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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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(MARK ONE)



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

For the quarterly period ended June 30, 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 ofincorporation or organization) |  | (I.R.S. EmployerIdentification 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 August 8, 2007, 5,929,561 shares of the registrants Common Stock, par value $.10 per share, were
outstanding.



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PART I - FINANCIAL INFORMATION



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

THE PEOPLES BANCTRUST
COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands)



|                                                 |  |               |         |   |                   |   |         |  
|------------------------------------------------ |  | ------------- | ------- | - | ----------------- | - | ------- | -
|                                                 |  | June 30, 2007 |         |   | December 31, 2006 |  
|                                                 |  | (unaudited)   |         |   |                   |  
|Assets                                           |  |               |         |   |                   |   |         |  
|Cash and due from banks                          |  | $             | 22,054  |   |                   | $ | 21,384  |  
|Interest bearing deposits in banks               |  |               | 34,473  |   |                   |   | 6,070   |  
|                                                 |  |               |         |   |                   |   |         |  
|Cash and cash equivalents                        |  |               | 56,527  |   |                   |   | 27,455  |  
|Available-for-sale securities                    |  |               | 15,003  |   |                   |   | 204,602 |  
|Trading securities                               |  |               | 151,684 |   |                   |   |        |  
|Loans, net of unearned income                    |  |               | 665,819 |   |                   |   | 631,800 |  
|Allowance for loan losses                        |  |               | (7,160  | ) |                   |   | (6,398  | )
|                                                 |  |               |         |   |                   |   |         |  
|Loans, net                                       |  |               | 658,659 |   |                   |   | 625,401 |  
|Bank premises and equipment                      |  |               | 47,060  |   |                   |   | 46,200  |  
|Less accumulated depreciation                    |  |               | (21,897 | ) |                   |   | (20,813 | )
|                                                 |  |               |         |   |                   |   |         |  
|Bank premises and equipment, net                 |  |               | 25,163  |   |                   |   | 25,387  |  
|Other real estate, net                           |  |               | 699     |   |                   |   | 1,034   |  
|Interest receivable                              |  |               | 5,103   |   |                   |   | 4,947   |  
|Intangible assets acquired, net                  |  |               | 6,331   |   |                   |   | 6,428   |  
|Deferred income taxes                            |  |               | 243     |   |                   |   | 2,640   |  
|Other assets                                     |  |               | 14,771  |   |                   |   | 12,811  |  
|                                                 |  |               |         |   |                   |   |         |  
|Total assets                                     |  | $             | 934,183 |   |                   | $ | 910,705 |  
|                                                 |  |               |         |   |                   |   |         |  
|Liabilities and Stockholders Equity             |  |               |         |   |                   |   |         |  
|Liabilities:                                     |  |               |         |   |                   |   |         |  
|Deposits:                                        |  |               |         |   |                   |   |         |  
|Demand-noninterest bearing                       |  | $             | 87,612  |   |                   | $ | 84,728  |  
|Demand-interest bearing                          |  |               | 276,137 |   |                   |   | 277,793 |  
|Savings                                          |  |               | 32,973  |   |                   |   | 33,481  |  
|Time                                             |  |               | 396,676 |   |                   |   | 372,699 |  
|                                                 |  |               |         |   |                   |   |         |  
|Total deposits                                   |  |               | 793,398 |   |                   |   | 768,701 |  
|Other borrowed funds                             |  |               | 46,374  |   |                   |   | 48,268  |  
|Interest payable                                 |  |               | 3,094   |   |                   |   | 3,468   |  
|Income taxes payable                             |  |               |        |   |                   |   | 9       |  
|Other liabilities                                |  |               | 3,323   |   |                   |   | 3,465   |  
|                                                 |  |               |         |   |                   |   |         |  
|Total liabilities                                |  |               | 846,189 |   |                   |   | 823,911 |  
|Stockholders equity:                            |  |               |         |   |                   |   |         |  
|Common stock                                     |  |               | 593     |   |                   |   | 592     |  
|Additional paid-in capital                       |  |               | 17,421  |   |                   |   | 17,200  |  
|Accumulated other comprehensive loss, net of tax |  |               | (1,188  | ) |                   |   | (4,150  | )
|Deferred stock based compensation                |  |               | (83     | ) |                   |   | (102    | )
|Retained earnings                                |  |               | 71,251  |   |                   |   | 73,254  |  
|                                                 |  |               |         |   |                   |   |         |  
|Total stockholders equity                       |  |               | 87,994  |   |                   |   | 86,794  |  
|                                                 |  |               |         |   |                   |   |         |  
|Total liabilities and stockholders equity       |  | $             | 934,183 |   |                   | $ | 910,705 |  
|                                                 |  |               |         |   |                   |   |         |  

See notes to Unaudited Condensed Consolidated Financial Statements



2



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THE PEOPLES BANCTRUST COMPANY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands except share and per share
data)



|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|--------------------------------------------------------------------- |  | --------------------------- | --------- | - | ------------------------- | - | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                                      |  | Three Months Ended June 30, |           |   | Six Months Ended June 30, |  
|                                                                      |  | 2007                        |           |   | 2006                      |   |           | 2007 |  |   | 2006      |  
|                                                                      |  | (unaudited)                 |           |   | (unaudited)               |  
|Interest income:                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Interest and fees on loans and bankers acceptances                    |  | $                           | 12,618    |   |                           | $ | 10,861    |      |  | $ | 24,829    |   |  | $ | 20,259    |  
|Interest and dividends on investment securities:                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|U.S. Government agency securities                                     |  |                             | 983       |   |                           |   | 1,073     |      |  |   | 1,994     |   |  |   | 2,175     |  
|Other securities                                                      |  |                             | 1,213     |   |                           |   | 982       |      |  |   | 2,099     |   |  |   | 2,007     |  
|Interest on federal funds sold and interest bearing deposits in banks |  |                             | 428       |   |                           |   | 119       |      |  |   | 800       |   |  |   | 293       |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Total interest income                                                 |  |                             | 15,242    |   |                           |   | 13,035    |      |  |   | 29,722    |   |  |   | 24,733    |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Interest expense:                                                     |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Interest on deposits                                                  |  |                             | 6,664     |   |                           |   | 5,195     |      |  |   | 13,093    |   |  |   | 9,508     |  
|Interest on federal funds purchased and other borrowed funds          |  |                             | 572       |   |                           |   | 543       |      |  |   | 1,152     |   |  |   | 1,045     |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Total interest expense                                                |  |                             | 7,236     |   |                           |   | 5,738     |      |  |   | 14,245    |   |  |   | 10,552    |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Net interest income                                                   |  |                             | 8,006     |   |                           |   | 7,297     |      |  |   | 15,477    |   |  |   | 14,181    |  
|Provision (credit) for loan losses                                    |  |                             | 517       |   |                           |   | (351      | )    |  |   | 761       |   |  |   | (893      | )
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Net interest income after provision (credit) for loan losses          |  |                             | 7,489     |   |                           |   | 7,648     |      |  |   | 14,716    |   |  |   | 15,074    |  
|Noninterest income:                                                   |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Trust department income                                               |  |                             | 276       |   |                           |   | 212       |      |  |   | 510       |   |  |   | 531       |  
|Service charges on deposit accounts                                   |  |                             | 1,446     |   |                           |   | 1,444     |      |  |   | 2,864     |   |  |   | 2,830     |  
|Net losses on sales of AFS securities                                 |  |                             | 0         |   |                           |   | (20       | )    |  |   | 0         |   |  |   | (18       | )
|Net losses on trading securities                                      |  |                             | (2,112    | ) |                           |   | 0         |      |  |   | (1,510    | ) |  |   | 0         |  
|Other noninterest income                                              |  |                             | 915       |   |                           |   | 630       |      |  |   | 1,795     |   |  |   | 1,326     |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Total noninterest income                                              |  |                             | 525       |   |                           |   | 2,266     |      |  |   | 3,659     |   |  |   | 4,668     |  
|Noninterest expense:                                                  |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Salaries and wages                                                    |  |                             | 3,260     |   |                           |   | 3,066     |      |  |   | 6,426     |   |  |   | 5,826     |  
|Pensions and other employee benefits                                  |  |                             | 618       |   |                           |   | 620       |      |  |   | 1,502     |   |  |   | 1,205     |  
|Occupancy and equipment expenses                                      |  |                             | 1,412     |   |                           |   | 1,311     |      |  |   | 2,752     |   |  |   | 2,447     |  
|Merger expenses                                                       |  |                             | 912       |   |                           |   | 0         |      |  |   | 912       |   |  |   | 0         |  
|Other noninterest expenses                                            |  |                             | 1,764     |   |                           |   | 1,502     |      |  |   | 3,573     |   |  |   | 3,145     |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Total noninterest expense                                             |  |                             | 7,966     |   |                           |   | 6,499     |      |  |   | 15,165    |   |  |   | 12,623    |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Income before provision for income taxes                              |  |                             | 48        |   |                           |   | 3,415     |      |  |   | 3,210     |   |  |   | 7,119     |  
|Provision for income taxes                                            |  |                             | 44        |   |                           |   | 1,141     |      |  |   | 997       |   |  |   | 2,353     |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Net income                                                            |  | $                           | 4         |   |                           | $ | 2,274     |      |  | $ | 2,213     |   |  | $ | 4,766     |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Earnings per share                                                    |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Basic net income per share                                            |  | $                           | 0.00      |   |                           | $ | 0.39      |      |  | $ | 0.37      |   |  | $ | 0.81      |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Diluted net income per share                                          |  | $                           | 0.00      |   |                           | $ | 0.38      |      |  | $ | 0.37      |   |  | $ | 0.80      |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Dividends per share                                                   |  | $                           | 0.13      |   |                           | $ | 0.12      |      |  | $ | 0.26      |   |  | $ | 0.24      |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Basic weighted average number of shares outstanding                   |  |                             | 5,929,561 |   |                           |   | 5,902,159 |      |  |   | 5,926,263 |   |  |   | 5,900,223 |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Diluted weighted average number of shares outstanding                 |  |                             | 5,996,365 |   |                           |   | 5,936,760 |      |  |   | 5,993,047 |   |  |   | 5,931,333 |  
|                                                                      |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  

See notes to Unaudited Condensed Consolidated Financial Statements



3



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THE PEOPLES BANCTRUST CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)



|                                                                                |  |                             |     |   |                           |   |        |      |  |   |       |   |  |   |        |  
|------------------------------------------------------------------------------- |  | --------------------------- | --- | - | ------------------------- | - | ------ | ---- |  | - | ----- | - |  | - | ------ | -
|                                                                                |  | Three Months Ended June 30, |     |   | Six Months Ended June 30, |  
|                                                                                |  | (Unaudited)                 |     |   | (Unaudited)               |  
|                                                                                |  | 2007                        |     |   | 2006                      |   |        | 2007 |  |   | 2006  |  
|Net income                                                                      |  | $                           | 4   |   |                           | $ | 2,274  |      |  | $ | 2,213 |   |  | $ | 4,766  |  
|Other comprehensive income (loss):                                              |  |                             |     |   |                           |   |        |      |  |   |       |   |  |   |        |  
|Unrealized gains (losses) on securities available for sale during the period    |  |                             | 47  |   |                           |   | (2,039 | )    |  |   | 131   |   |  |   | (2,397 | )
|Market valuation impact of interest rate floor contract                         |  |                             | (43 | ) |                           |   | (63    | )    |  |   | (55   | ) |  |   | (325   | )
|Defined benefit pension plan adjustment impact of SFAS 158                      |  |                             | 339 |   |                           |   |       |      |  |   | 378   |   |  |   |       |  
|Less: reclassification adjustment for net (losses) gains included in net income |  |                             |    |   |                           |   | (20    | )    |  |   |      |   |  |   | (18    | )
|                                                                                |  |                             |     |   |                           |   |        |      |  |   |       |   |  |   |        |  
|Other comprehensive income (loss):                                              |  |                             | 343 |   |                           |   | (2,082 | )    |  |   | 454   |   |  |   | (2,703 | )
|Income tax benefit related to items of other comprehensive income (loss)        |  |                             | 127 |   |                           |   | (768   | )    |  |   | 168   |   |  |   | (997   | )
|                                                                                |  |                             |     |   |                           |   |        |      |  |   |       |   |  |   |        |  
|Other comprehensive income (loss), net of tax                                   |  |                             | 216 |   |                           |   | (1,314 | )    |  |   | 286   |   |  |   | (1,706 | )
|                                                                                |  |                             |     |   |                           |   |        |      |  |   |       |   |  |   |        |  
|Comprehensive income, net of tax                                                |  | $                           | 220 |   |                           | $ | 960    |      |  | $ | 2,499 |   |  | $ | 3,060  |  
|                                                                                |  |                             |     |   |                           |   |        |      |  |   |       |   |  |   |        |  

See notes to Unaudited Condensed Consolidated Financial Statements



4



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THE PEOPLES BANCTRUST COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                       |  |                           |          |   |      |   |         |  
|-------------------------------------------------------------------------------------- |  | ------------------------- | -------- | - | ---- | - | ------- | -
|                                                                                       |  | Six Months Ended June 30, |         
|                                                                                       |  | 2007                      |          |   | 2006 |  
|                                                                                       |  | (unaudited)               |         
|Cash flows from operating activities                                                   |  |                           |          |   |      |   |         |  
|Net income                                                                             |  | $                         | 2,213    |   |      | $ | 4,766   |  
|Adjustments to reconcile net income to cash provided by (used in) operating activities |  |                           |          |   |      |   |         |  
|Provision (credit) for loan losses                                                     |  |                           | 761      |   |      |   | (893    | )
|Depreciation, amortization and accretion                                               |  |                           | 1,176    |   |      |   | 1,080   |  
|Increase in the unearned discount                                                      |  |                           | 659      |   |      |   | 952     |  
|Deferred income taxes, net                                                             |  |                           | 2,246    |   |      |   |        |  
|Stock based compensation                                                               |  |                           | 78       |   |      |   | 265     |  
|Gain on sales of OREO                                                                  |  |                           | (74      | ) |      |   | (5      | )
|Proceeds from sales of trading securities                                              |  |                           | 155,026  |   |      |   |        |  
|Purchases of trading securities                                                        |  |                           | (162,317 | ) |      |   |        |  
|Loss on trading securities                                                             |  |                           | 1,510    |   |      |   |        |  
|Loss on sales of available for sale securities                                         |  |                           |         |   |      |   | 18      |  
|Write down of other real estate and equipment                                          |  |                           | 25       |   |      |   | 18      |  
|Increase in assets                                                                     |  |                           |          |   |      |   |         |  
|Interest receivable                                                                    |  |                           | (156     | ) |      |   | (507    | )
|Other assets                                                                           |  |                           | (1,821   | ) |      |   | (1,110  | )
|Increase (decrease) in other liabilities                                               |  |                           |          |   |      |   |         |  
|Interest payable                                                                       |  |                           | (374     | ) |      |   | 739     |  
|Income taxes payable                                                                   |  |                           | (9       | ) |      |   | 242     |  
|Other liabilities                                                                      |  |                           | (143     | ) |      |   | (292    | )
|                                                                                       |  |                           |          |   |      |   |         |  
|Net cash provided by (used in) operating activities                                    |  |                           | (1,200   | ) |      |   | 5,273   |  
|Cash flows from investing activities                                                   |  |                           |          |   |      |   |         |  
|Proceeds from sales of available for sales securities                                  |  |                           |         |   |      |   | 5,024   |  
|Proceeds from maturities and calls of available for sale securities                    |  |                           | 44,000   |   |      |   | 15,045  |  
|Purchases of available for sale securities                                             |  |                           |         |   |      |   | (457    | )
|Purchase of derivative instruments                                                     |  |                           |         |   |      |   | (445    | )
|Net increase in loans                                                                  |  |                           | (34,730  | ) |      |   | (91,486 | )
|Purchases of bank premises and equipment                                               |  |                           | (888     | ) |      |   | (2,031  | )
|Proceeds from sales of other real estate and equipment                                 |  |                           | 465      |   |      |   | 1,826   |  
|                                                                                       |  |                           |          |   |      |   |         |  
|Net cash provided by (used in) investing activities                                    |  |                           | 8,847    |   |      |   | (72,524 | )
|Cash flows from financing activities                                                   |  |                           |          |   |      |   |         |  
|Net increase in deposits                                                               |  |                           | 24,697   |   |      |   | 43,009  |  
|Increase (decrease) in borrowings                                                      |  |                           | (1,894   | ) |      |   | 10,700  |  
|Proceeds from issuance of common stock                                                 |  |                           | 109      |   |      |   | 91      |  
|Dividends paid                                                                         |  |                           | (1,487   | ) |      |   | (1,306  | )
|                                                                                       |  |                           |          |   |      |   |         |  
|Net cash provided by financing activities                                              |  |                           | 21,425   |   |      |   | 52,494  |  
|Increase (decrease) in cash and cash equivalents                                       |  |                           | 29,072   |   |      |   | (14,757 | )
|Cash and cash equivalents                                                              |  |                           |          |   |      |   |         |  
|Beginning of period                                                                    |  |                           | 27,455   |   |      |   | 48,585  |  
|                                                                                       |  |                           |          |   |      |   |         |  
|End of period                                                                          |  | $                         | 56,527   |   |      | $ | 33,828  |  
|                                                                                       |  |                           |          |   |      |   |         |  
|Supplemental disclosure of cash flow information                                       |  |                           |          |   |      |   |         |  
|Cash paid during the period for:                                                       |  |                           |          |   |      |   |         |  
|Interest                                                                               |  |                           | 14,619   |   |      |   | 9,813   |  
|Income taxes                                                                           |  |                           | 52       |   |      |   | 2,066   |  

See notes to Unaudited Condensed Consolidated Financial Statements



5



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THE PEOPLES BANCTRUST COMPANY, INC. AND SUBSIDIARY

Notes to the Unaudited Condensed Consolidated Financial Statements

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 (the 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 first quarter 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 June 30, 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 and six months ended June 30, 2007 and 2006 respectively (in thousands, except per share data):



|                                            |  |                                  |       |                                |       |                 |   |        |  |        |       |                 |       |  |   |     
|------------------------------------------- |  | -------------------------------- | ----- | ------------------------------ | ----- | --------------- | - | ------ |  | ------ | ----- | --------------- | ----- |  | - | ----
|                                            |  | Three months ended June 30, 2007 |       | Six months ended June 30, 2007
|                                            |  | Income                           |       | Shares                         |       | Per-ShareAmount |   | Income |  | Shares |       | Per-ShareAmount
|Basic EPS                                   |  |                                  |       |                                |       |                 |   |        |  |        |       |                 |       |  |   |     
|Income available to common stockholders     |  | $                                | 4     |                                | 5,930 |                 | $ | 0.00   |  | $      | 2,213 |                 | 5,926 |  | $ | 0.37
|Effect of dilutive securities Stock options |  |                                  |       |                                | 66    |                 |   |        |  |        |       |                 | 67    |  |   |     
|                                            |  |                                  |       |                                |       |                 |   |        |  |        |       |                 |       |  |   |     
|Diluted EPS                                 |  | $                                | 4     |                                | 5,996 |                 | $ | 0.00   |  | $      | 2,213 |                 | 5,993 |  | $ | 0.37
|                                            |  |                                 
|                                            |  | Three months ended June 30, 2006 |       | Six months ended June 30, 2006
|                                            |  | Income                           |       | Shares                         |       | Per-ShareAmount |   | Income |  | Shares |       | Per-ShareAmount
|Basic EPS                                   |  |                                  |       |                                |       |                 |   |        |  |        |       |                 |       |  |   |     
|Income available to common stockholders     |  | $                                | 2,274 |                                | 5,902 |                 | $ | 0.39   |  | $      | 4,766 |                 | 5,900 |  | $ | 0.81
|Effect of dilutive securities Stock options |  |                                  |       |                                | 35    |                 |   |        |  |        |       |                 | 31    |  |   |     
|                                            |  |                                  |       |                                |       |                 |   |        |  |        |       |                 |       |  |   |     
|Diluted EPS                                 |  | $                                | 2,274 |                                | 5,937 |                 | $ | 0.38   |  | $      | 4,766 |                 | 5,931 |  | $ | 0.80



6



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Note 3. Stock-Based Compensation

At June 30, 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 six months ended June 30, 2007 and 2006 on the date of grant using the Black-Scholes
option-pricing model.



|                                                                 |  |                                  |      |   |      |   |      |  
|---------------------------------------------------------------- |  | -------------------------------- | ---- | - | ---- | - | ---- | -
|                                                                 |  | For the six monthsended June 30, |     
|                                                                 |  | 2007                             |      |   | 2006 |  
|Expected Life In years                                           |  |                                  | 5    |   |      |   | 5    |  
|Expected Volatility                                              |  |                                  | 27   | % |      |   | 22   | %
|Risk-Free Interest Rate                                          |  |                                  | 5    | % |      |   | 5    | %
|Expected Dividend Yield                                          |  |                                  | 2    | % |      |   | 2    | %
|Weighted Average Fair Value of options Granted During the Period |  | $                                | 7.66 |   |      | $ | 4.02 |  

At June 30, 2007, there was approximately $267,000 of pre-tax, unrecognized compensation
costs related to share-based payments which is expected to be recognized over a weighted-average period of 2.0 years.

The following table represents stock
option activity for the three and six months ended June 30, 2007:



|                                         |  |                                  |  |                                |       |                                         |      |        |         |   |                              |   |                                         |  |     
|---------------------------------------- |  | -------------------------------- |  | ------------------------------ | ----- | --------------------------------------- | ---- | ------ | ------- | - | ---------------------------- | - | --------------------------------------- |  | ----
|                                         |  | Three Months Ended June 30, 2007 |  | Six Months Ended June 30, 2007
|                                         |  | Number                           |  | WeightedAverageExercisePrice   |       | WeightedAverageRemainingContractualLife |      | Number |         |   | WeightedAverageExercisePrice |   | WeightedAverageRemainingContractualLife
|                                         |  |                                  |  |                                |       | (years)                                 |      |        |         |   |                              |   | (years)                                
|Options outstanding, beginning of period |  | 242,316                          |  | $                              | 16.41 |                                         |      |        | 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                          |  |                                | 16.41 |                                         | 6.58 |        | 242,316 |   |                              |   | 16.41                                   |  | 6.58
|                                         |  |                                  |  |                                |       |                                         |      |        |         |   |                              |   |                                         |  |     
|Exercisable, end of period               |  | 159,116                          |  | $                              | 15.07 |                                         | 5.33 |        | 159,116 |   |                              | $ | 15.07                                   |  | 5.33
|                                         |  |                                  |  |                                |       |                                         |      |        |         |   |                              |   |                                         |  |     



7



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Shares available for future stock option grants to employees and directors under existing plans totaled
391,576 at June 30, 2007. At June 30, 2007 the aggregate intrinsic value of options outstanding was $2,062,000 and the aggregate intrinsic value of options exercisable was $1,568,000. Total intrinsic value of options exercised was $95,000
for the six months ended June 30, 2007. There were no options exercised during the three months ended June 30, 2007.

Note 4. Recently Adopted
Accounting Standards

In September 2006, the Financial Accounting Standards Board (FASB) 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 elected to early adopt the Statement. Early adoption required 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 permits 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



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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 elected to early adopt the Statement. Early adoption required 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.

During the second quarter of 2007, the securities initially selected for fair value measurement under SFAS 159 were sold under a restructuring strategy
and reinvested in significantly higher yielding securities. The securities that were purchased as a result of the restructuring strategy are also being accounted for as trading securities under the fair value measurement option as prescribed by SFAS
159 in future periods. At each reporting period, 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 June 30, 2007 of trading securities held at fair value and the total of realized losses due to changes in the fair value of such securities as well as the fair value of securities available for sale and the total of unrealized
gains due to changes in fair value of such securities for the period ended June 30, 2007.



|                              |  |                              |         |                                                                                                 |   |        |                                                                                       |  |                                                                                                 |    |  |                                                                                       |        |   |  |   |    
|----------------------------- |  | ---------------------------- | ------- | ----------------------------------------------------------------------------------------------- | - | ------ | ------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- | -- |  | ------------------------------------------------------------------------------------- | ------ | - |  | - | ---
|($s in thousands             |  | Fair Value atJune 30, 2007 * |         | Changes in FMV forthe 3 month periodending June 30, 2007,recognized asgains/(losses) inearnings |   |        | Unrealizedgains/(losses) duechanges in FMV forthe 3 month periodending June 30, 2007. |  | Changes in FMV forthe 6 month periodending June 30, 2007,recognized
asgains/(losses) inearnings |    |  | Unrealizedgains/(losses) duechanges in FMV forthe 6 month
periodending June 30, 2007.
|Available-for-sale securities |  | $                            | 15,003  |                                                                                                 | $ |       |                                                                                       |  | $                                                                                               | 47 |  | $                                                                                     |       |   |  | $ | 131
|Trading securities            |  | $                            | 151,684 |                                                                                                 | $ | (2,112 | )*                                                                                    |  | $                                                                                               |   |  | $                                                                                     | (1,510 | ) |  | $ |   



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

In June
2006, the Financial Accounting Standards Board 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.



9



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

GENERAL

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

Managements discussion and analysis includes certain forward-looking statements addressing, among other things, BancTrusts prospects for earnings, asset growth and net interest margin. Forward-looking statements are accompanied
by, and identified with, such terms as anticipates, believes, expects, intends, and similar phrases. Managements expectations for BancTrusts future necessarily involve a number of
uncertainties, assumptions and estimates. Factors that could cause actual results to differ from the expectations expressed herein include 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 BancTrust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 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 BancTrust, 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.



10



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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, 2007. 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.



11



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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 June 30, 2007, cash and cash equivalents totaled $56,527,000, 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 June 30, 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 $34,019,000 to $665,819,000 at June 30, 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 June 30, 2007 to December 31, 2006.



|                           |  |                |         |                  |   |         |  |   |        |  
|-------------------------- |  | -------------- | ------- | ---------------- | - | ------- |  | - | ------ | -
|                           |  | June 30,2007   |         | December 31,2006 |   | Change  | 
|                           |  | (In thousands) |        
|Commercial and industrial  |  | $              | 159,359 |                  | $ | 152,407 |  | $ | 6,952  |  
|Real estate - mortgage     |  |                | 304,575 |                  |   | 294,128 |  |   | 10,447 |  
|Real estate - construction |  |                | 165,664 |                  |   | 145,693 |  |   | 19,971 |  
|Personal                   |  |                | 44,787  |                  |   | 46,332  |  |   | (1,545 | )
|Overdrafts and credit line |  |                | 1,079   |                  |   | 2,225   |  |   | (1,146 | )
|                           |  |                |         |                  |   |         |  |   |        |  
|Total loans                |  | $              | 675,464 |                  | $ | 640,785 |  | $ | 34,679 |  
|                           |  |                |         |                  |   |         |  |   |        |  
|Less:                      |  |                |         |                  |   |         |  |   |        |  
|Unearned income            |  | $              | 9,645   |                  | $ | 8,986   |  | $ | 659    |  
|Allowance for loan losses  |  |                | 7,160   |                  |   | 6,398   |  |   | 762    |  
|                           |  |                |         |                  |   |         |  |   |        |  
|Total loans, net           |  | $              | 658,659 |                  | $ | 625,401 |  | $ | 33,258 |  
|                           |  |                |         |                  |   |         |  |   |        |  

The largest increase was in real estate loans which increased $30,418,000 to $470,239,000 at
June 30, 2007 from $439,821,000 at December 31, 2006. Specifically, real estate mortgage loans increased $10,447,000 from $294,128,000 at December 31, 2006 to $304,575,000 at June 30, 2007 and construction loans increased
$19,971,000 to $165,664,000 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 $6,952,000 from $152,407,000 at December 31, 2006, to $159,359,000 at June 30, 2007.

Personal loans declined from $46,332,000 at December 31, 2006 to $44,787,000 at June 30, 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 levels of denials of personal loan applications have contributed to generally lower personal loan
portfolio totals over time.



12



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Allowance for Loan Losses

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

Management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 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. 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 June 30,
2007, BancTrusts allowance for loan losses had a balance of $7,160,000, compared to $6,398,000 at December 31, 2006. The ratio of the allowance to total loans, net of the unearned discount, was 1.08% and 1.01% at June 30, 2007 and
December 31, 2006, respectively. As a percentage of total loans, net of the unearned discount, non-accruing loans increased to 1.12% at June 30, 2007, compared to 0.67% at December 31, 2006. The coverage of the allowance to
non-accruing loans was 0.96X and 1.52X at June 30, 2007 and December 31, 2006, respectively. At June 30, 2007, management had identified $28,809,000 of potential problem loans compared to $22,276,000 at December 31, 2006. At each
of June 30, 2007 and December 31, 2006, potential problem loans included impaired loans of $22,417,000 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 increased to $7,472,000 at June 30, 2007 from $4,201,000 at December 31, 2006.

Subsequent to June 30, 2007, a loan identified by management as impaired and included in the totals for potential problem loans and impaired loans
at June 30, 2007 was paid down in the amount of $2,076,000. This pay down represents a 7.2% reduction in potential problem loans and a 9.3% reduction to impaired loans.

The following table indicates the loan charge off and recovery activity of BancTrust for the three and six months ended June 30, 2007 and 2006.



13



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|                                           |  |                             |      |   |                           |   |      |      |  |   |      |   |  |   |      |  
|------------------------------------------ |  | --------------------------- | ---- | - | ------------------------- | - | ---- | ---- |  | - | ---- | - |  | - | ---- | -
|                                           |  | Three Months Ended June 30, |      |   | Six Months Ended June 30, |  
|                                           |  | 2007                        |      |   | 2006                      |   |      | 2007 |  |   | 2006 |  
|                                           |  | (In Thousands)              |      |   | (In Thousands)            |  
|Loans charged-off                          |  | $                           | 158  |   |                           | $ | 265  |      |  | $ | 265  |   |  | $ | 441  |  
|Recoveries of loans previously charged off |  | $                           | (124 | ) |                           |   | (192 | )    |  | $ | (264 | ) |  |   | (464 | )
|                                           |  |                             |      |   |                           |   |      |      |  |   |      |   |  |   |      |  
|Net loans (recovered) charged-off          |  | $                           | 34   |   |                           | $ | 73   |      |  | $ | 1    |   |  | $ | (23  | )
|                                           |  |                             |      |   |                           |   |      |      |  |   |      |   |  |   |      |  

Securities

At January 1, 2007, BancTrust adopted SFAS 159, the provisions of which were applied to its investment securities portfolio (See Notes to the Unaudited Condensed Consolidated Financial
Statements). At June 30, 2007, investment securities totaled $166,687,000 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 June 30, 2007 total are securities totaling $151,684,000 held as
trading securities accounted for at fair value under the provisions of SFAS 159. BancTrust realized losses of $2,112,000 and $1,510,000 in earnings during the three and six months ended June 30, 2007, respectively, 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 available-for-sale portfolio had net unrealized gains (net of tax) of $167,000 at June 30, 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 retained earnings of $2,676,000 for securities held at fair value in accordance with the adoption of SFAS 159.

During the second quarter of 2007, the securities initially selected for fair value measurement under SFAS 159 were sold under a restructuring strategy
and reinvested in significantly higher yielding securities. BancTrust sold approximately $155,026,000 in trading securities and used the proceeds from the sale to purchase approximately $155,297,000 of new securities. These securities, purchased as
a result of the restructuring strategy, are also being accounted for as trading securities under the fair value measurement option as prescribed by SFAS 159. The restructuring allowed BancTrust to reinvest in higher yielding securities. The average
yield of BancTrusts portfolio prior to and after the restructuring was 3.96% and 5.32%, respectively.

At June 30, 2007,
BancTrust had pledged to the State Treasurer for the State of Alabama and other parties $144,902,000, or approximately 87% 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.



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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 $699,000 at
June 30, 2007 and $1,034,000 at December 31, 2006.

Deposits

Customer deposits are BancTrusts primary funding source. BancTrust held $793,398,000 in total deposits at June 30, 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 $24,697,000.

Non-interest bearing demand
deposits increased $2,884,000 from December 31, 2006 to $87,612,000 at June 30, 2007. Interest bearing transaction accounts, including negotiable order withdrawal (NOW) accounts, insured money market accounts (IMMA)
and savings accounts, totaled $309,110,000 and $311,274,000 at June 30, 2007 and December 31, 2006, respectively.

Time deposits,
at June 30, 2007 totaled $396,676,000, an increase of $23,977,000 from the December 31, 2006 total of $372,699,000. Included in time deposits at June 30, 2007 was $60,656,000 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.

The following table indicates each of the major deposit categories of BancTrust,
and the change in volume of each when comparing June 30, 2007 to December 31, 2006.



|                           |  |                |         |                   |   |         |  |   |        |  
|-------------------------- |  | -------------- | ------- | ----------------- | - | ------- |  | - | ------ | -
|                           |  | June 30, 2007  |         | December 31, 2006 |   | Change  | 
|                           |  | (In thousands) |        
|Demand-noninterest bearing |  | $              | 87,612  |                   | $ | 84,728  |  | $ | 2,884  |  
|Demand-interest bearing    |  |                | 276,137 |                   |   | 277,793 |  |   | (1,656 | )
|Savings                    |  |                | 32,973  |                   |   | 33,481  |  |   | (508   | )
|Time                       |  |                | 396,676 |                   |   | 372,699 |  |   | 23,977 |  
|                           |  |                |         |                   |   |         |  |   |        |  
|Total deposits             |  | $              | 793,398 |                   | $ | 768,701 |  | $ | 24,697 |  
|                           |  |                |         |                   |   |         |  |   |        |  

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.



15



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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 June 30, 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 $46,374,000 at June 30, 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 June 30, 2007, BancTrust had total
advances from FHLB of $45,554,000. When combined with approximately $18,482,000 of guarantees on commercial letters of credit provided by the FHLB, BancTrust had approximately $64,036,000 of active credit facilities at the FHLB on June 30,
2007. In addition to the aforementioned outstanding credit facilities, BancTrust had approximately $23,137,000 of unused credit facilities available at the FHLB on June 30, 2007. BancTrust had unused federal funds lines of credit with
correspondent financial institutions of approximately $53,000,000 at June 30, 2007.

Stockholders Equity and Regulatory Capital

At June 30, 2007, stockholders equity totaled $87,994,000, 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
June 30, 2007.



|                                             |  |                                                                |         |  |              |   |  |   |         |  |       |  
|-------------------------------------------- |  | -------------------------------------------------------------- | ------- |  | ------------ | - |  | - | ------- |  | ----- | -
|                                             |  | Risk-Based Capital Ratios & Leverage RatiosAs of June 30, 2007 |        
|                                             |  | Dollars in Thousands                                           |        
|                                             |  | BancTrust                                                      |         |  | Peoples Bank |  
|RISK-BASED CAPITAL RATIOS                    |  |                                                                |         |  |              |   |  |   |         |  |       |  
|Tier 1 Capital                               |  | $                                                              | 83,001  |  | 11.12        | % |  | $ | 77,430  |  | 10.40 | %
|Tier 1 Capital  Minimum Required            |  |                                                                | 29,855  |  | 4.00         | % |  |   | 29,777  |  | 4.00  | %
|                                             |  |                                                                |         |  |              |   |  |   |         |  |       |  
|Excess                                       |  | $                                                              | 53,146  |  | 7.12         | % |  | $ | 47,653  |  | 6.40  | %
|Total Capital                                |  | $                                                              | 90,161  |  | 12.08        | % |  | $ | 84,590  |  | 11.36 | %
|Total Capital  Minimum Required             |  |                                                                | 59,710  |  | 8.00         | % |  |   | 59,555  |  | 8.00  | %
|                                             |  |                                                                |         |  |              |   |  |   |         |  |       |  
|Excess                                       |  | $                                                              | 30,451  |  | 4.08         | % |  | $ | 25,035  |  | 3.36  | %
|Net risk-weighted assets                     |  | $                                                              | 746,379 |  |              |   |  | $ | 744,435 |  |       |  
|LEVERAGE RATIOS                              |  |                                                                |         |  |              |   |  |   |         |  |       |  
|Total Tier 1 Capital                         |  | $                                                              | 83,001  |  | 9.04         | % |  | $ | 77,430  |  | 8.49  | %
|Minimum Leverage Requirement                 |  |                                                                | 36,728  |  | 4.00         | % |  |   | 36,465  |  | 4.00  | %
|                                             |  |                                                                |         |  |              |   |  |   |         |  |       |  
|Excess                                       |  | $                                                              | 46,273  |  | 5.04         | % |  | $ | 40,965  |  | 4.49  | %
|Average Total Assets, Net of all intangibles |  | $                                                              | 918,195 |  |              |   |  | $ | 911,625 |  |       |  



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Interest Rate Risk

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

The process of measuring, compiling and analyzing the maturity and repricing dynamics of interest sensitive assets and liabilities is referred to as asset liability management. 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.

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 $120,023,000 and $108,060,000 in commitments to extend credit at June 30, 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 $21,031,000 and $21,406,000 in irrevocable standby letters of credit at June 30, 2007 and December 31, 2006, respectively.



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RESULTS OF OPERATIONS

Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 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 June 30, 2007 (the 2007 quarter) BancTrust earned $15,242,000 of interest income on its interest earning assets, compared to $13,035,000 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 7.12% on average volume of $859,074,000 and 6.69% on
average volume of $781,214,000 in the 2006 quarter.

Interest and fees on loans totaled $12,618,000 in the 2007 quarter and $10,861,000 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 7.75% on an average balance of $652,683,000, compared to an
average annual yield of 7.73% on an average balance of $563,866,000 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 increased
to $2,196,000 in the 2007 quarter from $2,055,000 in the 2006 quarter. The average balance of the investment securities portfolio declined to $176,609,000 in the 2007 quarter from $209,583,000 in the 2006 quarter. The increase in the average annual
yield to 4.99% in the 2007 quarter from 3.93% in the 2006 quarter was the primary contributing factor to the higher interest income earned from it, given the decrease in average balance of the investment securities portfolio. 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 and the portfolio restructuring in April 2007 contributed to
the higher average yield between the two quarters.

Interest income earned on federal funds sold and interest bearing deposits in banks
totaled $428,000 in the 2007 quarter and $119,000 in the 2006 quarter. In the 2007 quarter, federal funds and interest bearing deposits in banks earned an average annual yield of 5.77% on average volume of $29,781,000 compared to an average annual
yield of 6.12% on average volume of $7,766,000 in the 2006 quarter.

Interest expense on deposits increased to $6,664,000 in the 2007
quarter from $5,195,000 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 3.85%, compared to 3.31% in the 2006 quarter. The average balance of interest bearing deposits in the 2007 quarter was $694,751,000, compared to $628,646,000 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 $572,000 in
the 2007 quarter from $543,000 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 4.83% in the 2007 quarter and 5.32% in the 2006 quarter. The average balance of borrowed funds in the 2007 quarter totaled $47,358,000, compared to $40,957,000 in the 2006 quarter.

The resulting net interest income for the 2007 quarter totaled $8,006,000 compared to $7,297,000 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 3.74%, compared to 3.75% in the 2006 quarter.

Provision for loan losses in the 2007 quarter totaled $517,000 compared to ($351,000) 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 quarter, the provision for loan losses represented adjustments that lowered the allowance for loan losses account, causing the



18



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($351,000) provision for loan losses amount to have an increasing effect on income. In the 2007 quarter, BancTrust determined an increase in its allowance
for loan losses was warranted, and therefore realized $517,000 of provision for loan losses, which had a decreasing effect on income.

Noninterest income decreased in the 2007 quarter to $525,000, compared to $2,266,000 in the 2006 quarter. Included in the 2007 quarter was $2,112,000 of valuation losses on trading securities, which were accounted for under the provisions
of SFAS 159 and primarily accounted for the decrease in noninterest income between the two periods.

Noninterest expense increased
approximately 22.6%, from $6,499,000 in the 2006 quarter to $7,966,000 in the 2007 quarter. Significant increases in salary and benefits expenses, driven by market expansion efforts, and merger related expenditures (see
Item 5Other Information) were the primary contributing factors to the overall increase in noninterest expense between the two quarters. Merger related expenditures totaled $912,000 during the 2007 quarter.

Provision for income taxes in the 2007 quarter totaled $44,000 compared to $1,141,000 in the 2006 quarter. The effective income tax rate increased to
91.7% in the 2007 quarter from 33.4% in the 2006 quarter. The increase in the effective tax rate was related to adjustments to deferred income taxes recognized in the 2007 quarter.

Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006.

For the six
months ended June 30, 2007 (YTD 2007) BancTrust earned $29,722,000 of interest income on its interest earning assets, compared to $24,733,000 for the same period in 2006 (YTD 2006). 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 YTD 2007, interest earning assets yielded 7.04% on average volume of $851,186,000, and 6.55% on average volume of $762,014,000
in YTD 2006.

Interest and fees on loans totaled $24,829,000 in YTD 2007 and $20,259,000 in YTD 2006. Both the average annual yield earned
on the loan portfolio and its average balance increased between the two periods. In YTD 2007, loans yielded an average of 7.80% on an average balance of $642,277,000, compared to an average annual yield of 7.61% on an average balance of $536,604,000
in YTD 2006. 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 $4,093,000 in YTD 2007 from $4,182,000 in YTD 2006. The average balance of
the investment securities portfolio declined to $181,181,000 in YTD 2007 from $215,420,000 in YTD 2006. 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 4.56% in YTD 2007 from 3.91% in YTD 2006. 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 periods. The higher yield is a result of the portfolio restructuring that took place during the quarter.

Interest income earned on federal funds sold and interest bearing deposits in banks totaled $800,000 in YTD 2007 and $293,000 in YTD 2006. In YTD 2007,
federal funds and interest bearing deposits in banks earned an average annual yield of 5.82% on average volume of $27,728,000 compared to an average annual yield of 5.91% on average volume of $9,990,000 in YTD 2006. Increases in BancTrusts
deposit volumes as well as lower investment volumes contributed to higher average balances.

Interest expense on deposits increased to
$13,093,000 in YTD 2007 from $9,508,000 in YTD 2006. Increases in both average balances and the average annual rates of interest paid on interest bearing deposits were contributing factors. In YTD 2007, the average annual cost of interest bearing
deposits was 3.83%, compared to 3.14% in YTD 2006. The average balance of interest bearing deposits in YTD 2007 was $689,525,000, compared to $611,468,000 in YTD 2006. Higher market interest rates and loan demand contributed to the increased cost of
interest bearing deposits between the two periods. YTD 2007, BancTrust held approximately $60,558,000 of brokered time deposits compared to approximately $30,000,000 for the same period of 2006, which contributed to the aforementioned increases in
both the average balance of interest bearing deposits and their average annual cost.



19



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Interest expense on borrowed funds increased to $1,152,000 in YTD 2007 from $1,045,000 in YTD 2006. The
primary factor in this increase was that the average balance of borrowed funds increased from $40,230,000 in YTD 2006 to $47,847,000 in YTD 2007. The average rate of interest paid on borrowed funds was 4.85% in YTD 2007 and 5.24% in YTD 2006.

The resulting net interest income for YTD 2007 totaled $15,477,000 compared to $14,181,000 for YTD 2006. 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 YTD 2007 was 3.67%, compared to 3.75% in YTD 2006.

Provision for loan losses generally has the effect of decreasing income, as it represents additions to the allowance for loan losses deemed necessary to
adequately provide for potential losses within BancTrusts loan portfolio (see Allowance for Loan Losses). However, in YTD 2006, BancTrust realized credits in its provision for loan losses account, as periodic analyses of its
loan portfolio indicated that reductions to the allowance for loan losses account were warranted. BancTrust realized a credit provision for loan losses in YTD 2006 in the amount of $893,000. YTD 2007, BancTrusts analysis indicated a need to
increase the allowance for loan losses and recognized $761,000 in provision expense.

Noninterest income decreased in YTD 2007 to
$3,659,000, compared to $4,668,000 in YTD 2006. The primary factor in the decrease was the impact of the adoption of FAS 159 in 2007. Market value losses on trading securities accounted for under the provisions of FAS 159, totaled $1,510,000 in YTD
2007.

Noninterest expense increased approximately 20.1%, from $12,623,000 in YTD 2006 to $15,165,000 in YTD 2007. Increases in personnel
expenses as well as merger related expenses and other stockholder related expenses were the primary drivers of the increase between periods. BancTrust incurred merger related expenses and other stockholder expenses totaling $912,000 and $208,000,
respectively, in YTD 2007.

The provision for income taxes in YTD 2007 totaled $997,000 compared to $2,353,000 in YTD 2006. The effective
income tax rate decreased to 31.06% in YTD 2007 from 33.05% in YTD 2006.

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 June 30, 2007,



20



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

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



|Item 5. | Other Information
|------- | -----------------

On May 21, 2007, BancTrust
and BancTrust Financial Group, Inc. (BTFG) entered into a definitive merger agreement (the Agreement) providing for the merger of BancTrust into BTFG, with BTFG as the surviving corporation. Pursuant to the agreement, each
shareholder of BancTrust common stock will receive aggregate consideration of $25.50 per share of BancTrust stock to consist of $6.375 cash and BTFG stock. The cash price is a fixed amount while the amount of stock issued fluctuates within certain
dollars based on the 10-day average closing price of BTFG common stock shortly before the closing of the transaction. The merger is expected to close in the third quarter of 2007 and is subject to shareholder and regulatory approvals. In connection
with the agreement, options to purchase stock of BancTrust available and unexercised prior to the merger will immediately become vested and will be cancelled and converted into the right to receive a cash payment equal to the difference between the
dollar value of the merger consideration and the exercise price of the stock option. See also, Current Report on Form 8-K, dated May 23, 2007.

PART II  OTHER INFORMATION



|Item 6. | Exhibits
|------- | --------



|                 |  |                                                                                                                                                                                                                                                                     
|---------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                 | 
|Exhibit No. 2.1  |  | Agreement and Plan of Merger, dated as of May 21, 2007, by and between The Peoples BancTrust Company, Inc. and BancTrust Financial Group, Inc. - Incorporated herein by reference to Exhibit
2.1 to the Registrants Current Report on Form 8-K, dated May 23, 2007.
|                 | 
|Exhibit No. 2.2  |  | Form of Support  BTFG directors - Incorporated herein by reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K, dated May 23, 2007.                                                                                                              
|                 | 
|Exhibit No. 2.3  |  | Form of Support  PBTC directors - Incorporated herein by reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K, dated May 23, 2007.                                                                                                              
|                 | 
|Exhibit No. 2.4  |  | Form of Support  Stockholders for Progress - Incorporated herein by reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K, dated May 23, 2007.                                                                                                   
|                 | 
|Exhibit No. 31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes  Oxley Act of 2002                                                                                                                                                                
|                 | 
|Exhibit No. 31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes  Oxley Act of 2002                                                                                                                                                                
|                 | 
|Exhibit No. 32.1 |  | Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                          



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                   |  |  |  |                                      
|------------------ |  |  |  | -------------------------------------
|                   |  |  |  | The Peoples BancTrust Company, Inc.  
|                   |  | 
|Date: Aug 08, 2007 |  |  |  | /s/ Don J. Giardina                  
|                   |  |  |  | Don J. Giardina                      
|                   |  |  |  | President and Chief Executive Officer
|                   |  | 
|Date: Aug 08, 2007 |  |  |  | /s/ Thomas P. Wilbourne              
|                   |  |  |  | Thomas P. Wilbourne                  
|                   |  |  |  | Senior Vice President and            
|                   |  |  |  | Chief Financial Officer              
|                   |  | 
|Date: Aug 08, 2007 |  |  |  | /s/ Jeffery N. Smith                 
|                   |  |  |  | Jeffery N. Smith                     
|                   |  |  |  | Vice President and Controller        
|                   |  |  |  | (Principal Accounting Officer)       



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