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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, 2006

OR



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

Commission File Number: O-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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check One):

Large Accelerated
Filer ̈Accelerated Filer ̈Non-Accelerated Filer  x

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

As of the close of business on May 12, 2006, 5,905,028 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 COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

(In
Thousands)



|                                                 |  |                |         |   |                   |   |         |  
|------------------------------------------------ |  | -------------- | ------- | - | ----------------- | - | ------- | -
|                                                 |  | March 31, 2006 |         |   | December 31, 2005 |  
|                                                 |  | (unaudited)    |         |   |                   |  
|Assets                                           |  |                |         |   |                   |   |         |  
|Cash and due from banks                          |  | $              | 27,888  |   |                   | $ | 34,585  |  
|Federal funds sold                               |  |                |        |   |                   |   | 14,000  |  
|                                                 |  |                |         |   |                   |   |         |  
|Cash and cash equivalents                        |  |                | 27,888  |   |                   |   | 48,585  |  
|                                                 |  |               
|Available-for-sale securities                    |  |                | 215,906 |   |                   |   | 226,043 |  
|                                                 |  |               
|Loans, net of unearned income                    |  |                | 535,818 |   |                   |   | 495,509 |  
|Allowance for loan losses                        |  |                | (6,209  | ) |                   |   | (6,654  | )
|                                                 |  |                |         |   |                   |   |         |  
|Loans, net                                       |  |                | 529,609 |   |                   |   | 488,855 |  
|                                                 |  |               
|Bank premises and equipment                      |  |                | 38,787  |   |                   |   | 37,960  |  
|Less accumulated depreciation                    |  |                | (19,457 | ) |                   |   | (19,014 | )
|                                                 |  |                |         |   |                   |   |         |  
|Bank premises and equipment, net                 |  |                | 19,330  |   |                   |   | 18,946  |  
|                                                 |  |               
|Other real estate, net                           |  |                | 1,620   |   |                   |   | 2,746   |  
|Interest receivable                              |  |                | 4,059   |   |                   |   | 3,921   |  
|Intangible assets acquired, net                  |  |                | 6,578   |   |                   |   | 6,634   |  
|Deferred income taxes                            |  |                | 2,513   |   |                   |   | 2,283   |  
|Other assets                                     |  |                | 14,489  |   |                   |   | 13,759  |  
|                                                 |  |                |         |   |                   |   |         |  
|Total assets                                     |  | $              | 821,993 |   |                   | $ | 811,773 |  
|                                                 |  |                |         |   |                   |   |         |  
|Liabilities and Stockholders Equity             |  |                |         |   |                   |   |         |  
|                                                 |  |               
|Liabilities:                                     |  |                |         |   |                   |   |         |  
|Deposits:                                        |  |                |         |   |                   |   |         |  
|Demand-noninterest bearing                       |  | $              | 92,454  |   |                   | $ | 85,538  |  
|Demand-interest bearing                          |  |                | 228,622 |   |                   |   | 238,010 |  
|Savings                                          |  |                | 37,802  |   |                   |   | 36,965  |  
|Time                                             |  |                | 325,813 |   |                   |   | 327,536 |  
|                                                 |  |                |         |   |                   |   |         |  
|Total deposits                                   |  |                | 684,691 |   |                   |   | 688,049 |  
|Federal funds purchased                          |  |                | 11,500  |   |                   |   |        |  
|Other borrowed funds                             |  |                | 37,492  |   |                   |   | 37,732  |  
|Interest payable                                 |  |                | 2,388   |   |                   |   | 2,176   |  
|Income taxes payable                             |  |                | 1,210   |   |                   |   | 223     |  
|Other liabilities                                |  |                | 1,645   |   |                   |   | 2,042   |  
|                                                 |  |                |         |   |                   |   |         |  
|Total liabilities                                |  |                | 738,925 |   |                   |   | 730,222 |  
|                                                 |  |               
|Stockholders equity:                            |  |                |         |   |                   |   |         |  
|Common stock                                     |  |                | 590     |   |                   |   | 590     |  
|Treasury stock                                   |  |                | (91     | ) |                   |   | (91     | )
|Additional paid-in capital                       |  |                | 16,708  |   |                   |   | 16,586  |  
|Accumulated other comprehensive loss, net of tax |  |                | (3,841  | ) |                   |   | (3,449  | )
|Deferred stock based compensation                |  |                | (92     | ) |                   |   | (92     | )
|Retained earnings                                |  |                | 69,793  |   |                   |   | 68,007  |  
|                                                 |  |                |         |   |                   |   |         |  
|Total stockholders equity                       |  |                | 83,067  |   |                   |   | 81,551  |  
|                                                 |  |                |         |   |                   |   |         |  
|Total liabilities and stockholders equity       |  | $              | 821,993 |   |                   | $ | 811,773 |  
|                                                 |  |                |         |   |                   |   |         |  

See notes to Unaudited Condensed Consolidated Financial Statements



2



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THE PEOPLES BANCTRUST COMPANY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands except share and per share
data)



|                                                                      |  |                              |           |   |      |   |           |  
|--------------------------------------------------------------------- |  | ---------------------------- | --------- | - | ---- | - | --------- | -
|                                                                      |  | Three Months Ended March 31, |          
|                                                                      |  | 2006                         |           |   | 2005 |  
|                                                                      |  | (unaudited)                  |          
|Interest income:                                                      |  |                              |           |   |      |   |           |  
|Interest and fees on loans and bankers acceptances                    |  | $                            | 9,398     |   |      | $ | 7,227     |  
|Interest and dividends on investment securities:                      |  |                              |           |   |      |   |           |  
|U.S. Government securities                                            |  |                              | 1,101     |   |      |   | 1,072     |  
|Other securities and interest-bearing deposits                        |  |                              | 1,025     |   |      |   | 1,177     |  
|Interest on federal funds sold and interest bearing deposits in banks |  |                              | 174       |   |      |   | 232       |  
|                                                                      |  |                              |           |   |      |   |           |  
|Total interest income                                                 |  |                              | 11,698    |   |      |   | 9,708     |  
|                                                                      |  |                              |           |   |      |   |           |  
|Interest expense:                                                     |  |                              |           |   |      |   |           |  
|Interest on deposits                                                  |  |                              | 4,313     |   |      |   | 2,655     |  
|Interest on federal funds purchased and other borrowed funds          |  |                              | 501       |   |      |   | 614       |  
|                                                                      |  |                              |           |   |      |   |           |  
|Total interest expense                                                |  |                              | 4,814     |   |      |   | 3,269     |  
|                                                                      |  |                              |           |   |      |   |           |  
|Net interest income                                                   |  |                              | 6,884     |   |      |   | 6,439     |  
|                                                                      |  |                             
|(Credit) provision for loan losses                                    |  |                              | (541      | ) |      |   | (313      | )
|                                                                      |  |                              |           |   |      |   |           |  
|Net interest income after (credit) provision for loan losses          |  |                              | 7,426     |   |      |   | 6,752     |  
|                                                                      |  |                             
|Noninterest income:                                                   |  |                              |           |   |      |   |           |  
|Trust department income                                               |  |                              | 319       |   |      |   | 222       |  
|Service charges on deposit accounts                                   |  |                              | 1,386     |   |      |   | 1,011     |  
|Net securities gains                                                  |  |                              | 1         |   |      |   | 14        |  
|Other noninterest income                                              |  |                              | 696       |   |      |   | 816       |  
|                                                                      |  |                              |           |   |      |   |           |  
|Total noninterest income                                              |  |                              | 2,403     |   |      |   | 2,063     |  
|                                                                      |  |                             
|Noninterest expense:                                                  |  |                              |           |   |      |   |           |  
|Salaries and wages                                                    |  |                              | 2,760     |   |      |   | 3,147     |  
|Pensions and other employee benefits                                  |  |                              | 585       |   |      |   | 492       |  
|Occupancy and equipment expenses                                      |  |                              | 1,136     |   |      |   | 1,262     |  
|Other noninterest expenses                                            |  |                              | 1,643     |   |      |   | 1,914     |  
|                                                                      |  |                              |           |   |      |   |           |  
|Total noninterest expense                                             |  |                              | 6,124     |   |      |   | 6,816     |  
|                                                                      |  |                              |           |   |      |   |           |  
|Income before provision for income taxes                              |  |                              | 3,704     |   |      |   | 2,000     |  
|                                                                      |  |                             
|Provision for income taxes                                            |  |                              | 1,213     |   |      |   | 565       |  
|                                                                      |  |                              |           |   |      |   |           |  
|Net income                                                            |  | $                            | 2,492     |   |      | $ | 1,435     |  
|                                                                      |  |                              |           |   |      |   |           |  
|Earnings per share                                                    |  |                              |           |   |      |   |           |  
|Basic net income per share                                            |  | $                            | 0.42      |   |      | $ | 0.26      |  
|                                                                      |  |                              |           |   |      |   |           |  
|Diluted net income per share                                          |  | $                            | 0.42      |   |      | $ | 0.26      |  
|                                                                      |  |                              |           |   |      |   |           |  
|Dividends per share                                                   |  | $                            | 0.12      |   |      | $ | 0.11      |  
|                                                                      |  |                              |           |   |      |   |           |  
|Basic weighted average number of shares outstanding                   |  |                              | 5,898,286 |   |      |   | 5,585,158 |  
|                                                                      |  |                              |           |   |      |   |           |  
|Diluted weighted average number of shares outstanding                 |  |                              | 5,933,391 |   |      |   | 5,616,830 |  
|                                                                      |  |                              |           |   |      |   |           |  

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 Thousands)



|                                                                                          |  |                             |       |   |      |   |        |  
|----------------------------------------------------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ------ | -
|                                                                                          |  | Three Months EndedMarch 31, |      
|                                                                                          |  | (Unaudited)                 |      
|                                                                                          |  | 2006                        |       |   | 2005 |  
|Net income                                                                                |  | $                           | 2,492 |   |      | $ | 1,435  |  
|Other comprehensive income:                                                               |  |                             |       |   |      |   |        |  
|Unrealized losses on securities available for sale and cash flow hedges during the period |  |                             | (621  | ) |      |   | (2,932 | )
|Less: reclassification adjustment for net gains included in net income                    |  |                             | 1     |   |      |   | 14     |  
|                                                                                          |  |                             |       |   |      |   |        |  
|Other comprehensive loss                                                                  |  |                             | (622  | ) |      |   | (2,946 | )
|Income tax benefit related to items of other comprehensive loss                           |  |                             | (230  | ) |      |   | (1,087 | )
|                                                                                          |  |                             |       |   |      |   |        |  
|Other comprehensive loss, net of tax                                                      |  |                             | (392  | ) |      |   | (1,859 | )
|                                                                                          |  |                             |       |   |      |   |        |  
|Comprehensive income (loss), net of tax                                                   |  | $                           | 2,099 |   |      | $ | (424   | )
|                                                                                          |  |                             |       |   |      |   |        |  

See notes to Unaudited Condensed Consolidated Financial Statements



4



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THE PEOPLES BANCTRUST COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASHFLOWS

(In thousands)



|                                                                             |  |                              |         |   |      |   |         |  
|---------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                             |  | Three Months Ended March 31, |        
|                                                                             |  | 2006                         |         |   | 2005 |  
|                                                                             |  | (unaudited)                  |        
|Cash flows from operating activities                                         |  |                              |         |   |      |   |         |  
|Net income                                                                   |  | $                            | 2,492   |   |      | $ | 1,435   |  
|Adjustments to reconcile net income to cash provided by operating activities |  |                              |         |   |      |   |         |  
|(Credit) provision for loan losses                                           |  |                              | (541    | ) |      |   | (313    | )
|Depreciation, amortization and accretion                                     |  |                              | 531     |   |      |   | 641     |  
|Increase in the unearned discount                                            |  |                              | 364     |   |      |   | 47      |  
|(Gain) loss on sales of OREO                                                 |  |                              | (5      | ) |      |   | 5       |  
|Gain on sales of securities                                                  |  |                              | (1      | ) |      |   | (14     | )
|Write down of other real estate and equipment                                |  |                              | 9       |   |      |   | 9       |  
|Decrease (increase) in assets                                                |  |                              |         |   |      |   |         |  
|Interest receivable                                                          |  |                              | (138    | ) |      |   | (313    | )
|Income taxes receivable                                                      |  |                              |        |   |      |   | 559     |  
|Other assets                                                                 |  |                              | (560    | ) |      |   | 856     |  
|(Decrease) increase in other liabilities                                     |  |                              |         |   |      |   |         |  
|Interest payable                                                             |  |                              | 212     |   |      |   | 291     |  
|Minimum required contributions to defined benefits pension plan              |  |                              |        |   |      |   | (336    | )
|Income taxes payable                                                         |  |                              | 987     |   |      |   |        |  
|Other liabilities                                                            |  |                              | (397    | ) |      |   | (1,093  | )
|                                                                             |  |                              |         |   |      |   |         |  
|Net cash provided by operating activities                                    |  |                              | 2,953   |   |      |   | 1,773   |  
|                                                                             |  |                             
|Cash flows from investing activities                                         |  |                              |         |   |      |   |         |  
|Proceeds from sales of available for sales securities                        |  |                              | 288     |   |      |   | 4,573   |  
|Proceeds from maturities and calls of available for sale securities          |  |                              | 9,487   |   |      |   | 9,005   |  
|Purchases of available for sale securities                                   |  |                              | (31     | ) |      |   | (2,027  | )
|Purchase of derrivative instruments                                          |  |                              | (445    | ) |      |   |        |  
|Net increase in loans                                                        |  |                              | (40,810 | ) |      |   | (1,310  | )
|Purchases of bank premises and equipment                                     |  |                              | (932    | ) |      |   | (1,766  | )
|Proceeds from sales of other real estate and equipment                       |  |                              | 1,475   |   |      |   | 1,057   |  
|                                                                             |  |                              |         |   |      |   |         |  
|Net cash (used in) provided by investing activities                          |  |                              | (30,968 | ) |      |   | 9,532   |  
|                                                                             |  |                             
|Cash flows from financing activities                                         |  |                              |         |   |      |   |         |  
|Net decrease in deposits                                                     |  |                              | (3,358  | ) |      |   | (13,260 | )
|Increase (decrease) in borrowings                                            |  |                              | 11,260  |   |      |   | (1,306  | )
|Proceeds from issuance of common stock                                       |  |                              | 69      |   |      |   | 8       |  
|Dividends paid                                                               |  |                              | (653    | ) |      |   | (565    | )
|                                                                             |  |                              |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                          |  |                              | 7,318   |   |      |   | (15,123 | )
|                                                                             |  |                             
|Decrease in cash and cash equivalents                                        |  |                              | (20,697 | ) |      |   | (3,817  | )
|                                                                             |  |                             
|Cash and cash equivalents                                                    |  |                              |         |   |      |   |         |  
|December 31, 2005                                                            |  |                              | 48,585  |   |      |   | 63,177  |  
|                                                                             |  |                              |         |   |      |   |         |  
|March 31, 2006                                                               |  | $                            | 27,888  |   |      | $ | 59,359  |  
|                                                                             |  |                              |         |   |      |   |         |  
|Supplemental disclosure of cash flow information                             |  |                              |         |   |      |   |         |  
|Cash paid during the period for                                              |  |                              |         |   |      |   |         |  
|Interest                                                                     |  |                              | 4,602   |   |      |   | 2,978   |  
|Income taxes                                                                 |  |                              | 226     |   |      |   |        |  

See notes to Unaudited Condensed Consolidated Financial Statements



5



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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, 2005.

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, 2006 will have a materially adverse effect on BancTrusts financial statements.

On November 18, 2004, BancTrust executed a contract for the construction of a new main office facility in its Tuscaloosa, Alabama market. As of March 31, 2006 BancTrust had paid approximately $1,400,000
toward the construction project, and anticipates its additional commitment to the project to be approximately $1,500,000 payable in varying installments over the remaining construction period, which is to be completed in the summer of 2006.

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, 2006 and 2005 respectively (in thousands, except per share data):



|                                        |  |                                   |       |        |       |                 |   |     
|--------------------------------------- |  | --------------------------------- | ----- | ------ | ----- | --------------- | - | ----
|                                        |  | Three months ended March 31, 2006
|                                        |  | Income                            |       | Shares |       | Per-ShareAmount
|Basic EPS                               |  |                                   |       |        |       |                 |   |     
|Income available to common stockholders |  | $                                 | 2,492 |        | 5,898 |                 | $ | 0.42
|Effect of dilutive securities           |  |                                   |       |        |       |                 |   |     
|Stock options                           |  |                                   |       |        | 35    |                 |   |     
|                                        |  |                                   |       |        |       |                 |   |     
|Diluted EPS                             |  | $                                 | 2,492 |        | 5,933 |                 | $ | 0.42
|                                        | 
|                                        |  | Three months ended March 31, 2005
|                                        |  | 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



6



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Stock-Based Compensation

At March 31, 2006, BancTrust had a stock option plan, which is described more fully in Note 20 to the Consolidated Financial Statements its Annual Report on Form 10-K. Effective January 1, 2006, BancTrust
adopted SFAS No. 123 (revised), Share-Based Payment (SFAS 123(R)) utilizing the modified prospective method of accounting. Prior to the adoption of SFAS 123(R) BancTrust accounted for stock option grants in accordance
with APB Opinion No. 25, Accounting for Stock Issued to Employees (the intrinsic value method), and accordingly recognized no compensation expense for stock option grants.

Under the modified prospective method, SFAS 123(R) applies to new awards and to awards that were outstanding on January 1, 2006 that are
subsequently modified, repurchased or cancelled. Under the modified prospective approach, compensation costs recognized in the first quarter of 2006 includes compensation costs for all share-based payments granted prior to, but not yet vested as of
January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and compensation costs for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair
value estimated in accordance with the provisions of SFAS 123(R). Prior periods were not restated to reflect the impact of adopting the new standard.

Grant-date fair value is measured on the date of grant using an option-pricing model with market assumptions. The grant-date fair value is amortized into expense on a straight-line over the vesting date. Option
pricing models require the use of highly subjective assumptions, including but not limited to, expected stock price volatility, forfeiture rates, and interest rates, which if changed can materially affect fair value estimates. Accordingly the model
does not necessarily provide a reliable single measure of the fair value of BancTrusts stock options.

BancTrusts results of
operations and earnings per share were not impacted in the quarter ended March 31, 2006 and would not have been impacted in the quarter ended March 31, 2005, by expenses associated with stock options and by the adoption of SFAS 123(R).

The following is a summary of BancTrusts weighted average assumptions used to estimate the weighted-average per share fair value of
options granted on the date of grant using the Black-Scholes option-pricing model. There were no stock options granted during the three months ended March 31, 2005.



|                                                               |  |                                    |       |   |      |    
|-------------------------------------------------------------- |  | ---------------------------------- | ----- | - | ---- | ---
|                                                               |  | For the three months endedMarch 31
|                                                               |  | 2006                               |       |   | 2005
|Expected life (in years)                                       |  |                                    | 5.0   |   |      | N/A
|Expected volatility                                            |  |                                    | 21.63 | % |      | N/A
|Risk-free interest rate                                        |  |                                    | 5.02  | % |      | N/A
|Expected dividend yield                                        |  |                                    | 2.53  | % |      | N/A
|Weighted-average fair value of options granted during the year |  | $                                  | 4.02  |   |      | N/A

At March 31, 2006, there was approximately $418,000 of pre-tax, unrecognized compensation
costs related to share-based payments which is expected to be recognized over a weighted-average period of 2.6 years.

On September 9,
2005, BancTrust granted options to its President and Chief Executive Officer to acquire 50,000 shares of its common stock at the then current market price. Also on September 9, 2005 BancTrust awarded its President and Chief Executive Officer
6,000 shares of restricted common stock. On May 2, 2006, both the option shares and restricted shares became fully vested and exercisable after the death of BancTrusts President and Chief Executive Officer. Accordingly, BancTrust
anticipates that it will recognize approximately $239,000 of related expense in the second quarter of 2006, on a pre-tax basis.

On
January 31, 2006, BancTrust granted options to certain of its senior management, directors and other employees to acquire a total of 44,500 shares of its common stock at the then current market price. These options have a grant-date fair value
of $178,890, and will vest ratably over a three year period.



7



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The following table represents stock option activity for the three months ended
March 31, 2006:



|                                       |  |         |   |  |                              |       |                                         |     
|-------------------------------------- |  | ------- | - |  | ---------------------------- | ----- | --------------------------------------- | ----
|                                       |  | Number  |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualLife
|                                       |  |         |   |  |                              |       | (years)                                
|Options outstanding, beginning of year |  | 170,410 |   |  | $                            | 14.83 |                                         |     
|Granted                                |  | 44,500  |   |  |                              | 18.50 |                                         |     
|Exercised                              |  | (5,176  | ) |  |                              | 12.35 |                                         |     
|Terminated                             |  |        |   |  |                              |      |                                         |     
|                                       |  |         |   |  |                              |       |                                         |     
|Options outstanding, end of quarter    |  | 209,734 |   |  |                              | 15.67 |                                         | 6.67
|                                       |  |         |   |  |                              |       |                                         |     
|Exercisable, end of quarter            |  | 115,234 |   |  | $                            | 14.70 |                                         | 2.33
|                                       |  |         |   |  |                              |       |                                         |     

Shares available for future stock option grants to employees and directors under existing plans
totaled 447,576 at March 31, 2006. At March 31, 2006 the aggregate intrinsic value of shares outstanding was $782,518 and the aggregate intrinsic value of options exercisable was $541,218. Total intrinsic value of options exercised was
$32,168 for the three months ended March 31, 2006.

The following table summarizes BancTrusts nonvested stock
option activity for the three months ended March 31, 2006:



|                                       |  |        |  |                                     |     
|-------------------------------------- |  | ------ |  | ----------------------------------- | ----
|                                       |  | Number |  | WeightedAverageGrant DateFair Value
|Options outstanding, beginning of year |  | 50,000 |  | $                                   | 2.94
|Granted                                |  | 44,500 |  |                                     | 4.02
|Exercised                              |  |       |  |                                     |    
|Terminated                             |  |       |  |                                     |    
|                                       |  |        |  |                                     |     
|Options outstanding, end of quarter    |  | 91,800 |  | $                                   | 3.55
|                                       |  |        |  |                                     |     

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 factors summarized
in Item 1A of BancTrusts Annual Report on Form 10-K for the fiscal year ended December 31, 2005. Accordingly, any forward-looking statements included herein do not purport to be predictions of future events or circumstances and may
not be realized.



8



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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 BancTrusts Annual Report on Form 10-K for the year ended December 31, 2005.

Certain accounting policies involve significant judgments and assumptions by management which may 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.

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.



9



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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. BancTrust performed its goodwill impairment analysis according to the aforementioned method as of June 30, 2005. This analysis indicated that no goodwill impairment was
present; therefore no impairment loss was recognized.

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, 2006, cash and cash equivalents had decreased to $27,888,000 from $48,585,000 at December 31, 2005. Cash and
cash equivalents primarily consist of cash and due from banks, combined with federal funds sold. At March 31, 2006, BancTrust had $27,888,000 in cash and due from banks, and no federal funds sold, compared to $34,585,000 of cash and due from
banks and $14,000,000 of federal funds sold at December 31, 2005. The decline in cash and cash equivalents at March 31, 2006 compared to December 31, 2005 was primarily due to increased loan volumes (see 
Loans).

Investments

At March 31, 2006, investment securities totaled $215,906,000 compared to $226,043,000 at December 31, 2005. As with cash and cash equivalents, the decline in investment securities was primarily due to increased loan volumes (see
 Loans).

At March 31, 2006, BancTrust had pledged to the State Treasurer for the State of Alabama and other
parties $164,505,000, or approximately 76% of its investment securities portfolio. These securities are typically pledged as collateral to government or other public entities for deposits held by BancTrust that exceed the FDIC insurable limit.



10



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The entire securities portfolio is classified as available-for-sale, requiring that it be
marked-to-market with the unrealized gains and losses, net of the related tax effect reflected directly in stockholders equity. The portfolio had net unrealized losses (net of tax) of $3,676,000 at March 31, 2006 and $3,449,000 (net of
tax) at December 31, 2005. BancTrust considers these losses to be temporary.

Loans

Total loans, net of the unearned discount, increased $40,309,000 to $535,818,000 at March 31, 2006, from $495,509,000 at December 31, 2005. The
majority of this increase was realized in the commercial and industrial loan portfolio, as well as in the real estate 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, 2006 to
December 31, 2005.



|                                          |  |                |         |                  |   |         |  |   |       
|----------------------------------------- |  | -------------- | ------- | ---------------- | - | ------- |  | - | ------
|                                          |  | March 31,2006  |         | December 31,2005 |   | Change 
|                                          |  | (In thousands)
|Commercial and industrial                 |  | $              | 109,244 |                  | $ | 87,339  |  | $ | 21,905
|Real estate - mortgage                    |  |                |         |                  |   |         |  |   |       
|Commercial                                |  |                | 275,116 |                  |   | 265,740 |  |   | 9,376 
|Residential                               |  |                | 105,614 |                  |   | 97,098  |  |   | 8,516 
|Personal                                  |  |                | 46,051  |                  |   | 45,196  |  |   | 855   
|Overdrafts and credit line                |  |                | 1,039   |                  |   | 1,019   |  |   | 20    
|                                          |  |                |         |                  |   |         |  |   |       
|Total loans                               |  |                | 537,064 |                  |   | 496,392 |  |   | 40,672
|Less:                                     |  |                |         |                  |   |         |  |   |       
|Unearned discount                         |  |                | 1,246   |                  |   | 883     |  |   | 363   
|                                          |  |                |         |                  |   |         |  |   |       
|Total loans, net of the unearned discount |  | $              | 535,818 |                  | $ | 495,509 |  | $ | 40,309
|                                          |  |                |         |                  |   |         |  |   |       

Commercial and industrial loans increased from $87,339,000 at December 31, 2005, to
$109,244,000 at March 31, 2006. BancTrust has experienced increased demand for these types of loans in its newer and more economically dynamic markets, which contributed to this increase.

Total real estate loans increased $17,892,000 to $380,730,000 at March 31, 2006 from $362,838,000 at December 31, 2005. Specifically,
commercial real estate loans increased $9,376,000 from $265,740,000 at December 31, 2005 to $275,116,000 at March 31, 2006, while residential real estate loans increased $8,516,000 to $105,614,000 from $97,098,000 for the same period.
BancTrust has placed significant emphasis on originating loans secured by real estate. As a result, the total balances of BancTrusts real estate loan portfolios have consistently and significantly increased in recent periods.

Personal loans increased slightly from $45,196,000 at December 31, 2005 to $46,051,000 at March 31, 2006. BancTrust has placed continually less
significance on personal loan originations in recent periods, as both increased competition from alternative sources of credit and an increased level in denials of personal loan applications have contributed to generally lower personal loan
portfolio totals over time. Alternative sources of credit primarily include credit cards and finance companies.



11



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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 processes, BancTrusts credit administration personnel analyze and validate the loan loss reserve methodology at least quarterly. The analyses include specific allowances for individual loans and general allowances for certain
pools of loans. The credit administration personnel along with senior management review and ensure 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.

At March 31, 2006, BancTrusts allowance for loan losses had a balance of $6,209,000, compared to $6,654,000 at December 31, 2005. The ratio of the allowance to total loans, net of the unearned discount, was 1.16% and 1.34%
at March 31, 2006 and December 31, 2005, respectively. As a percentage of total loans, net of the unearned discount, non-accruing loans decreased to .09% at March 31, 2006, compared to .16% at December 31, 2005. The coverage of
the allowance to non-accruing loans was 12.49X and 8.16X at March 31, 2006 and December 31, 2005, respectively.



12



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Loans requiring special attention because of potential weakness (special attention loans)
decreased to $21,953,000 at March 31, 2006 from $24,974,000 at December 31, 2005. 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 processes used by BancTrust in its loan review function. At March 31, 2006, approximately $2,284,000 of the $6,209,000 allowance for loan losses was
allocated to special attention loans. Within special attention loans at March 31, 2006, were impaired loans totaling $6,283,000, and for which $721,000 was reserved in the allowance for loan losses total. The following table indicates the loan
charge off and recovery activity of BancTrust for the three months ended March 31, 2006 and 2005.



|                                           |  |                              |      |   |      |   |      |  
|------------------------------------------ |  | ---------------------------- | ---- | - | ---- | - | ---- | -
|                                           |  | Three Months Ended March 31, |     
|                                           |  | 2006                         |      |   | 2005 |  
|                                           |  | (In Thousands)               |     
|Loans charged-off                          |  | $                            | 176  |   |      | $ | 881  |  
|Recoveries of loans previously charged off |  |                              | (272 | ) |      |   | (489 | )
|                                           |  |                              |      |   |      |   |      |  
|Net loans (recovered) charged-off          |  | $                            | (96  | ) |      | $ | 392  |  
|                                           |  |                              |      |   |      |   |      |  

Deposits

BancTrust held $684,691,000 in total deposits at March 31, 2006 compared to $688,049,000 at December 31, 2005. Interest bearing demand deposits and time deposits decreased, while noninterest bearing demand
deposits and savings increased. The net effect was a $3,358,000 decrease in total deposits between the two periods.

Included in time
deposits at March 31, 2006 was $20,667,000 of brokered deposits, compared to $20,669,000 at December 31, 2005. 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 typically 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.

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, 2006, the entire investment securities portfolio of BancTrust was
classified as available-for-sale (see - Investments).



13



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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 $48,992,000 at March 31, 2006 compared to $37,732,000 at December 31, 2005. This increase is primarily accounted for in BancTrust having
purchased federal funds at March 31, 2006 of $11,500,000, whereas at December 31, 2005, it had none.

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, 2006, BancTrust had borrowed from FHLB, $36,677,000. When
combined with approximately $18,500,000 of guarantees on commercial letters of credit provided by the FHLB, BancTrust had approximately $55,177,000 of active credit facilities at the FHLB on March 31, 2006. Total credit facilities available to
BancTrust at the FHLB were approximately $65,200,000 on March 31, 2006. BancTrust had unused federal funds lines of credit with correspondent financial institutions of approximately $40,500,000 at March 31, 2006.

Stockholders Equity and Regulatory Capital

At
March 31, 2006, stockholders equity totaled $83,067,000, compared to $81,551,000 at December 31, 2005. Net income of $2,492,000 and the impact of common stock options exercised of $64,000 had increasing effects on stockholders
equity, while the net impact of dividends declared in the amount of $648,000 and a $392,000 change in accumulated other comprehensive loss net of tax, had decreasing effects on stockholders equity.

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, 2006.



|                                  |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|--------------------------------- |  | --------------------------------------------------------------- | ------- |  | ------------ | - |  | - | ------- |  | ----- | -
|                                  |  | Risk-Based Capital Ratios & Leverage RatiosAs of March 31, 2006 |        
|                                  |  | Dollars in Thousands                                            |        
|                                  |  | BancTrust                                                       |         |  | Peoples Bank |  
|RISK-BASED CAPITAL RATIOS         |  |                                                                 |         |  |              |   |  |  
|Tier 1 Capital                    |  | $                                                               | 80,459  |  | 13.01        | % |  | $ | 74,618  |  | 12.18 | %
|Tier 1 Capital  Minimum Required |  |                                                                 | 24,738  |  | 4.00         | % |  |   | 24,507  |  | 4.00  | %
|                                  |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Excess                            |  | $                                                               | 55,721  |  | 9.01         | % |  | $ | 50,111  |  | 8.18  | %
|                                  |  |                                                                 |         | 
|Total Capital                     |  | $                                                               | 86,668  |  | 14.01        | % |  | $ | 80,827  |  | 13.19 | %
|Total Capital  Minimum Required  |  |                                                                 | 49,477  |  | 8.00         | % |  |   | 49,013  |  | 8.00  | %
|                                  |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Excess                            |  | $                                                               | 37,191  |  | 6.01         | % |  | $ | 31,814  |  | 5.19  | %
|                                  |  |                                                                 |         | 
|Net risk-weighted assets          |  | $                                                               | 618,457 |  |              |   |  | $ | 612,666 |  |       |  
|                                  |  |                                                                 |         | 
|LEVERAGE RATIOS                   |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Total Tier 1 Capital              |  | $                                                               | 80,459  |  | 10.08        | % |  | $ | 74,618  |  | 9.40  | %
|Minimum Leverage Requirement      |  |                                                                 | 31,925  |  | 4.00         | % |  |   | 31,747  |  | 4.00  | %
|                                  |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Excess                            |  | $                                                               | 48,534  |  | 6.08         | % |  | $ | 42,871  |  | 5.40  | %
|                                  |  |                                                                 |         | 
|Average Total Assets,             |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Net of all intangibles            |  | $                                                               | 798,135 |  |              |   |  | $ | 793,676 |  |       |  



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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 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 assets and liabilities, and produces various reports and supporting detail, which indicate BancTrusts overall interest rate risk status.

RESULTS OF OPERATIONS

Three Months Ended
March 31, 2006 Compared to Three Months Ended March 31, 2005.

The profitability of BancTrust in a given period is heavily
dependent on the amount of net interest income it is able to generate. Simply stated, net interest income is the amount of interest income realized on earning assets such as loans and investments that remains after deducting interest expense
incurred on bearing liabilities such as interest bearing deposits and borrowed funds.

For the three months ended March 31, 2006 (the
2006 quarter) BancTrust earned $11,698,000 of interest income on its interest earning assets, compared to $9,708,000 for the same period in 2005 (the 2005 quarter). Increases in the average annual yields and average volumes
of interest earning assets accounted for the increase in interest income between the two periods. In the 2006 quarter, interest earning assets yielded 6.39% on average volume of $742,601,000, and 5.40% on average volume of $728,665,000 in the 2005
quarter.

Interest and fees on loans totaled $9,398,000 in the 2006 quarter and $7,227,000 in the 2005 quarter. Both the average annual
yield earned on the loan portfolio and its average balance increased between the two periods. In the 2006 quarter, loans yielded an average of 7.49% on an average balance of $509,039,000, compared to an average annual yield of 6.65% on an average
balance of $440,907,000 in the 2005 quarter. Increased loan demand between the two periods (see Loans) contributed to the higher average balance, while increases in market interest rates between the two periods contributed to the
higher average yields.

Interest income earned on the investment securities portfolio declined to $2,126,000 in the 2006 quarter from
$2,249,000 in the 2005 quarter. The average balance of the investment securities portfolio declined to $221,322,000 in the 2006 quarter from $249,232,000 in the 2005 quarter. The decrease in the average balance of the investment securities portfolio
was the primary contributing factor to the lower interest income earned from it, given that the average annual yield increased to 3.90% in the 2006 quarter from 3.66% in the 2005 quarter. The lower average balance was primarily the result of
available funds within the investment securities portfolio being redeployed into the higher yielding loan portfolio. Increases in market interest rates contributed to the higher average yield between the two quarters.



15



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Interest income earned on federal funds sold and interest bearing deposits in banks totaled $174,000 in
the 2006 quarter and $232,000 in the 2005 quarter. In the 2006 quarter, federal funds and interest bearing deposits in banks earned an average annual yield of 5.77% on average volume of $12,240,000 compared to an average annual yield of 2.44% on
average volume of $38,525,000 in the 2005 quarter. Increases in short term market interest rates between the two quarters contributed to the higher average annual yield on these instruments, while increases in BancTrusts loan portfolio
contributed to the lower average balance.

Interest expense on deposits increased to $4,313,000 in the 2006 quarter from $2,655,000 in the
2005 quarter. Increases in both average balances and the average annual rates of interest paid on interest bearing deposits were contributing factors. In the 2006 quarter, the average annual cost of interest bearing deposits was 2.94%, compared to
1.86% in the 2005 quarter. The average balance of interest bearing deposits in the 2006 quarter was $594,099,000, compared to $579,577,000 in the 2005 quarter. Higher market interest rates contributed to the increased cost of interest bearing
deposits between the two quarters, while loan funding demands contributed to the increase in average balances.

Interest expense on
borrowed funds decreased to $501,000 in the 2006 quarter from $614,000 in the 2005 quarter. The primary factor in this decrease was that the average balance of borrowed funds decreased from $48,165,000 in the 2005 quarter to $39,494,000 in the 2006
quarter. The average rate of interest paid on borrowed funds was 5.15% in the 2006 quarter and 5.17% in the 2005 quarter.

The resulting
net interest income for the 2006 quarter totaled $6,884,000 compared to $6,439,000 for the 2005 quarter. Expressed as an annualized percentage of average interest earning assets for a given period, net interest income is referred to as net interest
margin. BancTrusts net interest margin in the 2006 quarter was 3.76%, compared to 3.58% in the 2005 quarter.

Provision for loan
losses generally has the effect of decreasing income, as it represents additions to the allowance for loan losses deemed necessary to adequately provide for potential losses within BancTrusts loan portfolio (see Allowance for Loan
Losses). However, in both the 2006 and 2005 quarters, BancTrust realized credits in its provision for loan losses account, as periodic analyses of its loan portfolio indicated that reductions to the allowance for loan losses account were
warranted. BancTrust realized a credit provision for loan losses in each of the 2006 and 2005 quarters in the amounts of $541,000 and $313,000 respectively.

Noninterest income totaled $2,403,000 in the 2006 quarter and $2,063,000 in the 2005 quarter. This increase was primarily realized in deposit service charges. Deposit service charges increased from $1,011,000 in the
2005 quarter to $1,386,000 in the 2006 quarter. BancTrust attributes this increase in deposit service charges to higher fee eligible deposit account activity and higher average balances in its noninterest bearing deposit accounts during the 2006
quarter compared to the 2005 quarter.

Noninterest expense decreased to $6,124,000 in the 2006 quarter from $6,816,000 in the 2005 quarter.
The largest decrease was in salaries and wages expense. Salaries and wages expense decreased to $2,760,000 in the 2006 quarter from $3,147,000 in the 2005 quarter. Staff reductions between the two quarters contributed significantly to the reduction
in salaries and wages expense.

The provision for income taxes in the 2006 quarter totaled $1,213,000 compared to $565,000 in the 2005
quarter. The effective income tax rate increased to 32.7% in the 2006 quarter from 28.3% in the 2005 quarter, primarily due to the fact that income tax credits available to BancTrust are static amounts. Consequently, as income before provision for
income taxes increased, the relative beneficial impact of these income tax credits was diluted.

IMPACT OF NEW ACCOUNTING STANDARDS

See Notes to the Unaudited Condensed Consolidated Financial Statements.



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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.

In February 2006, BancTrusts
management entered into an agreement known as an interest rate floor in order to hedge BancTrusts exposure to declining market interest rates. Pursuant to the agreement, BancTrusts counterparty has agreed to pay BancTrust an
amount equal to the difference between the prime interest rate and 6.50% multiplied by a $50,000,000 notional amount in the event the prime interest rate falls below 6.50% during the three year term of the agreement. BancTrust paid to its
counterparty a one-time premium equal to $445,000 which will be amortized over the 5 year term of the agreement. The interest rate floor is being marked to market and accounted for as a cash flow hedge.

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,
2006, 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.

Item 5. Other Information

On May 2, 2006, BancTrusts President and Chief Executive Officer, Walter A.
Parrent, died. Accordingly, certain provisions made for his death in stock based compensation awards and employment terms were invoked. All stock based awards became fully vested and exercisable upon Mr. Parrents death. See Notes to the
Unaudited Condensed Consolidated Financial Statements (Stock Based Compensation) in Item 1  (Financial Statements) In addition, upon his death, Mr. Parrents widow or estate is to be paid on-half of his
current annual salary. Any such death benefits will be funded by proceeds from life insurance policies.



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PART II  OTHER INFORMATION

Item 1.A Risk Factors

There were no material changes from risk factors as previously disclosed
in BancTrusts Form 10-K for the period ended December 31, 2005 in response to Item 1A. to Part 1 of Form 10-K.

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 15, 2006 |  | /s/ Ted M. Henry                                    
|                   |  | Ted M. Henry                                        
|                   |  | Chairman and Chief Executive Officer                
|                   | 
|Date: May 15, 2006 |  | /s/ Andrew C. Bearden, Jr.                          
|                   |  | Andrew C. Bearden, Jr.                              
|                   |  | Executive Vice President and Chief Financial Officer
|                   | 
|Date: May 15, 2006 |  | /s/ Thomas P. Wilbourne                             
|                   |  | Thomas P. Wilbourne                                 
|                   |  | Vice President and Principal Accounting Officer     



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