**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      DC 20549**

**FORM      10-Q**

| x      | Quarterly                  report under Section 13 or 15(d) of the Securities Exchange Act                  of                  1934 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                 |
|   | For                  the quarterly period ended September                  30, 2007                                                  |

| o      | Transition                  report under Section 13 or 15(d) of the Exchange Act                     |
|--------|------------------------------------------------------------------------------------------------------|
|   |                                                                                                 |
|   | For                  the transition period from _______________ to                  ________________ |

**PEOPLES      BANCORP, INC.**

| Maryland                                                                |   | 52-2027776                           |
|-------------------------------------------------------------------------|--------|--------------------------------------|
| (State                  or Other Jurisdiction of                        |   | (I.R.S.                  Employer    |
| Incorporation                  or Organization)                         |   | Identification                  No.) |
|                                                                    |   |                                 |
| P.O.                  Box 210, 100 Spring Avenue, Chestertown, Maryland |   | 21620                                |
| (Address                  of Principal Executive Offices)               |   | (Zip                  Code)          |
|                                                                    |   |                                 |

| (410)                  778-3500                                                            |
|--------------------------------------------------------------------------------------------|
| Registrant’s                  Telephone Number, Including Area                  Code |

**APPLICABLE      ONLY TO CORPORATE ISSUERS**

----

**PEOPLES      BANCORP, INC.**

**FORM      10-Q**

**INDEX**

|                                                                   |                                                                                                                                                                 | Page   |
|------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                   |                                                                                                                                                                 |   |
| Part                  I –                  Financial Information |                                                                                                                                                                 |
|                                                                   |                                                                                                                                                                 |   |
| Item                  1.                                               | Financial                  Statements                                                                                                                                | 3      |
|                                                                   |                                                                                                                                                                 |   |
|                                                                   | Consolidated                  Balance Sheets at September 30, 2007 (unaudited) and December 31,                  2006                                                | 3      |
|                                                                   |                                                                                                                                                                 |   |
|                                                                   | Consolidated                  Statements of Income (unaudited) for three and nine months ended                  September                  30, 2007 and 2006         | 4      |
|                                                                   |                                                                                                                                                                 |   |
|                                                                   | Consolidated                  Statements of Changes in Stockholders’ Equity (unaudited) for the nine                  months ended September 30, 2007 and 2006 | 5      |
|                                                                   |                                                                                                                                                                 |   |
|                                                                   | Consolidated                  Statements of Cash Flows (unaudited) for nine months ended September                  30,                  2007 and 2006               | 6      |
|                                                                   |                                                                                                                                                                 |   |
|                                                                   | Notes                  to Financial Statements (unaudited)                                                                                                           | 8      |
|                                                                   |                                                                                                                                                                 |   |
| Item                  2.                                               | Management’s                  Discussion and Analysis of Financial Condition and Results of                  Operations                                        | 11     |
|                                                                   |                                                                                                                                                                 |   |
| Item                  3.                                               | Quantitative                  and Qualitative Disclosures About Market Risk                                                                                          | 21     |
| Item                  4.                                               | Controls                  and Procedures                                                                                                                             | 21     |
|                                                                   |                                                                                                                                                                 |   |
| Part                  II – Other Information                     |                                                                                                                                                                 |
|                                                                   |                                                                                                                                                                 |   |
| Item                  1.                                               | Legal                  Proceedings                                                                                                                                   | 22     |
| Item                  1A.                                              | Risk                  Factors                                                                                                                                        | 22     |
| Item                  2.                                               | Unregistered                  Sales of Equity Securities and Use of Proceeds                                                                                         | 22     |
| Item                  3.                                               | Defaults                  Upon Senior Securities                                                                                                                     | 22     |
| Item                  4.                                               | Submission                  of Matters to a Vote of Security Holders                                                                                                 | 22     |
| Item                  5.                                               | Other                  Information                                                                                                                                   | 22     |
| Item                  6.                                               | Exhibits                                                                                                                                                             | 22     |
|                                                                   |                                                                                                                                                                 |   |
| Signatures                                                             |                                                                                                                                                                 | 22     |
| Exhibit                  Index                                         |                                                                                                                                                                 | 23     |

----

**PART      I - FINANCIAL INFORMATION**

**Item      1. **
**Financial      Statements.**

**PEOPLES        BANCORP, INC. AND SUBSIDIARIES**

**Consolidated        Balance Sheets**

|                                                                                                                                                                                                                                                        |   | September                  30, |        | December                  31, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|-------------|-------------------------------|--------|
|                                                                                                                                                                                                                                                        |   | 2007                           |        | 2006                          |   |
|                                                                                                                                                                                                                                                        |   | (unaudited)                    |        |                          |   |
| **ASSETS**                                                                                                                                                                                                                                                  |   |                           |             |                          |   |   |   |
|                                                                                                                                                                                                                                                        |   |                           |        |                          |   |   |   |
| Cash                  and due from banks                                                                                                                                                                                                                    |   | $                              | 4,389,449   |                          | $      | 5,990,866 |   |
| Federal                  funds sold                                                                                                                                                                                                                         |   |                           | 3,538,143   |                          |   | 1,474,544 |   |
| Securities                  available for sale                                                                                                                                                                                                              |   |                           | 6,031,952   |                          |   | 7,937,008 |   |
| Securities                  held to maturity (approximate fair value of $12,048,365 and                  $10,887,433)                                                                                                                                       |   |                           | 11,990,188  |                          |   | 10,928,766 |   |
| Federal                  Home Loan Bank stock, at cost                                                                                                                                                                                                      |   |                           | 2,897,600   |                          |   | 2,533,100 |   |
| Loans,                  less allowance for loan losses of $1,803,964 and                  $1,860,283                                                                                                                                                        |   |                           | 215,812,135 |                          |   | 206,077,157 |   |
| Premises                  and equipment                                                                                                                                                                                                                     |   |                           | 5,859,107   |                          |   | 3,991,077 |   |
| Goodwill                  and intangible assets                                                                                                                                                                                                             |   |                           | 791,682     |                          |   | - |   |
| Accrued                  interest receivable                                                                                                                                                                                                                |   |                           | 1,869,618   |                          |   | 1,445,833 |   |
| Deferred                  income taxes                                                                                                                                                                                                                      |   |                           | 899,935     |                          |   | 918,012 |   |
| Other                  assets                                                                                                                                                                                                                               |   |                           | 1,073,649   |                          |   | 1,008,419 |   |
| **Total                  Assets**                                                                                                                                                                                                                           |   | $                              | 255,153,458 |                          | $      | 242,304,782 |   |
|                                                                                                                                                                                                                                                        |   |                           |        |                          |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                             |   |                           |        |                          |   |   |   |
|                                                                                                                                                                                                                                                        |   |                           |        |                          |   |   |   |
| Deposits                                                                                                                                                                                                                                                    |   |                           |        |                          |   |   |   |
| Non-interest-bearing                                                                                                                                                                                                                                        |   | $                              | 31,878,001  |                          | $      | 29,900,976 |   |
| Interest-bearing                                                                                                                                                                                                                                            |   |                           | 130,750,730 |                          |   | 125,284,608 |   |
|                                                                                                                                                                                                                                                        |   |                           | 162,628,731 |                          |   | 155,185,584 |   |
| Securities                  sold under repurchase agreements and federal funds                  purchased                                                                                                                                                   |   |                           | 9,187,113   |                          |   | 15,573,593 |   |
| Federal                  Home Loan Bank advances                                                                                                                                                                                                            |   |                           | 52,700,000  |                          |   | 43,700,000 |   |
| Other                  borrowings                                                                                                                                                                                                                           |   |                           | 271,984     |                          |   | - |   |
| Accrued                  interest payable                                                                                                                                                                                                                   |   |                           | 535,318     |                          |   | 469,747 |   |
| Other                  liabilities                                                                                                                                                                                                                          |   |                           | 2,141,630   |                          |   | 1,768,702 |   |
|                                                                                                                                                                                                                                                        |   |                           |        |                          |   |   |   |
|                                                                                                                                                                                                                                                        |   |                           | 227,464,776 |                          |   | 216,697,626 |   |
|                                                                                                                                                                                                                                                        |   |                           |        |                          |   |   |   |
| Stockholders'                  equity                                                                                                                                                                                                                       |   |                           |        |                          |   |   |   |
| Common                  stock, par value $10 per share, 1,000,000 shares authorized; issued                  and                  outstanding 788,512 shares at September 30, 2007 and 789,012 shares                  at                  December 31,2006 |   |                           | 7,855,120   |                          |   | 7,890,120 |   |
| Additional                  paid in capital                                                                                                                                                                                                                 |   |                           | 2,920,866   |                          |   | 2,920,866 |   |
| Retained                  earnings                                                                                                                                                                                                                          |   |                           | 17,720,798  |                          |   | 15,632,965 |   |
|                                                                                                                                                                                                                                                        |   |                           | 28,496,784  |                          |   | 26,443,951 |   |
| Accumulated                  other comprehensive income (loss)                                                                                                                                                                                              |   |                           |        |                          |   |   |   |
| Unrealized                  gain (loss) on available for sales securities                                                                                                                                                                                   |   |                           | 12,432      |                          |   | (16,261 | ) |
| Unfunded                  liability of defined benefit plan                                                                                                                                                                                                 |   |                           | (820,534    | )                             |   | (820,534 | ) |
|                                                                                                                                                                                                                                                        |   |                           | 27,688,682  |                          |   | 25,607,156 |   |
|                                                                                                                                                                                                                                                        |   |                           |        |                          |   |   |   |
| **Total                  Liabilities and Stockholders’ Equity**                                                                                                                                                                                       |   | $                              | 255,153,458 |                          | $      | 242,304,782 |   |

----

**PEOPLES        BANCORP, INC. AND SUBSIDIARIES**

**Consolidated          Statements of Income (unaudited)**

|                                                                        |   | For                  the three months ended |      | For                  the nine months ended |   |
|-----------------------------------------------------------------------------|--------|---------------------------------------------|-----------|--------------------------------------------|--------|
|                                                                        |   | September                  30               |      | September                  30              |   |
|                                                                        |   | 2007                                        |      | 2006                                       |   | 2007 |   | 2006 |   |
|                                                                             |   |                                        |      |                                       |   |   |   |   |   |
| Interest                  and dividend revenue                              |   |                                        |      |                                       |   |   |   |   |   |   |   |   |   |
| Loans,                  including fees                                      |   | $                                           | 4,127,285 |                                       | $      | 3,816,187 |   | $ | 12,139,387 |   | $ | 11,168,900 |   |
| Government                  Agencies securities                             |   |                                        | 215,022   |                                       |   | 215,743 |   |   | 651,940 |   |   | 627,709 |   |
| Deposits                  in other banks                                    |   |                                        | 1,730     |                                       |   | 376 |   |   | 8,022 |   |   | 2,328 |   |
| Federal                  funds sold                                         |   |                                        | 46,840    |                                       |   | 25,347 |   |   | 94,161 |   |   | 74,130 |   |
| Equity                  securities                                          |   |                                        | 42,878    |                                       |   | 35,366 |   |   | 120,812 |   |   | 93,748 |   |
| Total                  interest and dividend revenue                        |   |                                        | 4,433,755 |                                       |   | 4,093,019 |   |   | 13,014,322 |   |   | 11,966,815 |   |
| Interest                  Expense                                           |   |                                        |      |                                       |   |   |   |   |   |   |   |   |   |
| Deposits                                                                    |   |                                        | 984,257   |                                       |   | 827,718 |   |   | 2,785,282 |   |   | 2,297,530 |   |
| Borrowed                  funds                                             |   |                                        | 734,953   |                                       |   | 609,819 |   |   | 2,136,048 |   |   | 1,769,955 |   |
| Total                  interest expense                                     |   |                                        | 1,719,210 |                                       |   | 1,437,537 |   |   | 4,921,330 |   |   | 4,067,485 |   |
|                                                                        |   |                                        |      |                                       |   |   |   |   |   |   |   |   |   |
| Net                  interest income                                        |   |                                        | 2,714,545 |                                       |   | 2,655,482 |   |   | 8,092,992 |   |   | 7,899,330 |   |
|                                                                        |   |                                        |      |                                       |   |   |   |   |   |   |   |   |   |
| Provision                  for loan losses                                  |   |                                        | 10,000    |                                       |   | 0 |   |   | 40,000 |   |   | 240,000 |   |
| Net                    interest income after provision for loan losses |   |                                        | 2,704,545 |                                       |   | 2,655,482 |   |   | 8,052,992 |   |   | 7,659,330 |   |
| Noninterest                  revenue                                        |   |                                        |      |                                       |   |   |   |   |   |   |   |   |   |
| Service                  charges on deposit accounts                        |   |                                        | 264,290   |                                       |   | 219,826 |   |   | 737,193 |   |   | 646,529 |   |
| Insurance                  commissions                                      |   |                                        | 244,445   |                                       |   | 0 |   |   | 798,745 |   |   | 0 |   |
| Other                  noninterest revenue                                  |   |                                        | 68.359    |                                       |   | 59,780 |   |   | 233,054 |   |   | 232,635 |   |
| Total                  noninterest revenue                                  |   |                                        | 577,094   |                                       |   | 279,606 |   |   | 1,768,992 |   |   | 879,164 |   |
| Noninterest                  expenses                                       |   |                                        |      |                                       |   |   |   |   |   |   |   |   |   |
| Salaries                  and employee benefits                             |   |                                        | 987,126   |                                       |   | 729,584 |   |   | 2,884,295 |   |   | 2,100,487 |   |
| Occupancy                                                                   |   |                                        | 74,025    |                                       |   | 71,150 |   |   | 254,745 |   |   | 201,302 |   |
| Furniture                  and equipment                                    |   |                                        | 63,078    |                                       |   | 53,992 |   |   | 179,110 |   |   | 166,325 |   |
| Other                  operating                                            |   |                                        | 439,126   |                                       |   | 365,417 |   |   | 1,252,984 |   |   | 1,083,510 |   |
| Total                  noninterest expenses                                 |   |                                        | 1,563,355 |                                       |   | 1,220,143 |   |   | 4,571,134 |   |   | 3,551,624 |   |
| Income                  before income taxes                                 |   |                                        | 1,718,284 |                                       |   | 1,714,945 |   |   | 5,250,850 |   |   | 4,986,870 |   |
| Income                  taxes                                               |   |                                        | 636,832   |                                       |   | 609,189 |   |   | 1,965,612 |   |   | 1,840,793 |   |
| Net                  income                                                 |   | $                                           | 1,081,452 |                                       | $      | 1,105,756 |   | $ | 3,285,238 |   | $ | 3,146,077 |   |
| Earnings                  per common share                                  |   | $                                           | 1.38      |                                       | $      | 1.40 |   | $ | 4.17 |   | $ | 3.99 |   |

----

**PEOPLES        BANCORP, INC. AND SUBSIDIARIES**

**Consolidated        Statements of Changes in Stockholders’ Equity        (unaudited)**

**NINE        MONTHS ENDED SEPTEMBER 30, 2007 and 2006**

|                                                                                                                                          |   |                          |      |       |   |      |   | Accumulated   |       |          |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|-----------|------------|--------|-----------|--------|---------------|------------|---------------|--------|
|                                                                                                                                          |   |                          |      | Additional |   |      |   | other         |       |          |   |
|                                                                                                                                          |   |                          |      | paid-in    |   | Retained  |   | comprehensive |       | Comprehensive |   |
|                                                                                                                                          |   | Common                  Stock |      | capital    |   | earnings  |   | income        |       | income        |   |
|                                                                                                                                          |   |                          |      |       |   |      |   |          |       |          |   |
| **Balance,                  December 31, 2005**                                                                                               |   | $                             | 7,890,120 |       | $      | 2,920,866 |   | $             | 12,763,903 |          | $      | (6,668 | ) |   |   |   |
|                                                                                                                                          |   |                          |      |       |   |      |   |          |       |          |   |   |   |   |   |   |
| Net                  income                                                                                                                   |   |                          | -         |       |   | -         |   |          | 3,146,077  |          |   | - |   | $ | 3,146,077 |   |
| Unrealized                  loss on investment securities available for sale net of income                  taxes of                  $7,735  |   |                          | -         |       |   | -         |   |          | -          |          |   | (12,294 | ) |   | (12,294 | ) |
| Comprehensive                  income                                                                                                         |   |                          |      |       |   |      |   |          |       |          |   |   |   | $ | 3,133,783 |   |
| Cash                  dividend, $1.18 per share                                                                                               |   |                          | -         |       |   | -         |   |          | (931,034   | )             |   | - |   |   |   |   |
|                                                                                                                                          |   |                          |      |       |   |      |   |          |       |          |   |   |   |   |   |   |
| **Balance,                  September 30, 2006**                                                                                              |   | $                             | 7,890,120 |       | $      | 2,920,866 |   | $             | 14,978,946 |          | $      | (18,962 | ) |   |   |   |
|                                                                                                                                          |   |                          |      |       |   |      |   |          |       |          |   |   |   |   |   |   |
|                                                                                                                                          |   |                          |      |       |   |      |   |          |       |          |   |   |   |   |   |   |
| **Balance,                  December 31, 2006**                                                                                               |   | $                             | 7,890,120 |       | $      | 2,920,866 |   | $             | 15,632,965 |          | $      | (836,795 | ) |   |   |   |
|                                                                                                                                          |   |                          |      |       |   |      |   |          |       |          |   |   |   |   |   |   |
| Net                  income                                                                                                                   |   |                          | -         |       |   | -         |   |          | 3,285,238  |          |   |   |   | $ | 3,285,238 |   |
| Unrealized                  gain on investment securities available for sale net of income                  taxes of                  $18,053 |   |                          | -         |       |   | -         |   |          | -          |          |   | 28,693 |   |   | 28,693 |   |
| Comprehensive                  income                                                                                                         |   |                          |      |       |   |      |   |          |       |          |   |   |   | $ | 3,313,931 |   |
| Repurchase                  of stock                                                                                                          |   |                          | (35,000   | )          |   | -         |   |          | (220,500   | )             |   | - |   |   |   |   |
| Cash                  dividend, $1.25 per share                                                                                               |   |                          | -         |       |   | -         |   |          | (976,905   | )             |   | - |   |   |   |   |
|                                                                                                                                          |   |                          |      |       |   |      |   |          |       |          |   |   |   |   |   |   |
| **Balance,                  September 30, 2007**                                                                                              |   | $                             | 7,855,120 |       | $      | 2,920,866 |   | $             | 17,720,798 |          | $      | (808,102 | ) |   |   |   |

----

**PEOPLES        BANCORP, INC. AND SUBSIDIARIES**

**Consolidated          Statements of Cash Flows (unaudited)**

|                                                              |   | For                  the nine months ended |        |
|-------------------------------------------------------------------|--------|--------------------------------------------|-------------|
|                                                              |   | September                  30              |        |
|                                                              |   | **2007**                                   |        | **2006** |   |
|                                                              |   |                                       |        |   |   |
| **CASH                  FLOWS FROM OPERATING ACTIVITIES**         |   |                                       |        |   |   |
| Interest                  received                                |   | $                                          | 12,527,507  |   | $ | 11,529,301 |   |
| Fees                  and commissions received                    |   |                                       | 1,768,992   |   |   | 879,164 |   |
| Cash                  paid to suppliers and employees             |   |                                       | (4,045,713  | ) |   | (3,533,841 | ) |
| Interest                  paid                                    |   |                                       | (4,855,759  | ) |   | (3,972,901 | ) |
| Taxes                  paid                                       |   |                                       | (1,965,612  | ) |   | (1,941,579 | ) |
|                                                              |   |                                       | 3,429,415   |   |   | 2,960,144 |   |
| **CASH                  FLOWS FROM INVESTING ACTIVITIES**         |   |                                       |        |   |   |   |   |
| Cash                  paid for premises, equipment, and software  |   |                                       | (1,551,845  | ) |   | (124,242 | ) |
| Loans                  made, net of principal collected           |   |                                       | (9,755,873  | ) |   | (2,141,254 | ) |
| Proceeds                  from maturities and calls of securities |   |                                       |             |   |   |   |   |
| Available                  for sale                               |   |                                       | 2,000,000   |   |   | 3,500,000 |   |
| Held                  to maturity                                 |   |                                       | 1,002,058   |   |   | 2,001,222 |   |
| Purchase                  of securities Available for Sale        |   |                                       | 0           |   |   | (3,425,525 | ) |
| Purchase                  of securities held to maturity          |   |                                       | (2,037,521  | ) |   | (2,007,773 | ) |
| Purchase                  of FHLB Stock                           |   |                                       | (364,500    | ) |   | (250,700 | ) |
| Acquisition                  of Insurance Agency                  |   |                                       | (884,634    | ) |   | 0 |   |
|                                                              |   |                                       | (11,592,315 | ) |   | (2,448,272 | ) |
| **CASH                  FLOWS FROM FINANCING ACTIVITIES**         |   |                                       |        |   |   |   |   |
| Net                  increase (decrease) in                       |   |                                       |        |   |   |   |   |
| Time                  deposits                                    |   |                                       | 6,211,235   |   |   | 2,350,183 |   |
| Other                  deposits                                   |   |                                       | 1,231,912   |   |   | (8,730,188 | ) |
| Securities                  sold under repurchase agreements      |   |                                       | (6,386,480  | ) |   | 3,432,254 |   |
| Advances                  under (repayments of) notes payable     |   |                                       | 9,000,000   |   |   | 3,000,000 |   |
| Repayments                  of other borrowings                   |   |                                       | (199,180    | ) |   | 0 |   |
| Repurchase                  of Stock                              |   |                                       | (255,500    | ) |   | 0 |   |
| Dividends                  paid                                   |   |                                       | (976,905    | ) |   | (931,034 | ) |
|                                                              |   |                                       | 8,625,082   |   |   | (878,785 | ) |
| **NET                  INCREASE (DECREASE) IN CASH**              |   |                                       | 462,182     |   |   | (366,913 | ) |
| CASH                  AND EQUIVALENTS AT BEGINNING OF PERIOD      |   |                                       | 7,465,410   |   |   | 6,809,595 |   |
| CASH                  AND EQUIVALENTS AT END OF PERIOD            |   | $                                          | 7,927,592   |   | $ | 6,442,682 |   |

----

**PEOPLES        BANCORP, INC. AND SUBSIDIARIES**

**Consolidated          Statements of Cash Flows (unaudited)          (continued)**

|                                                                                                               |   | For                the nine months ended |      |
|---------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|-----------|
|                                                                                                          |   | September                30              |      |
|                                                                                                          |   | **2007**                                 |      | **2006** |   |
|                                                                                                          |   |                                     |      |   |   |
| **RECONCILIATION                OF NET INCOME TO NET CASH PROVIDED FROM OPERATING                ACTIVITIES** |   |                                     |      |   |   |
| Net                income                                                                                     |   | $                                        | 3,285,238 |   | $ | 3,146,077 |   |
| **ADJUSTMENTS**                                                                                               |   |                                     |      |   |   |   |   |
| Depreciation                and amortization                                                                  |   |                                     | 163,815   |   |   | 164,934 |   |
| Provision                for loan losses                                                                      |   |                                     | 40,000    |   |   | 240,000 |   |
| Amortization                of intangible assets                                                              |   |                                     | 41,250    |   |   | 0 |   |
| Security                discount accretion, net of premium amortization                                       |   |                                     | (43,925   | ) |   | (30,512 | ) |
| Decrease                (increase) in                                                                         |   |                                     |      |   |   |   |   |
| Accrued                interest receivable                                                                    |   |                                     | (423,785  | ) |   | (255,485 | ) |
| Other                assets                                                                                   |   |                                     | 111,062   |   |   | (280,314 | ) |
| Increase                (decrease) in                                                                         |   |                                     |      |   |   |   |   |
| Deferred                origination fees and costs, net                                                       |   |                                     | (19,106   | ) |   | (151,517 | ) |
| Accrued                Interest payable and other liabilities                                                 |   |                                     | 65,571    |   |   | 227,747 |   |
| Other                Liabilities                                                                              |   |                                     | 209,295   |   |   | (100,786 | ) |
|                                                                                                          |   | $                                        | 3,429,415 |   | $ | 2,960,144 |   |
| Supplemental                disclosure                                                                        |   |                                     |      |   |   |   |   |
| Fair                value of assets acquired                                                                  |   | $                                        | 686,499   |   | $ | 0 |   |
| Fair                value of liabilities assumed                                                              |   |                                     | (634,797  | ) |   | 0 |   |
| Purchase                price in excess of assets acquired                                                    |   |                                     | 832,932   |   |   | 0 |   |
| Net                cash paid for acquisition                                                                  |   | $                                        | 884,634   |   | $ | 0 |   |

----

**Peoples      Bancorp, Inc. and Subsidiaries**

**Notes      to Financial Statements (unaudited)**

| 1. | Basis                of Presentation |
|----|--------------------------------------|

| 2. | Cash                Flows |
|----|---------------------------|

| 3. | Comprehensive                income |
|----|-------------------------------------|

| 4. | Commitments |
|----|-------------|

|                                        |   | September 30, 2007  |       | December 31, 2007  |   |
|---------------------------------------------|--------|------------------------------------|------------|-----------------------------------|--------|
| Revolving                Home Equity Lines  |   | $                                  | 4,410,587  |                              | $      | 3,277,125 |   |
| Commercial                Real Estate Lines |   | $                                  | 7,949,421  |                              | $      | 6,402,332 |   |
| Other                Unused Commitments     |   | $                                  | 14,836,680 |                              | $      | 22,826,099 |   |
| Commercial                Letters of Credit |   | $                                  | 4,795,301  |                              | $      | 5,162,739 |   |

----

| 5. | Earnings                Per Share |
|----|-----------------------------------|

| 6. | Pension |
|----|---------|

*Restatement      of Comprehensive Income for the Year Ended December 31, 2006*

*Employers’      Accounting for Defined Benefit Plans and Other Postretirement Plans*

|  As              originally reported |   | $      | 3,285,574 |   |
|-------------------------------------------|--------|--------|-----------|--------|
| As              revised                   |   |   | 4,106,108 |   |

----

| 7. | Segment                  Reporting |
|----|------------------------------------|

| **2007**                                             |   | **Community****banking** |        | **Insurance****products****and                  services** |   | **Intersegment****Transactions** |   | **Consolidated****Total** |      |
|------------------------------------------------------|--------|--------------------------|-------------|------------------------------------------------------------|--------|----------------------------------|--------|---------------------------|-----------|
|                                                 |   |                     |        |                                                       |   |                             |   |                      |      |
| Net                  interest income                 |   | $                        | 8,102,756   |                                                       |   | ($9,764                          | )      | $                         | 0         |   | $ | 8,092,992 |   |
| Provision                  for loan losses           |   |                     | 40,000      |                                                       |   | 0                                |   |                      | 0         |   |   | 40,000 |   |
| Net                  interest income after provision |   |                     | 8,062,756   |                                                       |   | (9,764                           | )      |                      | 0         |   |   | 8,052,992 |   |
|                                                 |   |                     |        |                                                       |   |                             |   |                      |      |   |   |   |   |
| Noninterest                  revenue                 |   |                     | 965,717     |                                                       |   | 803,275                          |   |                      | 0         |   |   | 1,768,992 |   |
| Noninterest                  expense                 |   |                     | 3,953,767   |                                                       |   | 617,367                          |   |                      | 0         |   |   | 4,571,134 |   |
| Income                  before income taxes          |   |                     | 5,074,706   |                                                       |   | 176,144                          |   |                      | 0         |   |   | 5,250,850 |   |
| Income                  taxes                        |   |                     | 1,897,743   |                                                       |   | 67,869                           |   |                      | 0         |   |   | 1,965,612 |   |
| Net                  income                          |   | $                        | 3,176,963   |                                                       | $      | 108,275                          |   | $                         | 0         |   | $ | 3,285,238 |   |
|                                                 |   |                     |        |                                                       |   |                             |   |                      |      |   |   |   |   |
| Average                  assets                      |   | $                        | 248,929,824 |                                                       | $      | 1,051,414                        |   |                      | ($179,810 | ) | $ | 249,801,428 |   |

| 8. | Insurance                Agency Acquisition |
|----|---------------------------------------------|

----

**Item      2.**
**Management’s      Discussion and Analysis of Financial Condition and Results of      Operations.**

**Application      of Critical Accounting Policies**

----

**Forward-Looking      Information**

----

**RECENT      DEVELOPMENTS**

**RESULTS      OF OPERATIONS**

**General**

**Net      Interest Income**

----

----

**Average      Balances, Interest, and Yield**

|                                                                                                                                                                           |   | For                the Nine Months Ended September                30, 2007  |        | For                the Nine Months Ended September                30, 2006  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|-------------|----------------------------------------------------------------------------------|--------|
|                                                                                                                                                                           |   | AverageBalance                                                              |        | Interest                                                                    |   | Yield  |   | AverageBalance  |   | Interest  |   | Yield  |   |
| **Assets**                                                                                                                                                                     |   |                                                                             |        |                                                                             |   |   |   |   |   |   |   |   |   |
| Federal                funds sold                                                                                                                                              |   | $                                                                                | 2,334,825   |                                                                             | $      | 94,161 |   |   | 5.39 | % | $ | 2,051,584 |   | $ | 74,130 |   |   | 4.83 | % |
| Interest-bearing                deposits                                                                                                                                       |   |                                                                             | 194,138     |                                                                             |   | 8,394 |   |   | 5.78 | % |   | 68,674 |   |   | 2,441 |   |   | 4.75 | % |
| Investment                securities:                                                                                                                                          |   |                                                                             |        |                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.                S. government agency                                                                                                                                         |   |                                                                             | 18,719,580  |                                                                             |   | 683,498 |   |   | 4.88 | % |   | 19,750,117 |   |   | 658,090 |   |   | 4.45 | % |
| Other                                                                                                                                                                          |   |                                                                             | 27,095      |                                                                             |   | 405 |   |   | 2.00 | % |   | 0 |   |   | 0 |   |   | - | % |
| FHLB                of Atlanta Stock                                                                                                                                           |   |                                                                             | 2,822,188   |                                                                             |   | 126,238 |   |   | 5.98 | % |   | 2,493,944 |   |   | 98,290 |   |   | 5.27 | % |
| Total                investment securities                                                                                                                                     |   |                                                                             | 21,568,863  |                                                                             |   | 810,141 |   |   | 5.02 | % |   | 22,244,061 |   |   | 756,380 |   |   | 4.55 | % |
| Loans:                                                                                                                                                                         |   |                                                                             |        |                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                and time                                                                                                                                                 |   |                                                                             | 42,573,695  |                                                                             |   | 2,944,397 |   |   | 9.25 | % |   | 41,024,921 |   |   | 2,756,614 |   |   | 8.98 | % |
| Mortgage                                                                                                                                                                       |   |                                                                             | 166,681,555 |                                                                             |   | 8,935,825 |   |   | 7.17 | % |   | 160,334,009 |   |   | 8,144,515 |   |   | 6.79 | % |
| Installment                                                                                                                                                                    |   |                                                                             | 4,798,496   |                                                                             |   | 309,356 |   |   | 8.62 | % |   | 5,049,721 |   |   | 306,060 |   |   | 8.10 | % |
| Total                loans                                                                                                                                                     |   |                                                                             | 214,053,746 |                                                                             |   | 12,189,578 |   |   | 7.61 | % |   | 206,408,651 |   |   | 11,207,189 |   |   | 7.26 | % |
| Allowance                for loan losses                                                                                                                                       |   |                                                                             | 1,816,309   |                                                                             |   |   |   |   |   |   |   | 1,797,988 |   |   |   |   |   |   |   |
| Total                loans, net of allowance                                                                                                                                   |   |                                                                             | 212,237,437 |                                                                             |   | 12,189,578 |   |   | 7.68 | % |   | 204,610,663 |   |   | 11,207,189 |   |   | 7.32 | % |
| Total                interest-earning assets                                                                                                                                   |   |                                                                             | 236,335,263 |                                                                             |   | 13,102,274 |   |   | 7.41 | % |   | 228,974,982 |   |   | 12,040,140 |   |   | 7.03 | % |
| Non-interest-bearing                cash                                                                                                                                       |   |                                                                             | 4,606,782   |                                                                             |   |   |   |   |   |   |   | 4,683,523 |   |   |   |   |   |   |   |
| Premises                and equipment                                                                                                                                          |   |                                                                             | 5,188,392   |                                                                             |   |   |   |   |   |   |   | 3,809,369 |   |   |   |   |   |   |   |
| Other                assets                                                                                                                                                    |   |                                                                             | 3,670,991   |                                                                             |   |   |   |   |   |   |   | 2,489,475 |   |   |   |   |   |   |   |
| Total                assets                                                                                                                                                    |   | $                                                                                | 249,801,428 |                                                                             |   |   |   |   |   |   | $ | 239,957,349 |   |   |   |   |   |   |   |
| Liabilities                and Stockholders’ Equity                                                                                                                      |   |                                                                             |        |                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                Deposits                                                                                                                                       |   |                                                                             |        |                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                and NOW deposits                                                                                                                                        |   | $                                                                                | 36,813,087  |                                                                             |   | 160,488 |   |   | 0.58 | % | $ | 40,511,077 |   |   | 172,576 |   |   | 0.57 | % |
| Money                market and supernow                                                                                                                                       |   |                                                                             | 16,744,070  |                                                                             |   | 203,503 |   |   | 1.62 | % |   | 17,156,207 |   |   | 157,769 |   |   | 1.23 | % |
| Other                time deposits                                                                                                                                             |   |                                                                             | 74,525,969  |                                                                             |   | 2,421,291 |   |   | 4.34 | % |   | 71,007,758 |   |   | 1,967,186 |   |   | 3.70 | % |
| Total                interest-bearing deposits                                                                                                                                 |   |                                                                             | 128,083,126 |                                                                             |   | 2,785,282 |   |   | 2.91 | % |   | 128,675,042 |   |   | 2,297,531 |   |   | 2.39 | % |
| Borrowed                funds                                                                                                                                                  |   |                                                                             | 62,247,941  |                                                                             |   | 2,136,048 |   |   | 4.59 | % |   | 54,108,203 |   |   | 1,769,955 |   |   | 4.37 | % |
| Total                interest-bearing liabilities                                                                                                                              |   |                                                                             | 190,331,067 |                                                                             |   | 4,921,330 |   |   | 3.46 | % |   | 182,783,245 |   |   | 4,067,485 |   |   | 2.98 | % |
| Noninterest-bearing                deposits                                                                                                                                    |   |                                                                             | 30,833,556  |                                                                             |   |   |   |   |   |   |   | 31,551,068 |   |   |   |   |   |   |   |
|                                                                                                                                                                           |   |                                                                             | 221,164,623 |                                                                             |   |   |   |   |   |   |   | 214,334,313 |   |   |   |   |   |   |   |
| Other                liabilities                                                                                                                                               |   |                                                                             | 2,405,103   |                                                                             |   |   |   |   |   |   |   | 963,117 |   |   |   |   |   |   |   |
| Stockholders’                equity                                                                                                                                      |   |                                                                             | 26,231,702  |                                                                             |   |   |   |   |   |   |   | 24,659,919 |   |   |   |   |   |   |   |
| Total                liabilities and stockholders equity                                                                                                                       |   | $                                                                                | 249,801,428 |                                                                             |   |   |   |   |   |   | $ | 239,957,349 |   |   |   |   |   |   |   |
| Net                interest spread                                                                                                                                             |   |                                                                             |        |                                                                             |   |   |   |   | 3.95 | % |   |   |   |   |   |   |   | 4.05 | % |
| Net                interest income                                                                                                                                             |   |                                                                             |        |                                                                             | $      | 8,180,944 |   |   |   |   |   |   |   | $ | 7,972,654 |   |   |   |   |
| Net                margin on interest-earning assets                                                                                                                           |   |                                                                             |        |                                                                             |   |   |   |   | 4.63 | % |   |   |   |   |   |   |   | 4.66 | % |
|  Interest                on tax-exempt loans and investments are reported on fully taxable                equivalent basis (a non GAAP financial                measure). |

----

**Noninterest      Revenue**

**Noninterest      Expense**

**Income      Tax Expense**

**FINANCIAL      CONDITION**

**Overview**

----

**Composition      of Loan Portfolio**

**Loan      Quality**

----

**Allowance      for Loan Losses**

|                                                                             |   | Nine months ended                  September 30,2007 |      | Nine months ended                  September 30,2006 |   | Year ended                  December 31,                  2006 |   |
|----------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|-----------|---------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
| Balance                  at beginning of year                                    |   | $                                                                   | 1,860,283 |                                                                | $      | 1,649,420                                                                |   | $ | 1,649,420 |   |
| Loan                  losses:                                                    |   |                                                                |      |                                                                |   |                                                                     |   |   |   |   |
| Commercial                                                                       |   |                                                                | 81,189    |                                                                |   | 4,946                                                                    |   |   | 4,947 |   |
| Mortgages                                                                        |   |                                                                | 0         |                                                                |   | 0                                                                        |   |   | 15,000 |   |
| Consumer                                                                         |   |                                                                | 18,314    |                                                                |   | 8,986                                                                    |   |   | 16,214 |   |
| Total                  loan losses                                               |   |                                                                | 99,503    |                                                                |   | 13,932                                                                   |   |   | 36,161 |   |
| Recoveries                  on loans previously charged off                      |   |                                                                |      |                                                                |   |                                                                     |   |   |   |   |
| Commercial                                                                       |   |                                                                | 0         |                                                                |   | 25                                                                       |   |   | 25 |   |
| Mortgages                                                                        |   |                                                                | 2,271     |                                                                |   | 0                                                                        |   |   | 0 |   |
| Consumer                                                                         |   |                                                                | 912       |                                                                |   | 6,867                                                                    |   |   | 6,999 |   |
| Total                  loan recoveries                                           |   |                                                                | 3,183     |                                                                |   | 6,892                                                                    |   |   | 7,024 |   |
|                                                                             |   |                                                                |      |                                                                |   |                                                                     |   |   |   |   |
| Net                  loan losses (recoveries)                                    |   |                                                                | 96,320    |                                                                |   | (7,040                                                                   | )      |   | 29,137 |   |
| Provision                  for loan losses charged to expense                    |   |                                                                | 40,000    |                                                                |   | 240,000                                                                  |   |   | 240,000 |   |
| Balance                  at end of year                                          |   | $                                                                   | 1,803,963 |                                                                | $      | 1,882,380                                                                |   | $ | 1,860,283 |   |
| Allowance                  for loan losses to loans outstanding at end of period |   |                                                                | 0.83      | %                                                                   |   | 0.91                                                                     | %      |   | 0.90 | % |

| ** Risk                  Elements of Loan Portfolio** |
|------------------------------------------------------------|
|                                                       |   | **September 30,                  2007** | ** ** | **December 31,                  2006** |   |
|                                                       |   |   |   |   |   |
| Nonaccrual                  Loans                          |   | $ | 5,529 |   | $ | 23,201 |   |
| Accruing                  Loans Past Due 90 Days or More   |   |   | 224,878 |   |   | 399,137 |   |

----

**Deposits      and Other Interest-Bearing Liabilities**

**Short-term      Borrowings**

|                                                     |       | **September                  30, 2007** | ** ** | **December                  31, 2006** | ** ** |
|----------------------------------------------------------|------------|-----------------------------------------|------------|----------------------------------------|------------|
| ** **                                               | ** ** | **Amount**                              | ** ** | **Rate**                               | ** ** | **Amount** | ** ** | **Rate** |   |
|                                                     |       |                                    |       |                                   |       |   |   |   |   |
| Federal                  Home Loan Bank (daily re-price) |       | $                                       | 0          |                                   |       | - | % | $ | 0 |   |   | - | % |
| Retail                  Repurchase Agreements            |       |                                    | 7,987,113  |                                   |       | 3.80 | % |   | 9,513,593 |   |   | 2.85 | % |
| Federal                  Funds Borrowed                  |       |                                    | 1,200,000  |                                   |       | 4.69 | % |   | 6,060,000 |   |   | 1.60 | % |
| Total                                                    |       | $                                       | 9,187,113  |                                   |       |   |   | $ | 15,573,593 |   |   |   |   |
|                                                     |       |                                    |       |                                   |       |   |   |   |   |   |   |   |   |

----

**Liquidity      and Capital Resources**

|                                       |   | Actual |   | Minimum                  Requirements |   | To                  be well capitalized |   |
|--------------------------------------------|--------|--------|--------|---------------------------------------|--------|-----------------------------------------|--------|
| Tier                  1 risk-based capital |   |   | 12.69  | %                                     |   | 4.00                                    | %      |   | 6.00 | % |
| Total                  risk-based capital  |   |   | 13.54  | %                                     |   | 8.00                                    | %      |   | 10.00 | % |
| Leverage                  ratio            |   |   | 10.72  | %                                     |   | 4.00                                    | %      |   | 5.00 | % |

----

**Item3.          **
**Quantitative          and Qualitative Disclosures About Market Risk.**

|                                               |       | **Immediate                  Change in Rates** | ** ** | ** **            | ** ** |
|----------------------------------------------------|------------|------------------------------------------------|------------|-----------------------|------------|
| ** **                                         | ** ** | **+200**                                       | ** ** | **+100**              | ** ** | **-100** | ** ** | **-200** | ** ** | **Policy** | ** ** |
| ** **                                         | ** ** | **Basis Points**                          | ** ** | **Basis Points** | ** ** | **Basis Points** | ** ** | **Basis Points** | ** ** | **Limit** |   |
|                                               |       |                                           |       |                  |       |   |   |   |   |   |   |
| **September                  30, 2007**            |       |                                           |       |                  |       |   |   |   |   |   |   |
| %                  Change in Net Interest Income   |       |                                           | 3.97       | %                     |       | 2.01 | % |   | -2.39 | % |   | -                  5.20 | % |   | +10 | % |
| %                  Change in Fair Value of Capital |       |                                           | 7.81       | %                     |       | 3.89 | % |   | -4.41 | % |   | -8.98 | % |   | +20 | % |
| **December                  31, 2006**             |       |                                           |       |                  |       |   |   |   |   |   |   |   |   |   |   |   |
| %                  Change in Net Interest Income   |       |                                           | 3.26       | %                     |       | 1.66 | % |   | -2.15 | % |   | -                  5.03 | % |   | +10 | % |
| %                  Change in Fair Value of Capital |       |                                           | 6.79       | %                     |       | 3.44 | % |   | -3.82 | % |   | -                  8.10 | % |   | +20 | % |

**Item      4. **
**Controls      and Procedures.**

----

**PART      II - OTHER INFORMATION**

**Item      1. **
**Legal      Proceedings.**

**Item      1A. **
**Risk      Factors.**

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

**Item      3. **
**Defaults      Upon Senior Securities.**

**Item      4. **
**Submission      of Matters to a Vote of Security Holders.**

**Item      5. **
**Other      Information.**

**Item      6. **
**Exhibits.**

**SIGNATURES**

** **

|                                       | **PEOPLES                  BANCORP, INC.** |
|--------------------------------------------|--------------------------------------------|
|                                       |                                       |   |
| Date:                    November 13, 2007 | By:                                        | /s/                    Thomas G. Stevenson |
|                                       |                                       | Thomas                    G. Stevenson |
|                                       |                                       | President/Chief                    Executive Officer &                    Chief Financial Officer |

----

**EXHIBIT      INDEX**

| Exhibit                  No. |   | Description                                                                                                                                                                                                                                                   |
|------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         |   |                                                                                                                                                                                                                                                          |
| 3.1                          |   | Articles                  of Incorporation of the Company, as corrected and amended (incorporated                  by                  reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed                  on January 24, 2005) |
| 3.2                          |   | Bylaws                  of the Company, as amended (incorporated by reference to Exhibit                  3.2 of                  the Company’s Annual Report on Form 10-K for the year ended December 31,                  2004)                       |
| 10.1                         |   | Changes                  to Director Compensation Arrangement (incorporated by reference                  to Exhibit                  10.1 of the Company’s Current Report on Form 8-K filed on May 24,                  2006)                          |
| 31.1                         |   | Certifications                  of the Chief Executive Officer and the Chief Financial Officer                  pursuant to                  Section 302 of the Sarbanes-Oxley Act of 2002 (filed                  herewith)                                  |
| 32.1                         |   | Certification                  of the Periodic Report pursuant to Section 906 of the Sarbanes-Oxley                  Act                  of 2002 (furnished herewith)                                                                                        |

----