        collected.
 
 **Deposits**
 
 At
        September 30, 2005,  TransCommunity’s
        deposits totaled $141,538,558, an increase of $17,876,642 or 14% during the
        nine
        month period ended September 30, 2005. Noninterest bearing deposits accounted
        for 32% of total deposit growth during this nine month period, growing from
        13%
        of total deposits at December 31, 2004, to 15% of total deposits on September
        30, 2005. Time deposits as a percentage of total deposits, dropped slightly
        from
        51% at December 31, 2004 to 50% at September 30 2005. The growth in deposits
        is
        attributable to continued growth at each of TransCommunity’s existing
        banks.
  **Capital**
 
 On
        July
        22, 2005, TransCommunity completed the sale of 2,300,000 shares of its common
        stock at $8.00 per share in a registered public offering to a limited number
        of
        institutional investors. The minimum share purchase in the offering was 25,000
        shares. The offering was made through a firm commitment underwriting in which
        Sandler O’Neill & Partners, L.P. served as the sole manager. TransCommunity
        received net proceeds from the offering of approximately $16.8 million after
        deducting underwriting discounts and estimated expenses. A portion of the
        net
        proceeds from the offering was used to repay the outstanding principal balance
        of $1.45 million and accrued interest on TransCommunity’s line of credit.
        TransCommunity anticipates that a portion of the remaining proceeds, estimated
        to be approximately $8.0 million, will be used to provide the initial capital
        for Bank of Rockbridge, a new bank TransCommunity seeks to establish in
        Rockbridge County, Virginia. Additionally, TransCommunity has used $2.0 million
        of the proceeds from this offering to strengthen the capital position of
        two of
        its subsidiary banks by infusing $1.0 million into each of Bank of Goochland
        and Bank of Louisa. The remaining proceeds will be used to accommodate future
        growthand
        for
        general corporate purposes which may include, among other things, operating
        expenses of the holding company headquarters and the Financial Services
        division.
 
 
 Page
        19
  The
        Federal Reserve Board, along with the Comptroller of the Currency and the
        Federal Deposit Insurance Corporation, has adopted risk-based capital measures
        for regulatory purposes to assist in the assessment of capital adequacy.
        Management seeks to balance the return on equity to shareholders while
        satisfying the regulatory standards for risk-based capital ratios. Management
        believes, as of September 30, 2005, that the Company and each of its subsidiary
        Banks met all of the minimum regulatory capital requirements and are categorized
        as “well capitalized”. At September 30, 2005, the Company had a leverage ratio
        of 19.39%, a Tier 1 risk-based capital ratio of 22.06% and a total risk-based
        capital ratio of 23.22%. The book value of the Company’s common stock at
        September 30, 2005 was $6.83 per share.
 
 **Liquidity
        and Interest Sensitivity**
 
 At
        September 30, 2005, TransCommunity had liquid assets of approximately $27.6
        million in the form of cash, federal funds sold and available-for-sale
        investments. Management believed that liquid assets were adequate at September
        30, 2005. Management anticipates that additional liquidity will be provided
        by
        the growth in deposit accounts and loan repayments at each of its subsidiary
        banks. TransCommunity’s bank subsidiaries, Bank of Powhatan, Bank of Goochland
        and Bank of Louisa, also have the ability to purchase federal funds and borrow
        from the Federal Reserve Bank, if necessary.
  Other
        than as stated, management is not aware of any trends, events or uncertainties
        that are reasonably likely to have a material impact on the TransCommunity's
        short term or long term liquidity.
 
 At
        September 30, 2005, TransCommunity had a positive cumulative Gap Rate
        Sensitivity Ratio of 18.95% for the one-year repricing period. A positive
        one-year Gap Rate Sensitivity Ratio reflects management’s ability to generate
        loans and investment securities that will mature or reprice faster than interest
        bearing deposits in a rising rate environment. Management constantly monitors
        the interest rate risk and believes that the current position is an acceptable
        risk for a growing community bank. TransCommunity's interest sensitivity
        analysis is shown in Schedule II on page 21.
 
 **Future
        Prospects**
 
 TransCommunity’s
        strategy is to grow principally through the establishment of de novo banks
        in
        relatively under-banked communities experiencing faster-than-average growth.
        Newly-chartered banking institutions normally experience losses during their
        early years of operation, as it takes time to build a loan portfolio generating
        sufficient interest income to offset operating costs.
 
 Management
        anticipates that Bank of Powhatan will experience continued growth during
        the
        remainder of 2005. Bank of Powhatan has recouped its original capital and
        is
        able to pay dividends to TransCommunity. Likewise, Bank of Goochland began
        earning monthly operating profits in August 2004, its 20th month of operation
        and has been profitable in every succeeding month thereafter. Management
        anticipates that Bank of Goochland will continue to experience rapid growth,
        will recoup all of its accumulated losses within the next 6 months, and will
        thereafter be positioned to pay dividends to TransCommunity. Our newest bank
        subsidiary, Bank of Louisa, as well as future de novo banks such as the proposed
        Bank of Rockbridge, will initially experience operating losses as they establish
        their customer base, but we anticipate that each institution will reach
        profitability as it executes TransCommunity’s community banking strategy and
        takes advantage of the operational cost savings afforded by using
        TransCommunity’s common operating platform of shared services. Additionally,
        TransCommunity’s new Financial Services division, offering asset management,
        securities brokerage and insurance has experienced revenue growth during
        2005,
        and expects to contribute to TransCommunity’s profitability in the years
        ahead.
 
  Page
        20
 Schedule
        I
 **TRANSCOMMUNITY
                    FINANCIAL CORPORATION****NET
                    INTEREST MARGIN ANALYSIS****AVERAGE
                    BALANCE SHEETS****FOR
                    THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND
                    2004**2005
                
                2004AverageBalanceSheet
                
                InterestIncome/Expense
                
                AverageRatesEarned/Paid
                
                AverageBalanceSheet
                
                InterestIncome/Expense
                
                AverageRatesEarned/Paid**ASSETS:**Loans,
                    including fees
                
                
                
                
                $
                107,995,157
                
                $
                6,551,175
                
                
                8.11
                %
                $
                79,989,926
                
                $
                4,329,350
                
                
                7.24
                %Federal
                    funds sold
                
                
                
                
                
                21,774,880
                
                
                451,612
                
                
                2.77
                
                
                6,630,452
                
                
                49,129
                
                
                0.99Investments
                
                
                
                
                
                16,888,554
                
                
                370,191
                
                
                2.93
                
                
                18,632,902
                
                
                307,022
                
                
                2.20Total
                    Earning Assets
                
                
                
                
                
                146,658,591
                
                
                7,372,978
                
                
                6.72
                
                
                105,253,280
                
                
                4,685,501
                
                
                5.95Allowance
                    for loan losses
                
                
                
                
                
                (1,520,655
                )
                
                
                
                
                
                
                
                (1,046,797
                )Non-earning
                    assets
                
                
                
                
                
                15,408,548
                
                
                
                
                
                
                
                
                11,837,853Total
                    Assets
                
                
                
                
                $
                160,546,484
                
                
                
                
                
                
                
                $
                116,044,336**LIABILITIES
                    AND STOCKHOLDERS' EQUITY**Deposits:Demand-Interestbearing
                
                
                
                
                $
                38,242,532
                
                $
                311,242
                
                
                1.09
                %
                $
                23,298,947
                
                $
                167,613
                
                
                0.96
                %Savings
                
                
                
                
                
                9,162,693
                
                
                78,888
                
                
                1.15
                
                
                7,271,300
                
                
                54,121
                
                
                1.00Time
                    deposits
                
                
                
                
                
                67,854,615
                
                
                1,675,563
                
                
                3.30
                
                
                51,351,713
                
                
                1,002,224
                
                
                2.61Total
                    deposits
                
                
                
                
                
                115,259,840
                
                
                2,065,693
                
                
                2.40
                
                
                81,921,960
                
                
                1,223,958
                
                
                2.00Other
                      borrowedfunds
                
                
                
                
                
                2,473,121
                
                
                58,484
                
                
                3.16
                
                
                4,656,472
                
                
                71,531
                
                
                2.05Total
                      interest-bearingliabilities
                
                
                
                
                
                117,732,961
                
                
                2,124,177
                
                
                2.41
                
                
                86,578,432
                
                
                1,295,489
                
                
                2.00Non-interest
                      bearingdeposits
                
                
                
                
                
                18,799,441
                
                
                
                
                
                
                
                
                15,116,801Other
                    liabilities
                
                
                
                
                
                932,186
                
                
                
                
                
                
                
                
                706,177Total
                    liabilities
                
                
                
                
                
                137,464,588
                
                
                
                
                
                
                
                
                102,401,410Stockholders'
                    equity
                
                
                
                
                
                23,081,896
                
                
                
                
                
                
                
                
                13,642,926Total
                    liabilities and stockholders'
                    equity
                
                
                
                
                $
                160,546,484
                
                
                
                
                
                
                
                $
                116,044,336Net
                    interest earnings
                
                
                
                
                
                
                
                $
                5,248,801
                
                
                
                
                
                
                
                $
                3,390,012Net
                    interest margin
                
                
                
                
                
                
                
                
                
                
                
                4.79
                %
                
                
                
                
                
                
                
                4.31
                %Interest
                    spread
                
                
                
                
                
                
                
                
                
                
                
                4.31
                %
                
                
                
                
                
                
                
                3.95
                %
  
 
 Page
        21
 Schedule
        II
 TRANSCOMMUNITY
                    FINANCIAL CORPORATIONINTEREST
                    SENSITIVITY ANALYSISSEPTEMBER
                    30, 20051
                    -365Days
                
                
                1
                    to 5Years
                
                
                Over
                    5Years
                
                
                TotalUses
                    of Funds:Loans:Real
                    estateConstruction
                
                $
                15,162,396
                
                $
                896,614
                
                $
                —
                
                $
                16,059,010Residential
                
                
                16,726,684
                
                
                5,349,452
                
                
                1,339,177
                
                
                23,415,313Commercial
                
                
                27,213,309
                
                
                16,062,351
                
                
                2,958,307
                
                
                46,233,967Commercial,
                    industrial and agricultural
                
                
                12,898,720
                
                
                8,883,178
                
                
                104,308
                
                
                21,886,206Consumer
                    and Installment
                
                
                4,502,794
                
                
                2,675,268
                
                
                160,805
                
                
                7,338,867All
                    other
                
                
                996,898
                
                
                89,041
                
                
                —
                
                
                1,085,939Total
                    Loans
                
                
                77,500,801
                
                
                33,955,904
                
                
                4,562,597
                
                
                116,019,302Federal
                    funds sold
                
                
                8,862,512
                
                
                —
                
                
                —
                
                
                8,862,512Investment
                    securities at cost
                
                
                14,765,496
                
                
                6,799,348
                
                
                1,000,000
                
                
                22,564,844Investment
                    securities at fair value
                
                
                10,956,584
                
                
                2,385,725
                
                
                —
                
                
                13,342,309Total
                
                $
                112,085,393
                
                $
                43,140,977
                
                $
                5,562,597
                
                $
                160,788,967Sources
                    of Funds:Demand
                    DepositsInterest
                    bearing
                
                $
                40,209,537
                
                $
                —
                
                $
                —
                
                $
                40,209,537Savings
                    accounts
                
                
                9,637,756
                
                
                —
                
                
                —
                
                
                9,637,756Time
                    Deposits > $100,000
                
                
                11,794,157
                
                
                15,103,850
                
                
                —
                
                
                26,898,007Time
                    Deposits < $100,000
                
                
                19,767,948
                
                
                23,709,118
                
                
                —
                
                
                43,477,066Total
                    interest-bearing deposits
                
                
                81,409,398
                
                
                38,812,968
                
                
                —
                
                
                120,222,366Federal
                    funds purchased
                
                
                208,000
                
                
                —
                
                
                —
                
                
                208,000Borrowings
                
                
                —
                
                
                —
                
                
                —
                
                
                —Total
                
                $
                81,617,398
                
                $
                38,812,968
                
                $
                —
                
                $
                120,430,366Discrete
                    Gap
                
                
                30,467,995
                
                
                4,328,009
                
                
                5,562,597
                
                
                40,358,601Cumulative
                    Gap
                
                
                30,467,995
                
                
                34,796,004
                
                
                40,358,601Ratio
                      of Cumulative Gap to Total Earning Assets
                
                
                18.95
                %
                
                21.64
                %
                
                25.10
                %
  
 Page
        22
 
 **Item
        3.**  **Controls
        and Procedures**
 
 (a)  Evaluation
        of Disclosure Controls and Procedures
 
 As
        a
        result of the enactment of the Sarbanes-Oxley Act of 2002, issuers such as
        TransCommunity that file periodic reports under the Securities Exchange Act
        of
        1934 (the “Act”) are required to include in those reports certain information
        concerning the issuer’s controls and procedures for complying with the
        disclosure requirements of the federal securities laws. These disclosure
        controls and procedures include, without limitation, controls and procedures
        designed to ensure that information required to be disclosed by an issuer
        in the
        reports it files or submits under the Act, is accumulated and communicated
        to
        the issuer’s management, including its principal executive officer or officers
        and principal financial officer or officers, or persons performing similar
        functions, as appropriate to allow timely decisions regarding required
        disclosures.
  We
        have
        established disclosure controls and procedures to ensure that material
        information related to TransCommunity is available to or made known to our
        principal executive officers and principal financial officer on a regular
        basis,
        in particular during the periods in which our quarterly and annual reports
        are
        being prepared. As required, we evaluate the effectiveness of these disclosure
        controls and procedures on a quarterly basis, and have done so as of the
        end of
        the period covered by this report. Based on this evaluation, TransCommunity’s
        management, including the Chief Executive Officer and the Chief Financial
        Officer, concluded that TransCommunity’s disclosure controls and procedures were
        operating effectively as designed as of the date of such
        evaluation.
 
 At
        the
        beginning of the third quarter of 2005, our chief executive officer, chief
        operating officer and chief financial officer reevaluated the effectiveness
        of
        these disclosure controls and procedures as of the end of the periods ending
        December 31, 2004, and March 31, 2005, and based on their reevaluation,
        concluded that such disclosure controls and procedures did not operate
        effectively as of December 31, 2004, and March 31, 2005. This
        conclusion was based on two factors. First, as previously reported in the
        Company’s Form 10-QSB for the quarter ended March 31, 2005, during that quarter
        the Company’s independent auditors identified a weakness in the Company’s
        controls over the financial reporting process amounting to a significant
        deficiency. Second, the Company determined in early May, 2005, that one or
        more
        errors occurred during the first quarter of 2005 in the process of compiling
        the
        Company’s consolidated financial statements for 2004. This resulted in
        underreporting the Company’s consolidated net loss for 2004 by approximately
        $254,000 in the original 2004 consolidated financial statements included
        in the
        Company’s Form 10-KSB filed March 30, 2005. As a result, the Company filed an
        amended Form 10-KSB/A on May 16, 2005, containing restated financial statements
        for 2004. The Company subsequently concluded that both these factors should
        have
        been reflected in its evaluation of its disclosure controls and procedures
        as
        they existed at December 31, 2004, and at March 31, 2005. As a result,
        the
        Company filed an amended Item 8A on Form 10-KSB/A and an amended Item 3(b)
        on
        Form 10-QSB/A on July 15, 2005. As previously noted in Item 3(b) of
        the
        Company’s Form 10-QSB for the quarter ended March 31, 2005, the Company added a
        full-time internal controller to its staff during the second quarter of 2005.
        This addition has reduced, and the Company believes it will continue to reduce,
        the Company’s reliance on external financial reporting assistance and will
        improve the Company’s control over its financial reporting process and will help
        to assure that the Company’s disclosure controls and procedures operate
        effectively in the future. On this basis, the Company’s certifying officers
        believe the Company’s disclosure controls and procedures were operating
        effectively at September 30, 2005.
  
 
 Page
        23
  Notwithstanding
        the foregoing, because of the inherent limitations in all control systems,
        no
        evaluation of controls can provide absolute assurance that the Company’s
        disclosure controls and procedures will detect or uncover every situation
        involving the failure of persons within the Company and
        its
        consolidated subsidiaries to disclose material information otherwise required
        to
        be set forth in the Company’s periodic reports.
  (b)  Changes
        in Internal Controls
  The
        Company’s management is also responsible for establishing and maintaining
        adequate internal controls over financial reporting and control of its assets
        to
        provide reasonable assurance regarding the reliability of financial reporting
        and the preparation of financial statements for external purposes in accordance
        with generally accepted accounting principles. As stated above, during the
        quarter ended March 31, 2005, in the course of the audit of the Company’s
        financial statements for 2004 and its review of the Company’s Form 10-KSB for
        2004, the Company’s independent auditors noted a weakness in controls over the
        financial reporting process amounting to a significant deficiency. This weakness
        reflected a need for improved controls to ensure accuracy and completeness
        in
        the preparation of financial reports, including adequate review and verification
        of report contents and supporting documentation, including spreadsheets.
        Also,
        as stated above, the Company determined during the second quarter of 2005
        that
        one or more errors occurred during the first quarter of 2005 in the process
        of
        compiling the Company’s consolidated financial statements for 2004. The Company
        believes this error reflected the weakness in controls over the financial
        accounting process previously identified by the Company’s independent auditors.
        In order to address this issue and to improve the Company’s financial reporting
        process generally, during the quarter ended June 30, 2005, the Company added
        an
        internal controller to its staff. This addition has reduced, and the Company
        believes it will continue to reduce, the Company’s reliance on external
        financial reporting assistance and will improve the Company’s internal control
        over its financial reporting process and will help to assure that the Company’s
        internal controls and procedures operate effectively in the future. The Company
        also has addressed other recommendations made by the auditors, none of which
        was
        categorized as a significant deficiency. Other than as noted above, during
        TransCommunity’s fiscal quarter ended September 30, 2005, there were no
        significant changes in TransCommunity’s internal controls pertaining to its
        financial reporting and control of its assets or in other factors that could
        significantly affect these controls.
  
  Page
        24
 **Part
        II**  **Other
        Information**
 
 **Item
        1.**  **Legal
        Proceedings**
 
 In
        the
        ordinary course of operations, TransCommunity and the Banks expect to be
        parties
        to various routine legal proceedings incidental to its business. At present,
        there are no pending proceedings against TransCommunity or any of the Banks
        which, if determined adversely, would have material effect on the business,
        results of operations, or financial position of TransCommunity or any of
        the
        Banks.
 
 **Item
        2.**  **Unregistered
        Sales of Equity Securities and Use of Proceeds**
 
 None.
 
 **Item
        3.**  **Defaults
        Upon Senior Securities**
 
 None.
 
 **Item
        4. Submission of Matters to a Vote of Security Holders**
 
 None.
 
 **Item
        5.**  **Other
        Information**
 
 None.
 
 **Item
        6.**  **Exhibits**
 
 The
        following exhibits are filed or incorporated by reference as part of this
        Form
        10-QSB
 
 Exhibit
                No.
              Description
                  of Exhibits
 
 3.1
              Articles
                  of Incorporation of TransCommunity (as amended May 31, 2005)
                  (1)
 
 3.2
              Bylaws
                  of TransCommunity (as amended May 25, 2004) (2)
 
 31.1
              Certification
                  of Chief Executive Officer pursuant to Rule 13a-14(a) (filed
                  herewith).
 
 31.2
              Certification
                  of Chief Operating Officer pursuant to Rule 13a-14(a) (filed
                  herewith).
 
 31.3
              Certification
                  of Chief Financial Officer pursuant to Rule 13a-14(a) (filed
                  herewith).
  32
                  Certifications
                      of Chief Executive Officer, Chief Operating Officer and Chief
                      Financial
                      Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
                      to Section
                      906 of the Sabanes-Oxley Act of 2002 (filed
                      herewith).
  ___________________
 (1)
              Incorporated
                  by reference to Exhibit 3.1 to the Company’s Registration Statement on
                  Form SB-2 (No. 333-125560) filed with the Securities and Exchange
                  Commission on June 6, 2005.
 (2)
              Incorporated
                  by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form
                  10-QSB filed with the Securities and Exchange Commission on August
                  16,
                  2004.
  
  Page
        25
  **Signatures**
  In
        accordance with the requirements of the Exchange Act, the registrant has
        duly
        caused this report to be signed on its behalf by the undersigned thereunto
        duly
        authorized.
 TRANSCOMMUNITY
                    FINANCIAL CORPORATION(Registrant)Date:
                    November 10, 2005
                  /s/
                    WILLIAM C. WILEYWilliam
                    C. WileyChairman of the Board
                    and Chief Executive
                    Officer
 Date:
                      November 10, 2005
                    /s/
                      BRUCE B. NOLTEBruce
                      B. NoltePresident and Chief
                      Operating
                      Officer
 Date:
                      November 10, 2005
                    /s/
                      THOMAS M. CROWDERThomas
                      M. CrowderChief Financial
                      Officer