• competition among depository and other financial institutions may increase significantly;

• changes in the interest rate environment may reduce operating margins;

• general economic conditions, either nationally or in Virginia, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and an increase in credit risk-related losses and expenses;

• loan losses may exceed the level of allowance for loan losses;

• the rate of delinquencies and amount of charge-offs may be greater than expected;

• the rates of loan growth and deposit growth may not increase as expected;

• legislative, accounting or regulatory changes may adversely affect the Company's businesses;

• the Company may not find suitable merger or acquisition candidates or find other suitable ways in which to invest its excess capital;

• the Company may not successfully integrate the business operations of TFC and BOE; and

• the continued growth of the markets that the Company serves, may not be consistent with recent historical experience of TFC and BOE.

The forward-looking statements are based on current expectations about future events. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that these expectations actually will be achieved. The Company is under no duty to update any of the forward-looking statements after the date of the filing of this report to conform those statements to actual results. General
CBTC was incorporated on April 6, 2005, to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating commercial bank or bank holding company. CBTC consummated its initial public offering on June 8, 2006. At June 30, 2008, the Company was operating with two banking subsidiaries, TransCommunity Bank, N.A., headquartered in Glen Allen, Virginia and Bank of Essex, headquartered in Tappahannock, Virginia. On May 31, 2008 these institutions became wholly-owned subsidiaries of the Company. On July 31, 2008, TransCommunity Bank, N.A. merged into Bank of Essex. TransCommunity Bank, N.A.'s separate operating divisions, Bank of Goochland, Bank of Powhatan, Bank of Louisa and Bank of Rockbridge are now operating under the Bank of Essex charter, with their own local market Presidents and Advisory Boards.
The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The financial information contained within the statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability. The Company uses historical loss factors as one factor in determining the inherent loss that may be present in its loan portfolio. Actual losses could differ significantly from the historical factors that the Company uses. In addition, GAAP itself may change from one previously acceptable method to another method. Although the economics of the Company's transactions would be the same, the timing of events that would impact its transactions could change.

Critical Accounting Policies
The following is a summary of the Company's critical accounting policies that are highly dependent on estimates, assumptions and judgments.
Allowance for Loan and Lease Losses - The allowance for loan and lease losses ("ALLL") is maintained at a level that is appropriate to cover estimated credit losses on individually evaluated loans determined to be impaired, as well as estimated credit losses inherent in the remainder of the loan and lease portfolio. Since arriving at an appropriate ALLL involves a high degree of management judgment, an ongoing quarterly analysis to develop a range of estimated losses is utilized. In accordance with accounting principles generally accepted in the United States, best estimates within the range of potential credit loss to determine the appropriate ALLL is utilized. Credit losses are charged and recoveries are credited to the ALLL.
The Company utilizes an internal risk grading system for its loans. Those larger credits that exhibit probable or well defined credit weaknesses are subject to individual review. The borrower's cash flow, adequacy of collateral coverage, and other options available to the Company, including legal remedies, are evaluated. The review of individual loans includes those loans that are impaired as defined by SFAS 114, Accounting by Creditors for Impairment of a Loan. Collectibility of both principal and interest when assessing the need for loss provision is considered. Historical loss rates are applied to other loans not subject to specific allocations. The loss rates are determined from historical net charge offs experienced by the Banks.
Homogenous loans, such as consumer installment, residential mortgages, and home equity lines are not individually risk graded. The associated ALLL for these loans is measured under SFAS 5, Accounting for Contingencies. The ALLL allocation for these pools of loans is established based on the average, maximum, minimum, and median loss ratios over the previous twelve quarters. Historical loss rates for commercial and retail loans are adjusted for significant factors that, in management's judgment, reflect the impact of any current conditions on loss recognition. Factors that are considered include delinquency trends, current economic conditions and trends, strength of supervision and administration of the loan portfolio, levels of underperforming loans, level of recoveries to prior year's charge offs, trend in loan losses, industry concentrations and their relative strengths, amount of unsecured loans and underwriting exceptions. These factors are reviewed quarterly and a weighted score is assigned depending on the level and extent of the risk. The total of each of these weighted factors is then applied against the applicable portion of the portfolio and the ALLL is adjusted to ensure an appropriate level. Goodwill and Other Intangible Assets
The Company adopted SFAS 142, Goodwill and Other Intangible Assets. Accordingly, goodwill is no longer subject to amortization over its estimated useful life, but is subject to at least an annual assessment for impairment by applying a fair value-based test. Additionally, under SFAS 142, acquired intangible assets (such as core deposit intangibles) are separately recognized if the benefit of the assets can be sold, transferred, licensed, rented, or exchanged, and amortized over their useful lives. Any branch acquisition transactions were outside the scope of SFAS 142 and, accordingly, intangible assets related to such transactions continued to amortize upon the adoption of SFAS 142. The costs of purchased deposit relationships and other intangible assets, based on independent valuation by a qualified third party, are being amortized over their estimated lives. Core deposit intangible amortization expense charged to operations was $554,000 for the four months ended September 30, 2008. The Company did not record any goodwill or other intangible prior to the TFC and BOE mergers.
Mergers and Acquisitions
The Company was organized under the laws of the State of Delaware on April 6, 2005. As a "Targeted Acquisition Corporation" SM or "TAC" SM, it was formed to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business in the banking industry. This strategy was successful with the business combination completed on May 31, 2008 with TransCommunity Financial Corporation and the additional acquisition of BOE Financial Services of Virginia, Inc.

Industry Overview
The banking industry faces a number of challenges in the current economic environment. Widespread problems in the area of mortgage lending have led to the downfall of certain government-sponsored mortgage companies with a ripple effect throughout the financial sector. Companies are having a hard time maintaining an appropriate level of liquidity. The need to increase reserves for loan losses in this uncertain climate, while prudent, has the effect of limiting or threatening profitability. Additionally, declining interest rates are compressing net interest margins. To help spur the economy, the Federal Reserve has decreased rates 425 basis points since September 18, 2007. However, the anticipated effects of the rate cuts have not been broadly felt. During this challenging time, management plans to focus on its asset quality, liquidity and the net interest margin. While most of the banking industry news has been negative, management believes its conservative and proven banking practices will serve the Company well during this economic downturn.
Management believes that while banking prospects seem uncertain, the industry offers the opportunity for mergers or acquisitions and an attractive operating environment for target businesses. Further, management is aware of a number of distressed or failed depository institutions, and believes there will be more to follow. Management will consider these depository institutions as possible acquisition opportunities in a manner that is best for its shareholders. According to statistics as of December 31, 2004, published by the Federal Deposit Insurance Corporation (FDIC), there are more than 3,000 commercial banks in the U.S. with assets of $100 to $500 million, more than 2,400 of which have less than $300 million in assets.
Members of the Company's management team and board of directors have experience in operating banks, negotiating and consummating merger and acquisition transactions as well as implementing and integrating such transactions with existing bank operations. We intend to leverage the experience of our management team and our capital to create value for our shareholders. Strategy
The Company's strategy is to acquire or merge with commercial banks within the United States that have one or more of the following characteristics:
• An opportunity for regional expansion and/or the addition of new banking products and services;

• Constraints on its capital and limited access to alternative capital markets due to its size or other special considerations; and

• A size which is generally too small to attract the interest of larger acquirers.

Management believes the Company's balance sheet, and in particular, its capital structure, can be utilized to further grow the existing banking institution. Growth opportunities may include some or all of the following:
• Expanding the branch network of an existing banking institution;

• Utilizing capital to increase loans and deposits;

• Attracting personnel from other banks who can bring substantial business with them;

• Seeking other profitable business lines to add to the bank's core business; and

• Seeking strategic acquisitions which can provide growth to the existing business or a platform to enter another geographic market.

BUSINESS OVERVIEW
The following discussion is intended to assist readers in understanding and evaluating the financial condition and results of operations of the Company and its subsidiaries. This section should be read in conjunction with Company's consolidated financial statements and accompanying notes included elsewhere in this report.
Community Bankers Trust Corporation is a $695 million community bank holding company formed on May 31, 2008, as a result of the consummation of the merger between Community Bankers Acquisition Corp. and TransCommunity Financial Corporation, and Community Bankers Acquisition Corp. and BOE Financial Services of Virginia, Inc. The Company's headquarters are located in Glen Allen, Virginia which is a part of the greater Richmond, Virginia, metropolitan market. Currently, the Company operates 13 full service banking facilities that extend from the Chesapeake Bay to Lexington, Virginia. Eight offices operate as Bank of Essex, including two branches in Northumberland County operating in temporary facilities while construction on their permanent branches is expected to be completed early in 2009. Operating as divisions of Bank of Essex are two Bank of Goochland offices, one as Bank of Powhatan, one as Bank of Louisa and one as Bank of Rockbridge.
The Company's website can be accessed through the internet at www.cbtrustcorp.com. Additional information is available for the Bank of Essex at www.bankofessex.com. The shares of the Company are traded on the American Stock Exchange (AMEX) under the symbol "BTC".
As of September 30, 2008, the Company had total assets of $695.040 million, an increase of $635.599 million, or 1,069.29%, from $59.441 million at December 31, 2007. Total loans amounted to $504.481 million on September 30, 2008 and were $0 on December 31, 2007. As further described in the Note 4 to the consolidated financial statements, the Company acquired TFC and BOE effective May 31, 2008. The Company's securities portfolio increased $28.159 million, from $58.453 million at December 31, 2007, to $86.612 million at September 30, 2008. The Company had Federal funds purchased of $9.24 million on September 30, 2008 and none on December 31, 2007.
The Company is required to account for the effect of market changes in the value of securities available-for-sale ("AFS") under SFAS 115. The market value of the September 30, 2008 securities AFS portfolio was $79.935 million. At September 30, 2008, $831,000 represented the Company's net unrealized loss on AFS securities.
Total deposits at September 30, 2008 were $485.769 million and were $0 at December 31, 2007.
Stockholders' equity at September 30, 2008 was $150.287 million and represented 21.62% of total assets. Stockholders' equity was $45.312 million, or 76.23% of total assets at December 31, 2007.
Results of Operations
Net income for the three month and nine month periods of 2008 reflects full three and nine month periods for the Company and three and four months of consolidated operations for the holding company and banking subsidiaries. Net Income
Net income was $952,000 for the third quarter of 2008, or $0.04 per diluted share. This compares to net income of $372,000, or $0.03 per diluted share in the third quarter of 2007. The increase in earnings for the third quarter of 2008 compared to 2007 was $580,000, or 155.9%.
For the nine month period ended September 30, 2008 net income was $1.351 million. This compares to net income of $1.021 million for the same period in 2007. For the nine month period in 2008, net income for the Company increased by $330,000, or 32.3%. Fully diluted earnings per share were $0.08 and $0.09, respectively, for the nine month periods ended September 30, 2008 and September 30, 2007.
Nonaccruing loans were $2.535 million at September 30, 2008, or 0.50% of total loans. Loans past due 90 days or more and accruing interest were $2.413 million at September 30, 2008. Net charge-offs on loans were $47,000 and $92,000 for the three and nine months ended September 30, 2008, respectively.

Net Interest Income
The Company's results of operations are significantly affected by its ability to manage effectively the interest rate sensitivity and maturity of its interest-earning assets and interest-bearing liabilities. At September 30, 2008, the Company's interest-earning assets exceeded its interest-bearing liabilities by approximately $122.760 million, compared with a $58.453 million excess at December 31, 2007.
Net interest income was $6.188 million for the three months ended September 30, 2008 compared to $712,000 for the same period in 2007. Net interest income was $8.615 million for the nine months ended September 30, 2008 compared to $2.127 million for the same period in 2007.
The Company's total loans-to-deposits ratio was 103.85% at September 30, 2008 and 0% at December 31, 2007.
Provision for Credit Losses
The Company's provision for loan losses was $1.1 million for the third quarter of 2008 and $1.334 million for the first nine months of 2008. For the three and nine months ended September 30, 2008, net charged-off loans were $47,000 and $92,000, respectively. There were no provisions, charge-offs or recoveries during 2007.
Noninterest Income
For the three months ended September 30, 2008, noninterest income was $754,000 compared to $0 in the same period of 2007. Service charges on deposit accounts were $516,000 and other noninterest income was $238,000. For the nine months ended September 30, 2008, noninterest income was $1.053 million compared to $0 in the same period of 2007. Service charges on deposit accounts were $696,000 and other noninterest income was $357,000. Noninterest Expenses
For the three month period ended September 30, 2008, noninterest expenses were $4.656 million. Salaries and employee benefits were $2.375 million and represented the largest component of this category. Other overhead costs included other operating expenses of $577,000, amortization of intangibles of $406,000, occupancy expenses of $346,000, equipment expense of $292,000, data processing fees of $285,000 and professional fees of $375,000 for the operating period.
For the nine month period ended September 30, 2008, noninterest expenses were $6.591 million. Salaries and employee benefits were $2.949 million and represented the largest component of overhead. Other noninterest expenses included other operating expenses of $1.366 million, amortization of intangibles of $554,000, occupancy expenses of $458,000, equipment expense of $400,000, data processing fees of $389,000 and professional fees of $475,000 for the operating period.
During the fourth quarter of 2008, the Company consolidated its computer operating systems. While this will create economies of scale and increase capacity, there will be significant installation, training and implementation costs incurred.
Income Taxes
Income tax expense was $234,000 for the third quarter of 2008, compared to $228,000 for the same period in 2007. For the nine months ended September 30, 2008, income tax expense was $392,000 and $743,000 for the nine month period ended September 30, 2007.
Asset Quality
The Company's asset quality remains solid. The allowance for loan losses represents management's estimate of the amount adequate to provide for potential losses inherent in the loan portfolio. The Company's management has established an allowance for loan losses which it believes is adequate for the risk of loss inherent in the loan portfolio. Among other factors, management considers the Company's historical loss experience, the size and composition of the loan portfolio, the value and adequacy of collateral and guarantors, non-performing credits and current and anticipated economic conditions. There are additional risks of future loan losses, which cannot be precisely quantified nor attributed to particular loans or classes of loans. Because those risks include general economic trends, as well as conditions affecting individual borrowers, the allowance for loan losses is an estimate. The allowance is also subject to regulatory examinations and determination as to adequacy, which may take into account such factors as the methodology used to calculate the allowance and size of the allowance in comparison to peer companies identified by regulatory agencies.

The Company maintains a list of loans that have potential weaknesses which may need special attention. This nonperforming loan list is used to monitor such loans and is used in the determination of the adequacy of the Company's allowance for loan losses. At September 30, 2008, nonperforming assets totaled $5.346 million. Despite increasing industry concerns over credit issues, the Company's asset quality remains strong. Net charge-offs were $47,000 and $92,000 for the three and nine months ended September 30, 2008, respectively. Nationally, industry concerns over asset quality have increased due in large part to issues related to subprime mortgage lending, declining real estate activity and general economic concerns. While the Company has experienced reduced residential real estate activity, the markets in which the Company operates remain relatively stable. While the Company incurred appropriate provisions for loan losses and thus an adequate level of allowance for loan losses, there has been no significant deterioration in the quality of the loan portfolio. Residential loan demand has moderated somewhat, but the Company is still experiencing continued loan demand, particularly in commercial real estate. Management will continue to monitor delinquencies, risk rating changes, charge-offs, market trends and other indicators of risk in the Company's portfolio, particularly those tied to residential real estate, and adjust the allowance for loan losses accordingly.
The following table sets forth selected asset quality data and ratios for the quarter ending:

 (dollars in thousands)                                      September 30, 2008
 Nonaccrual loans                                           $              2,535
 Loans past due over 90 days                                               2,413
 Other real estate owned                                                     398

 Total nonperforming assets                                 $              5,346


 Balances
 Allowance for loan losses                                  $              6,235
 Average loans during quarter, net of unearned income       $            496,498
 Loans, net of unearned income                              $            504,481

 Ratios
 Allowance for loan losses to loans                                         1.24 %
 Allowance for loan losses to nonperforming assets                         116.6 %
 Nonperforming assets to loans & other real estate                          1.06 %
 3rd quarter net charge-offs to average loans, annualized                   0.04 %

See Footnote 8 to these financial statements for information related to the allowance for loan losses. As of September 30, 2008, total impaired loans equaled $7.7 million.
Capital Requirements
The determination of capital adequacy depends upon a number of factors, such as asset quality, liquidity, earnings, growth trends and economic conditions. The Company seeks to maintain a strong capital base to support its growth and expansion plans, provide stability to current operations and promote public confidence in the Company.
The federal banking regulators have defined three tests for assessing the capital strength and adequacy of banks, based on two definitions of capital. "Tier 1 Capital" is defined as a combination of common and qualifying preferred stockholders' equity less goodwill. "Tier 2 Capital" is defined as qualifying subordinated debt and a portion of the allowance for loan losses. "Total Capital" is defined as Tier 1 Capital plus Tier 2 Capital. Three risk-based capital ratios are computed using the above capital definitions, total assets and risk-weighted assets and are measured against regulatory minimums to ascertain adequacy. All assets and off-balance sheet risk items are grouped into categories according to degree of risk and assigned a risk-weighting and the resulting total is risk-weighted assets. "Tier 1 Risk-based Capital" is Tier 1 Capital divided by risk-weighted assets. "Total Risk-based Capital" is Total Capital divided by risk-weighted assets. The Leverage ratio is Tier 1 Capital divided by total average assets.

The Company's ratio of total capital to risk-weighted assets was 19.88% on September 30, 2008. The ratio of Tier 1 Capital to risk-weighted assets was 18.15% on September 30, 2008. The Company's leverage ratio (Tier 1 capital to average adjusted total assets) was 16.67% on September 30, 2008. These ratios exceed regulatory minimums. In the fourth quarter of 2003, the Company issued trust preferred subordinated debt that qualifies as regulatory capital. This trust preferred debt has a 30-year maturity with a 5-year call option and was issued at a rate of three month LIBOR plus 3.00% and was priced at 5.80% in the third quarter of 2008.
Liquidity
Liquidity represents the Company's ability to meet present and future financial obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. Liquid assets include cash, interest-bearing deposits with banks, federal funds sold, and certain investment securities. As a result of the Company's management of liquid assets and the ability to generate liquidity through liability funding, management believes that the Company maintains overall liquidity sufficient to satisfy its depositors' requirements and meet its customer's credit needs.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CREDIT RISK AND CONTRACTUAL OBLIGATIONS
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its clients and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest . . .