10-Q

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 September 30, 2008

OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission File Number 000-16435

COMMUNITY BANCORP.

Vermont	03-0284070
(State of Incorporation)	(IRS Employer Identification Number)
4811 US Route 5, Derby, Vermont	05829
(Address of Principal Executive Offices)	(zip code)
Registrant's Telephone Number:  (802) 334-7915

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 for such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ( X )  No (  )

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

At November 12, 2008, there were 4,450,937 shares outstanding of the Corporation's common stock.

FORM 10-Q
Index
	Page
PART I  FINANCIAL INFORMATION
Item I     Financial Statements	4
Item 2    Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3    Quantitative and Qualitative Disclosures About Market Risk	30
Item 4T  Controls and Procedures	30
PART II  OTHER INFORMATION
Item 1    Legal Proceedings	31
Item 2    Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 4    Submission of Matters to a Vote of Security Holders	31
Item 5    Other Events	31
Item 6    Exhibits	31
Signatures	32
Exhibit Index	32

PART I.  FINANCIAL INFORMATION

ITEM 1.  Financial Statements (Unaudited)

The following are the unaudited consolidated financial statements for Community Bancorp. and Subsidiary, "the Company".

COMMUNITY BANCORP. AND SUBSIDIARY	September 30			December 31			September 30
Consolidated Balance Sheets	2008			2007			2007
	(Unaudited)						(Unaudited)
Assets
Cash and due from banks	$	9,709,904		$	17,486,535		$	7,609,332
Federal funds sold and overnight deposits		32,353			2,785,988			12,389,462
Total cash and cash equivalents		9,742,257			20,272,523			19,998,794
Securities held-to-maturity (fair value $46,600,000 at 09/30/08,
$34,273,000 at 12/31/07, and $29,472,000 at 09/30/07)		46,368,055			34,310,833			29,431,718
Securities available-for-sale		29,638,437			46,876,771			25,074,048
Restricted equity securities, at cost		3,906,850			3,456,850			2,450,150
Loans held-for-sale		742,778			685,876			982,576
Loans		358,358,089			355,885,207			255,926,578
Allowance for loan losses		(3,058,882	)		(3,026,049	)		(2,321,409	)
Unearned net loan fees		(352,142	)		(443,372	)		(490,826	)
Net loans		354,947,065			352,415,786			253,114,343
Bank premises and equipment, net		15,163,398			16,361,152			12,072,266
Accrued interest receivable		2,235,882			2,304,055			1,755,545
Bank owned life insurance		3,658,911			3,559,376			0
Core deposit intangibles		3,536,850			4,161,000			0
Goodwill		11,567,032			10,347,455			0
Other real estate owned		185,000			0			0
Other assets		7,853,715			7,279,941			5,928,109
Total assets	$	489,546,230		$	502,031,618		$	350,807,549
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Demand, non-interest bearing	$	54,499,372		$	64,019,707		$	50,485,030
NOW and money market accounts		122,491,455			120,993,657			77,204,394
Savings		50,523,075			46,069,943			39,505,522
Time deposits, $100,000 and over		55,806,941			58,860,374			40,455,562
Other time deposits		124,551,597			126,276,429			94,388,283
Total deposits		407,872,440			416,220,110			302,038,791
Federal funds purchased and other borrowed funds		13,616,000			13,760,000			40,000
Repurchase agreements		14,615,209			17,444,933			14,212,876
Capital lease obligations		856,376			943,227			0
Junior subordinated debentures		12,887,000			12,887,000			0
Accrued interest and other liabilities		4,895,509			5,855,988			2,653,456
Total liabilities		454,742,534			467,111,258			318,945,123
Shareholders' Equity
Preferred stock 1,000,000 shares authorized, 25 shares issued and
outstanding at 09/30/08 and 12/31/07, ($100,000 liquidation value),
and no shares issued and outstanding at 09/30/07		2,500,000			2,500,000			0
Common stock - $2.50 par value; 10,000,000 shares authorized,
4,659,603 shares issued at 09/30/08, 4,609,268 shares issued
at 12/31/07, and 4,592,735 shares issued at 09/30/07		11,649,007			11,523,170			11,481,838
Additional paid-in capital		25,579,898			25,006,439			24,818,896
Accumulated deficit		(2,585,311	)		(1,597,682	)		(1,749,560	)
Accumulated other comprehensive income (loss)		282,879			111,210			(65,971	)
Less: treasury stock, at cost; 210,101 shares at 09/30/08, 12/31/07,
and 09/30/07		(2,622,777	)		(2,622,777	)		(2,622,777	)
Total shareholders' equity		34,803,696			34,920,360			31,862,426
Total liabilities and shareholders' equity	$	489,546,230		$	502,031,618		$	350,807,549

COMMUNITY BANCORP. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
For The Third Quarter Ended September 30,	2008		2007
Interest income
Interest and fees on loans	$	5,912,812	$	4,778,687
Interest on debt securities
Taxable		331,231		215,234
Tax-exempt		455,017		259,404
Dividends		41,240		37,329
Interest on federal funds sold and overnight deposits		2,077		133,350
Total interest income		6,742,377		5,424,004
Interest expense
Interest on deposits		2,141,927		1,957,858
Interest on federal funds purchased and other borrowed funds		142,644		63,283
Interest on repurchase agreements		60,138		79,004
Interest on junior subordinated debentures		243,564		0
Total interest expense		2,588,273		2,100,145
Net interest income		4,154,104		3,323,859
Provision for loan losses		112,499		47,500
Net interest income after provision for loan losses		4,041,605		3,276,359
Non-interest income
Service fees		562,319		350,054
Income on bank owned life insurance		33,924		0
Other income		487,731		760,304
Total non-interest income		1,083,974		1,110,358
Non-interest expense
Salaries and wages		1,361,196		1,168,792
Employee benefits		522,770		477,144
Occupancy expenses, net		759,576		539,202
Write down of Fannie Mae preferred stock		739,332		0
Other expenses		1,260,686		1,061,908
Total non-interest expense		4,643,560		3,247,046
Income before income taxes		482,019		1,139,671
Income tax expense		167,406		212,499
Net Income	$	314,613	$	927,172
Earnings per common share	$	0.06	$	0.21
Weighted average number of common shares
used in computing earnings per share		4,438,225		4,372,670
Dividends declared per common share	$	0.17	$	0.17
Book value per share on common shares outstanding at September 30,	$	7.26	$	7.27

COMMUNITY BANCORP. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
For the Nine Months Ended September 30,	2008			2007
Interest income
Interest and fees on loans	$	17,866,539		$	14,406,502
Interest on debt securities
Taxable		1,142,179			630,478
Tax-exempt		1,358,519			691,445
Dividends		148,908			126,370
Interest on federal funds sold and overnight deposits		63,044			191,178
Total interest income		20,579,189			16,045,973
Interest expense
Interest on deposits		7,498,218			5,774,457
Interest on federal funds purchased and other borrowed funds		397,359			90,642
Interest on repurchase agreements		195,746			240,688
Interest on junior subordinated debentures		732,776			0
Total interest expense		8,824,099			6,105,787
Net interest income		11,755,090			9,940,186
Provision for loan losses		237,497			122,500
Net interest income after provision for loan losses		11,517,593			9,817,686
Non-interest income
Service fees		1,641,457			1,031,526
Income on bank owned life insurance		99,535			0
Other income		1,455,761			1,676,660
Total non-interest income		3,196,753			2,708,186
Non-interest expense
Salaries and wages		4,487,017			3,421,779
Employee benefits		1,751,617			1,349,547
Occupancy expenses, net		2,416,944			1,776,935
Write down of Fannie Mae preferred stock		739,332			0
Other expenses		3,919,695			3,004,450
Total non-interest expense		13,314,605			9,552,711
Income before income taxes		1,399,741			2,973,161
Income tax (benefit) expense		(5,481	)		512,850
Net Income	$	1,405,222		$	2,460,311
Earnings per common share	$	0.29		$	0.56
Weighted average number of common shares
used in computing earnings per share		4,421,759			4,357,565
Dividends declared per common share	$	0.51		$	0.50
Book value per share on common shares outstanding at September 30,	$	7.26		$	7.27
All share and per share data for prior periods restated to reflect a 5% stock dividend declared in June 2007.

COMMUNITY BANCORP. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30,	2008			2007
Cash Flow from Operating Activities:
Net Income	$	1,405,222		$	2,460,311
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and amortization		809,686			710,591
Provision for loan losses		237,497			122,500
Provision (credit) for deferred income taxes		290,296			(34,470	)
Net gain on sale of loans		(250,845	)		(226,492	)
Loss on sale or disposal of fixed assets		1,757			8,415
Gain on investment in Trust LLC		(44,604	)		(104,337	)
Amortization (accretion) of bond premium (discount), net		(47,448	)		8,301
Write down of Fannie Mae preferred stock		739,332			0
Proceeds from sales of loans held for sale		20,470,308			22,295,686
Originations of loans held for sale		(20,276,365	)		(22,485,470	)
Decrease in taxes payable		(164,283	)		(202,680	)
Decrease (increase) in interest receivable		68,173			(88,410	)
Decrease (increase) in mortgage servicing rights		30,055			(90,643	)
Decrease (increase) in other assets		785,861			(366,050	)
Increase in bank owned life insurance		(99,535	)		0
Amortization of core deposit intangible		624,150			0
Amortization of limited partnerships		278,313			292,530
Decrease in unamortized loan fees		(91,230	)		(141,279	)
Decrease in interest payable		(109,609	)		(49,183	)
Increase in accrued expenses		23,438			88,396
(Decrease) increase in other liabilities		(3,256,848	)		22,037
Net cash provided by operating activities		1,423,321			2,219,753
Cash Flows from Investing Activities:
Investments - held to maturity
Maturities and paydowns		24,921,147			17,709,462
Purchases		(36,978,370	)		(26,071,314	)
Investments - available for sale
Sales and maturities		17,229,897			3,000,000
Purchases		(1,079,688	)		(5,160,000	)
Proceeds from (purchase) redemption of restricted equity securities		(450,000	)		378,100
Decrease in limited partnership contributions payable		0			(236,094	)
Investments in limited partnership		(5,000	)		(264,800	)
(Increase) decrease in loans, net		(2,940,890	)		12,686,366
Capital expenditures, net of proceeds from sales of bank
premises and equipment		386,311			(457,248	)
Recoveries of loans charged off		78,344			47,870
Net cash provided by investing activities		1,161,751			1,632,342
Cash Flows from Financing Activities:
Net decrease in demand, NOW, money market and savings accounts		(3,569,405	)		(82,051	)
Net (decrease) increase in time deposits		(4,778,265	)		1,132,648
Net decrease in repurchase agreements		(2,829,724	)		(2,871,070	)
Net increase in short-term borrowings		7,856,000			0
Repayments on long-term borrowings		(8,000,000	)		0
Decrease in capital lease obligations		(86,851	)		0
Dividends paid on preferred stock		(140,625	)		0
Payments to acquire treasury stock		0			(8,045	)
Dividends paid on common stock		(1,566,468	)		(1,491,393	)
Net cash used in financing activities		(13,115,338	)		(3,319,911	)
Net (decrease) increase in cash and cash equivalents		(10,530,266	)		532,184
Cash and cash equivalents:
Beginning		20,272,523			19,466,610
Ending	$	9,742,257		$	19,998,794
Supplemental Schedule of Cash Paid During the Period
Interest	$	8,933,708		$	6,154,970
Income taxes	$	405,000		$	750,000
Supplemental Schedule of Noncash Investing and Financing Activities:
Change in unrealized gain on securities available-for-sale	$	260,105		$	310,142
Other real estate owned acquired in settlement of loans	$	185,000		$	0
Fair value adjustment of Fannie Mae preferred stock	$	656,347		$	0
Investments in limited partnership
Increase in limited partnerships	$	(1,462,000	)	$	(264,800	)
Increase in contributions payable	$	1,457,000		$	0
	$	(5,000	)	$	(264,800	)
Common Shares Dividends Paid
Dividends declared	$	2,252,226		$	2,149,218
Increase (decrease) in dividends payable attributable to dividends declared		13,538			(42,872	)
Dividends reinvested		(699,296	)		(614,953	)
	$	1,566,468		$	1,491,393
Stock Dividends	$	0		$	2,821,320

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  BASIS OF PRESENTATION AND CONSOLIDATION

     The interim consolidated financial statements of Community Bancorp. and Subsidiary are unaudited.  All significant intercompany balances and transactions have been eliminated in consolidation.  In the opinion of management, all adjustments necessary for fair presentation of the financial condition and results of operations of the Company contained herein have been made.  The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2007 contained in the Company's Annual Report on Form 10-K.

NOTE 2.  5% STOCK DIVIDEND

     In June 2007, the Company declared a 5% stock dividend payable August 15, 2007 to shareholders of record as of July 15, 2007.  As a result of this stock dividend, all per share data and weighted average number of shares for prior periods have been restated.

NOTE 3.  RECENT ACCOUNTING DEVELOPMENTS

     In September 2006, the Financial Accounting Standards Board (the FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements”, which provides enhanced guidance for using fair value to measure assets and liabilities.  This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  This Statement applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute.  Accordingly, this Statement does not require any new fair value measurements.  SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  The Company adopted SFAS No. 157 effective January 1, 2008.  Additional information regarding the Company’s fair value measurements under SFAS No. 157 is contained in Note 8.  FASB Staff Position (FSP) No. FAS 157-2 delays the effect of SFAS No. 157 on the measurement of goodwill and other intangible assets measured at fair value on a nonrecurring basis until the first quarter of 2009.

     In October 2008, the FASB issued FSP No. 157-3, Determining The Fair Value of a Financial Asset when the Market for that Asset is not Active.  FSP No. 157-3 amended SFAS No. 157 by incorporating an example to illustrate key considerations in determining the fair value of a financial asset in an inactive market.  The FSP was effective upon issuance.  The Company is currently evaluating FSP No. 157-3 for materiality.

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, which gives entities the option to measure eligible financial assets and financial liabilities at fair value on an instrument by instrument basis. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability. Subsequent changes in fair value must be recorded in earnings. SFAS No. 159 contains provisions to apply the fair value option to existing eligible financial instruments at the date of adoption. This statement is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007, with provisions for early adoption.  To date the Company has not applied the fair value option to any financial instruments; therefore, SFAS No. 159 has not had any impact on the Company’s financial statements.

     In November 2007, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 109, Written Loan Commitments Recorded at Fair Value Through Earnings, in which the SEC Staff expressed its views concerning written loan commitments accounted for as derivatives or at fair value through earnings, as permitted by SFAS No. 159. It is the Staff's position that expected net future cash flows from servicing a loan should be included in the fair value measurement of a loan commitment when it qualifies for derivative accounting under SFAS No. 133 or at fair value through earnings, as permitted by SFAS No. 159. Implementation of SAB No. 109 did not have a material effect on the financial condition or results of operations of the Company.

     In December 2007, the FASB revised SFAS No. 141, “Business Combinations” (SFAS No.141R). This statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date. SFAS No. 141R recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase.  Additionally, SFAS No. 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination, establishes the acquisition date as the date that the acquiree achieves control and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008. Accordingly, SFAS No. 141R did not apply to the Company’s acquisition of LyndonBank completed at year-end 2007, but would apply to business combinations (if any) in 2009 and subsequent years.

     In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of Accounting Research Bulletin (ARB) No. 51”.  This statement applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. This statement amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning after December 15, 2008.  Management does not expect it will have a material effect on its financial condition or results of operations.

     In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133”. This statement requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact of SFAS No. 161 but does not expect it will have a material effect on its financial condition or results of operations.

NOTE 4.  INCOME TAXES

     Section 301 of the Emergency Economic Stabilization Act of 2008 provides tax relief to banking organizations that have suffered losses on certain holdings of Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) preferred stock by changing the character of these losses from capital to ordinary for federal income tax purposes.  However, under generally accepted accounting principles, because the Act was not enacted on October 3, 2008, banking organizations will not be able to recognize the tax effect of the ordinary losses resulting from Section 301 in their financial statements for the third quarter.  Accordingly, the tax benefit resulting from the Company’s third quarter write down of its Fannie Mae preferred shareholdings (approximately $251,000) will not be recorded for financial statement purposes until the fourth quarter of 2008. (See Note 8.)

     In July 2006, the FASB issued Financial Accounting Standards Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the financial statements. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. Effective January 1, 2007, the Company adopted FIN 48. The implementation of FIN 48 did not have a material impact on the Company’s financial statements.

     The Company’s income tax returns for the years ended December 31, 2004, 2005, 2006 and 2007 are open to audit under the statute of limitations by the Internal Revenue Service.  The Company’s policy is to record interest and penalties related to uncertain tax positions as part of its provision for income taxes.  A late estimated tax payment for the first quarter of 2006 resulted in a penalty of $15,208 which is reflected in income tax expense for 2007.

NOTE 5.  EARNINGS PER COMMON SHARE

     Earnings per common share amounts are computed based on the weighted average number of shares of common stock issued during the period (retroactively adjusted for stock splits and stock dividends) and reduced for shares held in Treasury. The following table illustrates the calculation for the third quarter and nine months ended September 30, as adjusted for the cash dividend declared on the preferred stock:

For the third quarter ended September 30,	2008		2007
Net income, as reported	$	314,613	$	927,172
Less: dividends to preferred shareholders		46,875		0
Net income available to common shareholders	$	267,738	$	927,172
Weighted average number of common shares used in calculating
earnings per share		4,438,225		4,372,670
Earnings per common share	$	0.06	$	0.21
For the nine months ended September 30,	2008		2007
Net income, as reported	$	1,405,222	$	2,460,311
Less: dividends to preferred shareholders		140,625		0
Net income available to common shareholders	$	1,264,597	$	2,460,311
Weighted average number of common shares used in calculating
earnings per share		4,421,759		4,357,565
Earnings per common share	$	0.29	$	0.56

NOTE 6.  COMPREHENSIVE INCOME

     Accounting principles generally require recognized revenue, expenses, gains, and losses to be included in net income.  Certain changes in assets and liabilities, such as the after-tax effect of unrealized gains and losses on available-for-sale securities, are not reflected in the statement of income, but the cumulative effect of such items from period-to-period is reflected as a separate component of the equity section of the balance sheet (accumulated other comprehensive income or loss).  Other comprehensive income or loss, along with net income, comprises the Company's total comprehensive income.

The Company's total comprehensive income for the comparison periods is calculated as follows:

For the third quarter ended September 30,	2008			2007
Net income	$	1,053,945		$	927,172
Realized loss on write down of Fannie Mae preferred stock		739,332			0
Net income after realized loss		314,613			927,172
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on available-for-sale
securities arising during the period		784,997			221,604
Tax effect		(266,899	)		(75,345	)
Other comprehensive income (loss), net of tax		518,098			146,259
Total comprehensive income	$	832,711		$	1,073,431
For the nine months ended September 30,	2008			2007
Net income	$	2,144,554		$	2,460,311
Realized loss on write down of Fannie Mae preferred stock		739,332			0
Net income after realized loss		1,405,222			2,460.311
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on available-for-sale
securities arising during the period		260,105			310,142
Tax effect		(88,436	)		(105,448	)
Other comprehensive income (loss), net of tax		171,669			204,694
Total comprehensive income	$	1,576,891		$	2,665,005

NOTE 7.  MERGER AND INTANGIBLE ASSETS

     On December 31, 2007, the Company completed its acquisition of LyndonBank, Lyndonville, Vermont, through the merger of LyndonBank with and into Community National Bank, the Company’s wholly-owned subsidiary.  On that date, Community National Bank sold the former Vergennes, Vermont branch of LyndonBank consisting of approximately $8.7 million in deposits and $12.1 million in branch assets, including $10.5 in loans.  The aggregate purchase price in the LyndonBank merger was approximately $26.7 million in cash.  To finance a portion of the acquisition costs, the Company issued approximately $12.9 million of junior subordinated debentures in a trust preferred securities financing (See Note 10.) and 25 shares of non-cumulative perpetual preferred stock for gross sale proceeds of $2.5 million.

     The transaction was accounted for as a purchase and, accordingly, the operations of LyndonBank are included in the Company’s consolidated financial statements from the date of the acquisition.  The purchase price has been allocated to assets acquired and liabilities assumed based on estimates of fair value at the date of acquisition.  The excess of purchase price over the fair value of net tangible and intangible assets acquired has been recorded as goodwill.  During the first quarter of 2008, the Company received valuations on bank premises and equipment to determine fair value and make the necessary adjustments to bank premises and equipment, goodwill and the related deferred tax liability.  The adjustment to goodwill was an increase of $212,884.  During the second quarter of 2008, additional adjustments amounting to a net decrease of $57,536 were made to goodwill for the settlement of certain LyndonBank liability accounts.  During the third quarter of 2008, adjustments amounting to a net increase were made totaling $1,064,228 for some additional costs related to the merger, disposal of software used during the first quarter of 2008 that is no longer needed, and a fair value adjustment totaling $656,347 on Fannie Mae preferred stock the Company acquired through the acquisition.

The purchase price allocation to the acquired assets, net of the Vergennes branch sale and including adjustments described above, was as follows:

Cash and cash equivalents	$	12,060,208
Federal Home Loan Bank stock		1,006,700
Investments		22,885,546
Loans, net		94,871,768
Bank premises and equipment		3,774,657
Prepaid expenses and other assets		4,773,431
Identified intangible asset		4,161,000
Goodwill		11,567,032
Deposits		(110,044,422	)
Borrowings		(14,269,911	)
Long-term debt		(943,227	)
Accrued expenses and other liabilities		(3,124,959	)
Aggregate purchase price	$	26,717,823

     The $4.2 million of indentified acquired intangible asset represents the core deposit intangible and is subject to amortization over the weighted-average life of the core deposit base which was determined to be approximately 10 years.  The amortization expense related to the core deposit intangible for the three month and nine month periods ended September 30, 2008 was $208,050 and $624,150, respectively.

The goodwill is not deductible for tax purposes.

NOTE 8.  FAIR VALUE MEASUREMENTS

     Effective January 1, 2008, the Company adopted SFAS No. 157, which provides a framework for measuring and disclosing fair value under generally accepted accounting principles.  SFAS No. 157 requires disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis (for example, available-for-sale investment securities) or on a nonrecurring basis (for example, impaired loans).

     SFAS No. 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  SFAS No. 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The standard describes three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities.  Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as U.S. Treasury, other U.S. Government and agency mortgage-backed debt securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2 Observable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.  Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.  This category generally includes certain derivative contracts, residential mortgage servicing rights, and impaired loans.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.  For example, this category generally includes certain private equity investments, retained residual interest in securitizations, and highly-structured or long-term derivative contracts.

     A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  Assets measured at fair value on a recurring basis at September 30, 2008 are summarized below:

	Level 1		Level 2		Level 3		Fair Value
Assets:
Securities available-for-sale	$	4,246,566	$	25,391,871	$	0	$	29,638,437

     The fair value of securities available for sale equals quoted market prices, if available.  If quoted market prices are not available, fair value is determined using quoted market prices for similar securities.  Level 1 securities include U.S. Government Bonds and certain preferred stock.  Level 2 securities include asset-backed securities including obligations of government sponsored entities, mortgage backed securities, municipal bonds and equity securities.

     During the third quarter of 2008, the Company recorded a noncash other than temporary impairment charge totaling $739,332 for its investment in two classes of Fannie Mae preferred stock.  That action was taken after the federal government placed Fannie Mae and its sister government sponsored enterprise, Freddie Mac under conservatorship on September 7, 2008.

Assets measured at fair value on a nonrecurring basis and reflected in the balance sheet at September 30, 2008 are summarized below:

	Level 1		Level 2		Level 3		Fair Value
Restricted equity securities		0		3,906,850		0		3,906,850
Mortgages held-for-sale		0		742,778		0		742,778
Mortgage servicing rights		0		1,068,130		0		1,068,130
Impaired loans		0		1,022,193		0		1,022,193
Other real estate owned		0		185,000		0		185,000
Total	$	0	$	1,207,193	$	0	$	1,207,193

     The fair value of loans held-for-sale is based upon an actual purchase and sale agreement between the Company and an independent market participant.  The sale is executed within a reasonable period following quarter end at the stated fair value.

     Mortgage servicing rights are initially recorded at estimated fair value and are then periodically measured for impairment by projecting and discounting future cash flows associated with servicing at market rates.  The projection of cash flows is a Level 2 measurement, incorporating assumptions of changes in cash flows due to estimated prepayments, estimated costs to service and estimates of other servicing income.  Market assumptions are used and primarily include discount rates and expected prepayments.  As of September 30, 2008, the Company’s mortgage servicing rights measured at fair value totaled $1.07 million.  During the third quarter of 2008, the Company recorded $94,945 of further impairment of mortgage servicing rights.  This was partially offset by $6,312 in new servicing rights income, resulting in a net negative valuation adjustment of $88,633 for the third quarter of 2008.

      Loans that are deemed to be impaired or transferred to other real estate owned are valued at the lower of cost or the fair value of the underlying real estate collateral.  Impaired loans are measured at fair value on a nonrecurring basis, with such fair values obtained using independent appraisals.  The fair market value of properties transferred to other real estate owned is determined prior to transferring the balance of the loan to other real estate owned.  The balance transferred to other real estate owned is the lesser of the estimated fair market value of the property, or the book value of the loan, less estimated cost to sell.  The Company considers impaired loans and other real estate owned to be level 2 inputs.

NOTE 9.  LEGAL PROCEEDINGS

     The Company has a pending legal issue involving safe deposit box procedures with a potential claim amounting to $50,000.  The Company’s subsidiary, Community National Bank, as successor by merger to LyndonBank, is a party to a contract dispute with a service provider involving disputed charges of approximately $72,000.  The dispute is currently in mediation and may proceed to binding arbitration if the parties are unable to settle the matter.  Currently the Company has not accrued for either of these matters, but will do so before year end if either matter is still outstanding at that time.

     In addition to the foregoing matters, in the normal course of business the Company and its subsidiary are involved in litigation that is considered incidental to their business.  Management does not expect that any such litigation will be material to the Company's consolidated financial condition or results of operations.

NOTE 10. JUNIOR SUBORDINATED DEBT SECURITIES DUE 2037

     As of September 30, 2008, the Company had outstanding $12,887,000 principal amount of Junior Subordinated Debentures Due 2037 (the “Debentures”).  The Debentures, which were issued to finance the LyndonBank acquisition (see Note 7), pay interest quarterly at a fixed annual rate of interest of 7.56% through December 15, 2012, and thereafter at a floating rate equal to the 3-month London Interbank Offered Rate (LIBOR) plus 2.85% and mature on December 15, 2037.  The Debentures are subordinated and junior in right of payment to all senior indebtedness of the Company, as defined in the Indenture dated as of October 31, 2007 (the “Indenture”) between the Company and First Tennessee Bank, National Association, as Trustee.  The Debentures are first redeemable, in whole or in part, by the Company on December 15, 2012.

     The Debentures were issued and sold to CMTV Capital Trust I (the “Trust”).  The Trust is a special purpose trust funded by a capital contribution of $387,000 from the Company, in exchange for 100% of the Trust’s common equity.  The Trust was formed for the purpose of issuing corporation-obligated mandatorily redeemable Capital Securities (“Capital Securities”) in the principal amount of $12.5 million to third-party investors and using the proceeds from the sale of such Capital Securities and the Company’s initial capital contribution to purchase the Debentures.  The Debentures are the sole asset of the Trust.  Distributions on the Capital Securities issued by the Trust are payable quarterly at a rate per annum equal to the interest rate being earned by the Trust on the Debentures.  The Capital Securities are subject to mandatory redemption, in whole or in part, upon repayment of the Debentures.  The Company has entered into an agreement which, taken collectively, fully and unconditionally guarantees the Capital Securities subject to the terms of the guarantee.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

for the Period Ended September 30, 2008

FORWARD-LOOKING STATEMENTS

     The Company's Management's Discussion and Analysis of Financial Condition and Results of Operations may contain certain forward-looking statements about the Company's operations, financial condition and business. When used therein, the words "believes," "expects," "anticipates," "intends," "estimates," "plans," "predicts," or similar expressions, indicate that management of the Company is making forward-looking statements.

     Forward-looking statements are not guarantees of future performance.  They necessarily involve risks, uncertainties and assumptions.  Future results of the Company may differ materially from those expressed in these forward-looking statements.  Examples of forward looking statements contained in this discussion include, but are not limited to, management’s expectations as to future asset growth, income trends, results of operations and other matters reflected in the Overview section, estimated contingent liability related to the Company's participation in the Federal Home Loan Bank (FHLB) Mortgage Partnership Finance (MPF) program, assumptions made within the asset/liability management process, and management's expectations as to the future interest rate environment and the Company's related liquidity level. Although these statements are based on management's current expectations and estimates, many of the factors that could influence or determine actual results are unpredictable and not within the Company's control.  Readers are cautioned not to place undue reliance on such statements as they speak only as of the date they are made.  The Company claims the protection of the safe harbor for forward-looking statements provided in the Private Securities Litigation Reform Act of 1995.

     Factors that may cause actual results to differ materially from those contemplated by these forward-looking statements include, among others, the following possibilities: (1) competitive pressures increase among financial services providers in the Company's northern New England market area or in the financial services industry generally, including competitive pressures from nonbank financial service providers, from increasing consolidation and integration of financial service providers, and from changes in technology and delivery systems, which erode the competitive advantage of in-market branch facilities; (2) interest rates change in such a way as to reduce the Company's margins; (3) adverse changes in the financial markets or in general economic conditions, either nationally or regionally, result in a deterioration in credit quality or a diminished demand for the Company's products and services; (4) changes in laws or government rules, or the way in which courts interpret those laws or rules, adversely affect the Company's business; and (5) unanticipated difficulties, expenses or delays might arise in the integration of LyndonBank’s operations or we may not fully realize the anticipated benefits of the acquisition or realize them within expected timeframes.

     These risks are heightened by the recent adverse developments in national and global financial markets.  During 2008, the capital and credit markets have experienced extended and significant volatility and disruption.  We are unable to predict what effect these uncertain market conditions will have on the banking industry generally or, in particular, on the Company’s business, financial condition and results of operations.

A Note to Reader

     The Company’s acquisition of LyndonBank became effective on December 31, 2007.  Accordingly, the Company’s results for the third quarter and first nine months of 2008 discussed in this report are of the merged institution.  The comparative period information in this report as of September 30, 2007 and for the third quarter and nine months then ended does not include data for LyndonBank.

OVERVIEW

     The Government’s takeover of Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) had a negative impact on the Company’s third quarter earnings.  The Company owned two classes of Fannie Mae preferred stock and after these agencies were placed under conservatorship, the value of their stock plummeted.  This resulted in a write down of the investment portfolio and a non-cash charge to earnings in the amount of approximately $739,000 for the third quarter.  Section 301 of the Emergency Economic Stabilization Act (EESA) of 2008 provides tax relief to banking organizations that have suffered losses on certain holdings of Fannie Mae and Freddie Mac preferred stock by changing the character of these losses from capital to ordinary for federal income tax purposes.  Although the EESA allows the write down to be taken as an ordinary loss, the tax benefit is not applicable until the fourth quarter according to generally accepted accounting principles.  Therefore, the write down of $739,000 was taken in the third quarter; and the applicable tax benefit of approximately $251,000 will be taken in the fourth quarter.

     Total assets at September 30, 2008 were $489.55 million compared to $502.03 million at December 31, 2007 and $350.81 at September 30, 2007.  The year-to-year increase reflects the acquisition of LyndonBank.  After a seasonal decline in assets at the end of the second quarter due to the municipal loans that mature, total assets have increased as new municipal loans were booked during the first weeks of the third quarter.  Although assets have increased during this quarter, total assets are still below prior year-end levels.  The Company’s cyclical pattern is to grow deposits through out the fourth quarter.  Gross loans increased from year-end by $1.46 million while deposits decreased by $27.09 million.  The decrease in deposits during the first half of the year is due in part to seasonal municipal activity; however this year, the Company also experienced some post-merger deposit runoff.  Low interest rates have made growing deposits a challenge.  The Company is also aware that the recent turmoil in the investment banking industry has caused erosion in customer confidence.  The increase in FDIC insurance coverage from $100,000 to $250,000 through the end of 2009 provided in the EESA has helped ease customers’ fears.

     A major component of the EESA is the Troubled Asset Relief Program (TARP) Capital Purchase Program (the “Program”).  Under the Program, the U.S. Treasury Department will purchase from participating banking institutions a limited amount of senior perpetual preferred securities equal to up to 3% of the institution’s risk-weighted assets, for a purchase price (liquidation preference) of $1,000 per share.  Treasury will also receive warrants for the purchase of common stock having an aggregate market value equal to 15% of the amount of its preferred stock investment, with the number of common shares and the warrant exercise price based on the average market price of the common stock for the 20 trading days preceding Treasury’s approval of the institution’s application.  The preferred shares will pay an annual dividend of 5% for five years, which then increases to 9%, and are redeemable in whole or in part at any time after three years.  The preferred shares, warrants and any common stock issued upon exercise of the warrants must be freely transferable.  For so long as Treasury holds any of a banking institution’s securities, subject to certain exceptions, the institution will be subject to limitations on certain executive compensation expenses, increases in dividend payments and on share buy back programs.  Participation in the program is voluntary, although the Treasury Department is encouraging healthy banks to participate.  The objective of the Program is to strengthen the financial system and increase credit availability in the economy, by building stronger capital base in the financial sector, especially in healthy banks, thereby providing them with additional capital to lend.

     Although the Company is “well capitalized” under all applicable regulatory measures, management believes that the TARP Capital Purchase Program represents a useful, cost-effective source of additional Tier 1 capital, and is considering whether to file an application under the Program.  Issuance of the preferred stock to Treasury would require the consent of the Company's existing preferred shareholders (three local banking institutions). The terms of any such investment by Treasury in the Company could differ from those described above.  That description is based on the terms announced by Treasury thus far for stock-exchange listed companies, which Treasury has stated may be modified in some respects for other banking organizations, including smaller public companies, such as Community Bancorp.

     The Company had strong enough core earnings to absorb the loss from the write down of the Fannie Mae preferred stock and reported positive earnings for both comparison periods.  Net income for the third quarter of 2008 was $314,613.  Without the write down, net income would have been $1.05 million compared to $927,172 for the third quarter of 2007.  Earnings per common share were reported as $0.06 for the third quarter of 2008 compared to earnings per common share of $0.21 for the same period last year.  Net interest income, after the provision for loan losses, was $4.04 million for the third quarter of 2008, compared to $3.28 million for the third quarter of 2007.  Yields on assets have stabilized somewhat while deposit rates continue to decrease.  This combined with some steepening of the yield curve has resulted in some improvement in spreads since the first two quarters.  Loan demand has been steady.  However, since much of the activity consists of refinancings, the increased loan activity has not resulted in significant growth of the portfolio.

     Non-interest income, which is derived primarily from charges and fees on deposit and loan products, was $1.08 million for the third quarter of 2008 compared to $1.11 million for the second quarter of 2007, a decrease of 2.4%.  This decrease is largely due to mark-to-market accounting adjustments to the mortgage servicing rights (MSR) which resulted in a net negative valuation adjustment and charge to income of $88,633 for the third quarter of 2008 compared to MSR income of $48,467 for the same period in 2007.    Non-interest expense, which is where the write down of the Fannie Mae preferred stock is carried, was $4.64 million for the third quarter of 2008 versus $3.25 million for the 2007 comparison period, an increase of 43%.  Without the write down, non-interest expense would have been $3.90 million for the quarter, an increase of 20% over the same quarter last year.  With most of the merger related costs having been expensed in the first quarter, expenses are starting to reflect the normal post-merger operating expense levels for the Company.  The regulatory environment continues to increase operating costs and place extensive burden on management resources to comply with rules such as Sarbanes-Oxley Act of 2002, the US Patriot Act and the Bank Secrecy Act to protect the U.S. financial system and the customer from fraud, identity theft, anti-money laundering, and terrorism.

     The following pages describe our third quarter and nine months ended September 30, 2008 financial results in much more detail. Please take the time to read them to more fully understand the results of those periods in relation to the 2007 comparison periods.  The discussion below should be read in conjunction with the Consolidated Financial Statements of the Company and related notes included in this report and with the Company's Annual Report on Form 10-K for the year ended December 31, 2007.  This report includes forward-looking statements within the meaning of the Securities and Exchange Act of 1934 (the "Exchange Act"). (See “FORWARD-LOOKING STATEMENTS” above.)

CRITICAL ACCOUNTING POLICIES

     The Company’s consolidated financial statements are prepared according to accounting principles generally accepted in the United States of America.  The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities in the consolidated financial statements and related notes.  The Securities and Exchange Commission (SEC) has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the Company’s financial condition and results of operations, and which require the Company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.  Because of the significance of these estimates and assumptions, there is a high likelihood that materially different amounts would be reported for the Company under different conditions or using different assumptions or estimates.

     Management evaluates on an ongoing basis its judgment as to which policies are considered to be critical. Management believes that the calculation of the allowance for loan losses (ALL) is a critical accounting policy that requires the most significant judgments and estimates used in the preparation of its consolidated financial statements.  In estimating the ALL, management considers historical experience as well as other factors including the effect of changes in the local real estate market on collateral values, current economic indicators and their probable impact on borrowers and changes in delinquent, non-performing or impaired loans.  Management’s estimates used in calculating the ALL may increase or decrease based on changes in these factors, which in turn will affect the amount of the Company’s provision for loan losses charged against current period income.  Actual results could differ significantly from these estimates under different assumptions, judgments or conditions.

     Occasionally, the Company acquires property in connection with foreclosures or in satisfaction of debt previously contracted.  To determine the value of property acquired in foreclosure, management often obtains independent appraisals for significant properties.  Because the extent of any recovery on these loans depends largely on the amount the Company is able to realize upon liquidation of the underlying collateral, the recovery of a substantial portion of the carrying amount of foreclosed real estate is susceptible to changes in local market conditions.  The amount of the change that is reasonably possible cannot be estimated.  In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for losses on loans and foreclosed real estate.  Such agencies may require the Company to recognize additions to the allowances based on their judgments about information available to them at the time of their examination.

Companies are required to perform periodic reviews of individual securities in their investment portfolios to determine whether decline in the value of a security is other than temporary. A review of other-than-temporary impairment requires companies to make certain judgments regarding the materiality of the decline, its effect on the financial statements and the probability, extent and timing of a valuation recovery and the Company’s intent and ability to hold the security. Pursuant to these requirements, management assesses valuation declines to determine the extent to which such changes are attributable to fundamental factors specific to the issuer, such as financial condition, business prospects or other factors or market-related factors, such as interest rates. Declines in the fair value of securities below their cost that are deemed to be other than temporary are recorded in earnings as realized losses.

     Under current accounting rules, mortgage servicing rights associated with loans originated and sold, where servicing is retained, are capitalized and included in other assets in the consolidated balance sheet. Mortgage servicing rights are amortized into non-interest income in proportion to, and over the period of, estimated future net servicing income of the underlying financial assets. Mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. The value of capitalized servicing rights represents the present value of the future servicing fees arising from the right to service loans in the portfolio. The carrying value of the mortgage servicing rights is periodically reviewed for impairment based on a determination of fair value and impairment, if any, is recognized through a valuation allowance and is recorded as amortization of other assets.  Fair value in excess of the carrying value of mortgage servicing rights is not recognized.  Critical accounting policies for mortgage servicing rights relate to the initial valuation and subsequent impairment tests. The methodology used to determine the valuation of mortgage servicing rights requires the development and use of a number of estimates, including anticipated principal amortization and loan prepayments. Events that may significantly affect the estimates used are changes in interest rates and the payment performance of the underlying loans.  As required by SFAS No. 156, “Accounting for Servicing of Financial Assets-an Amendment to FASB Statement No. 140”, the Company utilizes the services of a third party provider to perform a quarterly valuation analysis.

     Accounting for a business combination requires the application of the purchase method of accounting.  Under the purchase method, the Company is required to record the net assets and liabilities acquired through the merger at fair market value, with the excess of the purchase price over the fair market value of the net assets recorded as goodwill and evaluated annually for impairment.  The determination of fair value requires management to make various assumptions, including discount rates, and changes in those assumptions could significantly affect fair values.

     Management utilizes numerous techniques to estimate the carrying value of various assets held by the Company, including, but not limited to, bank premises and equipment and deferred taxes. The assumptions considered in making these estimates are based on historical experience and on various other factors that are believed by management to be reasonable under the circumstances.  Management acknowledges that the use of different estimates or assumptions could produce different estimates of carrying values.

RESULTS OF OPERATIONS

     The third quarter of 2008 and the nine months then ended reflect the combined operations following the Company’s acquisition of LyndonBank, which became effective on December 31, 2007.  Accordingly, in the discussion that follows, prior period income and expense figures are for the Company prior to the merger, and do not include LyndonBank’s results of operations.

     The Company’s net income for the third quarter and first nine months of 2008 was adversely affected by a write down in the amount of $739,332 taken for the Company’s investment in two classes of Fannie Mae preferred stock.  Although the write down was taken in the third quarter and the EESA permits the associated loss to be treated as ordinary rather than capital for tax purposes, due to the fourth quarter enactment date of EESA, the tax benefit amounting to approximately $251,000 will not be recorded until the fourth quarter.

     The Company’s net income for the third quarter of 2008 was $314,613, representing a decrease of $612,559 or 66.1% over net income of $927,172 for the third quarter of 2007. This resulted in earnings per common share of $0.06 and $0.21, respectively, for the third quarters of 2008 and 2007.  Despite the volatility in the financial markets, core earnings (net interest income) for the third quarter of 2008 were strong, with an increase of $830,245 or 25.0% over the third quarter of 2007.  Interest income on loans, the major component of interest income, increased $1.1 million or 23.7%, for the third quarter of 2008 to $5.9 million compared to $4.8 million for the third quarter of 2007.  Interest and dividend income on investments increased $315,521 or 61.6%. Interest paid on deposits, the major component of interest expense, increased $184,069 or 9.4%, between periods. Interest paid on junior subordinated debentures, a new component of interest expense between comparison periods, amounted to $243,564 for the third quarter of 2008.  This interest is paid out quarterly on the Company’s $12.9 million in junior subordinated debentures issued in October, 2007 in connection with a trust preferred securities financing to finance the Company’s acquisition of LyndonBank.

     Net income for the first nine months of 2008 was $1.4 million, representing a decrease of $1.1 million, or 42.9% compared to $2.5 million for the first nine months of 2007, with earning per share of $0.29 and $0.56 for the respective nine month periods.  Core earnings for the same comparison periods were $11.8 million for 2008, compared to $9.9 million for 2007, resulting in an increase of approximately $1.8 million, or 18.3%.  Interest income on loans increased $3.5 million or 24.0% for the first nine months of 2008 to approximately $17.9 million compared to $14.4 million for the same period in 2007, and interest and dividend income on investments increased $1.2 million or 82.9% between periods, to $2.6 million for the first nine months of 2008, versus $1.4 million for the 2007 comparison period.  Interest paid on deposits increased $1.7 million to $7.5 million for the first nine months of 2008 compared to $5.8 million for the first nine months of 2007, and interest paid on junior subordinated debentures amounted to $732,776 for the first nine months of 2008.  These increases are predominantly the result of increases in earning assets and interest bearing liabilities related to the Company’s recent merger with LyndonBank.  As a result of the merger, the Company is required to amortize the fair value adjustments of the acquired loans and deposits through net interest income.  The loan fair value adjustment was a net premium, therefore resulting in a decrease of $56,283 in interest income for the third quarter of 2008, and $253,100 for the first nine months of 2008.  The amortization of the core deposit intangible and the certificate of deposit fair value adjustment resulted in $273,050 of additional interest expense for the third quarter of 2008 and $819,150 for the first nine months of 2008.  The Company also incurred some additional expenses during the first half of 2008 that were a direct result of the merger, including costs to terminate service contracts held by the former LyndonBank, costs of outside contracts to complete the computer and network conversions, the cost of a communication booklet for the customers, and salary and wages for the personnel needed to complete the merger and the conversion of computer systems.

      Return on average assets (ROA), which is net income divided by average total assets, measures how effectively a corporation uses its assets to produce earnings.  Return on average equity (ROE), which is net income divided by average shareholders' equity, measures how effectively a corporation uses its equity capital to produce earnings.  ROA and ROE were significantly lower in the third quarter and first nine months of 2008 compared to 2007, reflecting the effect of merger-related expenses including the write down on the Fannie Mae preferred stock discussed throughout the narrative.  The following table shows these ratios annualized for the comparison periods.

For the third quarter ended September 30,	2008			2007
Return on Average Assets		0.25	%		1.03	%
Return on Average Equity		3.63	%		11.66	%
For the first nine months ended September 30,	2008			2007
Return on Average Assets		0.38	%		.93	%
Return on Average Equity		5.41	%		10.82	%

INTEREST INCOME LESS INTEREST EXPENSE (NET INTEREST INCOME)

     Net interest income, the difference between interest income and interest expense, represents the largest portion of the Company's earnings, and is affected by the volume, mix, and rate sensitivity of earning assets and interest bearing liabilities, market interest rates and the amount of non-interest bearing funds which support earning assets.  The three tables below provide a visual comparison of the consolidated figures, and are stated on a tax equivalent basis assuming a federal tax rate of 34%, the Company’s corporate tax rate. Therefore, to equalize tax-free and taxable income in the comparison, we divide the tax-free income by 66%, with the result that every tax-free dollar is equal to $1.52 in taxable income.

     Tax-exempt income is derived from municipal investments, which comprise the entire held-to-maturity portfolio of $46.4 million, along with a small municipal portfolio classified as available-for-sale amounting to approximately $1.2 million that was acquired through the merger with LyndonBank.  The Company also acquired Fannie Mae preferred stock through the acquisition of LyndonBank which is also included in its available-for-sale portfolio.  Prior to the third quarter of 2008, this preferred stock carried a fair value of approximately $1.2 million with a 70% tax exemption on the interest income generated.  During the third quarter of 2008, the Company consulted an independent securities valuation firm to determine a more accurate estimated fair value at the merger acquisition date, December 31, 2007.  The fair value adjustment amounted to $656,347 and was recorded through goodwill.  When Fannie Mae was placed under conservatorship, the Company was required to write down the stock to a fair value of $162,610 as of September 30, 2008, resulting in a write down of $739,332 during the third quarter of 2008.  Although the EESA accords ordinary loss rather than capital loss treatment to the write down, that tax benefit will not be recognized until the fourth quarter.  Dividend payments, which amounted to $68,843 for the first nine months of 2008, have ceased on this stock beginning with the last quarter of 2008.

     The following table shows the reconciliation between reported net interest income and tax equivalent, net interest income for the nine month comparison periods of 2008 and 2007:

For the nine months ended September 30,	2008		2007
Net interest income as presented	$	11,755,090	$	9,940,186
Effect of tax-exempt income		684,486		356,199
Net interest income, tax equivalent	$	12,439,576	$	10,296,385

AVERAGE BALANCES AND INTEREST RATES

     The table below presents average earning assets and average interest-bearing liabilities supporting earning assets.  Interest income (excluding interest on non-accrual loans) and interest expense are both expressed on a tax equivalent basis, both in dollars and as a rate/yield for the 2008 and 2007 comparison periods.  Loans are stated before deduction of non-accrual loans, unearned discount and allowance for loan losses.  Average earning assets and liabilities for the 2007 comparison period do not include the earning assets and liabilities of LyndonBank.

	For the Nine Months Ended:
			2008							2007
	Average		Income/		Rate/			Average		Income/		Rate/
	Balance		Expense		Yield			Balance		Expense		Yield
EARNING ASSETS
Loans (gross)	$	356,861,435	$	17,866,539		6.69	%	$	265,366,409	$	14,406,502		7.26	%
Taxable Investment Securities		33,252,461		1,142,179		4.59	%		21,882,922		630,477		3.85	%
Tax Exempt Investment Securities		45,715,510		2,043,005		5.97	%		22,309,646		1,047,645		6.28	%
Federal Funds Sold and Interest   Earning Deposit Accounts		1,751,793		63,044		4.81	%		4,948,974		191,178		5.16	%
Other Investments		4,118,120		148,908		4.83	%		2,370,985		126,370		7.13	%
TOTAL	$	441,699,319	$	21,263,675		6.43	%	$	316,878,936	$	16,402,172		6.92	%
INTEREST BEARING LIABILITIES & EQUITY
NOW & Money Market Funds	$	120,495,421	$	2,081,421		2.31	%	$	71,331,482	$	1,367,627		2.56	%
Savings Deposits		50,204,538		325,358		0.87	%		39,401,552		102,845		0.35	%
Time Deposits		176,392,223		5,091,439		3.86	%		132,389,714		4,303,985		4.35	%
Fed Funds Purchased and Other   Borrowed Funds		16,988,013		340,637		2.68	%		2,223,615		90,642		5.45	%
Repurchase Agreements		16,030,850		195,746		1.63	%		14,489,925		240,688		2.22	%
Capital Lease Obligations		933,634		56,722		8.12	%		0		0		0.00	%
Junior Subordinated Debentures		12,887,000		732,776		7.60	%		0		0		0.00	%
TOTAL	$	393,931,679	$	8,824,099		2.99	%	$	259,836,288	$	6,105,787		3.14	%
Net Interest Income			$	12,439,576						$	10,296,385
Net Interest Spread(1)						3.44	%						3.78	%
Interest Margin(2)						3.76	%						4.34	%

(1)  Net interest spread is the difference between the yield on average earning assets and the rate paid on average interest bearing liabilities.

(2)  Interest margin is net interest income divided by average earning assets.

     The average volume of earning assets for the first nine months of 2008 increased $124.8 million, or 39.4% compared to the same period of 2007, reflecting the effect of the LyndonBank merger, while average yield decreased 49 basis points reflecting the low interest rate environment.  The average volume of loans increased $91.5 million or 34.5%, and the average volume of the investment portfolio increased $36.5 million or 78.5% between periods.  These increases are attributable to the merger with LyndonBank at December 31, 2007, in which the Company acquired $94.8 million in loans and $23.5 million in available-for-sale investments.  LyndonBank figures are actual, compared to the average volumes discussed above and throughout this section.  Interest earned on the loan portfolio comprised approximately 84.0% of total interest income for the first nine months of 2008 and 87.8% for the 2007 comparison period.  Interest earned on tax exempt investments (which is presented on a tax equivalent basis) comprised 9.6% of net interest income for the first nine months of 2008 compared to 6.4% for the same period in 2007.   As discussed above, the Company acquired certain tax exempt, or partially tax exempt, investments in the merger with LyndonBank, contributing to this increase. Those investments included the Fannie Mae preferred stock, which was originally booked at $1.5 million using reported trading prices on December 31, 2007.  A revised valuation analysis by an independent third party resulted in a fair market value of $902,000 at December 31, 2007, creating a goodwill adjustment of $656,347.  At September 30, 2008, the other-than-temporary impairment of the Fannie Mae preferred stock was determined to be $739,332, resulting in a noncash charge to income in that amount.

     The average volume of interest-bearing liabilities for the first nine months of 2008 increased approximately $134.1 million, or 51.6% over the 2007 comparison period, again reflecting the effect of the LyndonBank merger, while the average rate paid on these accounts decreased 15 basis points, which is attributable to the low interest rate environment.  The average volume of time deposits increased $44.0 million, or 33.2%, and the interest paid on time deposits increased $787,454, or 18.3%, and comprised 57.7% and 70.5%, respectively, of total interest expense for the 2008 and 2007 comparison periods.  NOW and money market funds increased $49.2 million or 68.9%, and the interest paid on these funds increased $713,794, or 52.2% and comprised 23.6% and 22.4%, respectively, of the total interest expense for the first nine months of 2008 and 2007.  The Company acquired actual balances totaling $29.7 million in NOW and money market funds and $54.1 million in time deposits at December 31, 2007 through the merger with LyndonBank.  The average rate paid on the capital lease obligation the Company acquired through the merger was 8.12%, and the average rate paid on the junior subordinated debentures was 7.60%.  Although these rates are quite high, the rest of the portfolio, which is substantially more than these two items, reported decreases for the first nine months of 2008, accounting for the decrease in the overall average rate paid on interest-bearing liabilities. The junior subordinated debentures totaling $12.9 million helped to finance the year-end acquisition of LyndonBank.

     The cumulative result of all these changes was a decline of 34 basis points in the net interest spread and an increase of $2.1 million in tax equivalent net interest income.  However, the significant increase in the balance sheet resulted in a decrease of 58 basis points in the interest margin.

    The following table summarizes the variances in interest income and interest expense on a fully tax-equivalent basis for the 2008 and 2007 comparison periods resulting from volume changes in average assets and average liabilities and fluctuations in rates earned and paid.

CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
	Variance			Variance
RATE / VOLUME	Due to			Due to			Total
	Rate(1)			Volume(1)			Variance
INCOME EARNING ASSETS
Loans (2)		(1,508,218	)		4,968,255			3,460,037
Taxable Investment Securities		184,306			327,396			511,702
Tax Exempt Investment Securities		(104,036	)		1,099,396			995,360
Federal Funds Sold and Interest Earning Deposit Accounts		(13,006	)		(115,128	)		(128,134	)
Other Investments		(70,634	)		93,172			22,538
Total Interest Earnings		(1,511,466	)		6,372,969			4,861,503
INTEREST BEARING LIABILITIES
NOW & Money Market Funds		(227,567	)		941,361			713,794
Savings Deposits		194,233			28,280			222,513
Time Deposits		(644,195	)		1,431,649			787,454
Fed Funds Purchased and Other Borrowed Funds		(351,846	)		601,841			249,995
Repurchase Agreements		(70,528	)		25,586			(44,942	)
Capital Lease Obligations		56,722			0			56,722
Junior Subordinated Debentures		732,776			0			732,776
Total Interest Expense		(310,405	)		3,028,717			2,718,312
Changes in Net Interest Income		(1,201,061	)		3,344,252			2,143,191

(1) Items which have shown a year-to-year increase in volume have variances allocated as follows:

          Variance due to rate = Change in rate x new volume

          Variance due to volume = Change in volume x old rate

     Items which have shown a year-to-year decrease in volume have variances allocated as follows:

          Variance due to rate = Change in rate x old volume

          Variances due to volume = Change in volume x new rate

(2) Loans are stated before deduction of unearned discount and allowances for loan losses.  The

     principal balances of non-accrual loans is included in calculations of the yield on loans, while

     the interest on these non-performing assets is excluded.

NON-INTEREST INCOME AND NON-INTEREST EXPENSE

     Non-interest income decreased $26,384 or 2.4% for the third quarter of 2008 compared to the third quarter of 2007, from $1.11 million to $1.08 million.  Service fees increased $212,265 or 60.6%, while other income decreased $272,573 or 35.9% for the third quarter of 2008 compared to the same quarter in 2007.  The increase in service fees was not only attributable to the increase in deposit accounts acquired through the merger with LyndonBank, but also the result of an increase in various service fees on deposit accounts and increased customer utilization.  The Company sold its credit card portfolio during the third quarter of 2007 resulting in a gain of $257,836, partially accounting for the decrease in other income for the third quarter of 2008 compared to the third quarter of 2007.  Non-interest income increased $488,567 or 18.0% for the first nine months of 2008 compared to the same period in 2007 from $2.7 million to $3.2 million.  Service fees increased $609,931 or 59.1%, while other income decreased $220,899 or 13.2%.  The Company acquired bank owned life insurance (BOLI) through the merger, and recognized $99,535 in non-taxable income on this asset during the first nine months of 2008.  Commissions and distributions from insurance companies increased $261,545, with $336,415 reported for the first nine months of 2008 versus $74,870 for the same period in 2007.  This increase was attributable primarily to a receivable booked based on the balance of undistributed income allocation held by the mortgage guaranty reinsurer New England Mortgage Insurance Exchange (NEMIE) for its subscribers.  The Company is a subscriber of NEMIE and receives distributions annually.  Income from the sale and servicing of loans was down approximately $100,000 due in part to a decrease in the servicing percentage fee the Company receives as well as a decrease in secondary market volume.  Investment income from assets held in a rabbi trust under the Company’s Supplemental Employee Retirement Plan (SERP) was down $123,114 due to the current financial market.

     Non-interest expense increased $1.4 million or 43.0% for the third quarter of 2008 compared to 2007.  Salaries and wages increased $192,404 or 16.5% for the third quarter of 2008 compared to the same period in 2007 attributable to normal year to year increases as well as an increase in staff from the LyndonBank acquisition.  The merger with LyndonBank also resulted in the Company acquiring more premises and equipment, accounting for the increase of $220,374 or 40.9% in occupancy expenses for the third quarter of 2008 compared to the third quarter of 2007.  As mentioned in various sections throughout this discussion, the Company wrote down its investment in Fannie Mae preferred stock during the third quarter of 2008 resulting in a noncash expense totaling $739,332.  The tax benefit on this write down of approximately $251,000 was not recordable during the third quarter under GAAP, but will be recorded during the fourth quarter of 2008.  Non-interest expense increased $3.8 million or 39.4% for the first nine months of 2008 compared to the same period in 2007 to end the first nine months of 2008 at $13.3 million, compared to $9.6 million in 2007.  Salaries and wages heads the list of increases at $1.1 million or 31.1%, followed closely by other expenses with an increase of $915,245 or 30.5%, and occupancy expense with an increase of $640,009 or 36.0% for the first nine months of 2008 compared to the same period in 2007.  All increases are again attributable to the LyndonBank merger ranging from an increase in personnel, both permanent and temporary, to increases in building related expenses such as taxes, rent, heating and telephone.  Advertising and postage expenses were higher due in part to an increased customer base as well as an increase in mailings due to the Company’s efforts to keep customers informed of any and all changes occurring as a result of the merger process.

     Management monitors all components of other non-interest expenses; however, a quarterly review is performed to assure that the accruals for these expenses are accurate.  This helps alleviate the need to make significant adjustments to these accounts that in turn affect the net income of the Company.

APPLICABLE INCOME TAXES

     Provision for income taxes decreased $45,093 or 21.2% for the third quarter of 2008 compared to the same quarter of 2007, and decreased $518,331 or 101.1% for the first nine months of 2008 compared to the first nine months of 2007,  These decreases are the direct result of the decrease in income before taxes of $657,652 and $1.6 million, respectively for the third quarter and nine month comparison periods.  At December 31, 2007, the Company’s deferred tax liability increased through the valuation of fixed assets and deposits acquired through the merger with LyndonBank contributing to the increase of $255,826 in the deferred tax provision thereby decreasing taxes currently payable.

     As noted previously, in accordance with GAAP, an estimated tax benefit of approximately $251,000 from the write down of the Company’s Fannie Mae preferred shareholdings will be recognized in the fourth quarter of 2008.

CHANGES IN FINANCIAL CONDITION

     The merger of the Bank and LyndonBank occurred on December 31, 2007. Therefore, the assets and liabilities presented in the discussion below at that date and at September 30, 2008 include the assets and liabilities of the former LyndonBank.

     The following table reflects the composition of the Company's major categories of assets and liabilities as a percent of total assets or liabilities and shareholders’ equity, as the case may be, as of the dates indicated:

ASSETS	30-Sep-08				31-Dec-07				30-Sep-07
Loans (gross)*	$	359,100,867	73.35	%	$	356,571,083	71.03	%	$	256,909,154	73.23	%
Available for Sale Securities		29,638,437	6.05	%		46,876,771	9.34	%		25,074,048	7.15	%
Held to Maturity Securities		46,368,055	9.47	%		34,310,833	6.83	%		29,431,718	8.39	%
*includes loans held for sale
LIABILITIES
Time Deposits	$	180,358,538	36.84	%	$	185,136,803	36.88	%	$	134,843,845	38.44	%
Savings Deposits		50,523,075	10.32	%		46,069,943	9.18	%		39,505,522	11.26	%
Demand Deposits		54,499,372	11.13	%		64,019,707	12.75	%		50,485,030	14.39	%
NOW & Money Market Funds		122,491,455	25.02	%		120,993,657	24.10	%		77,204,394	22.01	%

     The Company's loan portfolio increased $2.5 million or 0.7% from December 31, 2007 to September 30, 2008, and $102.2 million or 39.8%, from September 30, 2007 to September 30, 2008.  The year-to-year comparison reflects $94.0 million in loans recorded as a result of the LyndonBank acquisition on December 31, 2007.  Available-for-sale investments decreased $17.2 million or 36.8% through maturities and calls during the first nine months of 2008, as these funds were then used to cover the outflow of deposit accounts and to fund loan demand.  The increase of $4.6 million in available-for-sale investments at September 30, 2008 compared Sept 30, 2007 is the result of $23.5 million in available-for-sale securities acquired in the merger, less $18.9 million in maturities and calls as well as the write down of the Fannie Mae preferred stock.  Held-to-maturity securities increased $12.1 million or 35.1% during the first nine months of 2008, and $16.9 million or 57.5% year to year.  All LyndonBank investments were classified as available-for-sale, therefore, none of the increases in the held-to-maturity portfolio were attributable to securities acquired in the merger.

     Time deposits decreased $4.8 million or 2.6% for the first nine months of 2008, while an increase of $45.5 million or 33.8% is noted year to year.  This year to year increase, when offset by the acquisition of $53.4 million in time deposits on December 31, 2007 in the LyndonBank merger, net of fair value adjustments and the sale of deposits associated with the Vergennes branch of LyndonBank, nets a decrease of $7.9 million from September 30, 2007 to September 30, 2008. Demand deposits decreased $9.5 million or 14.9% for the first nine months of 2008, compared to an increase of just over $4.0 million or approximately 8.0% year to year.  Although $18.1 million in demand deposits were acquired in the merger, approximately $8 million were reclassified to NOW accounts after the conversion, resulting in a net decrease of $6.1 million year to year.  Savings deposits increased $4.5 million or 9.7% for the first nine months of 2008, and $11.0 million or 27.9% year to year.  Approximately $8.8 million were acquired in the merger, making the net increase $2.2 million or 4.6%.  NOW and money market funds reported an increase of $1.5 million or 1.2% for the first nine months of 2008, but when netted against the $8 million in funds that were reclassified to NOW accounts, a decrease of $6.5 million was recognized.  NOW and money market accounts increased $45.3 million or 58.7% year to year, or $37.3 million net of the account reclassification during 2008.  The Company anticipated a post-merger runoff of 3% in non-maturing deposits during the first quarter of 2008; actual run off of these deposits during the first quarter was approximately 5%.  The expected seasonal increase in municipal deposits has begun as municipalities have started collecting tax payments from its residents and business customers.

RISK MANAGEMENT

Interest Rate Risk and Asset and Liability Management -Management actively monitors and manages its interest rate risk exposure and attempts to structure the balance sheet to maximize net interest income while controlling its exposure to interest rate risk.  The Company's Asset/Liability Management Committee (ALCO) formulates strategies to manage interest rate risk by evaluating the impact on earnings and capital of such factors as current interest rate forecasts and economic indicators, potential changes in such forecasts and indicators, liquidity, and various business strategies.  The ALCO meets monthly to review financial statements, liquidity levels, yields and spreads to better understand, measure, monitor and control the Company’s interest rate risk.  In the ALCO process, the committee members apply policy limits set forth in the Asset Liability, Liquidity and Investment policies approved by the Company’s Board of Directors.  The ALCO's methods for evaluating interest rate risk include an analysis of the effects of interest rate changes on net interest income and an analysis of the Company's interest rate sensitivity "gap", which provides a static analysis of the maturity and repricing characteristics of the entire balance sheet.

     Interest rate risk represents the sensitivity of earnings to changes in market interest rates.  As interest rates change, the interest income and expense streams associated with the Company’s interest sensitive assets and liabilities also change, thereby impacting net interest income (NII), the primary component of the Company’s earnings.  Fluctuations in interest rates can also have an impact on liquidity.  The ALCO uses an outside consultant to perform quarterly rate shock simulations to the Company's net interest income, as well as a variety of other analyses.  It is the ALCO’s function to provide the assumptions used in the modeling process.  The ALCO utilizes the results of this simulation model to quantify the estimated exposure of NII and liquidity to sustained interest rate changes.  The simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all interest-earning assets and interest-bearing liabilities reflected on the Company’s balance sheet.  Furthermore, the model simulates the balance sheet’s sensitivity to a prolonged flat rate environment. All rate scenarios are simulated assuming a parallel shift of the yield curve; however further simulations are performed utilizing a flattening yield curve as well. This sensitivity analysis is compared to the ALCO policy limits which specify a maximum tolerance level for NII exposure over a 1-year horizon, assuming no balance sheet growth, given a 200 basis point (bp) shift upward and a 100 bp shift downward in interest rates.  The analysis also provides a summary of the Company's liquidity position. Furthermore, the analysis provides testing of the assumptions used in previous simulation models by comparing the projected NII with actual NII.  The asset/liability simulation model provides management with an important tool for making sound economic decisions regarding the balance sheet.

     While assumptions are developed based upon current economic and local market conditions, the Company cannot provide any assurances as to the predictive nature of these assumptions including how or when customer preferences or competitor influences might change.  In addition, recent market turmoil and volatility may adversely affect the predictive nature of the Company’s assumptions.

Credit Risk - A primary concern of management is to reduce the exposure to credit loss within the loan portfolio.Management follows established underwriting guidelines, and any exceptions to the policy must be approved by a loan officer with higher authority than the loan officer originating the loan.  The adequacy of the loan loss coverage is reviewed quarterly by the risk management committee of the Board of Directors.  This committee meets to discuss, among other matters, potential exposures, historical loss experience, and overall economic conditions.  Existing or potential problems are noted and addressed by senior management in order to assess the risk of probable loss or delinquency.  A variety of loans are reviewed periodically by an independent firm in order to help ensure accuracy of the Company's internal risk ratings and compliance with various internal policies and procedures, as well as those set by the regulatory authorities.  The Company also employs a Credit Administration Officer whose duties include monitoring and reporting on the status of the loan portfolio including delinquent and non-performing loans.  Credit risk may also arise from geographic concentration of loans.  While the Company’s loan portfolio is derived primarily from its primary market area in northeastern Vermont, geographic concentration is partially mitigated by the continued growth of the Company’s loan portfolio in Washington, Lamoille and Franklin counties, its newest market areas.

The following table reflects the composition of the Company's loan portfolio as of the dates indicated:

	September 30, 2008						December 31, 2007
	Total Loans			% of Total			Total Loans			% of Total
Real Estate Loans
Construction & Land Development	$	16,011,480			4.46	%	$	12,896,803			3.62	%
Farm Land		8,958,744			2.49	%		9,645,648			2.70	%
1-4 Family Residential		206,797,708			57.59	%		195,843,105			54.92	%
Commercial Real Estate		85,187,549			23.72	%		85,576,002			24.00	%
Loans to Finance Agricultural Production		928,658			0.26	%		2,430,454			0.68	%
Commercial & Industrial		24,850,690			6.92	%		31,258,211			8.77	%
Consumer Loans		16,141,842			4.50	%		18,461,620			5.18	%
All Other Loans		224,195			0.06	%		459,241			0.13	%
Gross Loans		359,100,867			100.00	%		356,571,083			100.00	%
Allowance for Loan Losses		(3,058,882	)		-0.65	%		(3,026,049	)		-0.85	%
Unearned net Loan Fees		(352,142	)		-0.14	%		(443,372	)		-0.13	%
Net Loans	$	355,689,843			99.21	%	$	353,101,662			99.02	%

Allowance for loan losses and provisions - The Company maintains an allowance for loan losses at a level that management believes is appropriate to absorb losses inherent in the loan portfolio (See “Critical Accounting Policies”). As of September 30, 2008, the Company maintained a residential loan portfolio (including $19.9 million in home equity lines of credit (HELOC) of $206.8 million, compared to $195.8 million at December 31, 2007, accounting for 57.6% and 54.9%, respectively, of the total loan portfolio.  The commercial real estate portfolio (including construction, land development and farmland loans) totaled $110.2 million and $108.1 million, respectively, at September 30, 2008 and December 31, 2007, comprising 30.7% and 30.3%, respectively, of the total loan portfolio.  The Company's commercial loan portfolio includes loans that carry guarantees from government programs, thereby mitigating the Company's credit risk on such loans.  At September 30, 2008, the Company had $18.2 million in loans of which $12.8 million was guaranteed, compared to almost $19.0 million in loans with a guaranteed portion totaling $14.1 million at December 31, 2007.  The Company's estimate for loan loss coverage is based upon such factors as trends in the volumes of residential and commercial loans secured by real estate, historical loan loss experience on these portfolios, and the experience of loan origination, underwriting and credit administration staff.  Additionally, the Company does not have any “Sub-Prime” loans in its loan portfolio, nor does it intend to become involved with such loans.  The Company utilizes prudent underwriting standards, such as conservative loan-to-value ratios for secured loans, including home equity loans and takes a proactive approach to loan administration, thereby helping to reduce the risk inherent in the loan portfolio.  Based upon management's analysis of these and other factors, management believes its coverage for potential loan loss is adequate for the current environment.

The following table summarizes the Company's loan loss experience for the nine months ended September 30,

	2008			2007
Loans Outstanding End of Period	$	359,100,867		$	256,909,154
Average Loans Outstanding During Period	$	356,861,435		$	265,366,409
Loan Loss Reserve, Beginning of Period	$	3,026,049		$	2,267,821
Loans Charged Off:
Residential Real Estate		56,757			0
Commercial Real Estate		121,166			0
Commercial Loans not Secured by Real Estate		9,635			0
Consumer Loans		95,450			116,782
Total Loans Charged Off		283,008			116,782
Recoveries:
Residential Real Estate		6,585			13,446
Commercial Real Estate		1,601			12,459
Commercial Loans not Secured by Real Estate		12,090			1,944
Consumer Loans		58,068			20,021
Total Recoveries		78,344			47,870
Net Loans Charged Off		204,664			68,912
Provision Charged to Income		237,497			122,500
Loan Loss Reserve, End of Period	$	3,058,882		$	2,321,409
Net Charge Offs to Average Loans Outstanding		0.057	%		0.026	%
Loan Loss Reserve to Average Loans Outstanding		0.857	%		0.875	%

Non-performing assets for the comparison periods were as follows:

	September 30, 2008					December 31, 2007
			Percent					Percent
	Balance		of Total			Balance		of Total
Non-Accruing loans	$	1,301,946		69.94	%	$	1,337,641		90.66	%
Loans past due 90 days or more and still accruing		559,631		30.06	%		137,742		9.34	%
Total	$	1,861,577		100.00	%	$	1,475,383		100.00	%

     Specific allocations are made in the allowance for loan losses in situations management believes may represent a greater risk for loss.  In addition, a portion of the allowance (termed "unallocated") is established to absorb inherent losses that probably exist as of the valuation date although not identified through management's objective processes for estimated credit losses.  A quarterly review of various qualitative factors, including levels of, and trends in, delinquencies and non-accruals and national and local economic trends and conditions, helps to ensure that areas with potential risk are noted and coverage increased or decreased to reflect the trends in delinquencies and non-accruals.  Due in part to local economic conditions, the Company continues to focus more intently on this section, making adjustments when deemed necessary to ensure adequate coverage in more vulnerable areas.  Residential mortgage loans make up the largest part of the loan portfolio and have the lowest historical loss ratio, helping to alleviate the overall risk.  While the allowance is described as consisting of separate allocated portions, the entire allowance is available to support loan losses, regardless of category.

     The Company has experienced an increase in collection activity on loans 30 to 60 days past due during the first nine months of 2008.  The Company works actively with customers early in the delinquency process to help them to avoid default or foreclosure.  The Company’s non-accruing loan portfolio decreased $35,695 or 2.7% during the first nine months of 2008, mostly through foreclosure sales, however the loans brought into non-accrual have been substantial in size, offsetting most of the decrease.  The increase of $421,889 in the loans 90 days or more past due is attributable to three residential mortgage loans amounting to $388,567.  These residential loans are well secured minimizing the potential loss.

Market Risk - -In addition to credit risk in the Company’s loan portfolio and liquidity risk, the Company’s business activities also generate market risk.  Market risk is the risk of loss in a financial instrument arising from adverse changes in market prices and rates, foreign currency exchange rates, commodity prices and equity prices.  The Company does not have any market risk sensitive instruments acquired for trading purposes.  The Company’s market risk arises primarily from interest rate risk inherent in its lending, investing, and deposit taking activities.  Interest rate risk is directly related to the different maturities and repricing characteristics of interest-bearing assets and liabilities, as well as to loan prepayment risks, early withdrawal of time deposits, and the fact that the speed and magnitude of responses to interest rate changes vary by product.  Changes in interest rates also have a direct impact on the market value of the securities portfolio and the mortgage servicing rights.  As discussed above under "Interest Rate Risk and Asset and Liability Management", the Company actively monitors and manages its interest rate risk through the ALCO process.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

     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 customers and to reduce its own exposure to fluctuations in interest rates.  These financial instruments include commitments to extend credit (including commercial and construction lines of credit), standby letters of credit and risk-sharing commitments on certain sold loans.   Such instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet.  The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.  During the first nine months of 2008, the Company did not engage in any activity that created any additional types of off-balance-sheet risk.

     The Company generally requires collateral or other security to support financial instruments with credit risk.  The Company's financial instruments or commitments whose contract amount represents credit risk as of September 30, 2008 were as follows:

	Contract or
	Notional Amount
Unused portions of home equity lines of credit		15,659,560
Other commitments to extend credit		19,559,529
Residential and commercial construction lines of credit		5,750,962
Standby letters of credit and commercial letters of credit		326,200
Recourse on sale of credit card portfolio		940,900
MPF credit enhancement obligation, net of liability recorded		1,381,020

     Since some commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The recourse provision under the terms of the sale of the Company’s credit card portfolio in 2007 is based on total lines, not balances outstanding.  Based on historical losses, the Company does not expect any significant losses from this commitment.

     The Company has guaranteed the payment obligations under the $12.5 million principal amount of Capital Securities of its subsidiary, CMTV Statutory Trust I.  The source of funds for payments by the Trust on its Capital Securities is payments made by the Company on its junior subordinated debentures due 2037 issued to the Trust.  The Company's obligation under those debentures (which reflects initial capital funding for the Trust of approximately $400,000) is fully reflected in the Company's balance sheet, in the amount of $12.9 million at September 30, 2008.

LIQUIDITY AND CAPITAL RESOURCES

     Managing liquidity risk is essential to maintaining both depositor confidence and stability in earnings.  Liquidity management refers to the ability of the Company to adequately cover fluctuations in assets and liabilities.  Meeting loan demand (assets) and covering the withdrawal of deposit funds (liabilities) are two key components of the liquidity management process.  The Company’s principal sources of funds are deposits, amortization and prepayment of loans and securities, maturities of investment securities, sales of loans available for sale, and earnings and funds provided from operations.  Maintaining a relatively stable funding base, which is achieved by diversifying funding sources, competitively pricing deposit products, and extending the contractual maturity of liabilities, reduces the Company’s exposure to roll over risk on deposits and limits reliance on volatile short-term borrowed funds.  Short-term funding needs arise from declines in deposits or other funding sources and funding of loan commitments.  The Company’s strategy is to fund assets to the maximum extent possible with core deposits that provide a sizable source of relatively stable and low-cost funds.  When funding needs, including loan demand, out pace deposit growth, it is necessary for the Company to use alternative funding sources, such as investment portfolio maturities and short-term borrowings, to meet these funding needs.  During 2008, the Company’s liquidity management has also been impacted by net deposit out-flows of approximately $27.09 million.

     The Company has taken the approach of offering deposit specials at competitive rates, in varying terms that fit within the balance sheet mix.  The strategy of offering specials is meant to provide a means to retain deposits while not having to reprice the entire deposit portfolio.  The Company recognizes that with increasing competition for deposits, it may at times be desirable to utilize alternative sources of funding to supplement deposits.  In 2007, the Board of Directors approved an updated Asset Liability Management Funding Policy that includes the expanded use of brokered deposits.  This will allow the Company to augment retail deposits and borrowings with brokered deposits as needed to help fund loans.  As of September 30, 2008, the Company had $16.3 million in deposits placed in the Certificate of Deposit Account Registry Service (CDARS) of Promontory Interfinancial Network account, which allows the Company to provide FDIC deposit insurance in excess of account coverage limits by exchanging deposits with other CDARS members.  The Company may also purchase deposits from other CDARS members.  All such deposits are considered a form of brokered deposits.  Of the $16.3 million in CDARS deposits at September 30, 2008, $10 million represented exchanged deposits.

     During the first nine months of 2008, the Company's available-for-sale investment portfolio decreased $17.2 million through maturities and calls and the write down on the Fannie Mae preferred stock, while the held-to-maturity investment portfolio increased $12.1 million and the loan portfolio increased $2.5 million.  At September 30, 2008, 8 debt securities had aggregate unrealized losses totaling $8,071.  The primary factors considered in the determination of the values of these investments are the general market conditions, changes in interest rates and the quality of the issuer.  The Company evaluates debt securities for impairment at least quarterly, or more frequently as conditions warrant.  The Company considers factors it deems relevant in light of the nature of the security and the issuer, including whether the issuer is a government unit, a government agency or a government-sponsored enterprise, whether the security bears a government guarantee, whether downgrades have been made by rating agencies, and more recently, the status of relevant legislative and regulatory actions affecting the market for mortgage related securities.  As mentioned earlier in this report, the Company’s Fannie Mae preferred stock portfolio decreased in value to a point that a write down of $739,332 was deemed necessary to recognize the loss as other-than-temporary impairment.  Except for the write down of the Fannie Mae stock, no other declines in value were deemed by management to be other than temporary at September 30, 2008.

     On the liability side, NOW and money market accounts increased $1.5 million and savings deposits increased $4.5 million during the first nine months of 2008, while time deposits decreased $4.8 million, and demand deposits decreased $9.5 million.  Approximately $8 million in demand deposits were reclassified into NOW accounts, accounting for most of the decrease in demand deposits.  Without the reclassification NOW and money market accounts would have decreased by approximately $6.5 million.

     As a member of the Federal Home Loan Bank of Boston (FHLBB), the Company has access to pre-approved lines of credit.  The Company had a $1.0 million unsecured Federal Funds line with an available balance of the same at September 30, 2008.  Interest is chargeable at a rate determined daily, approximately 25 basis points higher than the rate paid on federal funds sold.  At September 30, 2008 the Company also had additional borrowing capacity of approximately $97.8 million, less outstanding advances and certain pledged collateral amounts, through the FHLBB, secured by the Company's qualifying loan portfolio.

     To cover seasonal decreases in deposits primarily associated with municipal accounts, the Company typically borrows short-term advances from the FHLBB at the end of the second quarter and pays the advances down as the municipal deposits flow back into the bank during the third and fourth quarter.  With the latest decrease in Federal Funds rate, most of the Company’s borrowings in the third quarter were placed in overnight funds.  At the end of the third quarter, the Company had outstanding advances of $13.6 million consisting of the following:

	Annual				Principal
Purchase Date	Rate			Maturity Date	Balance
Long-term Advance
November 16, 1992		7.67	%	November 16, 2012	$	10,000
Short-term Advances
Overnight Funds Purchased (FHLBB)		1.00	%	October 1, 2008	$	13,606,000

     Under a separate agreement with FHLBB, the Company has the authority to collateralize public unit deposits, up to its FHLBB borrowing capacity ($97.8 million less outstanding advances noted above) with letters of credit issued by the FHLBB.  At September 30, 2008, approximately $70.1 million was pledged under this agreement, as collateral for these deposits.  A letter of credit fee is charged to the Company quarterly based on the average daily balance for the quarter at an annual rate of 20 basis points.  The average daily balance for the third quarter of 2008 was approximately $12.2 million.

     Other alternative sources of funding come from unsecured Federal Funds lines with two other correspondent banks that total $7.5 million.  There were no balances outstanding on either line at September 30, 2008.

     In the third quarter of 2008, the Company declared a cash dividend of $0.17 per common share, payable in the fourth quarter of 2008, requiring an accrual of $753,571 at September 30, 2008.  Although dividend payments for the third quarter of 2008 and year-to-date exceeded net income, the Board of Directors concluded that the quarterly dividend rate of $0.17 per share should remain unchanged for those periods in light of the Company’s strong core earnings and the nonrecurring nature of a number of current year expenses, including merger-related expenses and the write down of the Company’s Fannie Mae shareholdings.

The following table illustrates the changes in shareholders' equity from December 31, 2007 to September 30, 2008:

Balance at December 31, 2007 (book value $7.94 per common share)	$	34,920,360
Net income		1,405,222
Issuance of stock through the Dividend Reinvestment Plan		699,296
Total dividends declared on common stock		(2,252,226	)
Total dividends declared on preferred stock		(140,625	)
Unrealized holding gain arising during the period on available-for-sale securities, net of tax		171,669
Balance at September 30, 2008 (book value $7.26 per common share)	$	34,803,696

     The primary source of funds for the Company's payment of dividends to its shareholders is dividends paid to the Company by the Bank.  The Bank, as a national bank, is subject to the dividend restrictions contained in the National Bank Act, administered by the Comptroller of the Currency ("OCC").  Under such restrictions, the Bank may not, without the prior approval of the OCC, declare dividends in excess of the sum of the current year's earnings (as defined) plus the retained earnings (as defined) from the prior two years.

     The U.S. Treasury Department (“Treasury”), working with the Federal Reserve Board and other banking regulators, recently announced the Troubled Asset Relief Program Capital Purchase Program (TARP Capital Purchase Program), which is intended to stabilize the financial services industry.  One of the components of the Program is a $250 billion voluntary capital purchase program for banking institutions.  Pursuant to the TARP Capital Purchase Program, Treasury will purchase from qualifying financial institutions, a limited amount of senior perpetual preferred securities equal to between 1-3% of a company’s risk-weighted assets.  Treasury will also receive a warrant for the purchase of common stock having an aggregate market value equal to 15% of the amount of its preferred stock investment, with the number of common shares and warrant exercise price based on the average trading price of the institution’s common stock for the 20 trading days immediately preceding Treasury’s approval of the institution’s application.  The preferred shares will pay an annual dividend of 5% for the first five years, which will increase to 9% thereafter, and are redeemable in whole or in part, after three years.  The preferred shares, warrants and common stock issued upon exercise of the warrants must be freely transferable.  For so long as Treasury holds any of a banking institution’s securities, subject to certain limited exceptions, the institution will be prohibited from (a) increasing the dividend to common shareholders and (b) conducting share repurchases without Treasury’s prior approval.  Participating financial institutions will also be subject to certain limitations on executive compensation as well as other conditions.  The foregoing description of the investment terms is based on the published terms applicable to Treasury’s investments under the Program in large, stock exchange listed public companies.  Treasury has stated that it may modify some of the investment terms for other types of banking institutions, including smaller reporting companies such as Community Bancorp.  Participation in the Program is voluntary, although Treasury is encouraging healthy institutions to participate.

     Although the Company and Bank are well capitalized, management believes that the TARP Capital Purchase Program represents a cost-effective source of additional Tier 1 capital and is considering whether to file an application to participate in the Program.  Issuance of the preferred stock to Treasury would require the consent of the Company's existing preferred shareholders (three local banking institutions).

     Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and a so-called leverage ratio of Tier 1 capital (as defined) to average assets (as defined).  Under current guidelines, banks must maintain a risk-based capital ratio of 8.0%, of which at least 4.0% must be in the form of core capital (as defined).

     Regulators have also established minimum capital ratio guidelines for FDIC-insured banks under the prompt corrective action provisions of the Federal Deposit Insurance Act, as amended.  These minimums are a total risk-based capital ratio of 10.0%, a Tier I risk-based capital ratio of 6%, and a leverage ratio of 5%.  As of September 30, 2008, the Company’s subsidiary was deemed well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that time that management believes have changed the Subsidiary's classification.

The risk based ratios of the Company and its subsidiary as of September 30, 2008 and December 31, 2007 exceeded regulatory guidelines and are presented in the table below.  At September 30, 2008, risk weighted assets of $323.9 million were reported for the consolidated Company and its subsidiary and $328.2 million were reported for the Bank, compared to $238.8 million and $237.7 million, respectively at December 31, 2007.  In accordance with regulatory guidance issued by the banking regulators, the September 30, 2008 capital ratios reflect the tax benefit from the write down on the Fannie Mae preferred stock notwithstanding that the tax benefit will not be recorded under GAAP until the fourth quarter.

					Minimum To Be Well
			Minimum		Capitalized Under
			For Capital		Prompt Corrective
	Actual		Adequacy Purposes:		Action Provisions:
	Amount	Ratio	Amount	Ratio	Amount	Ratio
	(Dollars in Thousands)
As of September 30, 2008:
Total capital (to risk-weighted assets)
Consolidated	$34,354	10.44%	$26,314	8.00%	N/A	N/A
Bank	$35,294	10.75%	$26,255	8.00%	$32,819	10.00%
Tier I capital (to risk-weighted assets)
Consolidated	$31,295	9.51%	$13,157	4.00%	N/A	N/A
Bank	$32,235	9.82%	$13,128	4.00%	$19,691	6.00%
Tier I capital (to average assets)
Consolidated	$31,295	6.64%	$18,867	4.00%	N/A	N/A
Bank	$32,235	6.85%	$18,837	4.00%	$23,569	5.00%
As of December 31, 2007:
Total capital (to risk-weighted assets)
Consolidated*	$36,975	15.48%	$19,104	8.00%	N/A	N/A
Community National Bank	$48,506	20.41%	$19,013	8.00%	$23,766	10.00%
Former LyndonBank	$13,536	12.94%	$  8,365	8.00%	$10,457	10.00%
Tier I capital (to risk-weighted assets)
Consolidated*	$34,736	14.55%	$ 9,552	4.00%	N/A	N/A
Community National Bank	$46,267	19.47%	$ 9,506	4.00%	$14,260	6.00%
Former LyndonBank	$12,749	12.19%	$ 4,183	4.00%	$  6,274	6.00%
Tier I capital (to average assets)
Consolidated*	$34,736	9.40%	$14,785	4.00%	N/A	N/A
Community National Bank	$46,267	12.54%	$14,752	4.00%	$18,440	5.00%
Former LyndonBank	$12,749	8.26%	$  6,153	4.00%	$  7,691	5.00%

*Consolidated refers to Community Bancorp. and Community National Bank before consolidation of the former LyndonBank assets.  The Federal Regulators approved the filing of separate Call Reports for Community National Bank and the former LyndonBank; therefore, numbers presented in the table above for 2007 are as filed with the applicable reporting agencies at December 31, 2007.

     The Company intends to maintain a capital resource position in excess of the minimums shown above.  Consistent with that policy, management will continue to anticipate the Company's future capital needs.

     From time to time the Company may make contributions to the capital of Community National Bank.  At present, regulatory authorities have made no demand on the Company to make additional capital contributions.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

     The Company's management of the credit, liquidity and market risk inherent in its business operations is discussed in Part 1, Item 2 of this report under the caption "RISK MANAGEMENT", which is incorporated herein by reference.  Management does not believe that there have been any material changes in the nature or categories of the Company's risk exposures from those disclosed in the Company’s 2007 annual report on form 10-K.

ITEM 4T. Controls and Procedures

Disclosure Controls and Procedures

     Management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”).  As of September 30, 2008, an evaluation was performed under the supervision and with the participation of management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures.  Based on that evaluation, management concluded that its disclosure controls and procedures as of September 30, 2008 were effective in ensuring that material information required to be disclosed in the reports it files with the Commission under the Exchange Act was recorded, processed, summarized, and reported on a timely basis.

Management’s Report on Internal Control Over Financial Reporting

     Management is responsible for establishing and maintaining effective internal controls over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.  As of December 31, 2007, an evaluation was performed under the supervision and with the participation of management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s internal controls over financial reporting.  Management assessed the Company’s system of internal control over financial reporting as of December 31, 2007, in relation to criteria for effective internal control over financial reporting as described in “Internal Control – Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on this assessment, management believes that, as of December 31, 2007, its system of internal control over financial reporting met those criteria and is effective.  As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report.  This evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer and its Vice President and Chief Financial Officer.  Based upon that evaluation, such officers concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.  For this purpose, the term “disclosure controls and procedures” means controls and other procedures of the Company that are designed to ensure that information required to be disclosed by it in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

     There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

     The Company has a pending legal issue involving safe deposit box procedures with a potential claim amounting to $50,000.  The Company’s subsidiary, Community National Bank, as successor by merger to LyndonBank, is a party to a contract dispute with a service provider involving disputed charges of approximately $72,000.  The dispute is currently in mediation and may proceed to binding arbitration if the parties are unable to settle the matter.  Currently the Company has not accrued for either of these matters, but will do so before year end if either matter is still outstanding at that time.

     In addition to the foregoing matters, in the normal course of business the Company and its subsidiary are involved in litigation that is considered incidental to their business.  Management does not expect that any such litigation will be material to the Company's consolidated financial condition or results of operations.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information as to purchases of the Company’s common stock during the third quarter ended September 30, 2008, by the Company and by any affiliated purchaser (as defined in SEC Rule 10b-18):

							Maximum Number of
					Total Number of		Shares That May Yet
	Total Number		Average		Shares Purchased		Be Purchased Under
	Of Shares		Price Paid		as Part of Publicly		the Plan at the End
For the period:	Purchased(1)(2)		Per Share		Announced Plan		of the Period
July 1 – July 30		0	$	0.00		N/A		N/A
August 1 – August 31		2,380	$	12.83		N/A		N/A
September 1 – September 30		0	$	0.00		N/A		N/A
Total		2,380	$	12.83		N/A		N/A

(1)  All 2,380 shares were purchased for the account of participants invested in the Company Stock Fund under the Company’s Retirement Savings Plan by or on behalf of the Plan Trustee, the Human Resources Committee of Community National Bank.  Such share purchases were facilitated through Community Financial Services Group, LLC (“CFSG”), which provides certain investment advisory services to the Plan.  Both the Plan Trustee and CFSG may be considered affiliates of the Company under Rule 10b-18.

(2)  Shares purchased during the period do not include fractional shares repurchased from time to time in connection with the participant's election to discontinue participation in the Company's Dividend Reinvestment Plan.

ITEM 6. Exhibits

The following exhibits are filed with this report:

Exhibit 3.1 - Amended and Restated Bylaws of Community Bancorp.

Exhibit 31.1 - Certification from the Chief Executive Officer of the Company pursuant to section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 - Certification from the Chief Financial Officer of the Company pursuant to section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1 - Certification from the Chief Executive Officer of the Company pursuant to 18 U.S.C., Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002*

Exhibit 32.2 - Certification from the Chief Financial Officer of the Company pursuant to 18 U.S.C., Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002*

*This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Act of 1934.

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.

COMMUNITY BANCORP.

DATED:  November 13, 2008	/s/ Stephen P. Marsh
	Stephen P. Marsh, President &
	Chief Executive Officer
DATED:  November 13, 2008	/s/ Louise M. Bonvechio
	Louise M. Bonvechio,  Vice President
	& Chief Financial Officer

EXHIBIT INDEX

The following exhibits are filed with this report:

Exhibit 3.1 - Amended and Restated Bylaws of Community Bancorp.

Exhibit 31.1 - Certification from the Chief Executive Officer of the Company pursuant to section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 - Certification from the Chief Financial Officer of the Company pursuant to section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1 - Certification from the Chief Executive Officer of the Company pursuant to 18 U.S.C., Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002*

Exhibit 32.2 - Certification from the Chief Financial Officer of the Company pursuant to 18 U.S.C., Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002*

*This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Act of 1934.

EX-3.1

BYLAWS

OF

COMMUNITY BANCORP.

A Vermont Corporation

(Amended and Restated as of October 7, 2008)

TABLE OF CONTENTS
	Page
ARTICLE ONE: OFFICES	1
1.01 Registered Office and Agent.	1
1.02 Other Offices.	1

ARTICLE TWO: SHAREHOLDERS	1
2.01 Classes of Shares.	1
2.02 Annual Meetings.	1
2.03 Special Meetings.	2
2.04 Place of Meetings.	2
2.05 Notice.	2
2.06 Voting List.	2
2.07 Voting of Shares Held by Corporation.	3
2.08 Quorum.	3
2.09 Required Vote; Withdrawal of Quorum.	3
2.10 Method of Voting; Proxies.	3
2.11 Acceptance of Votes.	4
2.12 Record Date.	5
2.13 Nominations and Other Business.	5
2.14 Presiding Officials at Meetings.	8
2.15 Inspection of Corporate Records.	8

ARTICLE THREE: DIRECTORS	9
3.01 Management.	9
3.02 Number; Election; Term; Qualification.	10
3.03 Classification.	10
3.04 Vacancies.	10
3.05 Removal.	10
3.06 Inconsistency	11
3.07 Mandatory Retirement.	11
3.08 Nominations.	11
3.09 Annual Meeting.	11
3.10 Regular Meetings.	11
3.11 Special Meetings.	11
3.12 Quorum; Majority Vote.	12
3.13 Procedure; Minutes.	12
3.14 Presumption of Assent.	12
3.15 Compensation.	12

ARTICLE FOUR: COMMITTEES	13
4.01 Audit Committee.	13
4.02 Compensation Committee.	13
4.03 Nominating/Corporate Governance Committee.	13
4.04 Independent Directors.	14
4.05 Other Committees.	14
4.06 Number; Qualification; Term.	14
4.07 Limitation on Authority.	14
4.08 Committee Changes.	15
4.09 Meetings.	15
4.10 Quorum; Majority Vote.	15
4.11 Minutes.	15
4.12 Compensation.	15
4.13 Responsibility.	15

ARTICLE FIVE: GENERAL PROVISIONS RELATING TO MEETINGS	15
5.01 Manner of Giving Notice.	16
5.02 Waiver of Notice.	16
5.03 Householding of Notices; E-Proxy.	16
5.04 Bulk Mail.	17
5.05 Shareholders Without Forwarding Addresses.	17
5.06 Telephone and Similar Meetings.	17
5.07 Action Without Meeting.	17

ARTICLE SIX: OFFICERS AND OTHER AGENTS	18
6.01 Number; Titles; Election; Term.	18
6.02 Removal.	18
6.03 Vacancies.	18
6.04 Authority.	18
6.05 Compensation.	18
6.06 Chairman of the Board.	19
6.07 Chief Executive Officer	19
6.08 President.	19
6.09 Chief Operating Officer	19
6.10 Vice President.	20
6.11 Treasurer.	20
6.12 Assistant Treasurers.	20
6.13 Secretary.	20
6.14 Assistant Secretaries.	21

ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS	21
7.01 Certificates for Shares.	21
7.02 Issuance.	21
7.03 Shares Without Certificates.	21
7.04 Consideration for Shares.	22
7.05 Lost, Stolen, or Destroyed Certificates.	22
7.06 Transfer Agent; Transfer of Shares.	23
7.07 Registered Shareholders.	24

ARTICLE EIGHT: INDEMNIFICATION	24
8.01 Definitions.	24
8.02 Authority to Indemnify.	24
8.03 Mandatory Indemnification in Certain Circumstances.	25
8.04 Advance for Expenses.	25
8.05 Court Ordered Indemnification.	26
8.06 Determination and Authorization of Indemnification.	26
8.07 Indemnification of Officers, Employees and Agents.	27
8.08 Insurance.	28
8.09 Contract Right.	28
8.10 Enforcement of Rights.	28
8.11 Non-Exclusive Rights; Survival.	28
8.12 Severability.	29
8.13 Application of this Article.	29

ARTICLE NINE: EMERGENCY PREPAREDNESS	30
9.01 Emergency.	30

ARTICLE TEN: MISCELLANEOUS PROVISIONS	30
10.01 Distributions.	30
10.02 Reserves.	30
10.03 Books and Records.	30
10.04 Fiscal Year.	31
10.05 Seal.	31
10.06 Resignation.	31
10.07 Securities of Other Corporations.	31
10.08 Amendment.	31
10.09 Invalid Provisions.	32
10.10 Headings.	32

BYLAWS

OF

COMMUNITY BANCORP.

ARTICLE ONE: OFFICES

1.01 Registered Office and Agent. The registered office and registered agent of Community Bancorp. (the "Corporation") shall be as designated from time to time by the appropriate filing by the Corporation in the office of the Secretary of State of Vermont.

1.02 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Vermont, as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE TWO: SHAREHOLDERS

2.01 Classes of Shares.  The Company has two classes of outstanding shares, common and preferred, as authorized by Article Five of the Corporation’s Amended and Restated Articles of Association (the “Articles of Association”).  The preferred shares are issuable in one or more series and have such limited voting rights as the Board of Directors may determine upon issuance and as may be specified in the applicable Certificate of Creation, filed with the Articles of Association in the Office of the Vermont Secretary of State.  The provisions of this Article shall pertain to each class or series of shareholders who have the right to vote as a voting group on any item presented at an annual or special meeting of shareholders, as the context may require.

2.02 Annual Meetings. The regular annual meeting of shareholders of the Corporation shall be held on the third Tuesday of May of each year, at such time and place as shall be designated by the Board of Directors and stated in the notice of the meeting. The Board of Directors may select a different date for the annual meeting upon a resolution duly adopted by the Board prior to the issuance of the notice of the meeting prescribed in Article 2.05. At such meeting, the shareholders shall elect directors and transact such other business as may properly be brought before the meeting.

2.03 Special Meetings. A special meeting of the shareholders may be called at any time by the Chairman, or by the Board of Directors, or by the Secretary upon the petition of the holders of not less than ten percent of the shares of a voting group entitled to vote on any issue at such meeting. Only such business shall be transacted at a special meeting as may be stated or indicated in the notice of such meeting. At any special meeting the only matters that may be considered for action by the shareholders are those proposed by the Board or by the shareholders who have requested the meeting, provided that such shareholders shall have complied with Section 2.13 of this Article Two with respect to each such matter (including election of any Director).

2.04 Place of Meetings. The annual meeting of shareholders may be held at any place within or without the State of Vermont as may be designated by the Board of Directors. Special meetings of shareholders may be held at any place within the State of Vermont as may be designated by the Board of Directors in the notice of meeting. If no place for a meeting is designated, it shall be held at the registered office of the Corporation.

2.05 Notice. Written or printed notice in accordance with Section 5.01 of these Bylaws stating the place, day, and hour of each meeting of shareholders, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than 60 days before the date of the meeting, by or at the direction of the Board of Directors, the Chairman, the Secretary, or the persons calling the meeting, to each shareholder of record entitled to vote at such meeting.

2.06 Voting List. Beginning two business days after the notice of meeting is given, and continuing through the meeting, the Secretary shall make available for inspection by any shareholder a complete list of shareholders entitled to notice of and to vote at such meeting, arranged in alphabetical order and by voting group (if applicable), including the address of each shareholder and the number of voting shares held by each shareholder. Such list shall be kept on file during the time specified at the principal office of the Corporation or at a place identified in the notice in the city or town in which the meeting is to be held. The list shall be subject to inspection during usual business hours, and upon written demand, by any shareholder of record entitled to vote at that meeting, or his or her agent or attorney, who shall be entitled to copy the list at his or her own expense. Such list shall be produced at such meeting, and at all times during such meeting shall be subject to inspection by any shareholder of record entitled to vote at that meeting, or his or her agent or attorney. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such list or stock transfer books.

2.07 Voting of Shares Held by Corporation. Treasury shares, and shares of the Corporation's own stock owned, directly or indirectly by another corporation (other than shares held in a fiduciary capacity) the majority of the voting stock of which is owned or controlled by the Corporation, shall not be shares entitled to vote or to be counted in determining (a) the total number of outstanding shares, (b) the number of shares constituting a quorum, or (c) the number of shares required to elect a director or to approve any other action.

2.08 Quorum. The holders of a majority of the outstanding shares of a voting group entitled to vote on a matter, present in person or represented by proxy, shall constitute a quorum for action on that matter by such voting group at any meeting of shareholders, except as otherwise provided by law or the Articles of Association. If a quorum shall not be present or represented at any meeting of shareholders, a majority of the shareholders who are present in person or represented by proxy and who are entitled to vote as a voting group on any issue at the meeting, may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At any reconvening of an adjourned meeting any business as to which a quorum of a voting group is present or represented by proxy may be transacted by such voting group which could have been transacted at the original meeting, had a quorum been present or represented.

2.09 Required Vote; Withdrawal of Quorum. Except as otherwise provided by law or the Articles of Association, if a quorum of a voting group with respect to a matter is present in person or represented by proxy at any meeting, the action on such matter will be approved by such voting group if the number of votes cast in favor of the matter exceeds the number of votes cast opposing the matter. The shareholders of a voting group present at a duly convened meeting may continue to transact business until adjournment, notwithstanding any withdrawal of shareholders which may leave less than a quorum remaining.

2.10 Method of Voting; Proxies. Every shareholder of record shall be entitled at every meeting of shareholders to one vote on each matter submitted to a vote, for every share standing in his name on the original stock transfer books of the Corporation, except to the extent that the voting rights of the shares of any class or series of shares are limited or denied by the Articles of Association (including any Certificate of Creation with respect to preferred shares) or by law. Such books shall be prima facie evidence as to the identity of shareholders entitled to vote. At any meeting of shareholders, every shareholder having the right to vote may vote either in person or by a proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact.  Proxies shall be in such form, and delivered by such method or methods, as the Board may approve from time to time, including by telephone; facsimile or electronic transmission. Each such proxy shall be filed with the Secretary of the Corporation or other officer or agent authorized to tabulate votes, before or at the time of the meeting and shall become effective upon such filing. No proxy shall be valid after 11 months from the date of its execution, unless otherwise expressly provided in the proxy. If no date is stated on a proxy, such proxy shall be presumed to have been executed on the date of the meeting at which it is to be voted. Each proxy shall be revocable unless expressly and conspicuously provided therein to be irrevocable and the appointment as proxy is coupled with an interest, or unless otherwise made irrevocable by law.

2.11 Acceptance of Votes. If the name signed on a vote, consent, waiver, or proxy appointment (including one submitted by facsimile or electronic transmission) corresponds to the name of a shareholder, the Corporation if acting in good faith, shall be entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder. If the name signed on a vote, consent, waiver, or proxy appointment does not correspond to the name of its shareholder, the Corporation, if acting in good faith, shall nevertheless be entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder if:

(1)	the shareholder is an entity and the name signed purports to be that of an officer or agent of the entity;
(2)	the name signed purports to be that of an administrator, executor, guardian, or conservator representing the shareholder and, if the Corporation requests, evidence of fiduciary status acceptable to the Corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
(3)	the name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the Corporation requests, evidence of this status acceptable to the Corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
(4)	the name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the Corporation requests, evidence acceptable to the Corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, or proxy appointment; or
(5)	two or more persons are the shareholder as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all the co-owners.

The Corporation shall be entitled to reject a vote, consent, waiver, or proxy appointment if the Secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about (a) the validity of the signature on it, or (b) the signatory's authority to sign for the shareholder, or (c) if applicable, the electronic transmission by which the proxy appointment or the vote, consent or waiver was made. The Corporation and its officer or agent who accepts or rejects a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this section are not liable in damages to the shareholder for the consequences of the acceptance or rejection. Corporate action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise.

2.12 Record Date. The Board of Directors may fix in advance a date as the record date for the purpose of determining voting groups and shareholders entitled to notice of or to vote at any meeting of shareholders or any reconvening thereof or entitled to receive payment of any dividend or in order to make a determination of shareholders for any other proper purpose. Such record date shall not be more than 70 days prior to the date on which the particular action requiring such determination of shareholders is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof unless the Board of Directors fixes a new record date. The Board of Directors shall fix a new record date if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.

2.13 Nominations and Other Business. Nominations for the election of Directors and other proposals for action at an annual or special meeting of shareholders may be made only (a) pursuant to the Corporation's notice of such meeting, (b) by the presiding officer at the meeting, (c) by or at the direction of a majority of the Board of Directors, or (d) by one or more shareholders, in compliance with the provisions of this Section 2.13. In addition, if a shareholder seeks to include his proposal for action in the Corporation’s proxy materials for the meeting, the shareholder must also comply with Securities and Exchange Commission (“SEC”) Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Notwithstanding anything herein to the contrary, a proposal by a shareholder for action at a meeting of shareholders may only be presented if it is a proper matter for shareholder action.

(a) Time for Submission. A nomination for the election of a Director or a proposal for action at an annual or special meeting of shareholders may be made by a shareholder only if a written notice of such nomination or proposal that complies in all respects with this Section 2.13 has been received by the Secretary at the Corporation's principal office on a timely basis. To be timely, such notice must be received by the Corporation at its principal office: In the case of an annual meeting,

(1)

No earlier than 180 days, and no later than 120 days, prior to the third Tuesday in May; or

(2)

If the annual meeting is to be held on a date other than the third Tuesday in May, no later than the close of business on the tenth day following the first public disclosure of the date of such meeting. The first public disclosure of the date of any annual meeting of shareholders shall be when public disclosure of such meeting date is first made (i) in a filing by the Corporation with the SEC, (ii) in any notice given to The NASDAQ Stock Market, or other securities self-regulatory organization, or (iii) in a news release reported by any national news service.

	In the case of a special meeting,
	No later than the close of business on the tenth day after the earlier of (i) the date the Corporation shall have mailed notice of such special meeting to its shareholders, or (ii) the date of the first public disclosure of the date of the special meeting made in a filing by the Corporation with the SEC, in any notice given to the NASDAQ Stock Market, or other securities self-regulatory organization, or in a news release reported by any national news service.
(b)	Information Required - General. Each such notice from a shareholder shall set forth:

(1)	the name and address, as they appear on the Corporation’s books, of the shareholder proposing such business or nominations and any Shareholder Associated Person (as defined herein);
(2)	(i) the class and series and number of shares of the Corporation which are held of record or are beneficially owned by such shareholder and by any Shareholder Associated Person with respect to the Corporation’s securities and (ii) any derivative positions held or beneficially held by the shareholder and any Shareholder Associated Person and whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding has been made, the effect or intent of which is to increase or decrease the voting power of, such shareholder or any Shareholder Associated Person with respect to the Corporation’s securities;
(3)	any material interest of the shareholder or any Shareholder Associated Person in such business or nomination(s); and
(4)	a representation that the shareholder intends to be present at the meeting in person or by proxy to make such nomination(s) or proposal.

(c) Information Required - Nominations. Each notice of nomination for the election of a Director from a shareholder also shall set forth:

(1)	The name and address of the person to be nominated;
(2)	A description of all arrangements or understandings between the shareholder and the nominee and any Shareholder Associated Person (as defined herein), or any other person or persons (naming such person or persons) pursuant to which the nomination is to be made by the shareholder;
(3)	Such other information regarding the nominee as would be required to be included in proxy materials filed under applicable rules of the Securities and Exchange Commission had the nominee been nominated by the Board of Directors; and
(4)	The written consent of the nominee to serve as a Director if properly nominated and elected.

(d) Information Required - Other Business. Each notice of a proposal for action at an annual meeting from a shareholder also shall set forth:

(1)	A brief description of the proposal;
(2)	The reasons for making such proposal; and
(3)	Any direct or indirect interest of the shareholder or any Shareholder Associated Person in making such proposal.

(e)	Shareholder Associated Person.  For purposes of this Section 2.13, a “Shareholder Associated Person” of any shareholder means (A) any person controlling, directly or indirectly, or acting in concert with, such shareholder, (B) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such shareholder and (C) any person controlling, controlled by or under common control with such Shareholder Associated Person.
(f)	Compliance Mandatory. The presiding officer at the meeting may refuse to permit any nomination for the election of a Director or proposal to be made at an annual or special meeting by a shareholder who has not complied with all of the foregoing procedures and requirements.
(g)	Interpretation of Provision.  Notwithstanding anything herein to the contrary, this provision shall be deemed to apply to all shareholder nominations for Director and proposals for other business, whether or not such shareholder seeks to include such matter in any proxy materials of the Corporation for such meeting.

2.14 Presiding Officials at Meetings. Unless some other person is elected by a vote of a majority of the shares then entitled to vote at a meeting of shareholders, or is designated by the Board of Directors, the Chairman shall preside at and the Secretary shall prepare minutes of each meeting of shareholders.

2.15 Inspection of Corporate Records.

(a)

Minutes and Accounting Records. The Corporation shall keep as permanent records minutes of all meetings of its shareholders and Board of Directors, a record of all actions taken by the shareholders or Board of Directors without a meeting, and a record of all actions taken by a committee of the Board of Directors in place of the Board of Directors on behalf of the Corporation. The Corporation shall maintain appropriate accounting records.

(b)

Absolute Inspection Rights of Records Required at Principal Office. Upon written demand to the Corporation made at least five business days before the date on which he wishes to inspect and copy, a shareholder (or his agent or attorney) shall be entitled to inspect and copy, during regular business hours, any of the following records, all of which the Corporation is required to keep at its principal office:

(1)	its Articles of Association and all amendments to them currently in effect;
(2)	its Bylaws and all amendments to them currently in effect;
(3)	the minutes of all shareholders' meetings, and records of all action taken by shareholders without a meeting, for the past three years;
(4)	all written communications to shareholders generally within the past three years, including the financial statements furnished for the past three years to the shareholders;
(5)	a list of the names and business addresses of its current directors and officers; and
(6)	its most recent annual report delivered to the Secretary of State.

(c) Conditional Inspection Right. A shareholder (or his agent or attorney) shall be entitled to inspect and copy, during regular business hours at a reasonable location specified by the Corporation, any of the records specified below in this paragraph (c), provided that (i) such shareholder gives the Corporation a written demand made in good faith, at least five business days before the date on which he wishes to inspect and copy, (ii) the demand is for a proper purpose and the written demand describes with reasonable particularity the purpose for the request and the records he or she desires to inspect, and (iii) the records are directly connected with the shareholder's purpose. The right of inspection specified in this paragraph (c) shall apply to the following records of the Corporation:

(1)	accounting records of the Corporation; and
(2)	the record of shareholders (compiled no earlier than the date of the shareholder's demand).

(d)	Copy Costs. The right to copy records includes, if reasonable, the right to receive copies made by photocopy or other means. The Corporation may impose a reasonable charge, covering the costs of labor and material, for copies of any documents provided to the shareholder. The charge may not exceed the estimated cost of production or reproduction of the records.
(e)	Shareholder Includes Beneficial Owner. For purposes of this Section 2.15, the term "shareholder" shall include a beneficial owner whose shares are held in a voting trust or by a nominee on the beneficial owner's behalf.

ARTICLE THREE: DIRECTORS

3.01 Management. The business and affairs of the Corporation shall be managed by the Board of Directors, subject to the restrictions imposed by law, the Articles of Association, or these Bylaws.

3.02 Number; Election; Term; Qualification. The Board of Directors shall consist of not less than 9 nor more than 25 shareholders, the exact number and the terms of office of which shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the full Board of Directors. Such exact number may be increased or decreased by the affirmative vote of the holders of at least seventy-five percent (75%) of the combined voting power of all of the then-outstanding shares of the Corporation's capital stock entitled to vote generally in the election of directors. Election of directors shall be by vote of a majority of the shares represented in person or by proxy at a meeting at which a quorum is present.

3.03 Classification. The directors shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible. Upon their initial election, the members of the first class shall hold office for a term expiring at the next annual meeting of the shareholders after their election, the members of the second class shall hold office for a term expiring at the second annual meeting of the shareholders after their election, and the members of the third class shall hold office for a term expiring at the third annual meeting of shareholders after their election. At each annual meeting of shareholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of shareholders after their election.

3.04 Vacancies.  Subject to Section 3.06, any vacancies in the Board of Directors resulting from death, resignation, retirement, or removal from office of a director may be filled by the Board of Directors, acting by resolution of a majority of the directors then in office (other than directors, if any, elected under Article Fifteen* of the Articles of Association), although less than a quorum. Any director chosen to fill a vacancy as provided herein shall hold office until the next election of the class for which such director shall have been elected and shall have qualified. No decrease in the number of directors shall shorten the term of any incumbent director.

3.05 Removal. Any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least seventy-five percent (75%) of the combined voting power of all of the then-outstanding shares of the Corporation's capital stock entitled to vote generally in the election of directors.

3.06 Inconsistency.  Nothing contained in Sections 3.02 through 3.06 of this Article Three shall be deemed to alter, amend or repeal any of the provisions of Article Fifteen* of the Articles of Association, which confers, under circumstances described therein, on the holders of the debentures referred to therein, the right to elect directors in certain circumstances.  During any period in which such rights may be exercised, the provision or provisions conferring such rights shall prevail over any provision of these Bylaws inconsistent therewith.

3.07 Mandatory Retirement. No person whether or not a director in office shall be elected as a member of the Board of Directors after his or her seventieth birthday. Any director who passes the age of seventy while in office may continue to serve until the next annual meeting.

3.08 Nominations. Nominations for election to the Board of Directors shall be made by the Nominating/Corporate Governance Committee of the Board of Directors, or by the shareholders, in compliance with the procedures set forth in Section 2.13 of these Bylaws.

3.09 Annual Meeting. The Board of Directors shall hold its annual meeting for the purpose of organization and the transaction of business, if a quorum is present, at its first regularly scheduled meeting following the annual meeting of shareholders, unless an earlier special meeting for that purpose is convened by the Chairman of the Board.

3.10 Regular Meetings. Regular meetings of the Board of Directors shall be held without notice at such times and places as may be designated from time to time by resolution of the Board of Directors and communicated to all directors.

3.11 Special Meetings. A special meeting of the Board of Directors shall be held whenever called by the Chairman of the Corporation or by any three directors at such time and place as the Chairman or directors shall designate in the notice of such special meeting. The person or persons calling any special meeting shall cause notice of such special meeting to be given to each director at least 24 hours before such special meeting. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice or waiver of notice of any special meeting, except for proposed amendments to the Bylaws.

3.12 Quorum; Majority Vote. At all meetings of the Board of Directors, a majority of the directors fixed in the manner provided in these Bylaws shall constitute a quorum for the transaction of business. If a quorum is not present at a meeting, a majority of the directors present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The vote of a majority of the directors present at a meeting at which a quorum is in attendance shall be the act of the board of directors, unless the vote of a different number is required by law, the Articles of Association or these Bylaws.

3.13 Procedure; Minutes.   Meetings of the Board of Directors may be held in person, or by means of any electronic or telecommunications medium permitting simultaneous or sequentially structured communications.  At meetings of the Board of Directors, business shall be transacted in such order as the Board of Directors may determine from time to time. The Chairman of the Corporation, or in his absence the President, shall preside at each meeting of the Board of Directors provided that in the absence of the Chairman and President, the Board of Directors may appoint a person to preside at the meeting. The Secretary of the Corporation or an Assistant Secretary designated by the Board shall act as secretary of each meeting provided that in the absence of the Secretary and any qualified Assistant Secretary, the Board of Directors shall appoint at each meeting a person to act as Secretary of the meeting. The Secretary of the meeting shall prepare minutes of the meeting which shall be delivered to the Secretary of the Corporation for placement in the minutes books of the Corporation.

3.14 Presumption of Assent. A director of the Corporation who is present at any meeting of the Board of Directors at which action on any matter is taken shall be presumed to have assented to the action unless (i) he shall object at the beginning of the meeting (or promptly following his arrival) to holding the meeting or transacting business at the meeting, or (ii) his dissent or abstention shall be entered in the minutes of the meeting or (iii) he shall file his written dissent or abstention to such action with the presiding officer of the meeting before the adjournment thereof. Such right to dissent shall not apply to a director who voted in favor of such action.

3.15 Compensation. Unless otherwise provided in the Articles of Association, by resolution of the Board of Directors, each director may be paid his expenses, if any, of attendance at meetings of the Board of Directors, and may be paid a stated salary or retainer as director or a fixed sum per meeting of the Board of Directors (and/or its Committees), or both. No such payment shall preclude any director from serving the Corporation in any non-director capacity and receiving compensation therefor.

ARTICLE FOUR: COMMITTEES

4.01 Audit Committee. There shall be an Audit Committee consisting entirely of such independent Directors as shall from time to time be appointed by resolution of the Board of Directors. The Audit Committee shall be responsible for the selection and appointment of the Corporation's independent accountants and for approving their compensation and any non-audit services performed by them; reviewing the scope and results of the audit plans of the independent accountants and internal auditors; overseeing the scope and adequacy of internal accounting control and record-keeping systems; reviewing the objectivity, effectiveness and resources of the internal audit function; conferring independently with management, the internal auditors and the independent accountants; and overseeing the Corporation's system of financial disclosure. The Audit Committee shall have such other duties and responsibilities as shall be set forth in a charter approved annually by the Board of Directors.

4.02 Compensation Committee. There shall be a Compensation Committee consisting of Directors as shall from time to time be appointed by resolution of the Board of Directors.  At least a majority of the Committee members shall be independent Directors.  The Compensation Committee shall be responsible for reviewing and approving the Chief Executive Officer's compensation, and the compensation of other executive officers, whether paid directly by the Corporation, or indirectly by the Corporation's subsidiaries. The Compensation Committee shall have such other duties and responsibilities as shall be set forth in a charter approved annually by the Board of Directors.

4.03 Nominating/Corporate Governance Committee. There shall be a Nominating/ Corporate Governance Committee consisting entirely of Directors as shall from time to time be appointed by resolution of the Board of Directors.  At least a majority of the Committee members shall be independent directors. The Nominating/Corporate Governance Committee shall be responsible for screening and recommending to the Board of Directors persons to be candidates for election or appointment as Directors; evaluating the performance of the Board, including the training and orientation of directors; establishing compensation policies for the Corporation’s directors; and reviewing corporate policies such as Code of Conduct, stock ownership guidelines and insider trading policies. The Nominating/ Corporate Governance Committee shall have such other duties and responsibilities as shall be set forth in a charter approved annually by the Board of Directors.

4.04 Independent Directors. For the purposes of the preceding sections 4.01, 4.02 and 4.03, an “independent director” shall mean a non-employee Director who otherwise meets the qualifications for independence under applicable standards of The NASDAQ Stock Market, as amended from time to time.

4.05 Other Committees. The Board of Directors may, at any time and from time to time, appoint such other standing or special committees with such duties and responsibilities as the Board of Directors shall determine, including, without limitation, an executive committee possessing and authorized to exercise, between meetings of the Board, all of the powers of the Board in the management of the business and affairs of the Corporation, except as may be limited by resolution of the Board, by Section 4.07 of these Bylaws, or otherwise by applicable law.

4.06 Number; Qualification; Term. Each committee shall consist of two or more directors appointed by resolution adopted by a majority of the entire Board of Directors. The number of committee members may be increased or decreased from time to time, and qualifications of membership established and modified, by resolution or committee charter adopted by a majority of the entire Board of Directors. Committee members shall serve at the pleasure of the Board of Directors.

4.07 Limitation on Authority. Notwithstanding anything to the contrary in the Bylaws, or in any committee or resolution of the Board appointing such committee, no committee shall have the authority of the Board of Directors in reference to:

(a)	amending the Articles of Association;
(b)	approving a plan of merger not requiring shareholder approval;
(c)	approving or proposing to shareholders action that the Vermont Business Corporation Act requires be approved by the shareholders;
(d)	amending, altering, or repealing these Bylaws or adopting new Bylaws;
(e)	filling vacancies in or removing members of the Board of Directors or of any committee;
(f)	electing or removing officers or committee members;
(g)	fixing the compensation of any committee member;
(h)	altering or repealing any resolution of the full Board of Directors;
(i)	declaring dividends or authorizing any other form of distribution to shareholders, or authorizing the issuance of shares of the Corporation; or
(j)	authorizing or approving the issuance or sale of shares or the reacquisition of shares, except according to a formula or method prescribed by the Board of Directors.

4.08 Committee Changes. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of, and to discharge any committee.

4.09 Meetings. Regular and special meetings of any committee may be held without notice at such times and places as may be designated from time to time by resolution of the committee and communicated to all committee members.

4.10 Quorum; Majority Vote. At all meetings of any committee, a majority of the number of committee members designated by the Board of Directors shall constitute a quorum for the transaction of business. If a quorum is not present at a meeting of any committee, a majority of the committee members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The vote of a majority of the committee members present at any meeting at which a quorum is in attendance shall be the act of a committee, unless the vote of a different number is required by the Articles of Association or these Bylaws.

4.11 Minutes. Each committee shall cause minutes of its proceedings to be prepared and shall report the same to the Board of Directors. The minutes of the proceedings of each committee shall be delivered to the Secretary of the Corporation for placement in the minute books of the Corporation.

4.12 Compensation. Committee members may, by resolution of the Board of Directors, be allowed a fixed sum and expenses of attendance, if any, for attending any committee meetings or a stated salary.

4.13 Responsibility. The designation of any committee and the delegation of authority to it shall not operate to relieve the Board of Directors or any director of any responsibility imposed upon it or such director by law.

ARTICLE FIVE: GENERAL PROVISIONS RELATING TO MEETINGS

5.01 Manner of Giving Notice. Any notice required to be given to any person under the provisions of the Articles of Association, these Bylaws or by law shall be given to the person either personally or by sending a copy thereof:

(a)	By first class or express mail, postage prepaid, or courier service, charges prepaid, to such person's postal address appearing on the books of the Corporation or, in the case of Directors, supplied by such Director to the Corporation for the purpose of notice. Notice pursuant to this subsection shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a courier service for delivery to that person; or
(b)	With respect to directors, by telephone, facsimile transmission, e-mail or other electronic communication to such person's facsimile number or address for e-mail or other electronic communications supplied by such person to the Corporation for the purpose of notice. Notice pursuant to this subsection shall be deemed to have been given when sent; or
(c)	With respect to shareholders, by a written medium specified by the Board of Directors from time to time and permitted by applicable law, including electronic transmission.  Notice pursuant to this subsection given by electronic transmission shall be deemed to have been given when transmitted in a manner authorized by the shareholder.

A notice of meeting shall specify the date, time and place, if any, of the meeting and any other information required by law or these Bylaws.

5.02 Waiver of Notice. Whenever by law, the Articles of  Association, or these Bylaws, any notice is required to be given to any person, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time notice should have been given, shall be equivalent to the giving of such notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

5.03 Householding of Notices; E-Proxy.  For so long as the Corporation shall have a class of stock registered under Section 12 of the Exchange Act, any documents, reports and other material (including proxy materials) delivered to a shareholder in a manner consistent with the delivery requirements contained in Regulation 14A or 14C under the Exchange Act shall be deemed to be delivered to the shareholder entitled to such delivery.

5.04 Bulk Mail. Notice of any regular or special meeting of the shareholders, or any other notice or delivery required by law, the Articles of Association or these Bylaws to be given to shareholders, may be given by bulk or second or third class mail, postage prepaid, if the notice is deposited in the United States mail at least 20 days prior to the day named for the meeting or any corporate or shareholder action specified in the notice.

5.05 Shareholders Without Forwarding Addresses. Except as may otherwise expressly be required by law, notice or other communications need not be sent to any shareholder with whom the Corporation has been unable to communicate for more than 24 consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the Corporation with a current address. Whenever the shareholder provides the Corporation with a current address, the Corporation shall commence sending notices and other communications to the shareholder in the same manner as to other shareholders.

5.06 Telephone and Similar Meetings. Directors or committee members may participate in and hold a meeting by means of audio or video conferencing or other telecommunications or electronic equipment, provided that all persons participating in the meeting may communicate with each other simultaneously. Participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

5.07 Action Without Meeting. Any action which may be taken, or is required by law, the Articles of Association, or these Bylaws to be taken, at a meeting of directors, or committee members may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors, or committee members, as the case may be, entitled to vote with respect to the subject matter thereof.  Any such written consent shall have the same force and effect as a resolution of such directors or committee members, as the case may be, adopted by unanimous vote at a duly convened meeting, and may be stated as such in any document filed with the Secretary of State of Vermont or in any certificate or other document delivered to any person. The consent may be in one or more counterparts so long as each director or committee member signs one of the counterparts. The signed consent shall be placed in the minute books of the Corporation and shall take effect as of the date of the last signature, unless a different effective date is specified in the consent.

ARTICLE SIX: OFFICERS AND OTHER AGENTS

6.01 Number; Titles; Election; Term. The Corporation shall have a Chairman of the Board, Chief Executive Officer, a president, one or more vice presidents (and, in the case of each vice president, with such descriptive title, if any, as the Board of Directors shall determine), a secretary, a treasurer, and such other officers and agents as the Board of Directors may deem desirable. The Board of Directors shall elect one of its members as Chief Executive Officer and one of its members as President of the Corporation. Both offices may but are not required to be held by the same person. The Board shall also elect one or more vice-presidents, a treasurer, and a secretary after each annual meeting of shareholders, or whenever a vacancy exists. The Board of Directors then, or from time to time, may also elect or appoint one or more other officers as it shall deem advisable. Each officer and agent shall hold office for the term for which he is elected or appointed and until his successor has been elected or appointed and qualified. Unless otherwise provided in the resolution of the Board of Directors electing or appointing an officer or agent, his term of office shall extend to and expire at the meeting of the Board of Directors following the next annual meeting of shareholders, or, if earlier, at his death, resignation, or removal. Any two or more offices may be held by the same person. No officer or agent except the Chief Executive Officer and President of the Corporation need be a shareholder, a director, a resident of the State of Vermont, or citizen of the United States. The Chief Executive Officer and President must be shareholders and duly elected or appointed directors of the Corporation.

6.02 Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors, at any time, with or without cause, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights.

6.03 Vacancies. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors.

6.04 Authority. Officers shall have such authority and perform such duties in the management of the Corporation as are provided in these Bylaws or as may be determined by resolution of the Board of Directors not inconsistent with these Bylaws.

6.05 Compensation. The compensation, if any, of officers shall be fixed, increased, or decreased from time to time by the Board of Directors; provided, that the Board of Directors may by resolution delegate to any one or more officers of the Corporation, or to a committee of the Board, the authority to fix such compensation.

6.06 Chairman of the Board. The Chairman of the Board shall perform such executive, supervisory, and management functions and duties as may be assigned to him from time to time by the Board of Directors.  The Chief Executive Officer of the Corporation shall be the Chairman unless the Board appoints another Director to be Chairman.

6.07 Chief Executive Officer. The Chief Executive Officer of the Corporation, subject to the supervision of the Board of Directors, shall have general management of the business and affairs of the Corporation in the ordinary course of its business with all such powers with respect to such business and affairs as may be reasonably incident to such responsibilities, including, but not limited to, the power to employ, discharge, or suspend employees and agents of the Corporation, to fix the compensation of employees and agents, and to suspend, with or without cause, any officer of the Corporation pending final action by the Board of Directors with respect to continued suspension, removal, or reinstatement of such officer. The Chief Executive Officer shall see that all orders and resolutions of the Board of Directors are carried into effect and shall perform such other duties and have such other authority and powers as the Board of Directors may from time to time prescribe.

6.08 President. The Board of Directors shall appoint a President to serve as one of the officers of the Company subject to the supervision of the Board of Directors. In the absence of the Chairman or if no Chairman is appointed, the President shall preside at any meeting of the Board. He or she shall have and may exercise any and all powers and duties pertaining by law, regulation or practice to the office of President or imposed by these Bylaws. He or she shall also have and may exercise such further powers and duties as from time to time may be conferred upon or assigned by the Board of Directors. In the absence or unavailability of the CEO, the President shall be authorized to perform all the duties of that office.

6.09 Chief Operating Officer. The Board of Directors may designate one of the officers of this Corporation as the Chief Operating Officer. The officer thus designated shall have and may exercise any and all powers and duties pertaining by law, regulation, or practice to the office or as may be imposed by these Bylaws. He or she shall also have and may exercise such further powers and duties as from time to time may be conferred upon or assigned by the Board of Directors.

6.10 Vice President. Each vice president shall have such powers and duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President. The Board shall designate one vice president to exercise the powers of the President in the event of that officer's absence or inability to act.

6.11 Treasurer. The Treasurer shall have custody of the Corporation's funds and securities, shall keep full and accurate accounts of receipts and disbursements, and shall deposit all moneys and valuable effects in the name and to the credit of the Corporation in such depository or depositories as may be designated by the Board of Directors. The Treasurer shall audit all payrolls and vouchers of the Corporation, receive, audit, and consolidate all operating and financial statements of the Corporation and its various departments and shall supervise the accounting and auditing practices of the Corporation. Additionally, the Treasurer shall have the power to endorse for deposit, collection or otherwise all checks, drafts, notes, bills of exchange, and other commercial paper payable to the Corporation and to give proper receipts and discharges for all payments to the Corporation. The Treasurer shall perform such other duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President.

6.12 Assistant Treasurers. Each Assistant Treasurer shall perform such duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President or Treasurer. The Assistant Treasurer shall exercise the powers of the Treasurer during that officer's absence or inability to act. In the event more than one Assistant Treasurer is appointed, the President shall designate one Assistant Treasurer to exercise the powers of the Treasurer as herein set forth.

6.13 Secretary. In addition to any other duties required by law or by the Board of Directors from time to time, the Secretary shall perform the following duties:

(a)	record all votes and proceedings of the shareholders and directors or any committee thereof;
(b)	have the custody of the corporate seal, and of the corporate records within this State;
(c)	keep a record book, which shall always be available for the inspection and copying by the shareholders, containing the names of the shareholders, their places of residence, the number of shares held by each, the time when they respectively acquired the shares, and the time of any transfers thereof, except that such record book may be kept by a transfer agent rather than the Secretary when such transfer agent is approved by the vote of a majority of the shareholders of the Corporation; and
(d)	procure and file in his own office certified copies of all papers required by law to be filed with the Secretary of State.

6.14 Assistant Secretaries. Each Assistant Secretary shall perform such duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President or Secretary. The Assistant Secretary shall exercise the powers of the Secretary during that officer's absence or inability to act. In the event more than one Assistant Secretary is appointed, the President shall designate one Assistant Secretary to exercise the powers of the Secretary as herein set forth.

ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS

7.01 Certificates for Shares. The certificates for shares of stock of the Corporation shall be in such form as shall be approved by the Board of Directors in conformity with law. The certificates of each class or series shall be consecutively numbered, shall be entered as they are issued in the books of the Corporation or in the records of the Corporation's designated transfer agent, if any, and shall state the shareholder's name, the number of shares, and such other matters as may be required by law. The certificates shall be signed, either manually or by facsimile, by the President or any Vice-President and by the Secretary or the Treasurer and shall be sealed with the seal of the Corporation or facsimile thereof.

7.02 Issuance. Common or preferred shares with or without par value may be issued pursuant to Article Five of the Articles of Association for such consideration and to such persons as the Board of Directors may from time to time determine, except in the case of the shares with par value the consideration must be at least equal to the par value of such shares. Shares may not be issued until the full amount of the consideration has been paid.

7.03 Shares Without Certificates.

(a)	Issuing Shares Without Certificates. Unless the Articles of Association provide otherwise, the Board of Directors may authorize the issuance of some or all the shares of the Corporation’s capital stock without certificates. Such authorization shall not affect shares already represented by certificates until they are surrendered to the Corporation.
(b)	Information Statement Required. Within a reasonable time after the issue or transfer of shares without certificates, the Corporation shall send the shareholder a written statement containing at a minimum:

(1)	the name of the issuing corporation and that it is organized under the laws of Vermont;
(2)	the name of the person to whom issued; and
(3)	the number and class of shares and the designation of the series, if any, of the issued shares.

(c) Procedures. The procedures in Section 7.06 shall not apply to uncertificated shares. The Board may adopt such alternative procedures concerning such shares as it deems necessary or appropriate.

7.04 Consideration for Shares. The consideration for the issuance of shares shall consist of money paid, labor done (including services actually performed for the Corporation), or property (tangible or intangible) actually received, including other securities of the Corporation, and, in the discretion of the Board of Directors, one or more promissory notes. The promise of future services shall not constitute payment for shares. In the absence of fraud in the transaction, the judgment of the Board of Directors as to the value of consideration received shall be conclusive. When consideration, fixed as provided by law, has been paid, the shares shall be deemed to have been issued and shall be considered fully paid and nonassessable. The consideration received for shares shall be allocated by the Board of Directors between stated capital and capital surplus accounts.

7.05 Lost, Stolen, or Destroyed Certificates. The Corporation shall issue a new certificate in place of any certificate for shares previously issued if the registered owner of the certificate:

(a)	Claim. Makes proof in affidavit form that a previously issued certificate for shares has been lost, destroyed, or stolen;
(b)	Timely Request. Requests the issuance of a new certificate before the Corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;
(c)	Bond. Gives a bond in such form, and with such surety or sureties, with fixed or open penalty, as the Board of Directors may direct, in its discretion, to indemnify the Corporation (and its transfer agent and registrar, if any) against any claim that may be made on account of the alleged loss, destruction, or theft of the certificate; and
(d)	Other Requirements. Satisfies any other reasonable requirements imposed by the Corporation, including any requirements of the Corporation’s transfer agent.

Notwithstanding the foregoing, the Corporation may waive any or all of the foregoing requirements in its discretion. When a certificate has been lost, destroyed, or stolen, and the shareholder of record fails to notify the Corporation within a reasonable time after he has notice of it, and the Corporation registers a transfer of the shares represented by the certificate before receiving such notification, the shareholder of record is precluded from making any claim against the Corporation for the transfer or for a new certificate.

7.06 Transfer Agent; Transfer of Shares.

(a)

Transfer Agent. The Corporation may act as its own registrar and transfer agent for any class or series of the Corporation's debt or equity securities, or it may designate an affiliated or non-affiliated third party for such purpose, as the Board of Directors may determine in its discretion.

(b)

Transfer of Shares. Shares of stock of the Corporation shall be transferable only on the books of the Corporation (or its designated transfer agent) by the shareholders of record thereof in person or by their duly authorized attorneys or legal representatives. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares, duly endorsed or accompanied by executed stock powers or other proper evidence of succession, assignment, or authority to transfer, the Corporation or its transfer agent shall issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. The Board of Directors may make such additional rules and regulations as it may deem necessary or appropriate concerning the issue, transfer and registration of share certificates and uncertificated shares.

7.07 Registered Shareholders. The Corporation shall be entitled to treat the shareholder of record as the shareholder in fact of any shares and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have actual or other notice thereof, except as otherwise provided by law.

ARTICLE EIGHT: INDEMNIFICATION

8.01 Definitions. Terms not otherwise defined in this Article shall have the meaning ascribed in the Vermont Business Corporation Law, Title 11A of the Vermont Statutes Annotated, as in effect from time to time.

8.02 Authority to Indemnify.

(a) Except as provided in subsection 8.02(d) and subject to Section 8.06, this Corporation shall indemnify an individual who is made a party to a proceeding because he is or was a director against liability incurred in the proceeding if:

(1)	he conducted himself in good faith; and
(2)	he reasonably believed:

(i)	in the case of conduct in his official capacity with the Corporation, that his conduct was in its best interest; and
(ii)	in all other cases, that his conduct was at least not opposed to its best interests; and

(3) in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful.

(b)	A director's conduct with respect to an employee benefit plan for a purpose he reasonably believed to be in the interests of the participants in and beneficiaries of the plan is conduct that satisfies the requirement of subsection 8.02(a)(2)(ii).
(c)	The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the director did not meet the standard of conduct described in this section.
(d)	The Corporation may not indemnify a director under this section:

(1)	in connection with a proceeding by or in the right of the Corporation in which the director was adjudged liable to the Corporation; or
(2)	in connection with any other proceeding charging improper personal benefit to him, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by him.

(e) Indemnification permitted under this section in connection with a proceeding by or in the right of the Corporation is limited to reasonable expenses incurred in connection with the proceeding.

8.03 Mandatory Indemnification in Certain Circumstances. This Corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he was a party because he is or was a director of the Corporation against reasonable expenses incurred by him in connection with the proceeding.

8.04 Advance for Expenses.

(a) The Corporation may pay for or reimburse the reasonable expenses incurred by a director who is or was a party to a proceeding in advance of final disposition of the proceeding if:

(1)	the director furnishes the Corporation a written affirmation of his good faith belief that he has met the standard of conduct described in Section 8.02;
(2)	the director furnishes the Corporation a written undertaking, executed personally or on his behalf, to repay the advance if it is ultimately determined that he did not meet the standard of conduct; and
(3)	a determination is made that the facts then known to those making the determination would not preclude indemnification under this Article Eight.

(b) The undertaking required by subsection 8.04(a)(2) must be an unlimited general obligation of the director but need not be secured and may be accepted without reference to financial ability to make repayment.

8.05 Court Ordered Indemnification. A director of this Corporation who is a party to a proceeding may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. On receipt of an application, the court after giving any notice the court considers necessary may order indemnification if it determines:

(1)	the director is entitled to mandatory indemnification under Section 8.03, in which case the court shall also order the Corporation to pay the director's reasonable expenses incurred to obtain court-ordered indemnification; or
(2)	the director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not he met the standard of conduct set forth in Section 8.02 or was adjudged liable as described in subsection 8.02(d), but if he was adjudged so liable his indemnification is limited to reasonable expenses incurred.

8.06 Determination and Authorization of Indemnification.

(a)	The Corporation may not indemnify a director under Section 8.02 unless authorized in the specific case after a determination has been made that indemnification of the director is permissible in the circumstances because he has met the standard of conduct set forth in Section 8.02.
(b)	The determination referred to in subsection 8.06(a) shall be made:

(1)	by the Board of Directors by majority vote of a quorum consisting of directors not at the time parties to the proceeding;
(2)	if a quorum cannot be obtained under subdivision (1), by majority vote of a committee duly designated by the Board of Directors (in which designation directors who are parties may participate), consisting solely of two or more directors not at the time parties to the proceeding;
(3)	by special legal counsel:

(i)	selected by the Board of Directors or its committee in the manner prescribed in subdivision (1) or (2); or
(ii)	if a quorum of the Board of Directors cannot be obtained under subdivision (1) and a committee cannot be designated under subdivision (2), selected by majority vote of the full Board of Directors (in which selection directors who are parties may participate); or

(4)	by the shareholders, but shares owned by or voted under the control of directors who are at the time parties to the proceeding may not be voted on the determination.
	Notwithstanding the foregoing, if a "change in control" (as defined in the federal Bank Holding Company Act of 1956, as amended) of the Corporation shall have occurred within the preceding two years, the determination shall be made by special legal counsel, unless otherwise expressly agreed by the person claiming indemnification.

(c) Authorization of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shall be made by those entitled under subsection 8.06(b)(3) to select counsel.

If it is determined under this Section 8.06 that the claimant is entitled to indemnification, payment to the claimant shall be made within 15 days after such determination or demand.

8.07 Indemnification of Officers, Employees and Agents.

(a)	An individual who is made a party to a proceeding because he is or was an officer of the Corporation is entitled to mandatory indemnification under Section 8.03 and is entitled to apply for court-ordered indemnification under Section 8.05, in each case to the same extent as a director.
(b)	The Corporation shall indemnify and advance expenses under Sections 8.02 and 8.04 to an individual who is made a party to a proceeding because he is or was an officer of the Corporation, subject to the same conditions and limitations and to the same extent that these Bylaws provide for indemnification and advancement of expenses to a director.
(c)	In the discretion of the Board of Directors, the Corporation may indemnify and advance expenses under Sections 8.02 and 8.04 to an individual who is made a party to a proceeding because he is or was an employee or agent of the Corporation, subject to the same conditions and limitations and to the same extent that these Bylaws provide for indemnification and advancement of expenses to a director.

8.08 Insurance. The Corporation may purchase and maintain insurance on behalf of an individual who is or was a director, officer, employee, or agent of the Corporation or who, while a director, officer, employee, or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, against liability asserted against or incurred by him in that capacity or arising from his status as a director, officer, employee, or agent, whether or not the Corporation would have power to indemnify him against the same liability under Sections 8.02 or 8.03.

8.09 Contract Right. The right of indemnification conferred upon directors and officers in this Bylaw shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any proceeding in advance of its final disposition. The right to indemnification under this Section 8.09 shall be deemed to vest upon the occurrence of the event giving rise to the claim for indemnification and no subsequent modification or repeal of this Article Eight or other action on the part of the Corporation or otherwise shall operate to limit or impair such right. Nothing in this Section 8.09 shall be deemed to create any vested contract right to indemnification or advance of expenses in favor of any person for whom indemnification or advancement of expenses is merely permissive and not required under applicable law or this Article Eight.

8.10 Enforcement of Rights. In any action brought by a claimant to enforce the right to indemnification under this Article Eight, it shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the requirements of Section 8.04 have been met), that the claimant has not met the standard of conduct which makes it permissible under the Vermont Business Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation.

8.11 Non-Exclusive Rights; Survival. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article Eight shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, other provision of the Articles of Association or Bylaws, contract, vote of stockholders or Directors or otherwise. No repeal or modification of this Article Eight shall in any way diminish or adversely affect the rights of any director, officer, employee or agent of the Corporation hereunder in respect of any occurrence or matter arising prior to any such repeal or modification.

8.12 Severability. If any provision or provisions of this Article Eight shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality and enforceability of the remaining provisions of this Article Eight (including, without limitation, each portion of any section of this Article Eight containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (ii) to the fullest extent possible, the provisions of this Article Eight shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

8.13 Application of this Article.

(a)	These provisions do not limit the Corporation's power to pay or reimburse expenses incurred by a director, officer or other person in connection with his appearance as a witness in a proceeding at a time when such individual has not been made a named defendant or respondent to the proceeding.
(b)	It is the intent of this Article Eight that the Corporation (i) shall indemnify and advance expenses to directors and officers of the Corporation and (ii) shall have the right to indemnify and advance expenses to any employee or agent, in each case, to the fullest extent permitted by applicable law. In the event that, after this Article Eight becomes effective, any such applicable law is amended to permit expanded powers to indemnify or advance expenses, the Corporation shall be deemed to have and may exercise all such expanded powers, notwithstanding any contrary provision of these Bylaws.
(c)	It is the intent of this Article Eight that it shall apply to acts and omissions that occurred prior to its adoption, even though suit is not filed or a claim is otherwise asserted until after such adoption.

ARTICLE NINE: EMERGENCY PREPAREDNESS

9.01 Emergency. If there is an emergency declared by governmental authorities or otherwise subsisting as the result of a regional or national disaster or act of war or terrorism, and of such severity as to prevent the normal conduct and management of the affairs of the Corporation and its subsidiaries:

(a)

Temporary Executive Committee. If it is impractical for the Board of Directors, or the Executive Committee (if one has been appointed) to meet, any three available Directors shall constitute an Emergency Executive Committee authorized to exercise the full authority of the Board of Directors, except as limited by applicable law, until such time as the appointed Executive Committee or the Board of Directors can again assume full responsibility and control of the Corporation; and

(b)

The available officers and employees of the Corporation shall continue to conduct the affairs of the Corporation, with such guidance as may be available to them from the Board of Directors, the Executive Committee or the Temporary Executive Committee constituted under Section 9.01(a) hereof, subject to conformance with any governmental directives during the emergency.

ARTICLE TEN: MISCELLANEOUS PROVISIONS

10.01 Distributions. Subject to provisions of the statutes and the Articles of Association, dividends or other distributions may be declared by the Board of Directors at any meeting and may be paid in cash, in property, or in shares of stock of the Corporation. Such declaration and payment shall be at the discretion of the Board of Directors.

10.02 Reserves. The Board of Directors may create out of funds of the Corporation legally available therefor such reserve or reserves as the Board of Directors from time to time, in its discretion, considers proper to provide for contingencies, to equalize dividends or to repair or maintain any property of the Corporation, or for such other purposes as the Board of Directors shall consider beneficial to the Corporation. The Board of Directors may modify or abolish any such reserve.

10.03 Books and Records. The Corporation shall keep correct and complete books and records of account, shall keep as permanent records the minutes of the proceedings of its shareholders, Board of Directors, and any committee, and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of the shares held by each shareholder.

10.04 Fiscal Year. The fiscal year of the Corporation shall be as provided in the Articles of Association.

10.05 Seal. The seal, if any, of the Corporation shall be in such form as may be approved from time to time by the Board of Directors.

10.06 Resignation. A director, committee member, officer, or agent may resign by so stating at any meeting of the Board of Directors or by giving written notice to the Board of Directors, the President, or the Secretary, or other officer responsible for recording the minutes of the meetings of the shareholders and directors. Such resignation shall take effect at the time specified therein, or immediately if no time is specified. Unless it specifies otherwise, a resignation is effective without being accepted.

10.07 Securities of Other Corporations. Except as may be otherwise provided by resolution of the Board of Directors, the Chairman, the CEO, the President, the Secretary, or any Vice-President of the Corporation shall have the power and authority to transfer, endorse for transfer, vote, consent, or take any other action with respect to any securities of another issuer which may be held or owned by the Corporation and to make, execute, and deliver any waiver, proxy, or consent with respect to any such securities. For purposes of this section, the term "securities" shall include, without limitation, any membership interest the Corporation may hold in any limited liability company or similar venture.

10.08 Amendment. Except as hereinafter provided in this Section 10.08, or by law or in the Articles of Association, these Bylaws may be altered, amended or repealed by the directors acting by resolution of a majority of the directors then in office or by resolution of the shareholders. Notwithstanding any other provision of these Bylaws or of the Articles of Association and notwithstanding the fact that some lesser percentage may be specified by law, the affirmative vote of the holders of 75% or more of the combined voting power of the then-outstanding shares of the Corporation's capital stock entitled to vote generally in the election of directors shall be required to amend, alter, change, or repeal, in whole or in part, Sections 3.02, 3.03, 3.04, 3.05 or 3.06 of these Bylaws.

10.09 Invalid Provisions. If any part of these Bylaws shall be held invalid or inoperative for any reason, the remaining parts, so far as it is possible and reasonable, shall remain valid and operative.

10.10 Headings. The headings used in these Bylaws are for convenience only and do not constitute matter to be construed in the interpretation of these Bylaws.

The undersigned, the Secretary of the Corporation, hereby certifies that the foregoing Bylaws, as amended and restated, were adopted by the Board of Directors of the Corporation, as of October 7, 2008.

/s/ Christianne Bumps

Corporate Secretary

Community Bancorp.

(Seal)

 

* Subsequently renumbered to Article Fourteen and deleted by vote of the shareholders on June 10, 2008.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Stephen P. Marsh, President and Chief Executive Officer, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Community Bancorp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 13, 2008

/s/ Stephen P. Marsh                            

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Louise M. Bonvechio, Vice President and Chief Financial Officer, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Community Bancorp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 13, 2008

/s/Louise M. Bonvechio                               

Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U. S. C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Community Bancorp. (the "Company") on Form 10-Q for the period ended September 30, 2008, filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned Chief Financial Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.

     A signed original of this written statement required by Section 906 has been provided to Community Bancorp. and will be retained by Community Bancorp. and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ Stephen P. Marsh                              

Stephen P. Marsh,

President & Chief Executive Officer

November 13, 2008

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U. S. C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Community Bancorp. (the "Company") on Form 10-Q for the period ended September 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned Chief Executive Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:  1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.

     A signed original of this written statement required by Section 906 has been provided to Community Bancorp. and will be retained by Community Bancorp. and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ Louise M. Bonvechio                    

Louise M. Bonvechio,

Vice President & CFO

November 13, 2008