UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2006 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-33355 TRANSCOMMUNITY FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Virginia 54-2032355 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4235 Innslake Drive Glen Allen, Virginia 23060 (Address of principal executive offices) (Zip Code) (804) 934-9999 (Registrant’s telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ X ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ] The number of shares outstanding of the registrant’s common stock at the close of business on August 11, 2006 was 4,581,741 shares of common stock, $.01 par value.

TRANSCOMMUNITY FINANCIAL CORPORATION
INDEX
		Page No.
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Statements of Financial Condition –
	June 30, 2006 (Unaudited) and December 31, 2005	1
	Consolidated Statements of Operations –
	Three and Six Months Ended June 30, 2006 and 2005 (Unaudited)	2
	Consolidated Statements of Changes in Stockholders' Equity –
	Six Months Ended June 30, 2006 and 2005 (Unaudited)	3
	Consolidated Statements of Cash Flows –
	Six Months Ended June 30, 2006 and 2005 (Unaudited)	4
	Notes to Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial
	Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market risk	25
Item 4.	Controls and Procedures	26
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Submission of Matters to a Vote of Security Holders	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
	SIGNATURES	32

SECURITIES AND EXCHANGE COMMISSION

~~Page~~WASHINGTON, 1DC 20549

~~Part~~FORM I10-Q

~~Financial~~QUARTERLY ~~Information~~REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

Commission File Number: 000-33355


	TRANSCOMMUNITY FINANCIAL CORPORATION
	(Exact name of registrant 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)

(Zip Code)


	(804) 934-9999
	(Registrant’s telephone number, including area code)

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

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

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ X ]

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

The number of shares outstanding of the registrant’s common stock at the close of business on August 2, 2007 was 4,586,741 shares of common stock, $.01 par value.

TRANSCOMMUNITY FINANCIAL CORPORATION

INDEX


		Page No.

	PART I FINANCIAL INFORMATION

Item 1.	Financial Statements	2

	Consolidated Statements of Financial Condition –
	June 30, 2007 (Unaudited) and December 31, 2006	2

	Consolidated Statements of Operations –
	Three and Six Months Ended June 30, 2007 and 2006 (Unaudited)	3

	Consolidated Statements of Changes in Stockholders' Equity –
	Six Months Ended June 30, 2007 and 2006 (Unaudited)	4

	Consolidated Statements of Cash Flows –
	Six Months Ended June 30, 2007 and 2006 (Unaudited)	5

	Notes to Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

Item 4T.	Controls and Procedures	22

	PART II OTHER INFORMATION

Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3.	Defaults Upon Senior Securities	24

Item 4.	Submission of Matters to a Vote of Security Holders	24

Item 5.	Other Information	25

Item 6.	Exhibits	26

	SIGNATURES	27

Part I Financial Information

Item 1.

Financial Statements

TRANSCOMMUNITY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 2006 AND DECEMBER 31, 2005
	(Dollars in thousands)
	June 30, 2006		December 31, 2005
Assets
Cash and due from banks	$	4,973	$	4,132
Federal funds sold		11,055		12,684
Total cash and cash equivalents		16,028		16,816
Securities available for sale, at fair value		7,600		5,355
Securities held to maturity, fair value of $23,626 and $25,723 at June 30, 2006 and December 31, 2005, respectively		23,892		25,883
Loans		142,977		135,088
Allowance for loan losses		(1,811)		(1,692)
Total loans, net		141,166		133,396
Premises and equipment, net		6,853		7,005
Federal Reserve bank stock (restricted)		656		535
Other assets		1,269		1,657
Total assets	$	197,464	$	190,647
Liabilities
Deposits:
Demand:
Noninterest bearing	$	22,874	$	17,254
Interest bearing		41,151		46,143
Savings		9,636		9,470
Time		81,519		73,735
Total deposits		155,180		146,602
Federal funds purchased		1,255		272
Secured borrowings		9,735		12,515
Accrued interest payable		410		302
Accrued expenses and other liabilities		591		586
Total liabilities		167,171		160,277
Stockholders' Equity
Common stock (25,000,000 shares authorized - $.01 par value) 4,581,741 shares issued and outstanding at June 30, 2006 and December 31, 2005, respectively		46		46
Additional paid in capital		39,800		39,778
Accumulated deficit		(9,473)		(9,379)
Accumulated other comprehensive income (loss)		(80)		(75)
Total stockholders' equity		30,293		30,370
Total liabilities and stockholders' equity	$	197,464	$	190,647

TRANSCOMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

JUNE 30, 2007 AND DECEMBER 31, 2006

(dollars in thousands)

(unaudited)


	June 30, 2007		December 31, 2006
	Unaudited
Assets
Cash and due from banks	$	4,929	$	3,669
Federal funds sold		7,417		1,422
Total cash and cash equivalents		12,346		5,091
Securities available for sale, at fair value		8,265		13,597
Securities held to maturity, fair value of $11,269 and $21,286 at June 30, 2007 and December 31, 2006, respectively		11,399		21,420
Loans		175,063		151,399
Allowance for loan losses		(2,041)		(2,065)
Total loans, net		173,022		149,334
Premises and equipment, net		7,136		6,689
Other investments		896		896
Assets from discontinued operations, net		-		88
Other assets		1,657		1,330
Total assets	$	214,721	$	198,445
Liabilities
Deposits:
Demand:
Noninterest bearing	$	22,644	$	20,450
Interest bearing		37,313		37,850
Savings		9,892		9,478
Time		113,989		97,195
Total deposits		183,838		164,973
Note payable		-		500
Federal funds purchased		-		1,517
Accrued interest payable		643		540
Liabilities from discontinued operations, net		-		10
Accrued expenses and other liabilities		217		352
Total liabilities		184,698		167,892
Stockholders' Equity
Common stock (25,000,000 shares authorized $.01 par value) 4,586,741 and 4,581,741 shares issued and outstanding at June 30, 2007 and December 31, 2006, respectively		46		46
Additional paid in capital		39,881		39,809
Accumulated deficit		(9,866)		(9,262)
Accumulated other comprehensive loss		(38)		(40)
Total stockholders' equity		30,023		30,553
Total liabilities and stockholders' equity	$	214,721	$	198,445

See accompanying notes to unaudited consolidated financial statements.

~~Page~~ 2

TRANSCOMMUNITY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(Unaudited)
	(Dollars in thousands, except share and per share amounts)
		For the three months ended				For the six months ended
	June 30, 2006		June 30, 2005		June 30, 2006		June 30, 2005
				(As Restated)			(As Restated)
Interest and dividend income
Interest on loans, including fees	$	2,928	$	2,285	$	5,745	$	4,363
Interest on federal funds sold		303		138		547		193
Interest on debt securities		182		104		349		221
Dividends on equity securities		24		15		24		20
Total interest and dividend income		3,437		2,542		6,665		4,797
Interest expense
Interest on deposits		1,009		699		1,914		1,300
Interest on other borrowed funds		110		151		313		271
Total interest expense		1,119		850		2,227		1,571
Net interest income		2,318		1,692		4,438		3,226
Provision for loan losses		92		90		144		154
Net interest income after provision for loan losses		2,226		1,602		4,294		3,072
Noninterest income
Bank service charges and fees		306		207		547		384
Commissions and fees from loan originations		679		1,101		1,555		2,087
Total noninterest income		985		1,308		2,102		2,471
Noninterest expense
Salaries and employee benefits		1,705		2,020		3,700		3,933
Occupancy expenses		206		207		431		412
Equipment expenses		169		184		345		338
Goodwill impairment		321		0		321		-
Other operating expenses		780		1,040		1,693		1,793
Total noninterest expense		3,181		3,451		6,490		6,476
Net income (loss) from continuing operations		30		(541)		(94)		(933)
Net loss from discontinued operations		-		(61)		-		(142)
Net income (loss)	$	30	$	(602)	$	(94)	$	(1,075)
Net income (loss) per share from continuing operations (basic and diluted)	$	0.01	$	(0.24)	$	(0.02)	$	(0.41)
Net income (loss) per share (basic and diluted)	$	0.01	$	(0.26)	$	(0.02)	$	(0.47)
Weighted average number of shares outstanding		4,581,741		2,293,241		4,581,741		2,285,740

TRANSCOMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006

(unaudited)

(dollars and shares in thousands)


	For the three months ended				For the six months ended
	June 30, 2007		June 30, 2006		June 30, 2007		June 30, 2006
Interest and dividend income
Interest on loans, including fees	$	3,895	$	2,938	$	7,407	$	5,764
Interest on federal funds sold		134		303		333		547
Interest on debt securities		172		182		368		349
Dividends on equity securities		21		24		25		24
Total interest income		4,222		3,447		8,133		6,684
Interest expense
Interest on deposits		1,563		1,009		2,993		1,914
Interest on other borrowed funds		2		110		22		313
Total interest expense		1,565		1,119		3,015		2,227
Net interest income		2,657		2,328		5,118		4,457
Provision for loan losses		66		92		512		144
Net interest income after provision for loan losses		2,591		2,236		4,606		4,313
Noninterest income
Bank service charges and fees		283		299		563		536
Total noninterest income		283		299		563		536
Noninterest expense
Salaries and employee benefits		1,342		1,115		2,657		2,323
Occupancy expenses		188		158		361		330
Equipment expenses		176		142		360		290
Other operating expenses		1,074		757		2,320		1,508
Total noninterest expense		2,780		2,172		5,698		4,451
Income (loss) from continuing operations before income taxes		94		363		(529)		398
Income tax expense		-		-				-
Net income (loss) from continuing operations		94		363		(529)		398
Net loss from discontinued operations		-		(333)		(77)		(492)
Net income (loss)	$	94	$	30	$	(606)	$	(94)
Net income (loss) per share from continuing operations (basic and diluted)	$	0.02	$	0.08	$	(0.12)	$	0.09
Net income (loss) per share from discontinued operations (basic and diluted)	$	0.00	$	(0.07)	$	(0.01)	$	(0.11)
Net income (loss) per share (basic and diluted)	$	0.02	$	0.01	$	(0.13)	$	(0.02)
Weighted average number of shares outstanding		4,587		4,582		4,587		4,582

See accompanying notes to unaudited consolidated financial statements.

~~Page~~ 3

TRANSCOMMUNITY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2006
(Unaudited)
			Shares of Common Stock		Common Stock		Additional Paid in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total
Balance,
	December 31, 2004			2,250	$	23	$	22,567	$	(7,607)	$	(44)	$	14,939
Net loss				-		-		-		(1,075)		-		(1,075)
	Unrealized loss on securities
		available for sale		-		-		-		-		(4)		(4)
	Total comprehensive loss			-		-		-		-		-		(1,079)
Common stock issued				43		-		557		-		-		557
Deferred compensation expense				-		-		48		-		-		48
Balance,
	June 30, 2005			2,293	$	23	$	23,172	$	(8,682)	$	(48)	$	14,465
Balance,
	December 31, 2005			4,582	$	46	$	39,778	$	(9,379)	$	(75)	$	30,370
Net loss				-		-		-		(94)		-		(94)
	Unrealized loss on securities
		available for sale		-		-		-		-		(5)		(5)
	Total comprehensive loss			-		-		-		-		-		(99)
Stock-based compensation expense				-		-		22		-		-		22
Balance,
	June 30, 2006			4,582	$	46	$	39,800	$	(9,473)	$	(80)	$	30,293

TRANSCOMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006

(Unaudited)

(dollars and shares in thousands)


	Shares of Common Stock	Common Stock Subscriptions		Common Stock		Additional Paid in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total
Balance,
December 31, 2005	4,582	$	-	$	46	$	39,778	$	(9,379)	$	(75)	$	30,370
Net loss	-		-		-		-		(94)		-		(94)
Unrealized gain on securities available for sale	-		-		-		-		-		(5)		(5)
Total comprehensive loss	-		-		-		-		-		-		(99)
Stock-based compensation expense	-		-		-		22		-		-		22
Balance,
June 30, 2006	4,582	$	-	$	46	$	39,800	$	(9,473)	$	(80)	$	30,293
Balance,
December 31, 2006	4,582	$	-	$	46	$	39,809	$	(9,262)	$	(40)	$	30,553
Net loss	-		-		-		-		(606)		-		(606)
Unrealized gain on securities available for sale	-		-		-		-		-		2		2
Total comprehensive loss													(604)
Common Stock issued	5		-		-		38						38
Stock-based compensation expense	-		-		-		34		-		-		34
Dissolution of subsidiary	-		-		-		-		2		-		2
Balance,
June 30, 2007	4,587	$	-	$	46	$	39,881	$	(9,866)	$	(38)	$	30,023

See accompanying notes to unaudited consolidated financial statements.

~~Page~~ 4

TRANSCOMMUNITY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(Unaudited)
		(Dollars in thousands)
	June 30, 2006		June 30, 2005
Operating activities:				(As Restated)
Net loss from continuing operations	$	(94)	$	(933)
Net loss from discontinued operations		-		(142)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Provision for loan losses		144		154
Amortization of security premiums and accretion of discounts, net		(9)		(3)
Impairment of goodwill		321		-
Depreciation		278		257
Deferred compensation expense		-		48
Stock-based compensation expense		22		-
Loss on disposition of property		-		2
Decrease (increase) in other assets		67		(400)
Increase in interest payable		108		61
Increase in accrued expenses and other liabilities		5		112
Net cash provided by (used in) operating activities		842		(844)
Investing activities:
Purchase of securities held to maturity		(34,500)		(37,500)
Purchase of securities available for sale		(2,250)		-
Proceeds from maturities of securities held to maturity		36,500		22,000
Proceeds from maturities of securities available for sale		-		11,500
Purchase of Federal Reserve bank stock		(121)		-
Net increase in loans		(7,914)		(7,863)
Purchase of premises and equipment		(125)		(1,219)
Net cash used in investing activities		(8,410)		(13,082)
Financing activities:
Net change in federal funds purchased		983		(2,133)
Proceeds from offering of common stock		-		641
Costs of stock offering		-		(83)
Net (decrease) increase in secured borrowings		(2,780)		2,438
Net increase in noninterest bearing and interest bearing demand deposits		628		9,486
Net increase in savings deposits		165		810
Net increase in time deposits		7,784		6,038
Net cash provided by financing activities		6,780		17,197
Net (decrease) increase in cash and cash equivalents		(788)		3,271
Cash and cash equivalents:
Beginning of the period		16,816		3,760
End of the period	$	16,028	$	7,031
Supplemental disclosures of cash flow information:
Interest paid	$	1,811	$	1,292

TRANSCOMMUNITY FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006

(Unaudited)


	For the six months ended
	June 30, 2007		June 30, 2006
Operating activities:
Net loss	$	(606)	$	(94)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Provision for loan losses		512		144
Amortization of security premiums and accretion of discounts, net		(12)		(9)
Impairment of goodwill		-		321
Depreciation		279		278
Stock-based compensation expense		34		22
(Increase) decrease in other assets		(323)		67
Increase in interest payable		103		108
(Decrease) increase accrued expenses and other liabilities		(145)		5
Net cash provided by (used in) operating activities		(158)		842
Investing activities:
Purchase of securities held to maturity		(6,000)		(34,500)
Purchase of securities available for sale		(16,522)		(2,250)
Proceeds from maturities of securities held to maturity		16,025		36,500
Proceeds from maturities of securities available for sale		21,863		-
Purchase of Federal Reserve bank stock		-		(121)
Net increase in loans		(24,183)		(7,914)
Purchase of premises and equipment		(656)		(125)
Net cash used in investing activities		(9,473)		(8,410)
Financing activities:
Net change in federal funds purchased		(1,517)		983
Proceeds from stock options exercised		38		-
Net decrease in note payable		(500)		-
Net decrease in secured borrowings		-		(2,780)
Net increase in noninterest bearing and interest bearing demand deposits		1,657		628
Net increase in savings deposits		414		165
Net increase in time deposits		16,794		7,784
Net cash provided by financing activities		16,886		6,780
Net increase (decrease) in cash and cash equivalents		7,255		(788)
Cash and cash equivalents:
Beginning of the period		5,091		16,816
End of the period	$	12,346	$	16,028
Supplemental disclosures of cash flow information:
Interest paid	$	2,913	$	1,811

See accompanying notes to unaudited consolidated financial statements.

~~Page~~ 5

TRANSCOMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 Principles of Consolidation and Basis of Presentation:

~~Principles~~The accompanying unaudited consolidated financial statements include the accounts of ~~Consolidation~~TransCommunity Financial Corporation (“TransCommunity” or the “Company”) and ~~Basis~~its ofconsolidated ~~Presentation:~~subsidiary TransCommunity Bank, N.A., which includes Main Street Mortgage and Investment Corporation (“Main Street Mortgage”), a former wholly-owned subsidiary that discontinued operations in December 2006. All significant intercompany transactions and balances associated with consolidated subsidiaries have been eliminated.

The ~~accompanying unaudited~~ consolidated financial statements ~~include~~of TransCommunity conform to accounting principles generally accepted in the ~~accounts~~United States of ~~TransCommunity~~America, ~~Financial~~to ~~Corporation~~general ~~(“TransCommunity”~~industry orpractices, and the ~~“Company”)~~instructions ~~and~~for ~~its~~Form ~~consolidated~~10-Q ~~subsidiaries,~~and ~~including~~Regulation ~~Bank~~S-X. In the opinion of ~~Powhatan~~management, ~~N.A.~~the accompanying unaudited consolidated financial statements contain all adjustments (~~“Bank~~consisting of ~~Powhatan”~~only normal recurring accruals) necessary to present fairly the financial position at June 30, ~~Bank~~2007, and the results of ~~Goochland~~operations for the three-month and six-month periods ended June 30, N2007 and 2006.A. The ~~(“Bank~~Consolidated Statement of ~~Goochland”),~~Financial ~~Bank~~Condition ofat ~~Louisa~~December 31, N2006 was derived from audited financial data.A. The ~~(“Bank~~preparation of ~~Louisa”)~~financial statements requires management to make estimates and ~~Main~~assumptions ~~Street~~that ~~Mortgage~~affect the reported amounts of assets and ~~Investment~~liabilities ~~Corporation~~and ~~(“Main~~contingent ~~Street~~assets ~~Mortgage”)~~and liabilities in the financial statements, aand ~~wholly-owned~~the ~~subsidiary~~disclosure of ~~Bank~~revenue ofand ~~Powhatan~~expense during the reporting periods. ~~All~~The ~~significant~~assumptions ~~intercompany~~are ~~transactions~~based on information available as of the date of the financial statements and ~~balances~~could ~~associated~~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 consolidated ~~subsidiaries~~financial ~~have~~statements ~~been~~included ~~eliminated~~in the audited December 31, 2006 financial statements for TransCommunity, which statements were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Securities and Exchange Commission (the “Commission”).

~~The~~NOTE ~~consolidated~~2 Impacts ~~financial statements~~ of ~~TransCommunity~~Certain ~~conform~~Accounting to accounting principles generally accepted in the United States of America, to general industry practices, and the instructions for Form 10-Q and Regulation S-X. 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 at June 30, 2006, and the results of operations for the three-month and six-month periods ended June 30, 2006 and 2005. The Consolidated Statement of Financial Condition at December 31, 2005 (As Restated) 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 periods. 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 consolidated financial statements included in the audited December 31, 2005 financial statements for TransCommunity, which statements were included in the Company’s Annual Report on Form 10-KSB/A for the year ended December 31, 2005 filed with the Securities and Exchange Commission (the “Commission”).Pronouncements:

~~NOTE~~In 2September 2006, the FASB released SFAS No. 157, “Fair Value Measurement”, which provides guidance for using fair value to measure assets and liabilities. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The Statement also responds to investors’ requests for more information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect that fair value measurements have on earnings. SFAS No. 157 will apply whenever another standard requires (or permits) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value to any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those years. SFAS No. 157 is effective for the Company for years beginning after January 1, 2008, and interim periods within that year. The Company is in the process of evaluating the impact that the adoption of SFAS No. 157 will have on its consolidated financial position and results of operations.

~~Impact~~In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities." This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. This Statement is effective as of ~~Certain~~the ~~Accounting~~beginning ~~Pronouncements:~~of an entity’s first fiscal year beginning after November 15, 2007. The Company is currently in the process of evaluating the impact that the adoption will have on its consolidated financial position and results of operations.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment,” that addresses the accounting for share-based payment transactions in which an enterprise exchanges its equity instruments for goods and services. The Statement eliminates the ability to account for share-based compensation transactions using Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and requires instead that such transactions be accounted for using a fair-value-based method. The Commission requires companies to implement SFAS No. 123R by the beginning of the first fiscal year that begins after June 15, 2005. On January 1, 2006, TransCommunity implemented SFAS No. 123R using the modified prospective transition method. By implementing SFAS No. 123R, TransCommunity recorded $22 thousand of additional compensation expense during the six months ended June 30, 2006, resulting from the application of fair-value-based accounting to its stock-based compensation programs. See Note 4 for more information about TransCommunity’s stock-based compensation programs. 6

~~Page~~NOTE 63 Investment Securities:

~~TRANSCOMMUNITY~~The ~~FINANCIAL~~carrying ~~CORPORATION~~values, unrealized gains, unrealized losses and approximate fair values of investment securities at June 30, 2007 and December 31, 2006 are shown in the table below. As of June 30, 2007, 17 U.S. Agency Securities with a carrying value of $12.7 million were pledged as collateral for public deposits.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Securities Available for Sale
June 30, 2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Gov't-sponsored enterprises-discount notes*	$	-	$	-	$	-	$	-
Gov't-sponsored enterprises-notes*		8,303		-		(38)		8,265
Total Securities Available for Sale	$	8,303	$	-	$	(38)	$	8,265

NOTE 2



Securities Held to Maturity
June 30, 2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Gov’t-sponsored enterprises-discount notes*	$	4,999	$	-	$	(4)	$	4,995
Gov’t-sponsored enterprises-notes*		6,400		-		(126)		6,274
Total Securities Held to Maturity	$	11,399	$	-	$	(130)	$	11,269

Impact of Certain Accounting Pronouncements (Continued):



Securities Available for Sale
December 31, 2006
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Gov't-sponsored enterprises-discount notes*		7,213		-	$	(7)		7,206
Gov't-sponsored enterprises-notes*		6,424		-		(33)		6,391
Total Securities Available for Sale	$	13,637	$	-	$	(40)	$	13,597

In February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments - an Amendment of FASB Statements No. 133 and 140” (“SFAS 155”). SFAS 155 amends FASB Statements No. 133, “Accounting for Derivative Instruments and Hedging Activities”, and No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. SFAS 155 resolves issues addressed in Statement 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.” SFAS 155 provides a fair value measurement option for certain hybrid financial instruments that contain an embedded derivative that would otherwise require bifurcation.



Securities Held to Maturity
December 31, 2006
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Gov't-sponsored enterprises-discount notes*	$	13,008	$	-	$	(12)	$	12,996
Gov't-sponsored enterprises-notes*		8,412		-		(122)		8,290
Total Securities Held to Maturity	$	21,420	$	-	$	(134)	$	21,286

*Issued by the Federal Home Loan Bank (FHLB)

Adoption of SFAS 155 is required as of the beginning of the first fiscal year subsequent to September 15, 2006. The Company does not anticipate the adoption of SFAS 155 in January 2007 will have a material effect on its financial position or results of operations.7

InInvestments ~~March~~in ~~2006, FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets -~~ an ~~Amendment~~unrealized ofloss ~~FASB~~position ~~Statement~~that ~~No.~~are ~~140”~~considered ~~(“SFAS 156”). SFAS~~temporarily ~~156~~impaired ~~amends~~at ~~FASB~~June ~~Statement No. 140~~30, ~~“Accounting~~2007 ~~for Transfers~~ and ~~Servicing~~December ~~of Financial Assets and Extinguishments of Liabilities”~~31, with respect to the accounting for separately recognized servicing assets and servicing liabilities. SFAS 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract to be initially measured at fair value2006, ifsegregated ~~practicable.~~between ~~SFAS~~investments ~~156~~sustaining ~~also~~unrealized ~~permits~~losses ~~entities~~for ~~to subsequently~~periods ~~measure~~less ~~servicing~~than ~~assets~~twelve months and ~~liabilities~~twelve ~~using~~months ~~an amortization method~~ or ~~fair value measurement method. Under the amortization method~~greater, ~~servicing assets and liabilities~~ are ~~amortized~~displayed in ~~proportion to and over~~ the ~~estimated~~following ~~period~~tables: of servicing. Under the fair value measurement method, servicing assets are measured at fair value at each reporting date and changes in fair value are reported in net income for the period the change occurs.

Adoption of SFAS 156 is required as of the beginning of the first fiscal year subsequent to September 15, 2006. Earlier adoption is permitted as of the beginning of an entity’s fiscal year, provided the entity has not yet issued financial statements, including interim financial statements, for any period of that fiscal year. The Company does not anticipate the adoption of SFAS 156 in January 2007 will have a material effect on its financial position or results of operations.


Securities Available for Sale
June 30, 2007	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Description of securities:
Gov't-sponsored enterprises-notes*	$	7,484	$	(15)	$	781	$	(23)	$	8,265	$	(38)
Gov't-sponsored enterprises-discount notes*		-		-		-		-		-		-
Total	$	7,484	$	(15)	$	781	$	(23)	$	8,265	$	(38)

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 clarifies the accounting and reporting for income taxes recognized in accordance with SFAS No. 109, “Accounting for Income Taxes.” This Interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The Company is currently evaluating the impact of FIN 48. The Company will adopt this Interpretation in the first quarter of 2007.


Securities Held to Maturity
June 30, 2007	Less than 12 months				12 months or more				Total
(dollars in thousands)	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Description of securities:
Gov't-sponsored enterprises-notes*	$	-	$	-	$	6,274	$	(126)	$	6,274	$	(126)
Gov't-sponsored enterprises-discount notes*		4,995		(4)		-		-		4,995		(4)
Total	$	4,995	$	(4)	$	6,274	$	(126)	$	11,269	$	(130)
*Issued by the Federal Home Loan Bank (FHLB)

Page 7


Securities Available for Sale
(Dollars in thousands)	Less than 12 months				12 months or more				Total
December 31, 2006	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Description of securities:
Gov't-sponsored enterprises- notes*	$	4,990	$	(4)	$	1,401	$	(29)	$	6,391	$	(33)
Gov't-sponsored enterprises-discount notes*		7,206		(7)		-		-		7,206		(7)
Total	$	12,196	$	(11)	$	1,401	$	(29)	$	13,597	$	(40)

TRANSCOMMUNITY FINANCIAL CORPORATION


Securities Held to Maturity
(Dollars in thousands)	Less than 12 months				12 months or more				Total
December 31, 2006	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Description of securities:
Gov't-sponsored enterprises- notes*	$	1,999	$	(1)	$	6,291	$	(121)	$	8,290	$	(122)
Gov't-sponsored enterprises-discount notes*		12,996		(12)		-		-		12,996		(12)
Total	$	14,995	$	(13)	$	6,291	$	(121)	$	21,286	$	(134)
*Issued by the Federal Home Loan Bank (FHLB)

~~NOTES~~The TOJune ~~CONSOLIDATED~~30, ~~FINANCIAL~~2007 ~~STATEMENTS~~unrealized ~~(Unaudited)~~loss was the aggregate of 18 U.S. Agency notes, of which 10 had a continuous loss period of more than 12 months. The December 31, 2006 unrealized loss was the aggregate of 20 U.S. Agency notes, of which 11 had a continuous loss period of more than 12 months. The unrealized loss positions in both years were primarily related to interest rate movements as there is minimal credit risk exposure in these investments. All securities are investment grade or better. No impairment loss has been recognized on these securities because management has both the intent and the ability to hold these securities until maturity or call dates.

~~NOTE 3~~8

~~Investment~~Management ~~Securities:~~evaluates securities for other-than-temporary impairment at least on a quarterly basis and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of TransCommunity’s subsidiary bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

~~The~~NOTE ~~carrying~~4 Stock ~~values,~~Based unrealized gains, unrealized losses and approximate fair values of investment securities at June 30, 2006 and December 31, 2005 are shown in the table below. As of June 30, 2006, 16 U.S. Agency Securities with a carrying value of $11.8 million were pledged as collateral for public deposits.Compensation:

Securities Available for Sale
June 30, 2006
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Agency notes	$	7,680	$	-	$	(80)	$	7,600
Total Securities Available for Sale	$	7,680	$	-	$	(80)	$	7,600
Securities Held to Maturity
June 30, 2006
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Agency discount notes	$	15,493	$	-	$	(12)	$	15,481
U.S. Agency notes		8,399		-		(254)		8,145
Total Securities Held to Maturity	$	23,892	$	-	$	(266)	$	23,626
Securities Available for Sale
December 31, 2005
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Agency notes	$	5,430	$	-	$	(75)	$	5,355
Total Securities Available for Sale	$	5,430	$	-	$	(75)	$	5,355
Securities Held to Maturity
December 31, 2005
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Agency discount notes	$	19,483	$	-	$	(12)	$	19,471
U.S. Agency notes		6,400		-		(148)		6,252
Total Securities Held to Maturity	$	25,883	$	-	$	(160)	$	25,723

A stock option plan was adopted by the Board of Directors of the Bank of Powhatan on May 8, 2001(the “2001 Plan”). This 2001 Plan was adopted by TransCommunity effective August 15, 2001 in connection with the reorganization in which the Bank of Powhatan became a subsidiary of TransCommunity. The purpose of the 2001 Plan was to reward employees and directors for services rendered and to promote the success of TransCommunity and its subsidiary by providing incentives to employees and directors that will promote the alignment of their personal financial interest with the long-term financial success of TransCommunity and its subsidiaries and with growth in shareholder value. The 2001 Plan provided that options for up to 330,000 shares of TransCommunity common stock may be issued. Under the 2001 Plan, annual grants of stock options were limited to 10,000 shares for each employee and 7,500 shares for each director. The exercise price may not be less than 100% of the fair market value of the shares on the grant date. Unless the Compensation Committee of TransCommunity’s Board of Directors determines otherwise, one-third of a grant becomes vested and exercisable on each of the first three anniversaries of the initial grant date. Each grant 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. At June 30, 2007, options to acquire 284,625 shares were outstanding, of which 242,625 were exercisable at that date.

~~Page~~On 8May 29, 2007, shareholders approved the TransCommunity Financial Corporation 2007 Equity Compensation Plan (the “2007 Plan”). As a result, the Company will not make any more stock option grants under the 2001 Plan. See Part II, Item 5 for more information on the 2007 Plan.

~~TRANSCOMMUNITY~~Effective ~~FINANCIAL~~January ~~CORPORATION~~1, 2006, TransCommunity adopted SFAS No. 123R, “Share-Based Payment,” using the modified prospective transition method. SFAS No. 123R requires companies to calculate compensation expense arising from stock-based compensation based on the respective fair values of awards at grant date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 3

Investment Securities (Continued):

Investments in an unrealized loss position that are considered temporarily impaired at June 30, 2006 and December 31, 2005, segregated between investments sustaining unrealized losses for periods less than twelve months, and twelve months or greater are displayed in the following tables:

		(Dollars in thousands)
		Less than 12 months				12 months or more				Total
June 30, 2006	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Description of securities:
US Agency notes	$	6,225	$	(24)	$	9,520	$	(310)	$	15,745	$	(334)
US Agency discount notes		15,481		(12)		-		-		15,481		(12)
Total	$	21,706	$	(36)	$	9,520	$	(310)	$	31,226	$	(346)
		(Dollars in thousands)
		Less than 12 months				12 months or more				Total
December 31, 2005	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Description of securities:
US Agency notes	$	5,066	$	(59)	$	6,540	$	(164)	$	11,606	$	(223)
US Agency discount notes		19,471		(12)		-		-		19,471		(12)
Total	$	24,537	$	(71)	$	6,540	$	(164)	$	31,077	$	(235)

The June 30, 2006 unrealized loss is the aggregate of 22 U.S. Agency notes, of which 13 have a continuous loss period of more than 12 months. The December 31, 2005 unrealized loss is the aggregate of 18 U.S. Agency notes, of which 11 have a continuous loss period of more than 12 months. The unrealized loss positions in both years were primarily related to interest rate movements as there is minimal credit risk exposure in these investments. All securities are investment grade or better. No impairment loss has been recognized on these securities because management has both the intent and the ability to hold these securities until maturity or call dates.

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of TransCommunity’s subsidiary banks to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Page 9

TRANSCOMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 4

Stock Based Compensation:

A stock option plan (the “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 to promote the success of TransCommunity and its subsidiaries by providing incentives to employees and directors that will promote the alignment of their personal financial interest with the long-term financial success of TransCommunity and its subsidiaries and with growth in stockholder value. Under the Plan, annual grants of stock options are limited to 10,000 shares for each employee and 7,500 shares for each director. 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 grant date. Unless the Executive Committee of TransCommunity’s Board of Directors determines otherwise, one-third of a grant becomes vested and exercisable on each of the first three anniversaries of the initial grant date. Each grant 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. At June 30, 2006, options to acquire 285,225 shares were outstanding, of which 274,492 were exercisable at that date.

Effective January 1, 2006, TransCommunity adopted SFAS No. 123R, “Share-Based Payment,” using the modified prospective transition method. SFAS No. 123R requires companies to calculate compensation expense arising from stock-based compensation based on the respective fair values of awards at grant date. During the six-month period ended June 30, 2006, TransCommunity recorded $22 thousand of compensation expense beyond what would have been recorded if it had not adopted SFAS No. 123R. As of June 30, 2006, there was $13 thousand of unrecognized compensation cost related to unvested stock-based awards which will be recognized over the remaining vesting period of one year.

A summary of the options granted is shown in the following table:

	Six months ended June 30,
		2006		2005
	2007		2006
Outstanding at January 1	$	~~281~~246,~~425~~725	$	~~317~~281,~~375~~425
Granted		556,000		-5,000
Exercised		-(5,000)		~~(100)~~-
Lapsed		(113,~~200~~100)		-(1,200)
Options outstanding at June 30		~~285~~284,~~225~~625		~~317~~285,~~275~~225
Options exercisable at June 30		~~274~~242,~~492~~625		~~243~~274,~~153~~492
Weighted average exercise price	$	9.9697	$	109.0096
Weighted average remaining contracted life at June 30		8257 months		9082 months

The weighted-average grant date fair value of 56,000 options granted under the 2001 Plan during the six months ended June 30, ~~2006~~2007, was $71.6584 per share, which equaled $103,040. The weighted average exercise price of options granted during the six months ended June 30, 2007, was $8.53 per share.

~~Page~~Options 10granted under the Plan generally expire ten years after the date of grant and are granted at market value of the stock on the date of grant. Option terms are determined by the Compensation Committee of TransCommunity’s Board of Directors at the time of the grant. TransCommunity utilizes the Black Scholes model to calculate fair values of options awarded. This model requires assumptions as to expected volatility, dividends, terms and risk free rates. Assumptions used for the periods covered herein are outlined in the following table:

~~TRANSCOMMUNITY FINANCIAL CORPORATION~~9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


	Six months ended
	June 30, 2007	June 30, 2006
Expected volatility	20%	5%
Expected dividend	0	0
Expected term (years)	10	10
Risk free rate	4.7%	4.4%

~~NOTE~~ Expected 4volatilities are based on volatility trends of similar entities in the region, as defined by the SNL Mid-Atlantic Bank Index. Expected dividends reflect the experience of TransCommunity’s common stock. Expected terms represent the period of time that options granted are expected to be outstanding. The risk free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the appropriate life of each option.

~~Stock~~NOTE ~~Based~~5 Earnings ~~Compensation~~ (~~Continued~~Losses) Per Share:

~~Options~~Basic ~~granted~~earnings ~~under~~(losses) ~~the~~per ~~Plan~~share ~~generally~~(“EPS”) ~~expire~~is ~~ten~~computed ~~years~~by ~~after~~dividing ~~the~~net ~~date~~income ~~of grant and are granted at~~ or ~~above~~loss by the ~~fair~~weighted ~~market~~average ~~value~~number of ~~the~~shares ~~stock~~outstanding onduring the ~~date of grant~~period. ~~Option~~Diluted ~~terms~~EPS ~~are~~is ~~determined~~computed byusing the ~~Executive~~weighted ~~Committee~~average ofnumber ~~TransCommunity’s Board~~ of ~~Directors~~common atshares ~~the~~outstanding ~~time~~during of the ~~grant.~~period, ~~TransCommunity~~including ~~utilizes~~ the ~~Black~~effect ~~Scholes model to calculate fair values~~ of ~~options~~dilutive ~~awarded.~~potential ~~This~~common ~~model~~shares ~~requires~~outstanding ~~assumptions~~attributable as to ~~expected~~stock ~~volatility,~~awards. Reported ~~dividends,~~basic ~~terms~~ and ~~risk~~dilutive ~~free~~earnings ~~rates.~~per ~~Assumptions~~share ~~used~~are ~~for~~the same as the ~~periods~~effect ~~covered~~on ~~herein~~EPS ~~are~~of ~~outlined~~TransCommunity’s inoutstanding ~~the~~stock ~~table~~options ~~below:~~would be antidilutive.

	Six months ended
	June 30, 2006	June 30, 2005
Expected volatility	4.54%	0.00%
Expected dividend	0	0
Expected term (years)	10	10
Risk free rate	4.36%	4.00%

NOTE 6 Business Segments:

~~Expected~~TransCommunity ~~volatilities~~has ~~are~~two ~~based~~reportable onbusiness ~~historical~~segments: ~~volatility~~“Community ~~trends~~Banking” ~~of TransCommunity common stock~~ and ~~other~~“Holding ~~factors~~Company Operations.” The ~~Expected~~Community ~~dividends~~Banking ~~reflect~~segment ~~the~~consists ~~experience~~ of ~~TransCommunity~~the Company’s ~~common~~four ~~stock. Expected~~subsidiary ~~terms~~banks ~~represent~~which ~~the~~were ~~period~~consolidated in June 2007, each of ~~time~~which ~~that~~provides ~~options~~loan, ~~granted~~deposit, ~~are~~mortgage ~~expected~~and investment services to beretail ~~outstanding.~~and ~~The~~commercial ~~risk~~customers ~~free~~in ~~rate~~their isrespective ~~based~~market onareas. Holding Company Operations consists of the ~~U.S.~~parent ~~Treasury~~company, ~~yield~~which ~~curve~~provides inmanagerial ~~effect~~support, atas ~~the~~well ~~time~~as an operational platform of ~~grant~~shared ~~for~~services ~~the~~utilized ~~appropriate~~by ~~life~~each of ~~each~~the ~~option~~subsidiary banks.

~~The~~During ~~following~~2006, ~~table~~the ~~provides~~Company ~~the~~had ~~pro~~two ~~forma~~additional ~~effect~~business onsegments, ~~net~~“Main ~~loss~~Street ~~and~~Mortgage,” ~~loss~~which ~~per~~provided ~~share~~a ~~for~~variety ~~the~~of ~~periods~~mortgage ~~covered~~loan products across the country under ~~this~~the ~~report~~exemption granted as a subsidiary of a nationally-chartered bank, ~~during~~and “Financial Services,” which ~~the~~offered ~~fair~~trust, ~~value~~asset ~~based~~management ~~method~~and ~~was~~securities ~~not~~and ~~used~~insurance brokerage services. The activities of both of these business segments were discontinued during 2006. The services previously provided by both of these business segments have been transferred to ~~account~~the ~~for~~Community ~~stock-based~~Banking ~~compensation:~~segment.

	Three months ended		Six months ended
	June 30, 2005		June 30, 2005
Net loss, as reported	$	(601,798)	$	(1,075,065)
Deduct: total stock-based employee compensation expense determined under fair value based method		(36,066)		(72,131)
Pro forma net loss	$	(637,864)	$	(1,147,196)
Loss per share:
Basic and diluted - as reported	$	(0.26)	$	(0.47)
Basic and diluted - pro forma	$	(0.28)	$	(0.50)

A summary of the business segments is shown in the following table:

NOTE 5


	For three months ended June 30, 2007
	(dollars in thousands)
	Community Banking		Main Street		Trans-Community		Eliminations		Consolidated
Net interest income (expense)	$	2,656	$	-	$	1	$	-	$	2,657
Provision for loan losses		(66)		-		-		-		(66)
Noninterest income		281		-		987		(985)		283
Noninterest expense		(3,073)		-		(1,014)		1,307		(2,780)
(Loss) income from subsidiaries		-		-		(202)		202		-
Net (loss) income from continuing operations		(202)		-		(228)		524		94
Net loss from discontinued operations		-		-		-		-		-
Net (loss) income	$	(202)	$	-	$	(228)	$	524	$	94
Total Assets	$	214,209	$	-	$	30,084	$	(29,572)	$	214,721

~~Earnings (Losses) Per Share:~~10

Basic earnings per share (“EPS”) is computed by dividing net income or loss by the weighted average number of shares outstanding during the period. Diluted EPS is computed using the weighted average number of common shares outstanding during the period, including the effect of dilutive potential common shares outstanding attributable to stock awards. Basic and dilutive earnings per share are identical and the effect on losses per share of TransCommunity’s outstanding stock options would be antidilutive and a decrease in loss per share is not appropriate.


	For three months ended June 30, 2006
	(dollars in thousands)
	Community Banking		Main Street		Trans-Community		Eliminations		Consolidated
Net interest income (expense)	$	2,212	$	-	$	115	$	1	$	2,328
Provision for loan losses		(92)		-		-		-		(92)
Noninterest income		288		-		112		(101)		299
Noninterest expense		(1,569)		-		(718)		115		(2,172)
(Loss) income from subsidiaries		-		-		506		(506)		-
Net (loss) income from continuing operations		839		-		15		(491)		363
Net loss from discontinued operations		-		(333)		-		-		(333)
Net (loss) income	$	839	$	(333)	$	15	$	(491)	$	30
Total Assets	$	187,498	$	355		30,531	$	(20,920)	$	197,464

Page 11


	For six months ended June 30, 2007
	(dollars in thousands)
	Community Banking		Main Street		Trans-Community		Eliminations		Consolidated
Net interest income (expense)	$	5,127	$	-	$	(9)	$	-	$	5,118
Provision for loan losses		(512)		-		-		-		(512)
Noninterest income		561		-		1,405		(1,403)		563
Noninterest expense		(5,771)		-		(2,138)		2,211		(5,698)
(Loss) income from subsidiaries		-		-		(672)		672		-
Net (loss) income from continuing operations		(595)		-		(1,414)		1,480		(529)
Net loss from discontinued operations		-		(77)		-		-		(77)
Net (loss) income	$	(595)	$	(77)	$	(1,414)	$	1,480	$	(606)
Total Assets	$	214,209	$	-	$	30,084	$	(29,572)	$	214,721

TRANSCOMMUNITY FINANCIAL CORPORATION


	For six months ended June 30, 2006
	(dollars in thousands)
	Community Banking		Main Street		Trans-Community		Eliminations		Consolidated
Net interest income (expense)	$	4,231	$		$	226	$	-	$	4,457
Provision for loan losses		(144)				-		-		(144)
Noninterest income		504				236		(204)		536
Noninterest expense		(3,076)				(1,608)		233		(4,451)
(Loss) income from subsidiaries		-		-		1,023		(1,023)		-
Net (loss) income from continuing operations		1,515		-		(123)		(994)		398
Net loss from discontinued operations		-		(492)		-		-		(492)
Net (loss) income	$	1,515	$	(492)	$	(123)	$	(994)	$	(94)
Total Assets	$	187,498	$	355	$	30,531	$	(20,920)	$	197,464

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~11

NOTE 67 Secured Borrowings:

~~Business~~As ~~Segments:~~of June 30, 2007, there were no secured borrowings. Secured borrowings at June 30, 2006 resulted from loan participations identified in August 2006 as being not properly accounted for during 2005. Additional information with respect to these borrowings was included in our Quarterly Report on Form 10-Q for the period ended March 31, 2007.

~~TransCommunity~~NOTE ~~has three reportable segments~~8 Capital: three commercial bank subsidiaries (“Community Banking”), a mortgage brokerage business (“Main Street Mortgage”) and holding company operations (“TransCommunity”). The community bank business includes three banks, which provide loan, deposit, and investment services to retail and commercial customers throughout their retail offices. The mortgage segment provides a variety of mortgage loan products across the country under the exemption granted as a subsidiary of a nationally chartered bank. The parent company is principally involved with providing managerial support and the operation of the shared services platform for the other reportable segments and receives reimbursements from the subsidiaries for cost associated with the common operating platform.

During 2005, TransCommunity also had a fourth reportable business segments: TransCommunity Investment Advisors, Inc. and TransCommunity Investment Services, Inc. (collectively, “Financial Services”). During the fourth quarter of 2005, the Company discontinued the operations of TransCommunity Investment Advisors, Inc. Additionally, during the first quarter of 2006, the Company completed a restructuring of TransCommunity Investment Services, Inc. (“TCIS”), its insurance and securities subsidiary, whereby its revenues, the employees and management responsibilities were transferred to the Community Banking segment of the Company. For 2005, the Financial Services segment results have been reclassified to conform to the presentation in 2006 for comparability.

The amount of noninterest expense reported for Main Street for the three and six month periods ended June 30, 2006, includes the $321 thousand charge for goodwill impairment.

	At and for three months ended June 30, 2006
	(dollars in thousands)
	Community Banking		Main Street		TransCommunity		Eliminations		Consolidated
Net interest income (expense)	$	2,212	$	(10)	$	115	$	1	$	2,318
Provision for loan losses		(92)		-		-		-		(92)
Noninterest income		288		687		112		(102)		985
Noninterest expense		(1,569)		(1,010)		(718)		116		(3,181)
Income (loss) from subsidiaries		-		-		506		(506)		-
Net income (loss) from continuing operations		839		(333)		15		(491)		30
Net loss from discontinued operations		-		-		-		-		-
Net income (loss)	$	839	$	(333)		15	$	(491)	$	30
Total Assets	$	187,498	$	355	$	30,531	$	(20,920)	$	197,464
	Three Months Ended June 30, 2005
	(As Restated - dollars in thousands)
	Community Banking		Main Street		TransCommunity		Eliminations		Consolidated
Net interest income	$	1,730	$	(10)	$	(28)	$	-	$	1,692
Provision for loan losses		(58)		(32)		0		-		(90)
Noninterest income		244		1,101		65		(102)		1,308
Noninterest expense		(1,621)		(1,037)		(895)		102		(3,451)
Income (loss) from from subsidiaries		-		-		317		(317)		-
Net income (loss) from continuing operations		295		22		(541)		(317)		(541)
Net loss from discontinued operations		-		-		(61)		-		(61)
Net Income (Loss)	$	295	$	22	$	(602)	$	(317)	$	(602)
Total Assets	$	166,480	$	1,430	$	16,236	$	(17,541)	$	166,605

Page 12

TRANSCOMMUNITY FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 6

Business Segments (Continued):

	At and for six months ended June 30, 2006
	(dollars in thousands)
	Community Banking		Main Street		TransCommunity		Eliminations		Consolidated
Net interest income (expense)	$	4,231	$	(19)	$	226	$	-	$	4,438
Provision for loan losses		(144)		-		-		-		(144)
Noninterest income		504		1,565		236		(203)		2,102
Noninterest expense		(3,076)		(2,038)		(1,608)		232		(6,490)
Income (loss) from subsidiaries		0		0		1,023		(1,023)		-
Net income (loss) from continuing operations		1,515		(492)		(123)		(994)		(94)
Net loss from discontinued operations		-		-		-		-		-
Net income (loss)	$	1,515	$	(492)		(123)	$	(994)	$	(94)
Total Assets	$	187,498	$	355	$	30,531	$	(20,920)	$	197,464
	Six Months Ended June 30, 2005
	(As Restated - dollars in thousands)
	Community Banking		Main Street		TransCommunity		Eliminations		Consolidated
Net interest income	$	3,287	$	(21)	$	(40)	$	-	$	3,226
Provision for loan losses		(107)		(47)		-		-		(154)
Noninterest income		464		2,087		149		(229)		2,471
Noninterest expense		(3,043)		(1,982)		(1,680)		229		(6,476)
Income (loss) from from subsidiaries		-		-		638		(638)		-
Net income (loss) from continuing operations		601		37		(933)		(638)		(933)
Net loss from discontinued operations		-		-		(142)		-		(142)
Net Income (Loss)	$	601	$	37	$	(1,075)	$	(638)	$	(1,075)
Total Assets	$	166,480	$	1,430	$	16,236	$	(17,541)	$	166,605

Page 13

NOTE 7

Capital:

TransCommunity’s consolidated regulatory capital levels are displayed in the following table:

	June 30, 2006		December 31, 2005
	June 30, 2007			December 31, 2006
	(in thousands)
Tier 1 Leverage Capital Ratio
Amount	$	30,~~288~~061	$	~~30,028~~$	30,457
Actual Ratio		1614.1874%		~~17.69%~~	15.86%
Minimum Capital Requirement		4.00%		~~4.00%~~	4.00%
Tier 1 Risk-Based Capital Ratio
Amount	$	30,~~288~~061	$	~~30,028~~$	30,457
Actual Ratio		1715.8826%		~~18.96%~~	17.16%
Minimum Capital Requirement		4.00%		~~4.00%~~	4.00%
Total Risk-Based Capital Ratio
Amount	$	32,~~099~~102	$	~~31,720~~$	32,522
Actual Ratio		1816.9530%		~~20.03%~~	18.32%
Minimum Capital Requirement		8.00%		~~8.00%~~	8.00%
Capital ratios:
Average equity to average assets		14.96%			15.79%
Leverage ratio		14.74%			15.86%
Tier 1 risk-based capital ratio		15.26%			17.16%
Total risk-based capital ratio		16.30%			18.32%

NOTE 8 9 Litigation:

~~Goodwill~~In the ordinary course of operations, TransCommunity and ~~Other~~its ~~Intangible~~subsidiaries ~~Assets~~may be parties to various legal proceedings. The following matters involve pending or potential claims:

~~During~~Minter ~~the~~Lawsuit. On ~~second~~November ~~quarter~~2, of 2006, ~~TransCommunity~~James ~~completed~~L. anMinter ~~impairment~~filed ~~test~~a oflawsuit ~~its~~against ~~goodwill in accordance with~~ the ~~specific~~Company ~~requirements of FASB Statement No. 142 “Goodwill~~ and ~~Other~~William ~~Intangible Assets”~~C. ~~This~~ ~~Statement~~Wiley, ~~addresses~~the ~~financial~~former ~~accounting~~Chief ~~and~~Executive ~~reporting~~Officer ~~for acquired goodwill~~ and ~~other~~Chairman ~~intangible~~of ~~assets~~the ~~and~~Board ~~supersedes~~of ~~APB~~Directors ~~Opinion~~of ~~No.~~the 17Company, ~~“Intangible~~in ~~Assets”.~~the ItCircuit ~~addresses~~Court ~~how~~of ~~intangible~~the ~~assets~~County ~~that are acquired individually or with a group~~ of ~~other~~Powhatan ~~assets should be accounted for~~ in ~~financial statements upon their acquisition~~Virginia. The ~~This~~suit ~~Statement~~arises ~~also~~out ~~addresses~~of ~~how~~the ~~goodwill~~Bank’s ~~and~~purchase ~~other~~of ~~intangible~~Main ~~assets~~Street ~~should~~Mortgage beand ~~accounted~~Investment ~~for~~Corporation ~~after they have been initially recognized~~ in ~~the~~early ~~financial statements~~2001. ~~Based~~Minter onalleges ~~second~~that ~~quarter~~in ~~personnel~~late ~~changes~~2000 ~~and~~Wiley awithheld ~~continued~~information ~~deterioration~~concerning of the ~~financial~~value ~~condition~~ of Main Street Mortgage, ~~the~~from ~~Company believed~~ the ~~$321~~Bank’s ~~thousand~~board of ~~goodwill~~directors ~~reported~~and asthat ~~other~~the ~~assets~~Bank ~~associated~~would ~~with~~not ~~the~~have ~~acquisition~~acquired of Main Street Mortgage ~~should~~if bethe ~~tested for impairment. The Company used a~~ valuation ~~approach~~had ~~which~~been ~~included~~provided ~~comparisons of historical forecasts~~ to ~~actual~~the ~~results~~Bank’s ~~and~~board. Minter’s ~~earnings~~suit ~~forecasts~~claims ~~for~~that the ~~next~~Company ~~year~~aided toand ~~determine~~abetted ifand ~~the~~conspired ~~fair~~with ~~value~~Wiley ofin ~~the~~his ~~subsidiary~~misrepresentation ~~exceeded~~of ~~the~~Main ~~book~~Street Mortgage’s value. ~~Because~~Minter’s ~~goodwill~~suit isalso ~~defined~~alleges asthat the ~~excess~~December of2005 ~~the~~separation ~~cost~~agreement ofbetween ~~an acquired entity over~~ the ~~fair~~Company ~~value of all identifiable tangible~~ and ~~intangible~~Wiley ~~assets~~improperly ~~acquired~~released ~~and~~claims the ~~liabilities assumed, the~~ Company ~~was~~had ~~required~~against toWiley ~~calculate~~arising ~~the~~out ~~fair value~~ of ~~such~~Wiley’s ~~assets~~alleged ~~and~~concealment ~~liabilities~~of ~~for~~the Main Street~~. Through~~ ~~this~~Mortgage ~~process,~~valuation ~~the~~from ~~Company concluded that~~ the ~~entire~~Bank’s ~~$321~~board ~~thousand~~in oflate ~~goodwill was impaired and this amount was charged to operating expenses during the second quarter of 2006~~2000.

~~NOTE 9~~ 12

Litigation:

On June 14, 2006, an individual and a company controlled by the individual (Dean H. Gould and Cal-Flo Investments, LLC) filed a lawsuit against Main Street Mortgage & Investment Corporation (“Main Street”), a wholly-owned subsidiary of Bank of Powhatan, and five other defendants that are not affiliated with Main Street in the General Court of Justice, Superior Court Division, in Wake County, North Carolina. The lawsuit arises from three properties on which Main Street originated mortgage loans. The loans at issue were made by third-party lenders, and neither the Company nor any of its subsidiary banks hold any of the loans for its own account. The plaintiffs allege that the defendants developed a fraudulent scheme to originate these mortgage loans through Main Street employing, with Main Street’s knowledge, inflated appraisals and other devices that resulted in damages to the plaintiffs in the aggregate amount of $100,000 to $150,000. The plaintiffs have requested both compensatory and punitive damages.

Main Street filed an answer to the lawsuit and denies any liability. There has been no further activity in the lawsuit from any other party, and Main Street has ceased its business operations and

Page 14

filed for dissolution under applicable Virginia law.

At the present time, the case is in the early stages, there has been no discovery, and accordingly, the Company can not conclude on the outcome or estimate any potential loss.

NOTE 10

Subsequent Events:

In July, 2006, the Federal Reserve Bank of Richmond notified the Board of Directors of the Company that the January 2006 memorandum of understanding disclosed in the Company’s Form 8-K filing dated February 6, 2006 has been terminated effective July 26, 2006.

In July 2006, Main Street entered into a line of credit arrangement to provide up to $500,000 of financing. A portion of the proceeds was used to pay off an existing $400,000 line with the Bank of Powhatan and the remainder will be used as working capital. The line of credit bears a rate of prime rate as published in the Wall Street Journal.

In November 2006, the Company’s Board of Directors approved the closing of Main Street. The Company does not expect to incur any material charges in connection with the closing of this business line.

On November 2, 2006, James L. Minter filed a lawsuit against the Company and William C. Wiley, the former Chief Executive Officer and Chairman of the Board of Directors of the Company, in the Circuit Court of the County of Powhatan in Virginia. The suit arises out of the Bank’s purchase of Main Street Mortgage and Investment Corporation in early 2001. Mr. Minter alleges that in late 2000 Wiley withheld information concerning the value of Main Street Mortgage from the Bank’s board of directors and that the Bank would not have acquired Main Street Mortgage if the valuation had been provided to the Bank’s board. Mr. Minter’s suit claims that the Company aided and abetted and conspired with Wiley in his misrepresentation of Main Street Mortgage’s value. Mr. Minter’s suit also alleges that the December, 2005 separation agreement between the Company and William Wiley improperly released claims the Company had against Wiley arising out of Wiley’s alleged concealment of the Main Street Mortgage valuation from the Bank’s board in late 2000.

Minter seeks unspecified rescissionary and compensatory damages, unspecified treble damages and punitive damages of $350,000 against each defendant, jointly and severally and with interest. Minter also seeks to recover his attorneys’ fees.

The Company believes that insofar as it concerns the Company, ~~Mr.~~ Minter’s suit is without merit.

The Company ~~has~~ moved for a dismissal; ~~has~~of the lawsuit, brought claims against ~~Mr.~~ Minter for breach of fiduciary duty related to his use of confidential Company information for personal gain; and ~~has~~ removed him from the board of the Bank of Powhatan. In response to the Company’s motion to dismiss the lawsuit, on August 8, 2007, the court dismissed the two counts that Minter had asserted against the Company. The court, however, permitted Minter to replead the count in which Minter alleged that the Company aided and abetted Wiley in his allegedly fraudulent conduct. The deadline for an amended complaint on that count is August 29, 2007.

Based on the facts presently known, the Company believes it has limited liability exposure arising from this lawsuit. WeHowever, ~~are~~since the case is in the early stages, the Company is unable to evaluate the likelihood of an unfavorable outcome ~~and~~or to estimate the amount or range of potential loss, if any, in this matter.

InNOTE ~~December~~10 Subsequent ~~2006, the Company opened Bank of Rockbridge, its fourth separately chartered bank.~~Events:

~~Page 15~~None.

~~TRANSCOMMUNITY FINANCIAL CORPORATION~~13

~~NOTES~~Item TO2. Management’s ~~CONSOLIDATED~~Discussion ~~FINANCIAL~~and ~~STATEMENTS~~Analysis ~~(Unaudited)~~of Financial Condition and Results of Operations

~~NOTE~~ The 11following discussion and analysis and the related financial data present a review of TransCommunity’s consolidated operating results for the three-month and six-month period ended June 30, 2007 and 2006, and consolidated financial condition at June 30, 2007 and December 31, 2006. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto contained in TransCommunity’s Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Commission on April 16, 2007, and the consolidated financial statements and notes in this Form 10-Q.

Correction of an error:

On August 11, 2006, the Company concluded that the previously issued financial statements contained in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2005 should not be relied upon because of errors in those statements. The Company discovered that it had incorrectly accounted for loans subject to certain loan participation agreements entered into with third-party financial institutions since the second quarter of 2004. During the second quarter of 2004, the Company implemented an automated loan documentation system which contained the option to include certain language that provided for termination of the participation agreement. This right to repurchase the participated balance allows the Company to retain a level of control over the loans sold to third parties. This termination clause allowed the originating institution to repurchase the loans sold to third parties and thus the loan transfers did not qualify for sale accounting treatment under FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of FASB Statement No. 125”. The Company had previously not reflected the participated balances of loans subject to these agreements on its balance sheet as required by FASB Statement No. 140.

A summary of the restatements of the accompanying financial statements is as follows:

	As previously reported		Correction		As amended
	(Dollars in thousands)
For the three-month period ended June 30, 2005:
Loans	$	110,339,525	$	9,657,706	$	119,997,231
Secured borrowings		-		9,657,706		9,657,706
Interest on loans, including fees	$	2,167,495	$	116,514	$	2,284,009
Interest on secured borrowings		-		116,514		116,514
For the six-month period ended June 30, 2005:
Loans	$	110,339,525	$	9,657,706	$	119,997,231
Secured borrowings		-		9,657,706		9,657,706
Interest on loans, including fees	$	4,143,962	$	219,023	$	4,362,985
Interest on secured borrowings		-		219,023		219,023

Page 16

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis and the related financial data present a review of TransCommunity’s consolidated operating results for the three-month and six-month periods ended June 30, 2006 and 2005 and consolidated financial condition as of June 30, 2006 and December 31, 2005. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto contained in TransCommunity’s Annual Report on Form 10-KSB/A for the year ended December 31, 2005 filed with the Commission on January 22, 2007.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Words and phrases such as: “will likely result,” “expect,” “will continue,” “anticipate,” “estimate,” “project,” “believe,” “intend,” “will,” “should,” “would,” “could,” “may,” “can,” “plan,” “target” and similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, discussions concerning:

Projections of revenues, expenses, losses, losses per share, net interest margins, asset growth, loan production, deposit growth, and other performance measures;

Expansion of operations, including de novo banks and branch openings, entrance into new markets, and development of products and services; and

Discussions on the outlook of the economy, competition, regulation, taxation, company strategies, subsidiaries, investment risk and policies.

Actual results or performance could differ from those implied or contemplated by forward-looking statements. Forward-looking statements are subject to certain risks and uncertainties, including, among others: general business, regulatory action or inaction, economic and market conditions, fiscal and monetary policies, war and terrorism, natural disasters, changes in interest rates, deposit flows, loan demand and real estate values; a deterioration in credit quality and/or a reduced demand for credit, competition with other providers of financial products and services; the issuance or redemption of additional Company equity or debt; volatility in the market price of the Company’s common stock; changes in accounting principles, policies or guidelines, changes in laws or regulation; reliance on other companies for products and services; operational or systems risks; and other economic, competitive, servicing capacity, governmental, technological factors affecting the Company’s operations, pricing, products and delivery of services. Information in this Quarterly Report on Form 10-Q is as of the dates, and for the periods, indicated. TransCommunity does not undertake, and specifically disclaims any obligation, to publicly update or revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, whether as the result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in or incorporated by reference into this report might not occur.

Significant Accounting Policies

TransCommunity’s financial position and results of operations are impacted by management’s application of accounting policies involving judgments made to arrive at the carrying value of certain assets. In implementing its policies, management must make estimates and assumptions about the effect of matters that are inherently less than certain. Actual results could differ significantly from these estimates which could materially affect the amounts of TransCommunity’s assets, liabilities, income and expenses. Critical accounting policies applied by TransCommunity include those that relate to the allowance for loan losses. For a more detailed discussion on these critical accounting policies, see “Significant Accounting Policies” on page F-8 of TransCommunity’s Annual Report on Form 10-K for the year ended December 31, 2006.

~~Page 17~~14

relate to the allowance for loan losses. For a more detailed discussion on these critical accounting policies, see “Critical Accounting Policies” on page F-8 of TransCommunity’s Annual Report on Form 10-KSB/A for the year ended December 31, 2005.

Overview

TransCommunity’s results of operations are dependent primarily on its net interest income, which is the difference between the interest earned on its assets, primarily its loan and securities portfolios, and its cost of funds, which consists of the interest paid on its deposits and borrowings. TransCommunity’s results of operations are also affected by its provision for loan losses as well as non-interest income and non-interest expenses. Non-interest expenses consist of employee compensation and benefits, occupancy and equipment, insurance, professional fees, telecommunications and data processing and other operating expenses.

In addition to the foregoing, results of TransCommunity’s operations, like those of other financial services companies, are affected by its asset and liability composition, as well as factors beyond its control, such as general economic conditions and the monetary and fiscal policies of the federal government. Lending activities are affected by the demand for commercial and retail financing and are thus influenced by interest rates and other factors affecting the availability of funds. Deposit flows and costs of funds are influenced by yields available on competing investments and by general market rates of interest.

In January 2007, the Company’s Board of Directors voted to consolidate the charters of its four subsidiary banks. This charter consolidation process was completed on June 29, 2007. Costs associated with the charter consolidation process negatively impacted the Company’s performance during both the first and second quarter of 2007.

In evaluating TransCommunity’s financial condition and operating performance, management focuses on the following:

Increasing loan originations

Increasing total and core deposit balances

Maintaining TransCommunity’s history of strong net interest margins

Maintaining high credit standards and low levels of non-performing assets

Maintaining an adequate loan loss reserve

Managing interest rate risk

Controlling expenses

Ensuring adequate funding for ongoing growth

Highlights of TransCommunity’s ~~performance~~three-month ~~for~~statement ~~the~~of ~~quarter~~operations ended June 30, ~~2006~~2007, as compared to the ~~same~~similar ~~period~~statement in ~~2005~~2006, and the statement of financial condition dated June 30, 2007, as compared to December 31, 2006 include the following:

Net income of $3094 thousand, an increase of $64 thousand over the 2nd quarter of 2006

~~Net~~Interest ~~interest~~ income ~~increased~~grew by $~~626~~775 thousand, or 3722.05%

~~Personnel~~Net ~~expense~~interest ~~from~~income ~~continuing~~increased ~~operations~~by ~~down~~ $~~315~~329 thousand, or 14.1%

Highlights of TransCommunity’s performance for the six-month period ended June 30, 2006 as compared to the same period in 2005 include:

~~Net~~Provisions for loan losses ofdecreased $9426 thousand, or 28.3%

~~Yield~~Assets ongrew ~~loans,~~$17.3 ~~including fees~~million, upor ~~97 basis points to~~ 8.67%, since December 31, 2006

~~Net~~Noninterest ~~interest~~expenses ~~income~~ increased by $~~1.2~~608 ~~million~~thousand, or ~~37.6~~28%

Highlights of TransCommunity’s six-month statement of operations ended June 30, 2007 as compared to the same period in 2006 include the following:

~~Net~~Yield ~~interest~~on ~~margin~~earnings upassets 62increased 85 basis points to 58.149%

~~Page 18~~·

Net interest margin increased 25 basis points to 5.34%

Provisions for loan losses increased $368 thousand, or 255%

Noninterest expenses increased $1.2 million, or 28%

Results of Operations

~~The~~For ~~Company~~the ~~reported~~second ~~its~~quarter ~~first~~ended ~~consolidated~~June ~~quarterly~~30, 2007, the Company reported profit asof $94 thousand. In 2006, net income for the ~~quarter~~same ~~ended~~period ~~June 30, 2006~~ was $30 thousand, anincluding ~~improvement~~losses ~~of 105%~~ from ~~net~~discontinued ~~losses~~operations of $~~602~~333 thousand. There were no losses from discontinued operations for the ~~same~~2nd ~~period~~quarter inof ~~2005~~2007. Net income per share ~~from continuing operations for the quarter~~, both basic and diluted, was $0.0102, orcomparing afavorably ~~104.2% improvement when compared~~ to ~~net losses per share of~~ $0.2401 over the same period in ~~2005~~2006.

~~Net~~For ~~losses from continuing operations for~~ the six-month period ended June 30, ~~2006 were $94 thousand~~2007, ~~an improvement of 89.9% from~~ net losses of $~~933~~606 thousand ~~for~~include ~~the same period in 2005. Net~~ losses ~~per share~~ from ~~continuing~~discontinued operations ~~for~~of ~~the six-month period ended June 30, 2006, both basic and diluted, was~~ $~~0.02,~~77 ~~or a 95~~thousand.1% These ~~improvement when compared to net~~ losses ~~per~~were ~~share~~concentrated ~~of $0.41 over the same period~~ in ~~2005. Loss on average equity from continuing operations for~~ the ~~six-month~~first ~~period~~quarter ~~ended~~of ~~June 30~~2007, ~~2006~~and ~~was~~are ~~0.31%. Loss~~directly onattributable ~~average assets from continuing operations for the six-month period ended June 30, 2006 was 0.05%. These ratios compare favorably~~ to ~~a loss on average equity and loss on average assets from continuing operations of 6.94% and 0.64%~~three, ~~respectively, for the six~~one-~~month~~time ~~period ended June 30, 2005.~~ events:

costs associated with our charter consolidation project;

fees charged in excess than those originally expected from our external auditors; and

an unusual addition to our allowance for loan losses associated with the dissolution of our mortgage banking affiliate.

Net Interest Income

For the ~~quarter~~three months ended June 30, ~~2006~~2007, net interest income totaled $2.37 million, a $~~626~~421 thousand, or 3718.01%, increase over TransCommunity’s performance for the same period during ~~2005~~2006. OnWhen acompared ~~linked~~with ~~quarter~~the ~~basis~~previous three month period ended March 31, 2007, net interest income isincreased up $~~198~~196 thousand, or 98.30% ~~from the three months ended March 31, 2006~~.

For the six~~-month~~ ~~period~~months ended June 30, ~~2006~~2007, net interest income totaled $45.41 million, a $~~1.2~~661 ~~million~~thousand, or 3714.68%, increase over ~~the~~TransCommunity’s ~~reported~~performance ~~results~~ for the same period induring ~~2005~~2006. Average earning assets for the six-month period ended June 30, ~~2006~~2007 grew 9.9%, to $~~175~~193.82 million compared to $~~145~~175.78 million during the same period in 2005. The growth in the earning asset base was complemented by a growth in the average yield on earning assets of 100 basis points. The net interest margin is the net interest income expressed as a percentage of average earnings assets. For the six-month period ended June 30, 2006~~, the net interest margin increased 62 basis points from the same period in 2005 to 5~~.~~09% from 4.47%.~~ The increase in net interest margin is attributable to benefits derived from an increase on yields of earning assets, while the cost of interest bearing liabilities only increased 75 basis points from 2.57% to 3.32%. Average loans outstanding increased 16.8% to $134.5 million coupled with a 12.7% increase in yield on average loans to 8.61% for the six-month period ended June 30, 2006, compared to a yield of 7.64% for the same period during 2005.

~~These~~The ~~favorable~~net ~~results~~interest ~~continue~~margin tois ~~demonstrate~~the ~~management’s ability to reprice earning assets faster than liabilities, benefiting TransCommunity’s~~ net interest ~~margin~~income inexpressed as a ~~rising~~percentage ~~interest~~of ~~rate~~average ~~environment~~earnings assets. ~~Management~~For ~~believes that~~ the ~~overall~~six ~~outlook~~month inperiod ~~its~~ended ~~net~~June ~~interest~~30, ~~income~~2007, isthe ~~positive.~~net ~~Management~~interest ~~expects~~margin ~~commercial~~increased ~~loans~~25 tobasis ~~continue~~points tofrom ~~grow because of~~ the ~~focus~~same ~~placed~~period onin ~~loan~~2006, ~~growth~~to ~~throughout~~5.34% ~~the~~from ~~Company~~5.09%. ~~Loan-related~~The ~~earning~~increase ~~assets~~in ~~tend~~net tointerest ~~have~~margin ais ~~higher~~attributable ~~spread~~to ~~than~~benefits ~~those~~derived ~~earned~~from inan ~~the~~increase ~~Company’s~~on ~~investment~~yields ~~portfolio. TransCommunity’s~~of ~~consolidated~~earning ~~net~~assets ~~interest~~of ~~margin~~85 ~~compares~~basis ~~favorably~~points ~~with~~to 8.49%, while the ~~experience~~cost of ~~many~~interest ~~other~~bearing ~~commercial~~liabilities ~~banks~~increased in70 ~~its~~basis ~~market~~points, ~~area~~from 3.32% to 4.02%.

~~The~~Average ~~following~~loans ~~table~~outstanding ~~details~~increased ~~the~~$28.8 ~~net~~million, ~~interest~~or ~~income~~21.4%, ~~calculations~~to $163.5 million coupled with a 6.2% increase in yield on average loans to 9.14% for the six- month ~~periods~~period ended June 30, ~~2006~~2007, ~~and~~compared ~~2005~~to a yield of 8.61% for the same period during 2006.

~~Page~~For 19the six month period ended June 30, 2007, loan income of $7.4 million increased approximately 28.9% from $5.7 million during the same period in 2006.

TRANSCOMMUNITY FINANCIAL CORPORATION
NET INTEREST MARGIN ANALYSIS
AVERAGE BALANCE SHEETS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
								2006						2005
						Average		Interest	Average			Average		Interest	Average
						Balance		Income/	Rates			Balance		Income/	Rates
						Sheet		Expense	Earned/Paid			Sheet		Expense	Earned/Paid
ASSETS:
	Loans, including fees (1)				$	134,548,916	$	5,745,534	8.61	%	$	115,160,912	$	4,362,985	7.64	%
	Federal funds sold					23,673,504		546,663	4.66			14,182,862		193,046	2.74
	Investments					17,616,045		372,892	4.27			16,307,730		240,977	2.98
	Total Earning Assets					175,838,465		6,665,089	7.64			145,651,504		4,797,008	6.64
	Allowance for loan losses					(1,719,199)						(1,479,901)
	Non-earning assets					13,049,191						11,116,741
	Total Assets				$	187,168,457					$	155,288,344
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
		Demand -
				Interest bearing	$	37,705,584	$	286,814	1.53	%	$	35,692,783	$	188,039	1.06	%
		Savings				10,084,040		77,910	1.56			8,847,916		49,452	1.13
		Time deposits				77,673,034		1,549,244	4.02			66,812,135		1,062,259	3.21
		Total deposits				125,462,658		1,913,968	3.08			111,352,834		1,299,750	2.35
		Other borrowed
				Funds (1)		9,784,200		313,547	6.46			11,896,980		271,521	4.60
		Total interest-bearing
				Liabilities		135,246,858		2,227,515	3.32			123,249,814		1,571,271	2.57
		Non-interest bearing
				Deposits		20,530,440						17,681,356
		Other liabilities				950,528						910,690
			Total liabilities			156,727,826						141,841,860
		Stockholders' equity				30,440,631						13,446,484
		Total liabilities and
				stockholders' equity	$	187,168,457					$	155,288,344
		Net interest earnings					$	4,437,574					$	3,225,737
		Interest spread							4.32	%					4.07	%
		Net interest margin							5.09	%					4.47	%

Management believes that the overall outlook in its net interest income is positive, although the Company expects to experience higher deposit costs in future periods. Management expects commercial loans to continue to grow because of the focus placed on loan growth throughout the Company. Loan-related earning assets tend to have a higher spread than those earned in the Company’s investment portfolio. TransCommunity’s consolidated net interest margin compares favorably with the experience of many other commercial banks in its market area.

~~(1)~~The following table details the net interest income calculations for the six-month periods ended June 30, 2007 and 2006.

Average balances for certain loans and secured borrowings totaling approximately $9.7 million and $8.6 million for the quarters ended June 30, 2006 and 2005, respectively, were calculated using month-end balances. All other reported average balances were calculated using daily balances.16

~~Page~~TRANSCOMMUNITY 20FINANCIAL CORPORATION

NET INTEREST MARGIN ANALYSIS

AVERAGE BALANCE SHEETS

FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006

(in thousand dollars)


				2007						2006
	Average		Interest		Average		Average		Interest		Average
	Balance		Income/		Rates		Balance		Income/		Rates
	Sheet		Expense		Earned/Paid		Sheet		Expense		Earned/Paid
ASSETS:
Loans, including fees (1)	$	163,333	$	7,407	9.14	%	$	134,549	$	5,745	8.61	%
Federal funds sold		13,014		333	5.16			23,674		547	4.66
Investments		16,829		393	4.71			17,616		373	4.27
Total earning assets		193,176		8,133	8.49			175,839		6,665	7.64
Allowance for loan losses		(2,007)						(1,719)
Non-earning assets		12,718						13,049
Total assets	$	203,887					$	187,169

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand -interest bearing	$	36,777	$	343	1.88	%	$	37,706	$	287	1.53	%
Savings		9,815		75	1.54			10,084		78	1.56
Time deposits		104,254		2,575	4.98			77,673		1,549	4.02
Total deposits		150,846		2,993	4.00			125,463		1,914	3.08
Other borrowed Funds		583		22	7.61			9,784		313	6.46
Total interest-bearing liabilities		151,429		3,015	4.02			135,247		2,227	3.32
Non-interest bearing deposits		21,087						20,530
Other liabilities		860						951
Total liabilities		173,376						156,728
Stockholders' equity		30,511						30,441
Total liabilities and stockholders' equity	$	203,887					$	187,169
Net interest earnings			$	5,118					$	4,438
Interest spread					4.47	%					4.32	%
Net interest margin					5.34	%					5.09	%

(1) Loan and fee income for 2006 includes amounts derived from our discontinued operations.

Provision for Loan Losses

For the six-month period ended June 30, ~~2006~~2007, the provision for loan losses was $~~144~~512 thousand, ~~down~~an ~~from~~increase of $~~154~~368 thousand ~~for~~over the same period in ~~2005~~2006. At June 30, ~~2006~~2007, nonperforming assets totaled $~~267~~543 thousand~~. Net~~, ~~charge-offs~~versus ~~for~~$267 ~~the~~thousand ~~year~~at ~~to date period ended~~ June 30, 2006 ~~amounted to $25 thousand~~. ~~Management believes the overall credit quality of the portfolio is sound based on the risk inherent in the loan portfolio.~~

~~The~~However, ~~allowance~~on ~~for~~a ~~loan~~year ~~losses~~to isdate ~~evaluated~~basis, atasset ~~least~~quality ~~quarterly~~improved bysince ~~management~~December ~~and~~31, is2006, ~~based~~when ~~upon~~nonperforming ~~management’s~~assets ~~periodic~~equaled ~~review~~$961 ofthousand. There ~~the~~is ~~probability~~no ofOther ~~collection,~~Real ~~industry~~Estate ~~historical~~Owned. Net ~~experience,~~charge-offs for the ~~nature~~year ~~and~~to ~~volume~~date ofperiod ~~the~~ended ~~loan~~June ~~portfolio~~30, ~~adverse~~2007 ~~situations~~amounted ~~that may affect a borrower’s ability~~ to ~~repay~~$536 thousand, ~~estimated~~versus ~~value~~$25 ofthousand ~~any~~for ~~underlying~~the ~~collateral~~same ~~and~~prior ~~prevailing economic conditions~~period. The Ancharge-offs ~~adequate~~and ~~allowance~~provisions iswere ~~calculated~~experienced ~~using~~during ~~appropriate risk factors depending on~~ the ~~type~~first ofquarter ~~borrower~~ and ~~whether the loan is secured or unsecured. Loans that~~ are ~~classified~~due ~~adversely~~primarily ~~are~~to ~~assigned~~loans arelated ~~risk~~to ~~percentage based on~~ the ~~classification~~discontinued tooperations ~~which~~of ~~they~~Main ~~are~~Street ~~assigned~~Mortgage. ~~Unclassified~~For ~~commercial~~the ~~loans~~three-month ~~secured~~period byended ~~real~~June ~~estate~~30, ~~and~~2007, ~~secured~~recoveries ~~consumer~~exceeded ~~loans~~charge-offs ~~are~~by ~~assigned an allowance of 1%. Unclassified other commercial loans and unsecured consumer loans are assigned an allowance of~~ $2%. Asthousand, ~~TransCommunity’s~~versus ~~subsidiary~~$37 ~~banks~~thousand ~~mature,~~during the ~~factors~~same ~~will~~period bein ~~adjusted to reflect actual experience~~2006. InManagement ~~addition,~~believes anthe ~~allowance~~overall ~~would~~credit bequality ~~established~~of ~~for~~the ~~problem~~portfolio ~~loans individually or by grouping. The allowance for loan loss evaluation~~ is ~~inherently~~sound ~~subjective~~based ason itthe ~~requires~~risk ~~estimates~~inherent ~~that~~in ~~are~~the ~~susceptible~~loan ~~to significant revision as more information becomes available~~portfolio.

The allowance for loan losses is evaluated continually by management and is based on management’s review of the probability of collection, industry historical experience, the nature and volume of the loan portfolio, credit concentrations, adverse conditions that may effect a borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. An adequate allowance relative to the quality of the loan portfolio sufficient to meet anticipated future loan losses is calculated using appropriate risk factors depending on the type of borrower and whether the loan is secured or unsecured. Loans that are classified adversely are assigned a loss reserve based on their risk rating and liquidation analysis based on present value of estimated cash flow and/or collateral. Unclassified loans are assigned a collective pool loan loss percentage based on historical peer group data in the absence of internal company loss history. As the Company’s loan portfolio seasons, the factors will be adjusted to reflect actual loss experience. The allowance for loan loss is subjective in the absence of actual, material loss data and, as such, requires estimates that are susceptible to periodic revision as conditions change.

Noninterest Income

~~Second~~During ~~Quarter~~the three months ended June 30, 2007, bank service charges and other fees of $283 thousand decreased slightly from $299 thousand reported for the same period in 2006. On a year to date basis, noninterest income totaled $563 thousand for the six months ended June 30, 2007, an increase of 5% from $536 thousand for the same period in 2006. The overall increase in noninterest income is attributable principally to higher customer service fees, particularly those associated with broker fees and commissions.

Noninterest income totaled $985 thousand, a decrease of 24.7% from $1.3 million for the same period in 2005. Fees from loan originations represented 69.0% of noninterest income earned during the quarter, with deposit-related service fees accounting for the balance. The overall decrease in noninterest income is attributable principally to lower volumes of loan originations at Main Street Mortgage. During the quarter, bank service charges and fees increased $99 thousand, or 47.8%, when compared to the same period in 2005.

Year to date

Noninterest income totaled $2.1 million, a decrease of 14.9% from $2.5 million for the same period in 2005. Bank service charges and fees grew $163 thousand, or 42.5%, which is primarily related to the growth of our deposit base. Mortgage related income is down $532 thousand, or 25.5%, when compared to the same period in 2005.

Noninterest Expense

~~Second~~Noninterest ~~Quarter~~expense for the six month period ended June 30, 2007 increased $1.2 million, or 28%, as compared with the same period in the prior year. Personnel costs, which represent 46.6% of total noninterest expense, were up $334 thousand or 14.4% when compared to the same period in 2006, due primarily to the opening of Bank of Rockbridge in December 2006. The remaining increase is attributable to costs associated with our charter consolidation efforts and higher than expected external auditor fees.

Noninterest expense decreased $270 thousand, or 7.8%, from the same period in the prior year. Personnel costs represent 53.6% of the total noninterest expenses and were down $315 thousand or 15.6% when compared to the same period in 2005. The Company continues to review staffing levels to achieve maximum efficiency and expects to continue realizing the benefits of restructuring during the remainder of 2006. Occupancy costs remained relatively consistent when compared to 2005 and equipment costs were down $15 thousand, or 8.2%.

Other operating expenses were up $61 thousand or 5.9% when compared to the same period in 2005. A major component of this expense category represented the $321 thousand impairment charge during the second quarter for the goodwill associated with the acquisition of Main Street Mortgage. Other operating expense also includes legal, accounting and data processing expenses which represented 34.6% of the total.

Year to date

Noninterest expense increased $14 thousand, or 0.2%, from the same period in 2005. Personnel costs were down $233 thousand, or 5.9% due primarily to lower mortgage commissions and

Page 21

the staffing reductions completed during the first quarter of 2006. The personnel reductions were offset by a $221 thousand, or 12.3%, increase in other operating expenses due to the $321 thousand charge for goodwill impairment associated with Main Street Mortgage.

Segment Information

~~Second~~For ~~Quarter~~the three months ended June 30, 2007, net losses from continuing operations for the Community Banking segment were $202 thousand, a decrease of approximately 124% from income of $839 thousand during the same period of 2006. Net interest income for the Community Banking segment increased by $444 thousand, or 20.1%, to $2.7 million in the first six months of 2007 as compared to the same period of 2006.

For the three months ended June 30, ~~2006~~2007, net ~~income~~losses from ~~continuing~~Holding ~~operations~~Company ~~for~~Operations ~~the~~were ~~Community Banking segment was~~ $~~839~~228 thousand, ana ~~increase~~decrease offrom the $~~544~~15 thousand, orincome ~~184.4%,~~recorded ~~from~~for ~~$295 thousand during~~ the same period ofone ~~2005~~year ago. ~~Net~~The ~~interest~~most ~~income~~notable ~~for~~decline ~~the~~in ~~Community~~periodic ~~Banking~~performance ~~segment~~is ~~increased~~related byto ~~$482~~income ~~thousand,~~derived orfrom ~~27.9%~~subsidiaries, towhich ~~$2.2~~now ~~million~~consists ~~for~~solely ~~the~~of ~~quarter as compared to~~ the ~~same~~Community ~~period~~Banking ~~of 2005~~segment.

For the ~~three~~six months ended June 30, ~~2006~~2007, net losses from continuing operations for the ~~mortgage~~Community ~~banking~~Banking segment ~~totaled~~were $~~333~~595 thousand, a decrease of $~~355~~2.1 ~~thousand~~million, ~~from~~or ~~net~~139%, from income of $221.5 ~~thousand~~million ~~for~~during the same period inof ~~2005~~2006. ~~Commissions~~Net ~~and~~interest ~~fees~~income ~~from~~for ~~loan originations in~~ the ~~mortgage~~Community ~~banking~~Banking segment ~~during~~increased ~~the quarter decreased~~ by $~~415~~896 thousand, or 3721.72%, ~~when~~to $5.1 million in the first six months of 2007 as compared to the same period inof ~~2005~~2006.

~~During~~For the ~~second~~six ~~quarter~~months ofended ~~2006~~June 30, ~~management~~2007, ~~began~~net ~~implementing~~losses afrom ~~plan~~Holding toCompany ~~downsize~~Operations ~~Main~~were ~~Street Mortgage and focus on the profitability of each office of this subsidiary~~$1. ~~The~~4 ~~plan called for a restructured management team and a revised commission schedule. As a result of the changes in operations~~million, ~~management~~an ~~believed~~increase ~~certain~~over ~~events warranted~~ the ~~testing of the~~ $~~321~~123 thousand inloss ~~goodwill~~recorded ~~reported~~for on the ~~balance~~same ~~sheet~~period ~~associated~~one ~~with~~year ~~the acquisition of this operating segment~~ago. ~~Management~~Most ~~concluded~~of the ~~entire~~difference ~~amount~~is ofattributable ~~goodwill~~to ~~was~~the inaforementioned ~~fact~~banking ~~impaired~~sector ~~and~~performance ~~recorded~~coupled ~~the~~with ~~expense~~charter ~~during~~consolidations ~~the second quarter of 2006~~costs.

~~Year~~The toCompany ~~date~~ had two additional segments in 2006 that were discontinued by year end.

For the six months ended June 30, 2006, net income from continuing operations for the Community Banking segment was $1.5 million, an increase of $914 thousand, or 152.1%, from $601 thousand during the same period of 2005. Net interest income for the Community Banking segment increased by $944 thousand, or 28.7%, to $4.2 million in the first six months of 2006 as compared to the same period of 2005.

For the six months ended June 30, 2006, net losses for the mortgage banking segment totaled $492 thousand, a decrease of $529 thousand from net income of $37 thousand for the same period in 2005. Commissions and fees from loan originations in the mortgage banking segment decreased by $532 thousand, or 25.5%, when compared to the same period in 2005.

Financial Condition

AtOn June 30, ~~2006~~2007, TransCommunity had total assets of $~~197~~214.47 million, up 38.62% from $~~190~~198.64 million at December 31, ~~2005~~2006. AtOn June 30, ~~2006~~2007, loans totaled $~~143~~175.01 million, an increase of $723.97 million since December 31, ~~2005~~2006.

Loans totaled $143.0 million and $120.0 million at June 30, 2006 and 2005, respectively. This represents growth of $23.0 million, or a 19.2% increase, year over year. Despite increased competition, the Company’s banks continue to experience strong loan demand. However, TransCommunity remains focused on maintaining its pricing discipline and strong asset quality, and adhering to its conservative underwriting standards. 18

~~During~~Loans ~~the~~totaled ~~first~~$175.1 ~~six~~million ~~months~~and of$143 ~~2006,~~million ~~the~~at ~~Company’s~~June ~~cost~~30, of2007 ~~deposits~~and ~~increased~~2006, ~~from 2~~respectively.~~35%~~ ~~during~~This ~~the~~represents ~~first~~growth ~~six months~~ of ~~2005 to 3.08%. Average interest-bearing deposits increased~~ $1432.1 million, ~~from~~or ~~$111.4~~an ~~million~~increase ~~during the first six months~~ of ~~2005 to $125~~22.54%. Despite ~~million~~increased ~~during~~competition, the ~~same~~Company’s ~~period~~banks incontinued ~~2006. Total~~to ~~deposits~~experience ~~increased~~strong ~~$8.6~~loan ~~million~~demand, orparticularly ~~5.9%,~~with toconstruction-related ~~$155~~loans.~~2 million at June 30~~ However, ~~2006~~TransCommunity ~~from~~remains ~~$146.6~~focused ~~million~~on atmaintaining ~~December~~its ~~31,~~pricing ~~2005. Noninterest-bearing~~discipline ~~deposits~~and ~~increased~~strong ~~$5.6~~asset ~~million~~quality, orand ~~32.6%~~adhering ~~from~~to ~~the~~its ~~amount~~conservative atunderwriting ~~December 31, 2005~~standards. ~~Management~~The ~~views~~amounts ~~these~~reported ~~deposits~~for asJune a2006 ~~key~~included ~~source~~$9.7 million of ~~funding~~participated ~~the loan growth~~balances.

~~Page~~ During 22the first six months of 2007, the Company’s average cost of interest-bearing deposits increased to 4.00%, up from 3.08% during the first six months of 2006. Average interest-bearing deposits increased $25.3 million, from $125.5 million during the first six months of 2006 to $150.8 million during the same period in 2007. Total deposits increased $18.8 million, or 11.4%, to $183.8 million at June 30, 2007 from $165.0 million at December 31, 2006. Noninterest-bearing deposits increased $2.2 million, or 10.7% from the amount at December 31, 2006. Management views these deposits as a key source for funding the loan growth. As traditional deposits become more difficult to obtain, alternative funding sources will likely result in relatively higher costing funding sources.

~~Secured~~At ~~borrowings~~June ~~totaled~~30, $92007, the Company’s capital position remained strong with an average equity-to-average assets ratio of 14.796%. TransCommunity ~~million~~had ata leverage ratio of 14.74%, a Tier 1 risk-based capital ratio of 15.26% and a total risk-based capital ratio of 16.30%. At June 30, ~~2006~~2007, ~~down~~the ~~$2.8~~book ~~million~~value ~~from~~of ~~$12.5~~the ~~million~~Company’s atcommon ~~December~~stock ~~31,~~was ~~2005~~$6. 55 per share.

The Company’s capital position remains strong with an average equity-to-average assets ratio of 16.26%. At June 30, 2006, TransCommunity had a leverage ratio of 16.18%, a Tier 1 risk-based capital ratio of 17.88% and a total risk-based capital ratio of 18.95%. At June 30, 2006, the book value of the Company’s common stock was $6.61 per share.

Income Taxes

No income tax ~~benefit~~provision has been recorded since, at this time, there is insufficient evidence to conclude that TransCommunity will produce taxable income in the future which ~~can~~cannot be offset by loss carryforwards from the current and prior periods. However, the Company may owe income taxes in the future, including those as determined by the alternate minimum tax (AMT) system. Income taxes for the year ended December 31, 2006, equaled $15 thousand using AMT calculations, which is available as a credit to reduce the regular tax liability in future years.

Loans

Total loans increased $723.97 million during the ~~first~~ six months of ~~2006~~2007 to $~~143~~175.01 million.

Loans by type are shown in the following schedule:

			June 30, 2006			December 31, 2005
	June 30,			December 31,
Real estate:
(dollars in thousands)	2007			2006
	Construction		$	16,919,986		$	16,040,907
Real estate:
	Residential			26,047,757			25,146,542
Construction	$	35,953		$	21,348
	Commercial			66,244,116			65,469,590
Residential		32,013			29,007
Commercial, industrial and agricultural				25,450,486			20,205,294
Commercial		62,947			60,571
Consumer and installment				8,171,769			7,595,098
Commercial, industrial and agricultural		34,906			31,284
All other				142,850			631,171
Consumer and installment		8,798			8,725
Total Loans			$	142,976,964		$	135,088,602
All other		446			464
Total loans	$	175,063		$	151,399

Allocation of the Allowance for Loan Losses

The allowance for loan losses consists of an allocated component and an unallocated component. The allocated component of the allowance for loan losses reflects expected losses resulting from analyses developed through specific credit allocations for individual loans. The unallocated portion of the allowance for loan losses reflects management's estimate of probable inherent but ~~undetected~~not specifically identified losses within the portfolio. The Company’s ~~allowances~~allocations for the allowance for loan losses were as follows:

~~Page 23~~19

				June 30, 2006				December 31, 2005
	June 30, 2007				December 31, 2006
				Allowance	Percent			Allowance	Percent
(dollars in thousands)	Allowance			Percent	Allowance			Percent
Real estate:
Construction	~~Construction~~$	419	$	~~217,283~~21%	~~12%~~$	291	$	~~270,744~~14%	~~16%~~
Residential	~~Residential~~	373		~~344,031~~19%	~~19%~~	396		~~321,509~~19%	~~19%~~
Commercial	~~Commercial~~	734		~~869,132~~34%	~~48%~~	826		~~727,626~~40%	~~43%~~
Commercial, industrial and agricultural		407		~~271,604~~20%	~~15%~~	427		~~253,823~~21%	~~15%~~
Consumer and installment		103		~~90,535~~5%	5%	119		~~101,529~~6%	6%
All other		5		~~18,107~~1%	1%	6		~~16,922~~0%	1%
Total Allowance for loan losses			$	1,810,691	100%		$	1,692,153	100%
Total	$	2,041		100%	$	2,065		100%

Nonaccrual, Past Due and Restructured Loans

At June 30, ~~2006~~2007, TransCommunity had $~~267~~543 thousand in loans classified as non-accrual or past due more than 90 days. At December 31, ~~2005~~2006, TransCommunity had $~~165~~961 thousand in loans classified as non-accrual or past due more than 90 days. Loans are placed in a non-accrual status when, in the opinion of management, the accrued interest income will not be collected.

Secured Borrowings

TransCommunity had recorded secured borrowings in past financial statements due to the prior accounting treatment on certain loan participation agreements entered into with third-party financial institutions since the second quarter of 2004. As described above and in Item 3 below, the Company discovered that it had incorrectly accounted for loans subject to these agreements in August 2006. Due to amendments to these agreements so that they could be properly reported under applicable accounting standards, the Company has eliminated the reporting of secured borrowings.

Liquidity and Interest Sensitivity

At June 30, ~~2006~~2007, TransCommunity had liquid assets of ~~approximately~~ $2321.61 million in the form of cash, federal funds sold and available-for-sale investments. Management ~~believed~~believes that liquid assets were adequate at June 30, ~~2006~~2007 to meet its customers’ deposit and credit needs. Management anticipates that additional liquidity will be provided by the growth in deposit accounts and loan repayments at ~~each~~TransCommunity ~~of its subsidiary banks~~Bank. TransCommunity’s ~~bank subsidiaries,~~ Bank ~~of Powhatan, Bank of Goochland and Bank of Louisa,~~ also ~~have~~has the ability to purchase overnight federal funds from a correspondent bank and borrow from the Federal Reserve Bank, if necessary.

~~Other~~Management ~~than as stated, management~~ is not aware of any trends, events or uncertainties that are reasonably likely to have a material impact on TransCommunity's short-term or long-term liquidity.

At June 30, ~~2006~~2007, TransCommunity had a positive cumulative Gap Rate Sensitivity Ratio of 168.0633% 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 financial services company.

~~Page~~TransCommunity's 24interest sensitivity analysis is shown on the following schedule:

~~TransCommunity's interest sensitivity analysis is shown below:~~20

TRANSCOMMUNITY FINANCIAL CORPORATION
INTEREST SENSITIVITY ANALYSIS
June 30, 2006
			(Dollars in thousands)
			1 - 365		1 to 5		Over 5
			Days		Years		Years		Total
Uses of Funds:
Loans:
Real estate
	Construction	$	15,620	$	1,300	$	-	$	16,920
	Residential		17,308		6,458		2,282		26,048
	Commercial		46,006		17,728		2,510		66,244
Commercial, industrial and agricultural			16,284		8,916		250		25,450
Consumer and installment			4,892		3,228		52		8,172
All other			143		-		-		143
Total Loans			100,253		37,630		5,094		142,977
Federal funds sold			11,055		-		-		11,055
Investment securities held to maturity, at cost			17,492		5,400		1,000		23,892
Investment securities available for sale, at fair value			6,838		762		-		7,600
Total		$	135,638	$	43,792	$	6,094	$	185,524
Sources of Funds:
Demand Deposits -
Interest bearing		$	41,151	$	-	$	-	$	41,151
Savings accounts			9,636		-		-		9,636
Time Deposits > $100,000			19,284		14,203		-		33,487
Time Deposits < $100,000			24,791		22,871		370		48,032
Total interest-bearing deposits			94,862		37,074		370		132,306
Secured borrowings			9,735		-		-		9,735
Federal funds purchased			1,255		-		-		1,255
Total		$	105,852	$	37,074	$	370	$	143,296
Discrete Gap		$	29,786	$	6,718	$	5,724	$	42,228
Cumulative Gap		$	29,786	$	36,504	$	42,228
Ratio of Cumulative Gap
to Total Earning Assets			16.06%		19.68%		22.76%

TRANSCOMMUNITY FINANCIAL CORPORATION

~~Page~~INTEREST 25SENSITIVITY ANALYSIS

JUNE 30, 2007

(dollars in thousands)



	1 - 365		1 to 5		Over 5
	Days		Years		Years		Total
Uses of Funds:
Loans:
Real estate
Construction	$	34,579	$	1,209	$	165	$	35,953
Residential		19,743		10,050		2,220		32,013
Commercial		31,760		29,802		1,385		62,947
Commercial, industrial and agricultural		18,893		15,427		586		34,906
Consumer and installment		4,742		3,843		213		8,798
All other		395		51		-		446
Total Loans		110,112		60,382		4,569		175,063
Federal funds sold		7,417		-		-		7,417
Investment securities held to maturity, at cost		6,199		4,200		1,000		11,399
Investment securities available for sale, at fair value		4,493		2,775		997		8,265
Total	$	128,221	$	67,357	$	6,566	$	202,144
Sources of Funds:
Demand Deposits -
Interest bearing	$	37,313	$	-	$	-	$	37,313
Savings accounts		9,892		-		-		9,892
Time Deposits > $100,000		27,884		22,559		-		50,443
Time Deposits < $100,000		36,301		27,238		7		63,546
Total interest-bearing deposits		111,390		49,797		7		161,194
Federal funds purchased		-		-		-		-
Borrowings		-		-		-		-
Total	$	111,390	$	49,797	$	7	$	161,194
Discrete Gap	$	16,831	$	17,560	$	6,559	$	40,950
Cumulative Gap	$	16,831	$	34,391	$	40,950
Ratio of Cumulative Gap to Total Earning Assets		8.33%		17.01%		20.26%

Contractual Obligations

TransCommunity has entered into certain contractual obligations to make future payments under contracts. The following table summarizes TransCommunity’s contractual obligations as of December 31, ~~2005~~2006:


	Payments due by period
	Total		Less than One Year		1-3 Years		3-5 Years		More than 5 Years
Contractual Obligations:
Operating lease obligations	$	3,635,231	$	484,415	$	956,126	$	954,920	$	1,239,770
Data processing services		1,462,989		531,996		930,993		-		-
Total	$	5,098,220	$	1,016,411	$	1,887,119	$	954,920	$	1,239,770

~~As of June 30, 2006, there have been no material changes to the contractual obligations listed above.~~21

As of June 30, 2007, there have been no material changes to the contractual obligations listed above.

Future Prospects

~~TransCommunity~~The Company’s ~~strategy~~loss isfor tothe ~~grow~~first ~~principally~~quarter ~~through~~resulted from the ~~establishment~~confluence of deseveral ~~novo~~one-time ~~banks~~events inwhich ~~relatively~~are ~~under-banked~~not ~~communities~~likely ~~experiencing~~to ~~faster-than-average growth~~recur. ~~Newly-chartered~~ In ~~banking~~spite ~~institutions~~of ~~normally~~the ~~experience~~continuing ~~losses~~costs ~~during~~associated ~~their~~with ~~early~~our ~~years~~charter consolidation, the Company managed to produce an operating profit in each month of ~~operation,~~the assecond itquarter. The ~~takes~~charter ~~time~~consolidation toprocess ~~build~~is anow ~~loan~~behind ~~portfolio~~us, ~~generating~~however, ~~sufficient~~and ~~interest~~will ~~income~~result toin ~~offset~~reduced operating costs as we move through the remaining months of 2007.

~~Management~~Our ~~anticipates~~new, ~~that~~consolidated ~~Bank~~bank, ~~of Powhatan~~ and ~~Bank~~each of ~~Goochland~~its ~~will~~operating ~~experience~~divisions ~~continued~~is ~~growth~~performing ~~during~~well, ~~2006. Bank~~producing ofnet ~~Powhatan~~interest ~~and~~margins ~~Bank~~that ofcompare ~~Goochland~~favorably ~~have~~with ~~recouped~~the ~~their~~experience ~~original~~of ~~capital~~our ~~and~~competitors. Loan ~~are~~demand in aeach ~~position~~of toour ~~pay~~markets ~~dividends~~remains tobrisk, ~~TransCommunity~~and our regulators, ~~when~~our outside loan review firm, and ifour ~~determined~~own ~~appropriate~~internal byloan review process all confirm that the ~~Company~~quality of our loan portfolio remains strong.

~~TransCommunity’s~~The ~~newest~~Company ~~bank~~does ~~subsidiary,~~business ~~Bank~~in some of ~~Louisa,~~the asbest ~~well~~markets asin ~~future~~the decountry. Each ~~novo~~of ~~banks~~those ~~such~~markets asis ~~the~~led ~~proposed~~by ~~Bank~~an ofexperienced ~~Rockbridge,~~banker ~~will~~with ~~initially~~significant ~~experience~~knowledge ~~operating~~of ~~losses as they establish~~ their ~~customer~~local ~~base,~~market. With ~~but~~operating ~~TransCommunity~~costs ~~anticipates~~expected ~~that~~to ~~each~~decline, dethe ~~novo~~Company ~~affiliate~~is ~~will~~poised ~~reach~~for ~~profitability~~strong asgrowth itin ~~executes~~the ~~TransCommunity’s~~months ~~community~~ahead. Management ~~banking~~continues ~~strategy~~to ~~and~~seek ~~takes~~successful ~~advantage~~commercial oflending ~~the~~officers ~~operational~~in ~~cost~~its ~~savings~~market ~~afforded~~area byto ~~using~~enhance ~~TransCommunity’s~~loan ~~common~~growth ~~operating~~and ~~platform~~resulting ofinterest ~~shared~~and ~~services~~fee income.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

~~Page~~Item 264T. Controls and Procedures

Item 4.

Controls and Procedures

Disclosure Controls and Procedures

The Company is required to maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as this periodic report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to its management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, the Company recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and ~~principal~~Chief ~~financial~~Financial ~~officer~~Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, ~~2006~~2007. Based upon that evaluation, our Chief Executive Officer and ~~principal~~Chief ~~financial~~Financial ~~officer~~Officer determined that, as a result of the material weakness described below, our disclosure controls and procedures were not effective.

In light of the material weakness described below, we performed additional analysis and other post-closing procedures to ensure our consolidated financial statements are prepared in accordance with generally accepted accounting principles.

Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) for the Company. This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

As more fully described in Note 25 of the Notes to Consolidated Financial Statements in our 2005 Form 10KSB/A, we discovered accounting errors in our previously reported financial results for 2005 and concluded on August 10, 2006 that previously issued financial statements would need to be restated due to the determination that there was a material weakness in our internal control over financial reporting. A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As of June 2006, we identified the following material weakness: 22

·As we have previously reported, we have identified both a material weakness and a significant deficiency in our internal control over financial reporting. The material weakness relates to our accounting and documentation for loans participated to third parties, and the significant deficiency relates to our accounting and record generation and maintenance for loan origination costs and for amortizing fees. Additional information with respect to these matters was included in our Quarterly Report on Form 10-Q for the period ended March 31, 2007.

The Company’s methods of accounting and documentation for loans participated to third-parties failed certain tests to qualify for sale accounting treatment under FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of FASB Statement No. 125”. Specifically, the Company discovered that it had incorrectly accounted for loans subject to certain loan participation agreements entered into with third-party financial institutions from the second quarter of 2004. During the second quarter of 2004, the Company implemented an automated loan documentation system which contained the option to include certain language that provided for termination of the participation agreement. This right to repurchase the participated balance allows the Company to retain a level of control over the loans sold to third parties. This termination clause allowed the originating institution to repurchase the loans sold to third parties, which failed certain tests to qualify for sale

Page 27

accounting treatment under FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of FASB Statement No. 125”. The Company had previously not reflected the participated balances of loans subject to these agreements on its balance sheet, which amounted to $9.7 million and $12.5 million at June 30, 2006 and December 31, 2005, respectively.

In September 2006, the Company amended the loan participation agreements to eliminate the right to repurchase the participated balance and adopted accounting controls to report the loans at issue properly under FASB Statement No. 140 in the future. In addition, during 2006, the Company recruited personnel to our organization and promoted others who have expertise in financial controls and reporting, including a new chief financial officer and a corporate controller, made other changes in accounting personnel, and retained outside experts to improve the overall quality and level of experience of our organization.

In connection with the restatement identified above, we also identified a significant deficiency in internal control over financial reporting. A significant deficiency is a control deficiency, or a combination of internal control deficiencies, that adversely affects a company's ability to initiate, authorize, record, process or report external financial data reliably in accordance with generally accepted accounting principles. The significant deficiency in internal control over financial reporting is as follows:

The Company’s methods of accounting and record generation and maintenance for loan origination costs and for amortizing fees are inadequate. In misapplying Statement of Financial Accounting Standards No. 91, “Accounting for Non-Refundable Fees and Costs Associated with Originating or Acquiring Loans and Indirect Costs of Leases” (FAS 91), the Company has applied an incorrect income recognition method.

The significant deficiency that we have identified does not have a material impact on the Company’s financial data and other financial results for any of the years presented in this Form 10-Q.

We have adopted and implemented measures in connection with our ongoing efforts to improve our internal control processes, some of which have been enhanced further or implemented in connection with the restatement process. These measures include the following:

We have reviewed and modified certain loan operating policies to provide guidance on daily operations.

We have provided additional training to loan personnel.

Additionally, we are considering centralizing certain operational areas to provide a clearer segregation of responsibilities in connection with origination and monitoring activities. The Company has identified a consultant to help the Company analyze its alternatives and implement any recommended process improvements. The Company expects to receive the consultant’s recommendations by the end of January 2007.·

We hired a new chief credit officer and centralized the credit administration function.

Additionally, on June 29, 2007, the Company consolidated its four bank charters and centralized certain operational areas to provide a clearer segregation of responsibilities in connection with origination and monitoring activities. Centralizing many of the operational functions will help ensure a stronger environment over internal controls.

As a part of the Company’s preparation for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, the Company will continue to evaluate the effectiveness of its internal controls and procedures on an ongoing basis and will take further action as appropriate. Section 404 will require the Company’s management to report on the effectiveness of the Company’s internal control structure and procedures for financial reporting as of December 31, 2007. Future remedial measures that we are considering include organizational changes to improve supervision and increased training for operations and accounting personnel. We will continue to develop new policies and procedures and educate and train our employees on our existing policies and procedures in our effort to constantly improve our internal controls and control environment.

~~Page~~We 28are taking all of these steps in connection with the consolidation of our banks and expect to eliminate the material weakness and significant deficiency when the process is complete.

Other than as described above, there were no changes in the Company’s internal control over financial reporting in the quarter ended June 30, ~~2006~~2007 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~Part II~~23

Part II Other Information

Item 1. Legal Proceedings

~~Legal~~In ~~Proceedings~~the ordinary course of operations, TransCommunity and its subsidiary bank expect to be parties to various legal proceedings. At present, there are no pending or threatened proceedings against TransCommunity or its subsidiary which, if determined adversely, would have a material effect on the business, results of operations, or financial position of TransCommunity or its subsidiary.

InThe ~~the~~Company’s ~~ordinary~~Annual ~~course~~Report ofon ~~operations,~~Form ~~TransCommunity~~10-K ~~and~~for ~~its~~the ~~subsidiary~~year ~~banks~~ended ~~expect~~December to31, be2006 ~~parties~~included todisclosure ~~various~~on ~~legal~~pending ~~proceedings~~litigation. At(See ~~present,~~also ~~there~~Note ~~are~~9 noabove ~~pending~~for orinformation ~~threatened~~on ~~proceedings~~this ~~against~~pending ~~TransCommunity~~litigation.) There orhave ~~any~~been ofno ~~the~~developments ~~Banks~~that ~~which, if determined adversely,~~ would ~~have~~change athat ~~material effect on the business, results of operations, or financial position of TransCommunity or any of the Banks~~disclosure.

~~The~~Item ~~following~~1A. Risk ~~paragraphs summarize other legal proceedings to which the Company or any of its affiliates are a party:~~Factors

OnThere ~~June~~have ~~14,~~been ~~2006,~~no anmaterial ~~individual~~changes and a company controlled by the individual (Dean H. Gould and Cal-Flo Investments, LLC) filed a lawsuit against Main Street Mortgage & Investment Corporation (“Main Street”), a wholly-owned subsidiary of Bank of Powhatan, and five other defendants that are not affiliated with Main Street in the ~~General~~risk ~~Court~~factors ofdisclosed ~~Justice, Superior Court Division,~~ in ~~Wake County, North Carolina. The lawsuit arises from three properties on which Main Street originated mortgage loans. The loans at issue were made by third-party lenders, and neither~~ the Company nor any of its subsidiary banks hold any of the loans for its own account. The plaintiffs allege that the defendants developed a fraudulent scheme to originate these mortgage loans through Main Street employing, with Main Street’s ~~knowledge,~~Annual ~~inflated~~Report ~~appraisals~~on ~~and~~Form ~~other~~10-K ~~devices~~for ~~that resulted in damages to~~ the ~~plaintiffs~~year inended ~~the~~December ~~aggregate amount of $100~~31,~~000~~ ~~to $150,000~~2006. ~~The plaintiffs have requested both compensatory and punitive damages.~~

~~Main~~Item ~~Street filed an answer to the lawsuit and denies any liability~~2. ~~There~~ Unregistered ~~has~~Sales ~~been~~of noEquity ~~further~~Securities ~~activity in the lawsuit from any other party,~~ and ~~Main~~Use ~~Street~~of ~~has ceased its business operations and filed for dissolution under applicable Virginia law.~~Proceeds

~~At the present time, the case is in the early stages, there has been no discovery, and accordingly, the Company can not conclude on the outcome or estimate any potential loss~~None.

OnItem ~~November 2, 2006, James L~~3. Defaults ~~Minter~~Upon ~~filed~~Senior a lawsuit against the Company and William C. Wiley, the former Chief Executive Officer and Chairman of the Board of Directors of the Company, in the Circuit Court of the County of Powhatan in Virginia. Mr. Minter was a director of Bank of Powhatan, a subsidiary of the Company (the “Bank”) until January 12, 2007, when he was removed by the Company. He was a former director of the Company until his resignation on March 29, 2006. Mr. Wiley resigned as the Company’s Chief Executive Officer and from its board of directors in December 2005. Securities

~~The suit arises out of the Bank’s purchase of Main Street Mortgage and Investment Corporation in early 2001~~None. Mr. Minter alleges that in late 2000 Wiley withheld information concerning the value of Main Street Mortgage from the Bank’s board of directors and that the Bank would not have acquired Main Street Mortgage if the valuation had been provided to the Bank’s board. The Company acquired the stock of the Bank in August, 2001, several months after the Bank acquired Main Street Mortgage. Mr. Minter’s suit claims that the Company aided and abetted and conspired with Wiley in his misrepresentation of Main Street Mortgage’s value.

InItem ~~2004~~4. Submission ~~a committee~~ of ~~the~~Matters Company’s board of directors investigated the Bank’s acquisition of Main Street Mortgage and concluded that Wiley had not defrauded the Bank’s board and that any further action would not be in the Company’s best interests. The committee reported its findings and recommendations to ~~the~~a ~~boards~~Vote of ~~the~~Security ~~Company and the Bank.~~Holders

~~Page~~On May 29, 2007, the Company held its annual meeting of shareholders. During the meeting, shareholders approved the following proposals with the following voting results:

Mr1. Minter’s suit also alleges that the December, 2005 separation agreement between the Company and William Wiley improperly released claims the Company had against Wiley arising out of Wiley’s alleged concealment of the Main Street Mortgage valuation from the Bank’s board in late 2000. The Company believes that it never had a claim against Wiley in connection with the Bank’s acquisition of Main Street Mortgage and that the separation agreement did not release any claim the Bank may have had against Wiley.

~~Against~~Election ~~Wiley,~~of ~~Minter~~three ~~alleges~~Class ~~that~~III ~~(a)~~directors ~~Wiley conspired~~ to ~~and~~serve ~~engaged~~until inthe a2010 ~~fraud~~Annual onMeeting ~~Minter~~of ~~by concealing and misrepresenting valuations regarding Main Street~~Shareholders, ~~(b)~~one ~~Wiley~~Class ~~fraudulently~~II ~~induced~~director ~~Minter~~ to ~~invest~~serve inuntil ~~an entity unaffiliated with~~ the ~~Company~~2009 ~~and~~Annual ~~has~~Meeting ~~engaged in conversion~~ of ~~certain of Minter’s funds~~Shareholders, and ~~(c)~~one ~~Wiley~~Class ~~breached~~I ~~his~~director ~~fiduciary duty~~ to ~~Minter,~~serve ~~the~~until ~~Bank and~~ the ~~Company~~2008 byAnnual ~~concealing~~Meeting ~~and~~of ~~misrepresenting valuations regarding Main Street~~Shareholders. ~~In the same proceeding, Minter has sued Wiley over a loss on an investment Minter made in 1999 in a business Wiley owned or controlled. The Company has had no interest in that business.~~


	Number of Shares
	For	Withheld
Class III Nominees
Bruce B. Nolte	2,422,055	582,644
John W. Pretlow, Jr.	2,907,780	96,919
John J. Sponski	2,907,030	97,669
Class II Nominee
Christopher G. Miller	2,906,130	98,569
Class I Nominee
Richard W. Bozard	2,905,730	98,969

~~The Company believes that insofar as it concerns the Company, Mr~~2. ~~Minter’s suit is without merit.~~

~~The~~Approval ~~Company has moved for a dismissal; has brought claims against Mr. Minter for breach~~ of ~~fiduciary~~an ~~duty~~amendment ~~related~~ to ~~his~~our ~~use~~Articles of ~~confidential~~Incorporation ~~Company~~to ~~information~~eliminate ~~for~~the ~~personal~~current ~~gain;~~class ~~and~~structure ~~has~~of ~~removed~~our ~~him from the~~ board: ~~of the Bank.~~

Item 1A.

~~Risk Factors~~24

Pursuant to the transition guidance provided by the staff of the Commission, this item is not applicable to TransCommunity since it will not be required to file its first 10-K requiring the inclusion of risk factors until it files its Form 10-K for the fiscal year ending December 31, 20063. ~~TransCommunity voluntarily included risk factors in its Form 10-KSB/A for the fiscal year ended December 31, 2005, and there have been no material changes to those risk factors.~~

~~Item~~Approval 2.of the TransCommunity Financial Corporation 2007 Equity Compensation Plan:

Unregistered Sales of Equity Securities and Use of Proceeds

~~None~~Item 5. Other Information

On May 29, 2007, the shareholders of TransCommunity approved the TransCommunity 2007 Equity Compensation Plan (the “2007 Plan”). The complete text of the 2007 Plan is being filed as an exhibit to this report and is incorporated by reference into this Item 35. The following general description of the principal features of the 2007 Plan is qualified in its entirety by reference to such exhibit. Additional information with respect to the 2007 Plan is included in the Company’s proxy statement for its 2007 annual meeting of shareholders, as filed with the Commission on April 23, 2007.

~~Defaults~~The ~~Upon~~2007 ~~Senior~~Plan ~~Securities~~authorizes the Compensation Committee of the Company’s Board of Directors to grant one or more of the following awards to directors, officers, key employees, consultants and advisors to TransCommunity and its subsidiaries who are designated by the Compensation Committee: options; stock appreciation rights; stock awards; performance share awards; incentive awards; and stock units. The Compensation Committee will administer the 2007 Plan.

~~None~~TransCommunity is authorized to issue under the 2007 Plan up to 250,000 shares of its common stock. Generally, if an award is forfeited, expires or terminates, the shares allocated to that award under the 2007 Plan may be reallocated to new awards under the 2007 Plan. Shares surrendered pursuant to the exercise of a stock option or other award or in satisfaction of tax withholding requirements under the 2007 Plan may also be reallocated to other awards. The 2007 Plan provides that if there is a stock split, stock dividend or other event that affects TransCommunity’s capitalization, appropriate adjustments will be made in the number of shares that may be issued under the 2007 Plan and in the number of shares and price of all outstanding grants and awards made before such event.

~~Page~~The 302007 Plan also provides that no award may be granted more than 10 years after the earlier of the date that it is approved by TransCommunity’s shareholders or the date it is adopted by TransCommunity’s Board of Directors, which was February 28, 2007.

~~Item~~The ~~4. Submission~~Board of ~~Matters~~Directors tomay aamend ~~Vote~~or terminate the 2007 Plan at any time, provided that no such amendment will be made without shareholder approval if (i) the amendment would increase the aggregate number of ~~Security~~shares ~~Holders~~of Common Stock that may be issued under the 2007 Plan (other than as permitted under the 2007 Plan), (ii) the amendment changes the class of individuals eligible to become participants or (iii) such approval is required under any applicable law, rule or regulation.

~~The following actions were approved at the Annual Meeting of Shareholders of TransCommunity held on May 30, 2006, by shareholders of record as of March 31, 2006:~~25

ToItem ~~elect four Class II directors to serve until the 2009 Annual Meeting and one Class III director to serve until the 2007 Annual Meeting by the following votes:~~6.

	Number of Shares
	For	Withhold Authority
Class II
Lawrence W. Broomall	3,117,660	152,926
Troy A. Peery, Jr.	3,100,985	169,601
George W. Rimler	3,114,760	155,821
Jack C. Zoeller	3,109,190	161,391
Class III
Bruce B. Nolte	3,089,420	181,166

Exhibits

NoThe ~~other~~following ~~proposals~~exhibits ~~were~~are ~~presented~~filed toor ~~shareholders.~~incorporated by reference as part of this Form 10-Q:

Item 5.


Exhibit No.	Description of Exhibits

3.1	Articles of Incorporation of the Company, as amended (as restated in electronic format only as of June 13, 2007) (filed herewith)

10.1	TransCommunity Financial Corporation 2007 Equity Compensation Plan (filed herewith)

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) (filed herewith)

31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith)

32	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

~~Other Information~~ 26

~~None.~~SIGNATURES

~~Page~~Pursuant 31to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Item 6.


	TRANSCOMMUNITY FINANCIAL CORPORATION
	(Registrant)


Date: August 10, 2007	/s/ Bruce B. Nolte
	Bruce B. Nolte
	Chief Executive Officer
	(principal executive officer)


Date: August 10, 2007	/s/ Patrick J. Tewell
	Patrick J. Tewell
	Chief Financial Officer
	(principal financial and accounting officer)

~~Exhibits~~ 27

The following exhibits are filed or incorporated by reference as part of this Form 10-Q:

Exhibit No.	Description of Exhibits
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) (filed herewith)
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith)
32	Certifications of Chief Executive Officer and Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)

Page 32

SIGNATURES

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

	TRANSCOMMUNITY FINANCIAL
	CORPORATION
	(Registrant)
Date: January 30, 2007	/s/ Bruce B. Nolte
	Bruce B. Nolte
	Chief Executive Officer
	(principal executive officer)

	TRANSCOMMUNITY FINANCIAL
	CORPORATION
	(Registrant)
Date: January 30, 2007	/s/ Thomas M. Crowder
	Thomas M. Crowder
	Chief Financial Officer
	(principal financial and accounting officer)

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