---

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



---

(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, 2007

OR



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

Commission File Number: O-13653

THE PEOPLES BANCTRUST COMPANY, INC.

(Exact name of registrant as specified on its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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)

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  x        Non-Accelerated Filer ̈

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 7, 2007, 5,929,561 shares of the registrants Common Stock, par value $.10 per share, were outstanding.



---



---

PART I - FINANCIAL INFORMATION

|Item 1. | Financial Statements
|------- | --------------------

THE PEOPLES BANCTRUST
COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands)



|                                                 |  |                |         |   |                   |   |         |  
|------------------------------------------------ |  | -------------- | ------- | - | ----------------- | - | ------- | -
|                                                 |  | March 31, 2007 |         |   | December 31, 2006 |  
|                                                 |  | (unaudited)    |         |   |                   |  
|Assets                                           |  |                |         |   |                   |   |         |  
|Cash and due from banks                          |  | $              | 21,036  |   |                   | $ | 21,384  |  
|Interest bearing deposits in banks               |  |                | 42,263  |   |                   |   | 6,070   |  
|                                                 |  |                |         |   |                   |   |         |  
|Cash and cash equivalents                        |  |                | 63,299  |   |                   |   | 27,455  |  
|Available-for-sale securities                    |  |                | 22,718  |   |                   |   | 204,602 |  
|Trading Securities                               |  |                | 156,291 |   |                   |   |        |  
|Loans, net of unearned income                    |  |                | 636,248 |   |                   |   | 631,800 |  
|Allowance for loan losses                        |  |                | (6,675  | ) |                   |   | (6,398  | )
|                                                 |  |                |         |   |                   |   |         |  
|Loans, net                                       |  |                | 629,573 |   |                   |   | 625,401 |  
|Bank premises and equipment                      |  |                | 46,834  |   |                   |   | 46,200  |  
|Less accumulated depreciation                    |  |                | (21,402 | ) |                   |   | (20,813 | )
|                                                 |  |                |         |   |                   |   |         |  
|Bank premises and equipment, net                 |  |                | 25,432  |   |                   |   | 25,387  |  
|Other real estate, net                           |  |                | 937     |   |                   |   | 1,034   |  
|Interest receivable                              |  |                | 4,697   |   |                   |   | 4,947   |  
|Intangible assets acquired, net                  |  |                | 6,380   |   |                   |   | 6,428   |  
|Deferred income taxes                            |  |                | 2,612   |   |                   |   | 2,640   |  
|Other assets                                     |  |                | 12,855  |   |                   |   | 12,811  |  
|                                                 |  |                |         |   |                   |   |         |  
|Total assets                                     |  | $              | 924,794 |   |                   | $ | 910,705 |  
|                                                 |  |                |         |   |                   |   |         |  
|Liabilities and Stockholders Equity             |  |                |         |   |                   |   |         |  
|Liabilities:                                     |  |                |         |   |                   |   |         |  
|Deposits:                                        |  |                |         |   |                   |   |         |  
|Demand-noninterest bearing                       |  | $              | 86,815  |   |                   | $ | 84,728  |  
|Demand-interest bearing                          |  |                | 283,240 |   |                   |   | 277,793 |  
|Savings                                          |  |                | 34,644  |   |                   |   | 33,481  |  
|Time                                             |  |                | 375,445 |   |                   |   | 372,699 |  
|                                                 |  |                |         |   |                   |   |         |  
|Total deposits                                   |  |                | 780,144 |   |                   |   | 768,701 |  
|Other borrowed funds                             |  |                | 48,014  |   |                   |   | 48,268  |  
|Interest payable                                 |  |                | 4,284   |   |                   |   | 3,468   |  
|Income taxes payable                             |  |                | 906     |   |                   |   | 9       |  
|Other liabilities                                |  |                | 2,933   |   |                   |   | 3,465   |  
|                                                 |  |                |         |   |                   |   |         |  
|Total liabilities                                |  |                | 836,281 |   |                   |   | 823,911 |  
|Stockholders equity:                            |  |                |         |   |                   |   |         |  
|Common stock                                     |  |                | 593     |   |                   |   | 592     |  
|Additional paid-in capital                       |  |                | 17,400  |   |                   |   | 17,200  |  
|Accumulated other comprehensive loss, net of tax |  |                | (1,404  | ) |                   |   | (4,150  | )
|Deferred stock based compensation                |  |                | (92     | ) |                   |   | (102    | )
|Retained earnings                                |  |                | 72,016  |   |                   |   | 73,254  |  
|                                                 |  |                |         |   |                   |   |         |  
|Total stockholders equity                       |  |                | 88,513  |   |                   |   | 86,794  |  
|                                                 |  |                |         |   |                   |   |         |  
|Total liabilities and stockholders equity       |  | $              | 924,794 |   |                   | $ | 910,705 |  
|                                                 |  |                |         |   |                   |   |         |  

See notes to Unaudited Condensed Consolidated Financial Statements



2



---

THE PEOPLES BANCTRUST COMPANY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands except share and per share
data)



|                                                                      |  |                              |           |      |   |           |  
|--------------------------------------------------------------------- |  | ---------------------------- | --------- | ---- | - | --------- | -
|                                                                      |  | Three Months Ended March 31, |          
|                                                                      |  | 2007                         |           | 2006 |  
|                                                                      |  | (unaudited)                  |          
|Interest income:                                                      |  |                              |           |      |   |           |  
|Interest and fees on loans and bankers acceptances                    |  | $                            | 12,211    |      | $ | 9,398     |  
|Interest and dividends on investment securities:                      |  |                              |           |      |   |           |  
|U.S. Government agency securities                                     |  |                              | 1,011     |      |   | 1,101     |  
|Other securities                                                      |  |                              | 886       |      |   | 1,025     |  
|Interest on federal funds sold and interest bearing deposits in banks |  |                              | 372       |      |   | 174       |  
|                                                                      |  |                              |           |      |   |           |  
|Total interest income                                                 |  |                              | 14,480    |      |   | 11,698    |  
|                                                                      |  |                              |           |      |   |           |  
|Interest expense:                                                     |  |                              |           |      |   |           |  
|Interest on deposits                                                  |  |                              | 6,429     |      |   | 4,313     |  
|Interest on federal funds purchased and other borrowed funds          |  |                              | 580       |      |   | 501       |  
|                                                                      |  |                              |           |      |   |           |  
|Total interest expense                                                |  |                              | 7,009     |      |   | 4,814     |  
|                                                                      |  |                              |           |      |   |           |  
|Net interest income                                                   |  |                              | 7,471     |      |   | 6,884     |  
|Provision (credit) for loan losses                                    |  |                              | 244       |      |   | (541      | )
|                                                                      |  |                              |           |      |   |           |  
|Net interest income after provision (credit) for loan losses          |  |                              | 7,227     |      |   | 7,426     |  
|Noninterest income:                                                   |  |                              |           |      |   |           |  
|Trust department income                                               |  |                              | 234       |      |   | 319       |  
|Service charges on deposit accounts                                   |  |                              | 1,418     |      |   | 1,386     |  
|Net gains on AFS securities                                           |  |                              | 0         |      |   | 1         |  
|Net gains on trading securities (Note 4)                              |  |                              | 602       |      |   | 0         |  
|Other noninterest income                                              |  |                              | 880       |      |   | 696       |  
|                                                                      |  |                              |           |      |   |           |  
|Total noninterest income                                              |  |                              | 3,134     |      |   | 2,403     |  
|Noninterest expense:                                                  |  |                              |           |      |   |           |  
|Salaries and wages                                                    |  |                              | 3,166     |      |   | 2,760     |  
|Pensions and other employee benefits                                  |  |                              | 884       |      |   | 585       |  
|Occupancy and equipment expenses                                      |  |                              | 1,340     |      |   | 1,136     |  
|Other noninterest expenses                                            |  |                              | 1,809     |      |   | 1,643     |  
|                                                                      |  |                              |           |      |   |           |  
|Total noninterest expense                                             |  |                              | 7,199     |      |   | 6,124     |  
|                                                                      |  |                              |           |      |   |           |  
|Income before provision for income taxes                              |  |                              | 3,162     |      |   | 3,704     |  
|Provision for income taxes                                            |  |                              | 953       |      |   | 1,213     |  
|                                                                      |  |                              |           |      |   |           |  
|Net income                                                            |  | $                            | 2,209     |      | $ | 2,492     |  
|                                                                      |  |                              |           |      |   |           |  
|Earnings per share                                                    |  |                              |           |      |   |           |  
|Basic net income per share                                            |  | $                            | 0.37      |      | $ | 0.42      |  
|                                                                      |  |                              |           |      |   |           |  
|Diluted net income per share                                          |  | $                            | 0.37      |      | $ | 0.42      |  
|                                                                      |  |                              |           |      |   |           |  
|Dividends per share                                                   |  | $                            | 0.13      |      | $ | 0.12      |  
|                                                                      |  |                              |           |      |   |           |  
|Basic weighted average number of shares outstanding                   |  |                              | 5,922,989 |      |   | 5,898,286 |  
|                                                                      |  |                              |           |      |   |           |  
|Diluted weighted average number of shares outstanding                 |  |                              | 5,975,586 |      |   | 5,933,391 |  
|                                                                      |  |                              |           |      |   |           |  

See notes to Unaudited Condensed Consolidated Financial Statements



3



---

THE PEOPLES BANCTRUST CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)



|                                                                                |  |                              |       |   |      |   |       |  
|------------------------------------------------------------------------------- |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                                                                                |  | Three Months Ended March 31, |      
|                                                                                |  | (Unaudited)                  |      
|                                                                                |  | 2007                         |       |   | 2006 |  
|Net income                                                                      |  | $                            | 2,209 |   |      | $ | 2,492 |  
|Other comprehensive income (loss):                                              |  |                              |       |   |      |   |       |  
|Unrealized gains (losses) on securities available for sale during the period    |  |                              | 84    |   |      |   | (361  | )
|Market valuation impact of interest rate floor contract                         |  |                              | (12   | ) |      |   | (262  | )
|Defined benefit pension plan adjustment impact of SFAS 158                      |  |                              | 39    |   |      |   |      |  
|Less: reclassification adjustment for net (losses) gains included in net income |  |                              |      |   |      |   | 1     |  
|                                                                                |  |                              |       |   |      |   |       |  
|Other comprehensive income (loss):                                              |  |                              | 111   |   |      |   | (622  | )
|Income tax benefit related to items of other comprehensive loss                 |  |                              | 41    |   |      |   | (230  | )
|                                                                                |  |                              |       |   |      |   |       |  
|Other comprehensive income (loss), net of tax                                   |  |                              | 70    |   |      |   | (392  | )
|                                                                                |  |                              |       |   |      |   |       |  
|Comprehensive income, net of tax                                                |  | $                            | 2,279 |   |      | $ | 2,099 |  
|                                                                                |  |                              |       |   |      |   |       |  

See notes to Unaudited Condensed Consolidated Financial Statements



4



---

THE PEOPLES BANCTRUST COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                             |  |                              |        |   |      |   |         |  
|---------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------- | -
|                                                                             |  | Three Months Ended March 31, |       
|                                                                             |  | 2007                         |        |   | 2006 |  
|                                                                             |  | (unaudited)                  |       
|Cash flows from operating activities                                         |  |                              |        |   |      |   |         |  
|Net income                                                                   |  | $                            | 2,209  |   |      | $ | 2,492   |  
|Adjustments to reconcile net income to cash provided by operating activities |  |                              |        |   |      |   |         |  
|Provision (credit) for loan losses                                           |  |                              | 244    |   |      |   | (541    | )
|Depreciation, amortization and accretion                                     |  |                              | 641    |   |      |   | 531     |  
|(Decrease) increase in the unearned discount                                 |  |                              | 584    |   |      |   | 364     |  
|Stock based compensation                                                     |  |                              | 48     |   |      |   |        |  
|Loss (gain) on sales of OREO                                                 |  |                              |       |   |      |   | (5      | )
|Loss (gain) on securities held at fair market value                          |  |                              | (602   | ) |      |   | 0       |  
|Loss (gain) on sales of securities                                           |  |                              |       |   |      |   | (1      | )
|Write down of other real estate and equipment                                |  |                              | 16     |   |      |   | 9       |  
|Decrease (increase) in assets                                                |  |                              |        |   |      |   |         |  
|Interest receivable                                                          |  |                              | 250    |   |      |   | (138    | )
|Other assets                                                                 |  |                              | (53    | ) |      |   | (560    | )
|Increase (decrease) in other liabilities                                     |  |                              |        |   |      |   |         |  
|Interest payable                                                             |  |                              | 816    |   |      |   | 212     |  
|Income taxes payable                                                         |  |                              | 897    |   |      |   | 987     |  
|Other liabilities                                                            |  |                              | (531   | ) |      |   | (397    | )
|                                                                             |  |                              |        |   |      |   |         |  
|Net cash provided by (used in) operating activities                          |  |                              | 4,519  |   |      |   | 2,953   |  
|Cash flows from investing activities                                         |  |                              |        |   |      |   |         |  
|Proceeds from sales of available for sales securities                        |  |                              |       |   |      |   | 288     |  
|Proceeds from maturities and calls of available for sale securities          |  |                              | 26,420 |   |      |   | 9,487   |  
|Purchases of available for sale securities                                   |  |                              | (123   | ) |      |   | (31     | )
|Purchase of derivative instruments                                           |  |                              |       |   |      |   | (445    | )
|Net decrease (increase) in loans                                             |  |                              | (5,000 | ) |      |   | (40,810 | )
|Purchases of bank premises and equipment                                     |  |                              | (634   | ) |      |   | (932    | )
|Proceeds from sales of other real estate and equipment                       |  |                              | 81     |   |      |   | 1,475   |  
|                                                                             |  |                              |        |   |      |   |         |  
|Net cash provided by (used in) investing activities                          |  |                              | 20,744 |   |      |   | (30,968 | )
|Cash flows from financing activities                                         |  |                              |        |   |      |   |         |  
|Net increase (decrease) in deposits                                          |  |                              | 11,443 |   |      |   | (3,358  | )
|Increase (decrease) in borrowings                                            |  |                              | (254   | ) |      |   | 11,260  |  
|Proceeds from issuance of common stock                                       |  |                              | 109    |   |      |   | 69      |  
|Dividends paid                                                               |  |                              | (717   | ) |      |   | (653    | )
|                                                                             |  |                              |        |   |      |   |         |  
|Net cash provided by (used in) financing activities                          |  |                              | 10,581 |   |      |   | 7,318   |  
|Increase (decrease) in cash and cash equivalents                             |  |                              | 35,844 |   |      |   | (20,697 | )
|Cash and cash equivalents                                                    |  |                              |        |   |      |   |         |  
|Beginning of period                                                          |  |                              | 27,455 |   |      |   | 48,585  |  
|                                                                             |  |                              |        |   |      |   |         |  
|End of period                                                                |  | $                            | 63,299 |   |      | $ | 27,888  |  
|                                                                             |  |                              |        |   |      |   |         |  
|Supplemental disclosure of cash flow information                             |  |                              |        |   |      |   |         |  
|Cash paid during the period for                                              |  |                              |        |   |      |   |         |  
|Interest                                                                     |  |                              | 6,193  |   |      |   | 4,602   |  
|Income taxes                                                                 |  |                              | 50     |   |      |   | 226     |  

See notes to Unaudited Condensed Consolidated Financial Statements



5



---

THE PEOPLES BANCTRUST COMPANY, INC. AND SUBSIDIARY

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 1.
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 with the exception of the adoption of SFAS 159) 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, 2006.

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, 2007 will have a materially adverse effect on BancTrusts financial statements.

Note 2. 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, 2007 and 2006 respectively (in thousands, except per share data):



|                                        |  |                                   |       |        |       |                 |   |     
|--------------------------------------- |  | --------------------------------- | ----- | ------ | ----- | --------------- | - | ----
|                                        |  | Three months ended March 31, 2007
|                                        |  | Income                            |       | Shares |       | Per-ShareAmount
|Basic EPS                               |  |                                   |       |        |       |                 |   |     
|Income available to common stockholders |  | $                                 | 2,209 |        | 5,923 |                 | $ | 0.37
|Effect of dilutive securities           |  |                                   |       |        |       |                 |   |     
|Stock options                           |  |                                   |       |        | 53    |                 |   |     
|                                        |  |                                   |       |        |       |                 |   |     
|Diluted EPS                             |  | $                                 | 2,209 |        | 5,976 |                 | $ | 0.37



|                                        |  |                                   |       |        |       |                 |   |     
|--------------------------------------- |  | --------------------------------- | ----- | ------ | ----- | --------------- | - | ----
|                                        |  | 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



6



---

Note 3. Stock-Based Compensation

At March 31, 2007, 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.

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 basis over the vesting period.
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.

The following is a
summary of BancTrusts weighted average assumptions used to estimate the weighted-average per share fair value of options granted during the three months ended March 31, 2007 and 2006 on the date of grant using the Black-Scholes
option-pricing model.



|                                                                 |  |                                     |      |      |   |     
|---------------------------------------------------------------- |  | ----------------------------------- | ---- | ---- | - | ----
|                                                                 |  | For the three months endedMarch 31,
|                                                                 |  | 2007                                |      | 2006
|Expected Life In years                                           |  |                                     | 5    |      |   | 5   
|Expected Volatility                                              |  |                                     | 27%  |      |   | 22% 
|Risk-Free Interest Rate                                          |  |                                     | 5%   |      |   | 5%  
|Expected Dividend Yield                                          |  |                                     | 2%   |      |   | 3%  
|Weighted Average Fair Value of options Granted During the Period |  | $                                   | 7.66 |      | $ | 4.02

At March 31, 2007, there was approximately $425,000 of pre-tax, unrecognized compensation
costs related to share-based payments which is expected to be recognized over a weighted-average period of 2.2 years.

The following table represents stock
option activity for the three months ended March 31, 2007:



|                                         |  |                                   |   |  |                               |       |                                         |     
|---------------------------------------- |  | --------------------------------- | - |  | ----------------------------- | ----- | --------------------------------------- | ----
|                                         |  | Three Months Ended March 31, 2007
|                                         |  | Number                            |   |  | WeightedAverageExercise Price |       | WeightedAverageRemainingContractualLife
|                                         |  |                                   |   |  |                               |       | (years)                                
|Options outstanding, beginning of period |  | 265,580                           |   |  | $                             | 16.59 |                                         |     
|Granted                                  |  | 500                               |   |  |                               | 23.84 |                                         |     
|Exercised                                |  | (13,764                           | ) |  |                               | 18.29 |                                         |     
|Terminated                               |  | (10,000                           | ) |  |                               | 18.92 |                                         |     
|                                         |  |                                   |   |  |                               |       |                                         |     
|Options outstanding, end of period       |  | 242,316                           |   |  |                               | 16.90 |                                         | 6.83
|                                         |  |                                   |   |  |                               |       |                                         |     
|Exercisable, end of period               |  | 158,116                           |   |  | $                             | 15.80 |                                         | 3.63
|                                         |  |                                   |   |  |                               |       |                                         |     



7



---

Shares available for future stock option grants to employees and directors under existing plans totaled
391,576 at March 31, 2007. At March 31, 2007 the aggregate intrinsic value of options outstanding was $515,604 and the aggregate intrinsic value of options exercisable was $511,113. Total intrinsic value of options exercised was $95,000
for the three months ended March 31, 2007.

Note 4. Recently Adopted Accounting Standards

In September 2006, the Financial Accounting Standards Board issued Statement No. 157, Fair Value Measurements (SFAS 157). The
Statement should improve financial reporting by creating a single definition of fair value and a framework for measuring fair value, resulting in increased consistency and comparability in fair value measurements on financial statements. The
expanded disclosures about the use of fair value should provide users of financial statements with better information about how fair value is used to measure recognized assets and liabilities, the factors used to develop the measurements, and the
impact of the measurements on earnings (or changes in net assets) for the period.

The Statement defines fair value, establishes guidelines
for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies to previously released accounting pronouncements that require or permit fair value
measurements, and does not establish new requirements for fair value measurements. Prior to this Statement, there were different definitions of fair value. The definition of fair value retains the exchange price notion in earlier definitions of fair
value. This Statement clarifies that the exchange price is the price in an orderly transaction between market participants, at the reporting date, to sell the asset or transfer the liability in the market in which the reporting entity would transact
for the asset or liability, and is viewed from the sellers perspective. Therefore, the definition focuses on the price that would be received to sell the asset or paid to transfer the liability (an exit price), not the price that would be paid
to acquire the asset or received to assume the liability (an entry price). The Statement emphasizes that fair value is not an entity-specific measurement, but rather a market-based measurement. Therefore, the assumptions that market participants
would use in pricing the asset or liability should be used to determine fair value measurement. As a basis for considering market participant assumptions in fair value measurements, this Statement establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) the reporting entitys own assumptions about market
participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The notion of unobservable inputs is intended to allow for situations in which there is little, if any, market activity for the
asset or liability at the measurement date. In those situations, the reporting entity need not undertake all possible efforts to obtain information about market participant assumptions.

BancTrust has elected to early adopt the Statement. Early adoption requires BancTrust to apply the provisions of the Statement to all annual and interim
statements for the year ended December 31, 2007, including this report on Form 10-Q. The provisions of this statement have not had or are not expected to have a material impact on results of operations, financial position, or liquidity of
BancTrust.

In February 2007, the Financial Accounting Standards Board issued Statement No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities Including An Amendment of FASB Statements No. 115(SFAS 159). This Statement improves financial reporting by allowing entities to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply the complexities of hedge accounting. The statement expands the use of fair value measurement of assets and liabilities, in line with the Boards measurement
objectives. The statement also establishes presentation and disclosure requirements that will simplify comparisons between entities that use different measurement methods for similar assets and liabilities.

This Statement will permit BancTrust to:



| | a. | Elect to value financial instruments using the fair value option or continue current measurement and reporting methods.
| | -- | -----------------------------------------------------------------------------------------------------------------------



| | b. | Elect the fair value option on an instrument by instrument basis. It is not necessary to elect the fair value option for similar instruments.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------



8



---

This Statement requires BancTrust to:



| | a. | Elect the option at the date of adoption of the standard or at the date of recognition of the object.
| | -- | -----------------------------------------------------------------------------------------------------



| | b. | Value items for which the fair value option has been elected at fair value and recognize the unrealized gains and losses in earnings. Currently, unrealized gains and losses are
recognized as a balance sheet adjustment.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | Report assets and liabilities that are measured at fair value in a manner which separates them from similar items using other measurement methods.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | Disclose Managements reasons for electing a fair value option for each eligible item or group of similar items and reasons for partial election if similar items are not
elected.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | Elect early adoption of Financial Accounting Standards Board issued Statement No. 157, Fair Value Measurements.
| | -- | ---------------------------------------------------------------------------------------------------------------

BancTrust has elected to early adopt the Statement. Early adoption requires BancTrust to apply the provisions of the Statement to all annual and interim
statements for the year ended December 31, 2007, including this report on Form 10-Q.

Fair Value Measurement

Under the provisions of Financial Accounting Standards Board issued Statement No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities,BancTrust has elected to value certain assets (certain securities) previously reported as available for sale and accounted for under the provisions of FASB statement 115, using the fair value option. Upon the adoption of SFAS 159,
certain securities were selected, reclassified as trading securities and reported at fair value at January 1, 2007. All unrealized gains or losses, previously reported in comprehensive income on the balance sheet, were removed from the
valuation allowance and reported as a cumulative adjustment to retained earnings under the provisions of the Statement.

In determining
which securities would be valued under the provisions of SFAS 159, management examined each security and prevailing market conditions to determine a strategy for better positioning BancTrusts portfolio for future earnings growth and
maintaining future liquidity needs. Generally, those securities with maturities exceeding six months were chosen for the restructuring strategy under SFAS 159.

At March 31, 2007 and each reporting period hereafter, these trading securities will be marked to market and changes in market value will be recognized as gains or losses in earnings in the period which the
change occurs. Interest and dividends on these trading securities will continue to be recognized in interest income based upon the yield of each security.

The following table sets forth the balance at March 31, 2007 of securities held at fair value and the total of realized gains due to changes in the fair value of such securities for the period ended
March 31, 2007. During April 2007, the securities initially selected for fair value measurement under SFAS 159 were sold in the second quarter of 2007 under a restructuring strategy and reinvested in significantly higher yielding securities.
The securities that were purchased as a result of the restructuring strategy will also be accounted for as trading securities under the fair value measurement option as prescribed by SFAS 159 in future periods.



|                              |  |                             |         |                                                                                                  |   |     |                                                                                      |  |   |   
|----------------------------- |  | --------------------------- | ------- | ------------------------------------------------------------------------------------------------ | - | --- | ------------------------------------------------------------------------------------ |  | - | --
|($s in thousands)            |  | Fair Value atMarch 31, 2007 |         | Changes in FMV forthe 3 month periodending March 31,2007, recognized asgains/(losses)
inearnings |   |     | Unrealizedgains/(losses) duechanges in FMV forthe 3 month periodending
March 31,2007
|Available-for-sale securities |  | $                           | 22,718  |                                                                                                  | $ |    |                                                                                      |  | $ | 84
|Trading securities            |  | $                           | 156,291 |                                                                                                  | $ | 602 | *                                                                                    |  | $ |  



|* | Measured using quoted prices in active market.
|- | ----------------------------------------------



9



---

The total of this adjustment was to reduce retained earnings on January 1, 2007 by $2,676,000 and to
reduce the amount of unrealized losses on available for sale securities in comprehensive income by the same amount. The following illustrates the impact of the adoption of the Statement on Risked Based Capital ratios at March 31, 2007.



|                          |  |                            |   |  |                |    |  |                            |  
|------------------------- |  | -------------------------- | - |  | -------------- | -- |  | -------------------------- | -
|                          |  | March 31, 2007             |  
|                          |  | ExcludingImpact ofSFAS 159 |   |  | SFAS 159Impact |    |  | IncludingImpact ofSFAS 159 |  
|Tier one leverage ratio   |  | 9.50                       | % |  | (0.23          | %) |  | 9.27                       | %
|Tier one risk based ratio |  | 12.03                      | % |  | (0.29          | %) |  | 11.74                      | %
|Total risk based ratio    |  | 12.96                      | % |  | (0.29          | %) |  | 12.67                      | %

In June 2006, the Financial Accounting Standards Board (FASB) issued interpretation no. 48,
Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance
with FASB Statement No. 109, Accounting for Income Taxes (SFAS 109). This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 became effective for fiscal years beginning
after December 15, 2006. The adoption of FIN 48 will not have a materially adverse effect on BancTrusts financial statements.



10



---

|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, 2006. 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, goodwill impairment, deferred tax assets
or liabilities and fair value determination of certain assets and 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, 2006.

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.

Estimates of Fair Value - The estimation of fair value is significant to a number
of the Companys assets, including, but not limited to, investment securities, derivatives, other real estate owned, intangible assets and other repossessed assets. Derivatives and investment securities are recorded at fair value while other
real estate owned, intangible assets and other repossessed assets are recorded at either cost or fair value, whichever is lower. Fair values for investment securities and derivatives are based on quoted market prices, and if not available, quoted
prices on similar instruments. The fair values of other real estate owned and repossessions are typically determined based on third-party appraisals less estimated costs to sell. Intangible assets, such as the charter cost, are periodically
evaluated to determine if any impairment might exist.

The estimation of fair value and subsequent changes of fair value of investment
securities, derivatives, other real estate owned, repossessions and intangible assets can have a significant impact on the value of the Company, as well as have an impact on the recorded values and reported net income.

Changes in interest rates is the primary determining factor in the fair value of investment securities, derivatives, and the value at which these assets
are reported in BancTrusts financial statements. Local economic conditions are often the key factor in the valuation of other real estate owned and repossessed assets. Changes in these factors can cause assets to be written down and have an
impact on the financial results. The overall financial condition and results of operations of the banking unit is the primary determinant as to the value of recorded intangible assets.



11



---

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.

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, 2006. 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.



12



---

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, 2007, cash and cash equivalents totaled $63,299,000, compared to $27,455,000 at December 31, 2006. Cash and cash
equivalents primarily consist of cash and due from banks, combined with federal funds sold. At March 31, 2007, cash and cash equivalents consisted entirely of cash and due from banks, as was also the case at December 31, 2006.

Loans

Total loans, net of the unearned discount,
increased $4,449,000 to $636,248,000 at March 31, 2007, from $631,800,000 at December 31, 2006. 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. The following table indicates each of the major loan categories of BancTrust, and the change in volume of each when
comparing March 31, 2007 to December 31, 2006.



|                           |  |                |         |                   |   |         |  |   |        |  
|-------------------------- |  | -------------- | ------- | ----------------- | - | ------- |  | - | ------ | -
|                           |  | March 31, 2007 |         | December 31, 2006 |   | Change  | 
|                           |  | (In thousands) |        
|Commercial and industrial  |  | $              | 153,251 |                   | $ | 152,407 |  | $ | 844    |  
|Real estate - mortgage     |  |                | 302,240 |                   |   | 294,128 |  |   | 8,112  |  
|Real estate - construction |  |                | 143,548 |                   |   | 145,693 |  |   | (2,145 | )
|Personal                   |  |                | 45,832  |                   |   | 46,332  |  |   | (500   | )
|Overdrafts and credit line |  |                | 947     |                   |   | 2,225   |  |   | (1,278 | )
|                           |  |                |         |                   |   |         |  |   |        |  
|Total loans                |  | $              | 645,818 |                   | $ | 640,785 |  | $ | 5,033  |  
|                           |  |                |         |                   |   |         |  |   |        |  
|Less:                      |  |                |         |                   |   |         |  |   |        |  
|Unearned income            |  | $              | 9,570   |                   | $ | 8,986   |  | $ | 584    |  
|Allowance for loan losses  |  |                | 6,675   |                   |   | 6,398   |  |   | 277    |  
|                           |  |                |         |                   |   |         |  |   |        |  
|Total loans, net           |  | $              | 629,573 |                   | $ | 625,401 |  | $ | 4,172  |  
|                           |  |                |         |                   |   |         |  |   |        |  

The largest increase was in real estate loans which increased $5,967,000 to $445,788,000 at
March 31, 2007 from $439,821,000 at December 31, 2006. Specifically, real estate mortgage loans increased $8,112,000 from $294,128,000 at December 31, 2006 to $302,240,000 at March 31, 2007, while construction loans decreased
$2,145,000 to $143,548,000 from $145,693,000 for the same period. BancTrust has placed significant emphasis on originating loans secured by real estate because fair market values for real estate tend to be more stable and readily determinable than
fair market values for other forms of collateral such as equipment and inventories. Additionally, real estate collateral tends to facilitate a more orderly and timely liquidation in the event of default by the borrower.

Commercial and industrial loans increased slightly, from $152,407,000 at December 31, 2006, to $153,251,000 at March 31, 2007.

Personal loans declined from $46,332,000 at December 31, 2006 to $45,832,000 at March 31, 2007. BancTrust continues to place less significance
on personal loan originations, as both increased competition from alternative sources of credit, primarily from credit cards and finance companies, and increased levels of denials of personal loan applications have contributed to generally lower
personal loan portfolio totals over time.



13



---

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s periodic evaluation of the
adequacy of the allowance also considers unimpaired loans and takes into consideration the Banks loan loss experience for pools of homogeneous loans, known and inherent risks in the portfolio, adverse situations that may affect the
borrowers ability to repay 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 the Banks regulators or its economic environment will not require further increases in the allowance.

A loan is considered impaired, based on current information and events, if it is probable that the Company 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.

The Company uses several factors in determining if a loan is impaired. 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 and operating income or loss.

At March 31, 2007, BancTrusts allowance for loan losses had a balance
of $6,675,000, compared to $6,398,000 at December 31, 2006. The ratio of the allowance to total loans, net of the unearned discount, was 1.05% and 1.01% at March 31, 2007 and December 31, 2006, respectively. As a percentage of total
loans, net of the unearned discount, non-accruing loans decreased to .64% at March 31, 2007, compared to 0.66% at December 31, 2006. The coverage of the allowance to non-accruing loans was 1.65X and 1.52X at March 31, 2007 and
December 31, 2006, respectively. At March 31, 2007, management had identified $24,298,000 of potential problem loans compared to $22,276,000 at December 31, 2006. At each of March 31, 2007 and December 31, 2006, potential
problem loans included impaired loans of $15,541,000 and $6,761,000, respectively. This increase was due to a reduction in the threshold for monitoring potential problems loans as BancTrust continues to focus on strengthening credit quality. Loans
accounted for on a nonaccrual basis decreased to $4,051,000 at March 31, 2007 from $4,201,000 at December 31, 2006.



|                                           |  |                              |      |   |      |   |      |  
|------------------------------------------ |  | ---------------------------- | ---- | - | ---- | - | ---- | -
|                                           |  | Three Months Ended March 31, |     
|                                           |  | 2007                         |      |   | 2006 |  
|                                           |  | (In Thousands)               |     
|Loans charged-off                          |  | $                            | 107  |   |      | $ | 176  |  
|Recoveries of loans previously charged off |  | $                            | (140 | ) |      |   | (272 | )
|                                           |  |                              |      |   |      |   |      |  
|Net loans (recovered) charged-off          |  | $                            | (33  | ) |      | $ | (96  | )
|                                           |  |                              |      |   |      |   |      |  



14



---

Securities

At January 1, 2007, BancTrust adopted FAS 159, the provisions of which were applied to its investment securities portfolio (See Notes to the Unaudited Condensed Consolidated Financial Statements). At March 31,
2007, investment securities totaled $179,009,000 compared to $204,602,000 at December 31, 2006. The decline in investment securities was primarily due to increased loan volumes and interest bearing deposits in banks (see 
Loans), as available funds were redeployed into the higher yielding loan portfolio or held for future loan growth. Included in the March 31, 2007 total are securities totaling $156,291,000 held as trading securities accounted
for at fair value under the provisions of SFAS 159. BancTrust realized gains of $602,000 in earnings during the period on the change in fair value of these trading securities. The remainder of the 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 gains (net of tax) of
$137,000 at March 31, 2007 and net unrealized losses (net of tax) of $2,592,000 at December 31, 2006. The change in unrealized losses net of tax included a cumulative reclassification of unrealized losses to prior periods retained
earnings for securities held at fair value in accordance with the adoption of SFAS 159. Excluding the reclassification adjustment, net unrealized gains on available-for-sale securities for the three months ending March 31, 2007 were $84,000.
BancTrust considers these gains to be temporary.

At March 31, 2007, BancTrust had pledged to the State Treasurer for the State of
Alabama and other parties $143,199,000, or approximately 80% 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.

Other Real Estate

Other real estate (ORE) represents real estate BancTrust has acquired via foreclosure on loans secured by real estate, or otherwise taken possession of in lieu of foreclosure on loans secured by real estate, or other premises
not used in the ordinary course of its operations. When BancTrust takes possession of real estate in such a manner, it is recorded at its fair market value. Periodically, BancTrust may reduce the value of ORE through write downs in its value
resulting from fluctuations in market values.

Other real estate, net of accumulated write downs, totaled $937,000 at March 31, 2007
and $1,034,000 at December 31, 2006.

Deposits

Customer deposits are BancTrusts primary funding source BancTrust held $780,144,000 in total deposits at March 31, 2007 compared to $768,701,000 at December 31, 2006, reflecting growth in all primary
deposit categories. The net effect was an increase in total deposits between the two periods of $11,443,000.

Non-interest bearing demand
deposits increased $2,087,000 from December 31, 2006 to $86,815,000 at March 31, 2007. Interest bearing transaction accounts, including negotiable order withdrawal (NOW) accounts, insured money market accounts
(IMMA) and savings accounts, totaled $317,884,000 and $311,274,000 at March 31, 2007 and December 31, 2006, respectively.

Time deposits, at March 31, 2007 totaled $375,445,000, an increase of $2,746,000 from the December 31, 2006 total of $372,699,000. Included in time deposits at March 31, 2007 was $61,174,000 of brokered time deposits,
compared to $61,273,000 at December 31, 2006. 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.



15



---

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, 2007, the entire investment securities portfolio of BancTrust was classified as either available-for-sale or trading securities (see
- Securities).

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 $48,014,000 at March 31, 2007 compared to $48,268,000 at December 31, 2006.

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, 2007, BancTrust had total advances from FHLB of $47,194,000. When combined with approximately $18,482,000 of guarantees on commercial letters of credit provided by the FHLB, BancTrust had
approximately $65,676,000 of active credit facilities at the FHLB on March 31, 2007. In addition to the aforementioned outstanding credit facilities, BancTrust had approximately $31,942,000 of unused credit facilities available at the FHLB on
March 31, 2007. BancTrust had unused federal funds lines of credit with correspondent financial institutions of approximately $52,000,000 at March 31, 2007.

Stockholders Equity and Regulatory Capital

At March 31, 2007, stockholders equity
totaled $88,513,000, compared to $86,794,000 at December 31, 2006. 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. Tier 1 capital primarily consists of stockholders equity less goodwill and other qualifying intangible assets and net unrealized gains or losses on available for sales securities). The following
table indicates the risk-based capital ratios of BancTrust and Peoples Bank at March 31, 2007.



16



---

|                                  |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|--------------------------------- |  | --------------------------------------------------------------- | ------- |  | ------------ | - |  | - | ------- |  | ----- | -
|                                  |  | Risk-Based Capital Ratios & Leverage RatiosAs of March 31, 2007 |        
|                                  |  | Dollars in Thousands                                            |        
|                                  |  | BancTrust                                                       |         |  | Peoples Bank |  
|RISK-BASED CAPITAL RATIOS         |  |                                                                 |         |  |              |   |  |  
|Tier 1 Capital                    |  | $                                                               | 83,696  |  | 11.74        | % |  | $ | 77,610  |  | 10.91 | %
|Tier 1 Capital  Minimum Required |  |                                                                 | 28,524  |  | 4.00         | % |  |   | 28,448  |  | 4.00  | %
|                                  |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Excess                            |  | $                                                               | 55,172  |  | 7.74         | % |  | $ | 49,162  |  | 6.91  | %
|Total Capital                     |  | $                                                               | 90,372  |  | 12.67        | % |  | $ | 84,286  |  | 11.85 | %
|Total Capital  Minimum Required  |  |                                                                 | 57,048  |  | 8.00         | % |  |   | 56,896  |  | 8.00  | %
|                                  |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Excess                            |  | $                                                               | 33,324  |  | 4.67         | % |  | $ | 27,390  |  | 3.85  | %
|Net risk-weighted assets          |  | $                                                               | 713,098 |  |              |   |  | $ | 711,200 |  |       |  
|LEVERAGE RATIOS                   |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Total Tier 1 Capital              |  | $                                                               | 83,696  |  | 9.27         | % |  | $ | 77,610  |  | 8.64  | %
|Minimum Leverage Requirement      |  |                                                                 | 36,101  |  | 4.00         | % |  |   | 35,918  |  | 4.00  | %
|                                  |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Excess                            |  | $                                                               | 47,595  |  | 5.27         | % |  | $ | 41,692  |  | 4.64  | %
|Average Total Assets,             |  |                                                                 |         |  |              |   |  |   |         |  |       |  
|Net of all intangibles            |  | $                                                               | 902,523 |  |              |   |  | $ | 897,951 |  |       |  

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. BancTrust has established an
ALCO (see - Liquidity), consisting of executive management. 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.

Financial Instruments With Off-Balance-Sheet Risk

The Bank is party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. The contract amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments.



17



---

The Banks exposure to credit loss in the event of nonperformance by the counterparty to the
financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does
for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of
any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The Bank had approximately $107,848,000 and $108,060,000 in commitments to extend credit at March 31, 2007 and December 31, 2006, respectively. The Bank evaluates
each customers credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on managements credit evaluation of the customer. Collateral held varies, but
may include certificates of deposit, marketable securities, real estate, and other collateral.

Irrevocable standby letters of credit are
conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and
similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The collateral varies but may include certificates of deposit, marketable securities,
real estate, and other collateral for those commitments for which collateral is deemed necessary. The Bank had approximately $21,530,000 and $21,406,000 in irrevocable standby letters of credit at March 31, 2007 and December 31, 2006,
respectively.



18



---

RESULTS OF OPERATIONS

Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006.

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 interest bearing liabilities such as interest bearing deposits and borrowed funds.

For the three
months ended March 31, 2007 (the 2007 quarter) BancTrust earned $14,480,000 of interest income on its interest earning assets, compared to $11,698,000 for the same period in 2006 (the 2006 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 2007 quarter, interest earning assets yielded 6.96% on average volume of $843,211,000, and 6.39% on
average volume of $742,601,000 in the 2006 quarter.

Interest and fees on loans totaled $12,211,000 in the 2007 quarter and $9,398,000 in
the 2006 quarter. Both the average annual yield earned on the loan portfolio and its average balance increased between the two periods. In the 2007 quarter, loans yielded an average of 7.84% on an average balance of $631,755,000, compared to an
average annual yield of 7.49% on an average balance of $509,039,000 in the 2006 quarter. Increased loan demand between the two periods (see Loans) contributed to higher average balances, 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 $1,897,000 in the 2007 quarter from $2,126,000 in the 2006 quarter. The average balance of the investment securities portfolio declined to $185,804,000 in the 2007 quarter from $221,322,000 in the 2006 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 4.14% in the 2007 quarter from 3.90% in the 2006 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.

Interest income earned on federal funds sold and interest bearing deposits in banks totaled $372,000 in the 2007 quarter and
$174,000 in the 2006 quarter. In the 2007 quarter, federal funds and interest bearing deposits in banks earned an average annual yield of 5.88% on average volume of $25,652,000 compared to an average annual yield of 5.77% on average volume of
$12,239,000 in the 2006 quarter. Increases in short term market interest rates between the two quarters contributed to the higher average annual yield on these instruments.

Interest expense on deposits increased to $6,429,000 in the 2007 quarter from $4,313,000 in the 2006 quarter. Increases in both average balances and the
average annual rates of interest paid on interest bearing deposits were contributing factors. In the 2007 quarter, the average annual cost of interest bearing deposits was 3.81%, compared to 2.94% in the 2006 quarter. The average balance of interest
bearing deposits in the 2007 quarter was $684,241,000, compared to $594,099,000 in the 2006 quarter. Higher market interest rates and loan demand contributed to the increased cost of interest bearing deposits between the two periods.

Interest expense on borrowed funds increased to $580,000 in the 2007 quarter from $501,000 in the 2006 quarter. This increase is attributable to a higher
average balance of borrowed funds in the 2007 quarter compared to the 2006 quarter, as the average cost of borrowed funds declined between the two periods. The average rate of interest paid on borrowed funds was 4.87% in the 2007 quarter and 5.15%
in the 2006 quarter. The average balance of borrowed funds in the 2007 quarter totaled $48,341,000, compared to $39,494,000 in the 2006 quarter.

The resulting net interest income for the 2007 quarter totaled $7,471,000 compared to $6,884,000 for the 2006 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 2007 quarter was 3.59%, compared to 3.76% in the 2006 quarter.

Provision for loan losses in the 2007 quarter totaled $244,000 compared to ($541,000) in the 2006 quarter. The provision for loan losses in a given period represents adjustments to the allowance for loan losses account that are deemed
necessary to adequately provide for potential losses within BancTrusts loan portfolio at a given point in time (see Allowance for Loan Losses). In the 2006



19



---

quarter, the provision for loan losses represented adjustments that lowered the allowance for loan losses account, causing the ($541,000) provision for loan
losses amount to have an increasing effect on income. In the 2007 quarter, BancTrust deemed it necessary to increase the allowance for loan losses, and therefore realized $244,000 of provision for loan losses, which had a decreasing effect on
income.

Noninterest income increased in the 2007 quarter to $3,134,000, compared to $2,403,000 in the 2006 quarter. Included in the 2007
quarter was $602,000 of valuation gains on trading securities, which resulted from the early adoption of SFAS 159 and primarily accounted for the increase in noninterest income between the two periods.

Noninterest expense increased approximately 17.6%, from $6,124,000 in the 2006 quarter to $7,199,000 in the 2007 quarter. Significant increases in salary
and benefits expenses, driven by market expansion efforts, were the primary contributing factors to the overall increase in noninterest expense between the two quarters.

Provision for income taxes in the 2007 quarter totaled $953,000 compared to $1,213,000 in the 2006 quarter. The effective income tax rate decreased to 30.1% in the 2007 quarter from 32.7% in the 2006 quarter due to
the fact that income tax credits available to BancTrust are static amounts. Consequently, as income before provision for income taxes decreased, the relative beneficial impact of these income tax credits was greater in the 2007 quarter than in the
2006 quarter.

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 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 five year term of the agreement. BancTrust paid to its counterparty a one-time premium equal to $445,000 which is being 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, 2007, 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.



20



---

PART II  OTHER INFORMATION



|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



21



---

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 09, 2007 |  |  |  |                                     |  | /s/ Don J. Giardina                  
|                   |  |  |  |                                     |  | Don J. Giardina                      
|                   |  |  |  |                                     |  | President and Chief Executive Officer



|                   |  |  |  |  |  |                                                  
|------------------ |  |  |  |  |  | -------------------------------------------------
|                   |  |  |  | 
|                   |  |  | 
|Date: May 09, 2007 |  |  |  |  |  | /s/ Thomas P. Wilbourne                          
|                   |  |  |  |  |  | Thomas P. Wilbourne                              
|                   |  |  |  |  |  | Senior Vice President and Chief Financial Officer
|                   |  |  |  |  |  | (Principal Accounting Officer)                   



22