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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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(MARK ONE)

|x | QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------



For the quarterly period ended March 31, 2005



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



Commission File Number: 0-13653



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THE PEOPLES BANCTRUST COMPANY, INC.

(Exact name of registrant as specified on its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Alabama                                                        |  | 63-0896239                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|310 Broad Street, Selma, Alabama                               |  | 36701                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



(334) 875-1000

(Registrants telephone number, including area code)



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Indicate by a 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 such shorter time period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



Indicate by check mark, whether the registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange Act)    Yes ̈No  x



As of the close of business on May 11, 2005, 5,874,992 shares of the registrants Common Stock, par value $.10 per share, were outstanding.



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PART I - FINANCIAL INFORMATION



Item 1. Financial Statements



THE PEOPLES BANCTRUST CO., INC.

CONDENSED
CONSOLIDATED BALANCE SHEETS



|                                                                       |  |               |         |   |                  |   |         |  
|---------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                       |  | In Thousands  |        
|                                                                       |  | March 31,2005 |         |   | December 31,2004 |  
|                                                                       |  | (Unaudited)   |         |   |                  |  
|ASSETS:                                                                |  |               |         |   |                  |   |         |  
|Cash and due from banks                                                |  | $             | 51,859  |   |                  | $ | 46,177  |  
|Federal funds sold and securities purchased under agreements to resell |  |               | 7,500   |   |                  |   | 17,000  |  
|                                                                       |  |               |         |   |                  |   |         |  
|Total cash and cash equivalents                                        |  |               | 59,359  |   |                  |   | 63,177  |  
|                                                                       |  |              
|Securities available-for-sale                                          |  |               | 239,182 |   |                  |   | 253,744 |  
|                                                                       |  |              
|Loans, net of unearned discount                                        |  |               | 438,728 |   |                  |   | 438,019 |  
|Allowance for loan losses                                              |  |               | (8,339  | ) |                  |   | (9,043  | )
|                                                                       |  |               |         |   |                  |   |         |  
|Net loans                                                              |  |               | 430,389 |   |                  |   | 428,976 |  
|                                                                       |  |              
|Bank premises and equipment, net                                       |  |               | 18,601  |   |                  |   | 18,366  |  
|Goodwill                                                               |  |               | 6,203   |   |                  |   | 6,203   |  
|Other intangible assets                                                |  |               | 602     |   |                  |   | 658     |  
|Other real estate, net                                                 |  |               | 2,124   |   |                  |   | 2,006   |  
|Other assets                                                           |  |               | 19,441  |   |                  |   | 19,119  |  
|                                                                       |  |               |         |   |                  |   |         |  
|Total assets                                                           |  | $             | 775,901 |   |                  | $ | 792,249 |  
|                                                                       |  |               |         |   |                  |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY:                                  |  |               |         |   |                  |   |         |  
|Noninterest-bearing deposits                                           |  | $             | 77,175  |   |                  | $ | 78,641  |  
|Interest-bearing deposits                                              |  |               | 575,218 |   |                  |   | 587,012 |  
|                                                                       |  |               |         |   |                  |   |         |  
|Total deposits                                                         |  |               | 652,393 |   |                  |   | 665,653 |  
|FHLB and other borrowed funds                                          |  |               | 47,007  |   |                  |   | 48,313  |  
|Other liabilites                                                       |  |               | 2,439   |   |                  |   | 3,241   |  
|                                                                       |  |               |         |   |                  |   |         |  
|Total liabilities                                                      |  |               | 701,839 |   |                  |   | 717,207 |  
|                                                                       |  |              
|Commitments and contingencies (Note 1)                                 |  |               |        |   |                  |   |        |  
|                                                                       |  |              
|Common stock                                                           |  |               | 559     |   |                  |   | 558     |  
|Additional paid-in-capital                                             |  |               | 11,463  |   |                  |   | 11,406  |  
|Accumulated other comprehensive (loss) income, net of tax              |  |               | (2,806  | ) |                  |   | (947    | )
|Retained earnings                                                      |  |               | 64,846  |   |                  |   | 64,025  |  
|                                                                       |  |               |         |   |                  |   |         |  
|Total stockholders equity                                             |  |               | 74,062  |   |                  |   | 75,042  |  
|                                                                       |  |               |         |   |                  |   |         |  
|Total liabilities and stockholders equity                             |  | $             | 775,901 |   |                  | $ | 792,249 |  
|                                                                       |  |               |         |   |                  |   |         |  



See notes to Unaudited Condensed
Consolidated Financial Statements



2



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THE PEOPLES BANCTRUST CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME



|                                                    |  |                                                                                      |           |   |      |   |          
|--------------------------------------------------- |  | ------------------------------------------------------------------------------------ | --------- | - | ---- | - | ---------
|                                                    |  | In Thousands, except shareand per share data(Unaudited) Three Months Ended March
31,
|                                                    |  | 2005                                                                                 |           |   | 2004
|Interest and fees on loans                          |  | $                                                                                    | 7,227     |   |      | $ | 7,180    
|Interest and dividends on investment securities     |  |                                                                                      | 2,248     |   |      |   | 1,940    
|Other interest income                               |  |                                                                                      | 233       |   |      |   | 121      
|                                                    |  |                                                                                      |           |   |      |   |          
|Total interest income                               |  |                                                                                      | 9,708     |   |      |   | 9,241    
|                                                    |  |                                                                                     
|Interest on deposits                                |  |                                                                                      | 2,655     |   |      |   | 2,233    
|Interest on borrowed funds                          |  |                                                                                      | 614       |   |      |   | 536      
|                                                    |  |                                                                                      |           |   |      |   |          
|Total interest expense                              |  |                                                                                      | 3,269     |   |      |   | 2,769    
|                                                    |  |                                                                                      |           |   |      |   |          
|Net interest income                                 |  |                                                                                      | 6,439     |   |      |   | 6,472    
|                                                    |  |                                                                                     
|Provision for loan losses                           |  |                                                                                      | (313      | ) |      |   | 426      
|                                                    |  |                                                                                      |           |   |      |   |          
|Net interest income after provision for loan losses |  |                                                                                      | 6,752     |   |      |   | 6,046    
|                                                    |  |                                                                                     
|Deposit service charges                             |  |                                                                                      | 1,011     |   |      |   | 1,199    
|Net securities gains                                |  |                                                                                      | 14        |   |      |   | 203      
|Other noninterest income                            |  |                                                                                      | 1,038     |   |      |   | 940      
|                                                    |  |                                                                                      |           |   |      |   |          
|Total noninterest income                            |  |                                                                                      | 2,063     |   |      |   | 2,342    
|                                                    |  |                                                                                     
|Salaries, benefits and other personnel expense      |  |                                                                                      | 3,639     |   |      |   | 3,365    
|Premises and fixed assets expense                   |  |                                                                                      | 1,262     |   |      |   | 1,177    
|Other noninterest expense                           |  |                                                                                      | 1,914     |   |      |   | 1,821    
|                                                    |  |                                                                                      |           |   |      |   |          
|Total noninterest expense                           |  |                                                                                      | 6,815     |   |      |   | 6,363    
|                                                    |  |                                                                                      |           |   |      |   |          
|Income before income taxes                          |  |                                                                                      | 2,000     |   |      |   | 2,025    
|                                                    |  |                                                                                     
|Provision for income taxes                          |  |                                                                                      | 565       |   |      |   | 567      
|                                                    |  |                                                                                      |           |   |      |   |          
|Net income                                          |  | $                                                                                    | 1,435     |   |      | $ | 1,458    
|                                                    |  |                                                                                      |           |   |      |   |          
|Basic weighted average number of shares             |  |                                                                                      | 5,585,158 |   |      |   | 5,565,543
|Diluted weighted average number of shares           |  |                                                                                      | 5,616,830 |   |      |   | 5,592,521
|Basic net income per share                          |  | $                                                                                    | 0.26      |   |      | $ | 0.26     
|Diluted net income per share                        |  | $                                                                                    | 0.26      |   |      | $ | 0.26     
|Dividends per share                                 |  | $                                                                                    | 0.11      |   |      | $ | 0.11     



See notes to Unaudited Condensed
Consolidated Financial Statements



3



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THE PEOPLES BANCTRUST CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



|                                                                                     |  |                                                    |        |   |      |   |      
|------------------------------------------------------------------------------------ |  | -------------------------------------------------- | ------ | - | ---- | - | -----
|                                                                                     |  | In ThousandsThree Months EndedMarch 31,(Unaudited)
|                                                                                     |  | 2005                                               |        |   | 2004
|Net income                                                                           |  | $                                                  | 1,435  |   |      | $ | 1,458
|Other comprehensive income:                                                          |  |                                                    |        |   |      |   |      
|Unrealized (losses) gains on securities available for sale during the period         |  |                                                    | (2,932 | ) |      |   | 1,464
|Less: reclassification adjustment for net gains included in net income               |  |                                                    | 14     |   |      |   | 203  
|                                                                                     |  |                                                    |        |   |      |   |      
|Other comprehensive (loss) income                                                    |  |                                                    | (2,946 | ) |      |   | 1,261
|Income tax (benefit) provision related to items of other comprehensive (loss) income |  |                                                    | (1,087 | ) |      |   | 465  
|                                                                                     |  |                                                    |        |   |      |   |      
|Other comprehensive (loss) income, net of tax                                        |  |                                                    | (1,859 | ) |      |   | 796  
|                                                                                     |  |                                                    |        |   |      |   |      
|Comprehensive (loss) income, net of tax                                              |  | $                                                  | (424   | ) |      | $ | 2,254
|                                                                                     |  |                                                    |        |   |      |   |      



See notes to Unaudited Condensed
Consolidated Financial Statements



4



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THE PEOPLES BANCTRUST COMPANY., INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW



|                                                            |  |                                                     |         |   |      |   |         |  
|----------------------------------------------------------- |  | --------------------------------------------------- | ------- | - | ---- | - | ------- | -
|                                                            |  | In Thousands(Unaudited) Three Months EndedMarch 31, |        
|                                                            |  | 2005                                                |         |   | 2004 |  
|Cashflow provided by operating activities                   |  | $                                                   | 2,250   |   |      | $ | 2,103   |  
|                                                            |  |                                                     |         |   |      |   |         |  
|Cash flow from investing activities                         |  |                                                     |         |   |      |   |         |  
|Proceeds from sales of investment securities                |  |                                                     | 1,958   |   |      |   | 32,419  |  
|Proceeds from maturities and calls of investment securities |  |                                                     | 11,620  |   |      |   | 29,762  |  
|Purchases of investment securities                          |  |                                                     | (2,027  | ) |      |   | (61,178 | )
|Net (increase) decrease in loans                            |  |                                                     | (756    | ) |      |   | 6,730   |  
|Purchases of bank premises and equipment                    |  |                                                     | (1,766  | ) |      |   | (548    | )
|Proceeds from sale of bank premises and equipment           |  |                                                     | 4       |   |      |   | 35      |  
|Proceeds from sale of other real estate                     |  |                                                     | 30      |   |      |   | 33      |  
|                                                            |  |                                                     |         |   |      |   |         |  
|Net cash provided by investing activities                   |  |                                                     | 9,063   |   |      |   | 7,253   |  
|                                                            |  |                                                    
|Cash flow from financing activities                         |  |                                                     |         |   |      |   |         |  
|Net (decrease) increase in deposits                         |  |                                                     | (13,260 | ) |      |   | 2,556   |  
|Net decrease in borrowed funds                              |  |                                                     | (1,306  | ) |      |   | (2,139  | )
|Dividends paid                                              |  |                                                     | (565    | ) |      |   | (562    | )
|                                                            |  |                                                     |         |   |      |   |         |  
|Net cash (used in) / provided by financing activities       |  |                                                     | (15,131 | ) |      |   | (145    | )
|                                                            |  |                                                    
|Net (decrease) increase in cash and cash equivalents        |  |                                                     | (3,818  | ) |      |   | 41,660  |  
|Cash and cash equivalents at beginning of period            |  |                                                     | 63,177  |   |      |   | 37,583  |  
|                                                            |  |                                                     |         |   |      |   |         |  
|Cash and cash equivalents at end of period                  |  | $                                                   | 59,359  |   |      | $ | 79,243  |  
|                                                            |  |                                                     |         |   |      |   |         |  
|Cash paid for interest                                      |  | $                                                   | 2,978   |   |      | $ | 2,801   |  
|                                                            |  |                                                     |         |   |      |   |         |  
|Cash paid for income taxes                                  |  | $                                                   |        |   |      | $ |        |  
|                                                            |  |                                                     |         |   |      |   |         |  



See notes to Unaudited Condensed
Consolidated Financial Statements



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THE PEOPLES BANCTRUST COMPANY, INC. AND SUBSIDIARY



Notes to the Unaudited Condensed Consolidated Financial Statements



Accounting Policies:



The accompanying unaudited condensed consolidated financial statements of The Peoples BancTrust Company, Inc, (BancTrust) and
its subsidiary, The Peoples Bank and Trust Company (Peoples Bank), along with its subsidiaries Loan Express, Inc. and The Peoples Insurance Agency, Inc. have been prepared in accordance with generally accepted accounting principles for
interim information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations are not necessarily indicative of the results of
operations for the full year or any other interim periods. For further information refer to the consolidated financial statements and footnotes thereto included in BancTrusts Annual Report on Form 10-K for the fiscal year ended December 31,
2004.



Commitments and Contingencies:



BancTrust and its subsidiaries are from time to time defendants in legal actions arising
from normal business activities. Management does not anticipate that the ultimate liability arising from litigation outstanding at March 31, 2005 will have a materially adverse effect on BancTrusts financial statements.



Earnings Per Share (EPS):



The following table reflects the reconciliation of the numerator and denominator of the
basic EPS computation to the diluted EPS computation for the three months ended March 31, 2005 and 2004 respectively (in thousands, except per share data):



|                                        |  |                                   |       |        |       |                 |   |     
|--------------------------------------- |  | --------------------------------- | ----- | ------ | ----- | --------------- | - | ----
|                                        |  | Three months ended March 31, 2005
|                                        |  | Net Income                        |       | Shares |       | Per-ShareAmount
|Basic EPS                               |  |                                   |       |        |       |                 |   |     
|Income available to common stockholders |  | $                                 | 1,435 |        | 5,585 |                 | $ | 0.26
|Effect of dilutive securities           |  |                                   |       |        |       |                 |   |     
|Stock options                           |  |                                   |       |        | 32    |                 |   |     
|                                        |  |                                   |       |        |       |                 |   |     
|Diluted EPS                             |  | $                                 | 1,435 |        | 5,617 |                 | $ | 0.26
|                                        | 
|                                        |  | Three months ended March 31, 2004
|                                        |  | Net Income                        |       | Shares |       | Per-ShareAmount
|Basic EPS                               |  |                                   |       |        |       |                 |   |     
|Income available to common stockholders |  | $                                 | 1,458 |        | 5,566 |                 | $ | 0.26
|Effect of dilutive securities           |  |                                   |       |        |       |                 |   |     
|Stock options                           |  |                                   |       |        | 27    |                 |   |     
|                                        |  |                                   |       |        |       |                 |   |     
|Diluted EPS                             |  | $                                 | 1,458 |        | 5,593 |                 | $ | 0.26



6



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Stock-Based Compensation



SFAS No. 123, Accounting for Stock-Based Compensation, defines a fair value based method of accounting for an employee stock option or similar
equity instrument. However, SFAS No. 123 allows an entity to continue to measure compensation costs for those plans using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, Accounting for Stock Issued to
Employees. Entities electing to remain with the accounting in Opinion No. 25 must make pro forma disclosures of net income and earnings per share as if the fair value based method of accounting defined in SFAS No. 123 had been applied. Under the
fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. Under the intrinsic value based method, compensation cost is the
excess, if any, of the quoted market price of the stock at the grant date or other measurement date over the amount an employee must pay to acquire the stock. BancTrust has elected to continue to measure compensation cost for its stock option plans
under the provisions in APB Opinion 25 and has calculated the fair value of outstanding options for purposes of pro forma disclosure utilizing the Black-Scholes method.



At March 31, 2005, BancTrust had not issued stock options in 2005, nor had it issued stock options during the same period in
2004. Consequently, BancTrusts results of operations would not have been impacted in either period by expenses associated with stock options, as options granted by BancTrust typically vest on the first anniversary date after grant.



Recent Accounting Pronouncements:



In December 2004, the Financial Accounting Standards Board
(FASB) published FASB Statement No. 123 (revised 2004), Share-Based Payment (FAS 123(R) or the Statement). FAS 123(R) requires that the compensation cost relating to share-based payment transactions,
including grants of employee stock options, be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. FAS 123(R) covers a wide range of share-based compensation
arrangements including stock options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. FAS 123(R) is a replacement of FASB Statement No. 123, Accounting for Stock-Based
Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related interpretive guidance.



The effect of the Statement will be to require entities to measure the cost of employee services received in exchange for stock options based on the
grant-date fair value of the award, and to recognize the cost over the period the employee is required to provide services for the award. FAS 123(R) permits entities to use any option-pricing model that meets the fair value objective in the
Statement.



BancTrust will be required to apply FAS 123(R) as
of the beginning of its first interim period that begins after December 15, 2005, which will be the quarter ending March 31, 2006.



FAS 123(R) allows two methods for determining the effects of the transition: the modified prospective transition method and the modified retrospective
method of transition. Under the modified prospective transition method, an entity would use the fair value based accounting method for all employee awards granted, modified, or settled after the effective date. As of the effective date, compensation
cost related to the nonvested portion of awards outstanding as of that date would be based on the grant-date fair value of those awards as calculated under the original provisions of Statement No. 123; that is, an entity would not remeasure the
grant-date fair value estimate of the unvested portion of awards granted prior to the effective date of FAS 123(R). An entity will have the further option to either apply the Statement to only the quarters in the period of adoption and subsequent
periods, or apply the Statement to all quarters in the fiscal year of adoption. Under the modified retrospective method of transition, an entity would revise its previously issued financial statements to recognize employee compensation cost for
prior periods presented in accordance with the original provisions of Statement No. 123. The provisions of this statement are not expected to have a material impact on results of operations, financial position, or liquidity of BancTrust.



7



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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.



GENERAL



The following analysis focuses on the financial condition and results of operations of BancTrust, and should be read in
conjunction with the consolidated financial statements included in this report.



Managements discussion and analysis includes certain forward-looking statements addressing, among other things, BancTrusts prospects for earnings, asset growth and net interest margin. Forward-looking
statements are accompanied by, and identified with, such terms as anticipates, believes, expects, intends, and similar phrases. Managements expectations for BancTrusts future necessarily
involve a number of uncertainties, assumptions and estimates. Factors that could cause actual results to differ from the expectations expressed herein include: substantial changes in interest rates and changes in the general economy, as well as
changes in BancTrusts strategies for credit-risk management, interest-rate risk management and investment activities. Accordingly, any forward-looking statements included herein do not purport to be predictions of future events or
circumstances and may not be realized.



Use of estimates in the
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the
near term relate to the determination of the allowance for loan and lease losses and deferred tax assets or liabilities.



CRITICAL ACCOUNTING POLICIES



BancTrust has adopted various accounting policies which govern the application of accounting principles generally accepted in the United States of America
in the preparation of its financial statements. Significant accounting policies are described in the footnotes to the consolidated financial statements in this quarterly report on Form 10-Q as disclosed in BancTrusts annual report on Form 10-K
for the year ended December 31, 2004.



Certain accounting
policies involve significant judgments and assumptions by management which have a material impact on the carrying value of certain assets and liabilities. Management considers these accounting policies to be critical accounting policies. The
judgments and assumptions used are based on historical experience and other factors, which management believes are reasonable under the circumstances. Because of the nature of the judgments and assumptions management makes, actual results could
differ from these judgments and estimates which could have a material impact on the carrying values of BancTrusts assets and liabilities and results of operations.



Allowance for Loan Losses - A loan is considered impaired, based on current information and events, if it is probable
that BancTrust will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Uncollateralized loans are measured for impairment based on the present value of expected
future cash flows discounted at the historical effective interest rate, while all collateral-dependent loans are measured for impairment based on the fair value of the collateral.



BancTrust uses several factors in determining if a loan is impaired. The internal asset classification procedures include a
thorough review of significant loans and lending relationships and include the accumulation of related data. This data includes loan payment status, borrowers financial data, and borrowers operating factors such as cash flows, operating
income or loss, etc.



The allowance for loan losses is
established through charges to earnings in the form of a provision for loan losses. Increases and decreases in the allowance due to changes in the measurement of the impaired loans are included in the provision for loan losses. Loans continue to be
classified as impaired unless they are brought fully current and the collection of scheduled interest and principal is considered probable. When a loan or portion of a loan is determined to be uncollectible, the portion deemed uncollectible is
charged against the allowance and subsequent recoveries, if any, are credited to the allowance.



8



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Managements periodic evaluation of the adequacy of the allowance also considers impaired loans and
takes into consideration BancTrusts past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of any underlying collateral, and current
economic conditions. While management believes that it has established the allowance in accordance with generally accepted accounting principles and has taken into account the views of its regulators and the current economic environment, there can
be no assurance that in the future BancTrusts regulators or its economic environment will not require further increases in the allowance.



Goodwill Impairment Analysis -Goodwill represents the excess of the cost of the acquisition over the fair value of the net assets acquired.
BancTrust tests goodwill for impairment on an annual basis, or more often if events or circumstances indicate that there may be impairment. BancTrust has elected to perform its annual testing as of June 30 each year. The goodwill impairment test is
a two-step process, which requires management to make judgments in determining the assumptions used in the calculations. The first step involves estimating the fair value of each reporting unit and comparing it to the reporting units carrying
value, which includes the allocated goodwill. If the estimated fair value is less than the carrying value, then a second step is performed to measure the actual amount of goodwill impairment. The second step first involves determining the implied
fair value of goodwill. This requires BancTrust to allocate the estimated fair value to all the assets and liabilities of the reporting unit. Any unallocated fair value represents the implied fair value of goodwill which is compared to its
corresponding carrying value. If the carrying value exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess.



Fair values of reporting units were estimated using discounted cash flow models derived from internal earnings forecasts. The key assumptions used to
estimate the fair value of each reporting unit included earnings forecasts for 10 years, terminal values based on future growth rates and discount interest rates. Changes in market interest rates, depending on the magnitude and duration, could
impact the discount interest rates used in the impairment analysis. Generally, and with all other assumptions remaining the same, increasing the discount interest rate used in the analysis would tend to lower the fair value estimates, while lowering
the discount interest rate would tend to increase the fair value estimates.



Income taxes - The determination of BancTrusts overall income tax provision is complex and requires careful analysis. As part of the overall business strategy, BancTrust may enter into business
transactions that require management to consider tax laws and regulations that apply to the specific facts and circumstances under consideration. This analysis includes evaluating the amount and timing of the realization of income tax liabilities or
benefits. Management continually monitors tax developments as they affect BancTrusts overall tax position.



Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.



FINANCIAL CONDITION



Cash and Cash Equivalents



At March 31, 2005, cash and cash equivalents had decreased to $59,359,000 from $63,177,000 at December 31, 2004. Cash and cash equivalents primarily
consist of cash and due from banks, combined with federal funds sold. At March 31, 2005, cash and due from banks totaled $51,859,000 compared to $46,177,000 at December 31, 2004, with federal funds sold totaling $7,500,000 and $17,000,000 for the
same periods respectively. The decline in cash and cash equivalents was primarily due to lower deposit levels at March 31, 2005 than at December 31, 2004 (see  Deposits).



9



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Investments



At March 31, 2005, investment securities totaled $239,182,000 compared to $253,744,000 at December 31, 2004. As with cash and cash equivalents, the
decline in investment securities was primarily due to lower deposit levels at March 31, 2005 than at December 31, 2004 (see  Deposits).



BancTrust is a participant in the Security for Alabama Funds Enhancement (SAFE) program. Under this program, banks that hold deposits of
the State of Alabama, or deposits of SAFE member municipalities within the State of Alabama, must pledge qualifying securities (typically United States Treasury or Agency debt instruments) as collateral for those amounts that exceed the FDIC
insurable limit. At March 31, 2005 BancTrust had securities totaling $109,808,000 pledged to the Treasurer of the State of Alabama under the SAFE program.



At year-end 2004, and at March 31, 2005, the entire investment securities portfolio was classified as available-for-sale, resulting in the
portfolio being marked-to-market. At December 31, 2004, the portfolio had a net unrealized loss (net of taxes) of $947,000 compared to a net unrealized loss (net of taxes) of $2,806,000 at March 31, 2005. BancTrust considers these unrealized losses
(net of taxes) to be temporary.



Loans



Total loans, net of the unearned discount, increased $709,000 to
$438,728,000 at March 31, 2005, from $438,019,000 at December 31, 2004. BancTrust realized growth in is real estate mortgage loan portfolio, which was substantially offset by reductions in both the commercial and industrial loan portfolio as well as
in the personal loan portfolio. BancTrust continues to place emphasis on originating loans secured by real estate, as well as on loans to commercial interests. Particular emphasis is placed on originating commercial real estate loans. The following
table indicates each of the major loan categories of BancTrust, and the change in volume of each when comparing March 31, 2005 to December 31, 2004.



|                                          |  |                |         |                   |   |         |  |   |        |  
|----------------------------------------- |  | -------------- | ------- | ----------------- | - | ------- |  | - | ------ | -
|                                          |  | March 31, 2005 |         | December 31, 2004 |   | Change  | 
|                                          |  |                |         | (In thousands)    |   |         | 
|Commercial and industrial                 |  | $              | 75,536  |                   | $ | 83,315  |  | $ | (7,779 | )
|Real estate - mortgage                    |  |                |         |                   |   |         |  |   |        |  
|Commercial                                |  |                | 234,766 |                   |   | 224,327 |  |   | 10,439 |  
|Residential                               |  |                | 82,335  |                   |   | 83,036  |  |   | (701   | )
|Personal                                  |  |                | 45,511  |                   |   | 46,693  |  |   | (1,182 | )
|Overdrafts and credit line                |  |                | 1,360   |                   |   | 1,381   |  |   | (21    | )
|                                          |  |                |         |                   |   |         |  |   |        |  
|Total loans                               |  |                | 439,508 |                   |   | 438,752 |  |   | 756    |  
|Less:                                     |  |                |         |                   |   |         |  |   |        |  
|Unearned discount                         |  |                | 780     |                   |   | 733     |  |   | 47     |  
|                                          |  |                |         |                   |   |         |  |   |        |  
|Total loans, net of the unearned discount |  | $              | 438,728 |                   | $ | 438,019 |  | $ | 709    |  
|                                          |  |                |         |                   |   |         |  |   |        |  



Commercial and
industrial loans declined from $83,315,000 at December 31, 2004 to $75,536,000 at March 31, 2005. BancTrust experienced significant repayments in its commercial and industrial loan portfolio, including the repayment of an approximately $5,500,000
commercial loan. Increased competition in commercial lending markets, as well as an emphasis on securing commercial credit facilities with real estate combined to account for the decline in commercial and industrial loans when comparing March 31,
2005 to December 31, 2004. When a new or existing commercial credit facility is secured with real estate, it is classified within the real estate loan portfolio rather than the commercial loan portfolio, regardless of its purpose.



Total real estate loans increased $9,738,000 to $317,101,000 at March 31,
2005 from $307,363,000 at December 31, 2004. Specifically, commercial real estate loans increased $10,439,000 from $224,327,000 at December 31, 2004 to $234,766,000 at March 31, 2005, while residential loans decreased $701,000 to $82,335,000 from
$83,036,000 for the same period. The increase in commercial real estate loans primarily occurred in BancTrusts newer markets where economic activity has been generally more significant than in other markets.



10



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Personal loans decreased from $46,693,000 at December 31, 2004 to $45,511,000 at March 31, 2005. Both
increased competition from alternative sources of credit and an increased level in denials of personal loan applications were the primary causes of the decrease in the personal loan portfolio. Alternative sources of credit primarily include credit
cards and finance companies.



Allowance for Loan Losses



Managements estimate of uncollectible amounts within BancTrusts
loan portfolio is represented by the allowance for loan losses. The allowance for loan losses is established through charges against earnings in the form of a provision for loan losses. A loan is charged against the allowance for loan losses when
management determines that it is probable that BancTrust will not recover the entire loan balance, either through repayment by the customer or from collateral proceeds. Should a loan that has been charged off be recovered, either partially or
entirely, it is credited back to the allowance. Periodic reviews of the loan portfolio that include analysis of such factors as current and expected economic conditions, historical loss experience and levels of non-accruing loans and delinquencies,
determine the appropriate level at which to maintain the allowance for loan losses. Because the allowance is based on assumptions and subjective judgments, it is not necessarily reflective of the charge-offs that may ultimately occur.



Management monitors and evaluates all loans in an effort to identify those
which currently possess, or otherwise indicate characteristics of weakness, potential weakness or non-conformity with their original terms. A loan is evaluated in light of its performance against its original stated terms, the fair market value of
the collateral securing the loan, known or anticipated economic events and or trends, and the on-going credit worthiness of the borrower and any guarantors. If when a loan is evaluated, there is determined to be a deficiency (or deficiencies) in any
of the aforementioned areas, the loan is added to a list of loans which are subject to heightened scrutiny, and for which additional loss reserves are maintained, depending on the magnitude of the deficiencies. The loan continues to be monitored
closely, which may include modifications through negotiations with the borrower. Such modifications may include, but are not limited to, the assignment of additional collateral, the modification of repayment terms and the procurement of a
guarantor(s). Only after the loan has been paid back in full, or performs in a favorable manner for a sustained period of time with all identified deficiencies having been duly discharged and documented, will the loan no longer receive the
exceptionally close and frequent monitoring previously described.



Using input from BancTrusts credit risk identification process, BancTrusts credit administration area analyzes and validates the loan loss reserve methodology at least quarterly. The analysis includes specific allowances for
individual loans and general allowances for certain pools of loans. The credit administration area along with senior management reviews and ensures the methodology is appropriate and that all risk elements have been assessed in order to determine
the appropriate level of allowance for the inherent losses in the loan portfolio at each quarter end.



The first area of the allowance for loan losses analysis involves the calculation of specific allowances for individual impaired loans as required by SFAS
114 and 118. In addition, BancTrust requires that a broad group of loans be analyzed for impairment each quarter (this includes all loans of $500,000 and over that have internal risk ratings below a predetermined classification level). The credit
administration area validates all impairment testing and validates the reserve allocations for all impaired loans each quarter. Reserves associated with these activities are based on a thorough analysis of the most probable sources of repayment
which is normally the liquidation of collateral, but also includes discounted future cash flows or the market value of the loan itself.



The second reserve area is the general allowance for loan pools assessed by applying loan loss allowance factors to groups of loans within the portfolio
that have similar characteristics. This part of the methodology is governed by SFAS 5. The general allowance factors are based upon recent and historical charge-off experience and are typically applied to the portfolio by loan type. Historical loss
analyses provide the basis for factors used for homogenous pools of smaller loans, such as residential real estate and other consumer loan categories which are not evaluated based on individual risk ratings but almost entirely based on historical
losses. The statistics used in this analysis of this second reserve element are adjusted quarterly based on loss trends and risk rating migrations.



11



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At March 31, 2005, BancTrusts allowance for loan losses had a balance of $8,339,000, compared to
$9,043,000 at December 31, 2004. The ratio of the allowance to total loans, net of the unearned discount, was 1.90% and 2.06% at March 31, 2005 and December 31, 2004, respectively. As a percentage of total loans, net of the unearned discount,
non-accruing loans decreased to .24% at March 31, 2005, compared to .48% at December 31, 2004. The coverage of the allowance to non-accruing loans was 779% and 426% at March 31, 2005 and December 31, 2004, respectively.



Loans requiring special attention because of potential weakness
(special attention loans) decreased to $29,381,000 at March 31, 2005 from $44,332,000 at December 31, 2004. This reduction is due in part to intensive efforts by management to reduce special attention loans. Special attention loans are
comprised of those loans classified as substandard or doubtful, within the classification process used by BancTrust in its loan review function. At March 31, 2005, approximately $3,338,000 of the $8,339,000 allowance for loan
losses was allocated to special attention loans. The following table indicates the loan charge off and recovery activity of BancTrust for the three months ended March 31, 2005 and 2004.



|                                           |  |                                        |      |   |      |   |      |  
|------------------------------------------ |  | -------------------------------------- | ---- | - | ---- | - | ---- | -
|                                           |  | Three Months EndedMarch 31,(unaudited) |     
|                                           |  | 2005                                   |      |   | 2004 |  
|Loans charged-off                          |  | $                                      | 881  |   |      | $ | 639  |  
|Recoveries of loans previously charged-off |  |                                        | (489 | ) |      |   | (399 | )
|                                           |  |                                        |      |   |      |   |      |  
|Net loans charged-off                      |  | $                                      | 392  |   |      | $ | 240  |  
|                                           |  |                                        |      |   |      |   |      |  



Deposits



Total deposits at March 31, 2005 were $652,393,000, representing a
$13,260,000 decrease from the December 31, 2004 total of $665,653,000. BancTrust experienced decreases in each primary deposit type. The most significant decreases were realized in interest bearing demand deposits, which decreased from $247,507,000
at December 31, 2004 to $238,755,000 at March 31, 2005. Time deposits decreased to $295,521,000 at March 31, 2005 from $299,432,000 December 31, 2004.



Included in time deposits at March 31, 2005 was $20,277,000 of brokered deposits. Brokered deposits are more likely to be withdrawn from BancTrust upon
maturity than other more traditional types of deposits. These deposits are fully insured by the Federal Deposit Insurance Corporation and are deployed by management to meet short-term funding needs.



Liquidity



Liquidity describes BancTrusts ability to meet its needs for cash. Those needs primarily include lending, withdrawal
demands of customers and the payment of operating expenses.



Liquidity management is crucial in ensuring that BancTrust is able to conduct its day-to-day business. Without proper liquidity management, BancTrust would be restricted in its activities as a financial institution, including its ability to
meet the needs of the communities it serves.



12



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Typically, increasing the liquidity of BancTrust would serve to reduce its profits as a result of reduced
earnings from assets with shorter maturities. Estimating liquidity needs is made more complex by the fact that certain balance sheet components are, by nature, more controllable by management than others. For example, the maturity frequency of the
securities portfolio is generally manageable at the time investment decisions are made. However, deposits flowing into and out of BancTrust are much less predictable and controllable by management. Monitoring liquidity needs and the changing
relationships between certain balance sheet components is the responsibility of BancTrusts Asset Liability Committee (ALCO) (see  Interest Rate Risk).



The asset items that are BancTrusts primary sources of liquidity are
cash and cash equivalents (see - Cash and Cash Equivalents). Also, the asset base provides liquidity through interest and fee income on loans, loan repayments and the maturity or sales of other earning assets, including
securities. BancTrusts securities are generally high grade, marketable securities. At March 31, 2005, the entire investment securities portfolio of BancTrust was classified as available-for-sale (see - Investments).



The liability base provides liquidity through deposit growth,
the rollover of maturing deposits and accessibility to external sources of funds, (borrowed funds). Borrowed funds totaled $47,007,000 at March 31, 2005, compared to $48,313,000 at December 31, 2004.



BancTrust has several available sources from which to borrow funds. The
predominant source of borrowed funds utilized by BancTrust is the Federal Home Loan Bank of Atlanta (FHLB). At March 31, 2005, BancTrust had borrowed from FHLB, $46,101,000. When combined with approximately $18,500,000 of guarantees on
commercial letters of credit provided by the FHLB, BancTrust had approximately $64,601,000 of active credit facilities at the FHLB on March 31, 2005. Total credit facilities available to BancTrust at the FHLB totaled approximately $65,226,000 on
March 31, 2005. BancTrust had unused federal funds lines of credit with correspondent financial institutions of approximately $49,000,000 at March 31, 2005.



Stockholders Equity and Regulatory Capital



At March 31, 2005, total stockholders equity was $74,062,000 compared to $75,042,000 at December 31, 2004. This change represents a decrease of
$980,000 that is accounted for as follows: net income - $1,435,000, dividends declared and paid - $614,000, common stock issued per dividend reinvestment plan - $58,000 and a decrease in accumulated other comprehensive income, net of tax of
$1,859,000. Net income and the issuance of common stock had the effect of increasing stockholders equity, while the decrease in other comprehensive income, net of tax and dividends declared and paid had the effect of lowering
stockholders equity.



13



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Risk-based capital regulations require all bank holding companies and banks to achieve and maintain a
minimum total capital to risk based assets ratio of 8%, at least half of which must be in the form of Tier 1 capital (consisting of stockholders equity less goodwill, other qualifying intangible assets and allowance for loan losses). The
following table indicates the risk-based capital ratios of BancTrust and Peoples Bank at March 31, 2005.



|                                             |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|-------------------------------------------- |  | --------------------------------------------------------------- | ------- |  | ------------ | - |  | - | ------- |  | ----- | -
|                                             |  | Risk-Based Capital Ratios & Leverage RatiosAs of March 31, 2005 |        
|                                             |  | Dollars in Thousands                                            |        
|                                             |  | BancTrust                                                       |         |  | Peoples Bank |  
|RISK-BASED CAPITAL RATIOS                    |  |                                                                 |         |  |              |   |  |  
|Tier 1 Capital                               |  | $                                                               | 70,221  |  | 13.51        | % |  | $ | 68,716  |  | 13.26 | %
|Tier 1 Capital  Minimum Required            |  |                                                                 | 20,784  |  | 4.00         | % |  |   | 20,722  |  | 4.00  | %
|                                             |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Excess                                       |  | $                                                               | 49,437  |  | 9.51         | % |  | $ | 47,994  |  | 9.26  | %
|                                             |  |                                                                 |         | 
|Total Capital                                |  | $                                                               | 76,740  |  | 14.77        | % |  | $ | 75,216  |  | 14.52 | %
|Total Capital  Minimum Required             |  |                                                                 | 41,568  |  | 8.00         | % |  |   | 41,444  |  | 8.00  | %
|                                             |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Excess                                       |  | $                                                               | 35,172  |  | 6.77         | % |  | $ | 33,772  |  | 6.52  | %
|                                             |  |                                                                 |         | 
|Net risk-weighted assets                     |  | $                                                               | 519,606 |  |              |   |  | $ | 518,047 |  |       |  
|                                             |  |                                                                 |         | 
|LEVERAGE RATIOS                              |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Total Tier 1 Capital                         |  | $                                                               | 70,221  |  | 9.01         | % |  | $ | 68,716  |  | 8.82  | %
|Minimum Leverage Requirement                 |  |                                                                 | 31,182  |  | 4.00         | % |  |   | 31,146  |  | 4.00  | %
|                                             |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Excess                                       |  | $                                                               | 39,039  |  | 5.01         | % |  | $ | 37,570  |  | 4.82  | %
|                                             |  |                                                                 |         | 
|Average Total Assets, Net of all intangibles |  | $                                                               | 779,559 |  |              |   |  | $ | 778,657 |  |       |  



Interest Rate Risk



The profitability of most financial institutions, including BancTrust, is
greatly dependent on net interest income. Given this, management believes changes in interest rates impact BancTrusts profitability to a greater extent than the effects of general inflation levels. Interest rates do not always move with the
same magnitude, or in the same direction, as inflation. When interest-earning assets are repricing to market rate levels at a different pace than interest-bearing liabilities, net interest income is affected either positively or negatively,
depending on the direction market rates are moving. When interest rates are volatile, liquidity and maturity of BancTrusts assets and liabilities is crucial in maintaining desired performance levels. Interest rates are highly sensitive to many
factors, including Federal Reserve monetary policies and domestic and international political conditions such as inflation, recession, unemployment, money supply and government borrowing. Other factors beyond managements control may also
affect interest rates. Management is unable to predict the future of interest rate movements; therefore, management attempts to strike a relative balance between rate sensitive assets and liabilities. This strategy is designed to protect
BancTrusts profitability against radical shifts in interest rate levels.



The process of measuring, compiling and analyzing the maturity and repricing dynamics of interest sensitive assets and interest sensitive liabilities is referred to as, asset liability management
(ALM). BancTrust has established an ALCO (see - Liquidity), consisting of executive management and the Principal Accounting Officer. The ALCO is responsible for ensuring that the relationship of interest sensitive
assets and liabilities, as defined by their respective maturity and repricing characteristics, does not become so mismatched as to expose BancTrust to unacceptable levels of risk in the areas of equity capital valuation, earnings or liquidity. ALCO
achieves its objectives via regular meetings where various data relating to specific liquidity and interest rate issues are presented and discussed. At least quarterly, ALCO utilizes an interest rate risk computer model which compiles the detailed
repricing and maturity characteristics of BancTrusts interest sensitive instruments (both assets and liabilities), and produces various reports and supporting detail, which indicate BancTrusts overall interest rate risk status.



14



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RESULTS OF OPERATIONS



Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004.



Like many financial institutions, the profitability of BancTrust is largely
dependent on the net interest income it is able to generate. Simply stated, net interest income is the difference between the interest earned on loans and investments (interest earning assets), and the interest expense paid on deposits
and borrowings (interest bearing liabilities). While overall market interest rates increased during the three months ended March 31, 2005 (2005 quarter), BancTrusts net interest income was slightly lower than during the
three months ended March 30, 2004 (2004 quarter). The primary reason for this is that yields realized on earning assets and costs realized on interest bearing liabilities typically lag movements in market interest rates to varying
extents, depending on the repricing characteristics of BancTrusts interest sensitive balance sheet components (see  Interest Rate Risk).



Interest earning assets produced $9,708,000 of interest income in the 2005 quarter and $9,241,000 of interest income in the
2004 quarter. These assets earned an average annual yield of 5.40% on average volume of $728,665,000 in the 2005 quarter compared to 5.14% on average volume of $720,819,000 in the 2004 quarter.



Interest income earned on investment securities in the 2005 quarter totaled
$2,248,000, compared to $1,940,000 in the 2004 quarter. The investment securities portfolio earned an average annual yield of 3.66% on average volume of $249,232,000 in the 2005 quarter, and 3.44% on average volume of $226,249,000 in the 2004
quarter. Negative loan growth between the two quarters contributed to the increase in average volume, as loan repayments were occurring with greater magnitude and frequency than loan originations. As a result, funds that would have typically been
deployed in, or remained in, the loan portfolio were deployed in the investment securities portfolio. The average annual yield earned on the investment securities portfolio increased between the 2004 and 2005 quarters as overall market rates of
interest increased.



Interest and fee income earned on loans
totaled $7,227,000 in the 2005 quarter and $7,180,000 in the 2004 quarter. This increase was primarily attributed to an increase in the average annual yield earned on the loan portfolio between the 2004 and 2005 quarters, given that there was a
decrease in the average volume between the same two periods. Market interest rates increased between the 2004 and 2005 quarters, thus contributing to the increase in the average annual yield earned on the loan portfolio. Negative total loan growth
between the 2004 and 2005 quarters contributed significantly to the decrease in the average volume of the loan portfolio.



In the 2005 quarter, interest and fee income on real estate loans totaled $5,142,000 compared to $4,349,000 in the 2004 quarter. In the 2005 quarter, real
estate loans earned an average annual yield of 6.60% on average volume of $315,785,000 and 6.30% on average volume of $276,825,000 in the 2004 quarter. Overall market interest rates increased between the 2004 and 2005 quarters, thus contributing to
the increase in average annual yield earned on the real estate loan portfolio. Growth in the commercial real estate loan portfolio between the quarters contributed to the increase in the average balance of the overall real estate loan portfolio.



Interest and fee income on commercial and industrial loans
totaled $1,164,000 in the 2005 quarter, and $1,674,000 in the 2004 quarter. The commercial and industrial loan portfolio yielded 6.06% on average volume of $77,999,000 in the 2005 quarter, and 5.21% on average volume of $128,806,000 in the 2004
quarter. Negative growth within the commercial and industrial loan portfolio contributed to the decrease in average volume between the two periods, while increases in market rates of interest contributed to the increase in average annual yield.



Interest and fee income on personal loans totaled $920,000 and
$1,156,000 for the 2005 and 2004 quarters respectively. This decrease was the result of declines in both the average annual yield earned and average volume in the 2005 quarter compared to the 2004 quarter. In the 2005 quarter, personal loans earned
an average annual yield of 7.92% on average volume of $47,124,000. In the 2004 quarter, personal loans earned an average annual yield of 9.10% on average volume of $50,959,000. BancTrust significantly curtailed the operations of its consumer finance
subsidiary in late 2004, halting consumer loan originations and closing all but one office. The cessation of loan originations by the consumer finance subsidiary contributed significantly to the decrease in the average annual yield of the overall
personal loan portfolio between the two quarters, and also contributed to the decrease in average volume between the same periods.



15



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Interest expense on deposits in the 2005 quarter totaled $2,655,000, compared to $2,233,000 in the 2004
quarter. The largest contributing factor to this increase was a rise in the average annual cost of deposits in the 2005 quarter to 1.86% compared to 1.56% in the 2004 quarter. Average deposits increased in the 2005 quarter to $579,577,000 from
$573,988,000 in the 2004 quarter. Increases in market interest rates contributed significantly to the increase in the average annual cost of deposits between the 2004 and 2005 quarters.



Interest expense on borrowed funds totaled $614,000 in the 2005 quarter and $536,000 in the 2004 quarter. In the 2005 and
2004 quarters, the average annual rate of interest paid on borrowed funds was 5.17% and 3.93%, respectively. The average volume of borrowed funds for the 2005 and 2004 quarters was $48,165,000 and $55,265,000, respectively. BancTrust repaid
$7,500,000 of FHLB advances in the second quarter of 2004 that bore a weighted average interest rate of less than 2%, thereby accounting for the majority of the aforementioned increase in the average annual rate of interest paid on borrowed funds
when comparing the 2005 quarter to the 2004 quarter. Also, as market rates of interest increased, FHLB advances with adjustable interest rates repriced accordingly, further contributing to the increase in the average annual rate of interest paid on
borrowed funds. The aforementioned FHLB advance repayments primarily accounted for the decrease in the average volume of borrowed funds between the two quarters.



The resulting net interest income for the 2005 quarter totaled $6,439,000, compared to $6,472,000 for the 2004 quarter. When
expressed as an average annual rate, net interest income as a percent of average earning assets is referred to as the net interest margin. The net interest margin for the 2005 quarter was 3.58%, compared to 3.60% for the 2004 quarter.
The following table illustrates the changes, and causes of those changes, in the primary components of net interest income for the 2005 quarter compared to the 2004 quarter.



ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSE

for the three months ended March 31, 2005

(In Thousands)



|                                                                       |  |                       |     |   |                      |   |      |                     |  |         |     |  |   |     |  
|---------------------------------------------------------------------- |  | --------------------- | --- | - | -------------------- | - | ---- | ------------------- |  | ------- | --- |  | - | --- | -
|                                                                       |  | 2005 Compared to 2004 |    
|                                                                       |  | Total                 |     |   | Changesin Volume (1) |   |      | Changesin Rates (1) |  | Mix (1) |    
|Interest income on:                                                    |  |                       |     |   |                      |   |      |                     |  |         |     |  |   |     |  
|Loans                                                                  |  | $                     | 47  |   |                      | $ | (247 | )                   |  | $       | 304 |  | $ | (10 | )
|Investment securities                                                  |  |                       | 308 |   |                      |   | 197  |                     |  |         | 101 |  |   | 10  |  
|Federal funds sold and securities purchases under agreements to resell |  |                       | 112 |   |                      |   | 2    |                     |  |         | 108 |  |   | 2   |  
|                                                                       |  |                       |     |   |                      |   |      |                     |  |         |     |  |   |     |  
|Total interest income                                                  |  | $                     | 467 |   |                      | $ | (48  | )                   |  | $       | 513 |  | $ | 2   |  
|                                                                       |  |                       |     |   |                      |   |      |                     |  |         |     |  |   |     |  
|Interest expense on:                                                   |  |                       |     |   |                      |   |      |                     |  |         |     |  |   |     |  
|Interest bearing deposits                                              |  | $                     | 422 |   |                      | $ | 22   |                     |  | $       | 396 |  | $ | 4   |  
|Borrowed funds                                                         |  |                       | 78  |   |                      |   | (64  | )                   |  |         | 162 |  |   | (20 | )
|                                                                       |  |                       |     |   |                      |   |      |                     |  |         |     |  |   |     |  
|Total interest expense                                                 |  | $                     | 500 |   |                      | $ | (42  | )                   |  | $       | 558 |  | $ | (16 | )
|Net change in net interest income before loan losses                   |  | $                     | (33 | ) |                      |   |      |                     |  |         |     |  |   |     |  
|                                                                       |  |                       |     |   |                      |   |      |                     |  |         |     |  |   |     |  

---

|(1) | Increases (decreases) are attributed to volume changes and rate changes on the following basis:
|--- | -----------------------------------------------------------------------------------------------



Changes in Volume = change in volume times old rate. Changes in Rates = change in rate times old volume. The mix change =
change in volume times change in rate.



16



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Typically, the provision for loan losses has the effect of reducing income, as it represents charges
against income in the form of necessary additions to the allowance for loan losses during a given period (see Allowance for Loan Losses). However, such was not the case in the 2005 quarter. In the 2005 quarter provision for loan
losses was ($313,000), having an increasing effect on income, compared to $426,000 in the 2004 quarter which had a decreasing effect on income. As loan repayments continued to offset loan originations (see  Loans), and
overall credit quality improved, BancTrusts loan review analyses indicated that a reduction in its recorded allowance for loan losses was warranted. Therefore, the allowance for loan losses was reduced in the 2005 quarter via a credit to
provision for loan losses, to a level consistent with BancTrusts loan review analyses.



Deposit service charges totaled $1,011,000 in the 2005 quarter, and $1,199,000 in the 2004 quarter. Management believes that an overall reduction in the number of fee eligible transactions by its checking deposit
customers is the primary reason for the decline in deposit service charges.



Realized gains on sales of securities totaled $14,000 in the 2005 quarter and $203,000 in the 2004 quarter. As market interest rates rise, the market values of fixed rate debt instruments tend to decline.
Consequently, fewer opportunities exist for gains to be realized when these instruments are sold. Such was the case with BancTrust in the 2005 quarter compared to the 2004 quarter, thereby accounting for the reduction in realized gains on sales of
securities.



Other noninterest income totaled $1,038,000 in the
2005 quarter and $940,000 in the 2004 quarter. Increases in fees and commissions earned from insurance and investment brokerage business lines were the primary reason for the increase in other noninterest income between the 2004 and 2005 quarters.



Salaries and benefits expense increased from $3,365,000 in the
2004 quarter to $3,639,000 in the 2005 quarter. BancTrust continued to increase its presence in newer markets with additional personnel, thereby accounting for the majority of the increase between the two quarters.



Premises and fixed assets expense increased from $1,177,000 in the 2004
quarter to $1,262,000 in the 2005 quarter. The primary factors in this increase were expenses associated with BancTrusts newly renovated operations center, and loan production offices located in new markets.



Other noninterest expense increased from $1,821,000 in the 2004 quarter to
$1,914,000 in the 2005 quarter. Contributing to the increase in other noninterest income was an approximately $150,000 provision made by BancTrust for anticipated liability regarding a deposit endorsement claim. Also, BancTrust recognized additional
expenses in the 2005 quarter associated with outside services utilized in its credit review function and Sarbanes Oxley Act compliance initiatives that were not realized in the 2004 quarter.



Provision for income taxes totaled $565,000 in the 2005 quarter and $567,000
in the 2004 quarter. In each of the 2005 and 2004 quarter, income taxes equaled 28% of income before income taxes.



IMPACT OF NEW ACCOUNTING STANDARDS



See Notes to the Unaudited Condensed Consolidated Financial Statements.



Item 3. Quantitative and Qualitative Disclosures About Market Risk



Interest sensitivity is one measure of the vulnerability of earnings to changes in the general level of interest rates. Whenever interest-earning assets
reprice to market interest rates at a different pace than interest-bearing liabilities, net interest income performance will be affected favorably or unfavorably, depending on the whether or not market interest rates are in a state of decline or
rise. Management is unable to predict future changes in market rates and their impact on BancTrusts profitability. Management believes that the current relationship of interest-earning assets to interest-bearing liabilities provides adequate
protection against any potential negative impact arising from changes in market rates of interest.



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Item 4. Controls and Procedures



BancTrust carried out an evaluation, under the supervision and with the participation of its chief executive officer and
chief financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures as of March 31, 2005, pursuant to Rule 13a  15(b) of the Securities Exchange Act of 1934. Based on this evaluation,
BancTrusts chief executive officer and chief financial officer concluded that BancTrusts disclosure controls and procedures, as designed and implemented, are effective in timely alerting them to material information required to be
included in its periodic SEC reports. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions, regardless of how remote.



In addition, BancTrust reviewed its internal controls. There has been no change in BancTrusts internal control over financial reporting during the last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, BancTrusts internal controls over financial reporting.



PART II  OTHER INFORMATION



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



On April 6, 2005, BancTrust entered into a Stock Purchase Agreement setting forth terms and conditions of the purchase by Endurance Capital Investors,
L.P. of 287,209 shares of common stock of BancTrust in a private placement at a purchase price of $17.41 per share pursuant to the exemptions from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506 under that Act. For
additional information, see BancTrusts Current Report on Form 8-K dated April 6, 2005.



Unregistered Sales of Equity Securities and Use of Proceeds



On April 6, 2005, BancTrust announced that it had entered into a Stock Purchase Agreement setting forth terms and conditions of the purchase by Endurance
Capital Investors, L.P. of 287,209 shares of common stock of BancTrust at $17.41 per share in a private placement pursuant to the exemptions from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506 under that Act. For
additional information, see BancTrusts Current Report on Form 8-K dated April 6, 2005.



Item 6. Exhibits



|                 |  |                                                                                                                                                                           
|---------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. 31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes  Oxley Act of 2002                                                                      
|                 | 
|Exhibit No. 31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes  Oxley Act of 2002                                                                      
|                 | 
|Exhibit No. 32.1 |  | Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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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.



|                   |  |                                                     
|------------------ |  | ----------------------------------------------------
|                   |  | The Peoples BancTrust Company, Inc.                 
|                   | 
|Date: May 10, 2005 |  | /s/ Elam P. Holley, Jr.                             
|                   |  | Elam P. Holley, Jr.                                 
|                   |  | President and Chief Executive Officer               
|                   | 
|Date: May 10, 2005 |  | /s/ Andrew C. Bearden, Jr.                          
|                   |  | Andrew C. Bearden, Jr.                              
|                   |  | Executive Vice President and Chief Financial Officer
|                   | 
|Date: May 10, 2005 |  | /s/ Thomas P. Wilbourne                             
|                   |  | Thomas P. Wilbourne                                 
|                   |  | Vice President and Principal Accounting Officer     





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