**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 |
|---|--------------------------------------------------------------------------------------------------------------------------------------------|

| o |  Transition report under Section 13                or                15(d) of the Exchange Act |
|---|-----------------------------------------------------------------------------------------------------|

**PEOPLES        BANCORP, INC.**

| Maryland                                                                                        |        | 52-2027776                                                            |
|-------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|
| (State                  or Other Jurisdiction ofIncorporation                  or Organization) |   | (I.R.S.                  EmployerIdentification                  No.) |
|                                                                                            |   |                                                                  |

| P.O.                  Box 210, 100 Spring Avenue, Chestertown, Maryland |   | 21620                       |
|-------------------------------------------------------------------------|--------|-----------------------------|
| (Address                  of Principal Executive Offices)               |   | (Zip                  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 March 31, 2006 (unaudited) and December 31,                  2005                                                 | 3       |
|                           |   |                                                                                                                                                              |    |
|                           |   | Consolidated                  Statements of Income (unaudited) for the three months ended March                  31, 2006                  and 2005               | 4       |
|                           |   |                                                                                                                                                              |    |
|                           |   | Consolidated                  Statements of Changes in Stockholders’ Equity (unaudited) for the three                  months ended March 31, 2006 and 2005 | 5       |
|                           |   |                                                                                                                                                              |    |
|                           |   | Consolidated                  Statements of Cash Flows (unaudited) for the three months ended                  March 31,                  2006 and 2005           | 6       |
|                           |   |                                                                                                                                                              |    |
|                           |   | Notes                  to Financial Statements (unaudited)                                                                                                        | 7       |
|                           |   |                                                                                                                                                              |    |
| Item                  2.       |        | Management’s                  Discussion and Analysis of Financial Condition and                  Results of Operations                                     | 9  |
| Item                  3.       |   | Quantitative                  and Qualitative Disclosures About Market Risk                                                                                       | 17      |
| Item                  4.       |   | Controls                  and Procedures                                                                                                                          | 18      |
|                           |   |                                                                                                                                                              |    |
|                           |   | Part                  II - Other Information                                                                                                                      |    |
|                           |   |                                                                                                                                                              |    |
| Item                  1.       |   | Legal                  Proceedings                                                                                                                                | 18      |
| Item                  1A.      |   | Risk                  Factors                                                                                                                                     | 18      |
| Item                  2.       |   | Unregistered                  Sales of Equity Securities and Use of Proceeds                                                                                      | 18      |
| Item                  3.       |   | Defaults                  Upon Senior Securities                                                                                                                  | 18      |
| Item                  4.       |   | Submission                  of Matters to a Vote of Security Holders                                                                                              | 18      |
| Item                  5.       |   | Other                  Information                                                                                                                                | 19      |
| Item                  6.       |   | Exhibits                                                                                                                                                          | 19      |
|                           |   |                                                                                                                                                              |    |
| Signatures                     |   |                                                                                                                                                              | 19      |
| Exhibit                  Index |   | 20                                                                                                                                                                |

----

**PART        I - FINANCIAL INFORMATION**

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

**PEOPLES        BANCORP, INC. AND SUBSIDIARY**

**Consolidated        Balance Sheets**

|                                                                                                                                                        |   |   | March                  31, 2006  |   |   | December                  31, 2005 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------|--------|--------|-----------------------------------------|--------|
| **ASSETS**                                                                                                                                                  |   |   | (unaudited)                           |   |   |                                    |   |
| Cash                  and due from banks                                                                                                                    |   | $      | 4,904,512                             |   | $      | 4,709,890                               |   |
| Federal                  funds sold                                                                                                                         |   |   | 1,823,348                             |   |   | 2,099,705                               |   |
| Securities                  available for sale                                                                                                              |   |   | 10,392,895                            |   |   | 10,439,293                              |   |
| Securities                  held to maturity (approximate fair value of $9,300,636 and                  $9,800,311)                                         |   |   | 9,467,749                             |   |   | 9,465,210                               |   |
| Federal                  Home Loan Bank stock, at cost                                                                                                      |   |   | 2,533,100                             |   |   | 2,282,400                               |   |
| Loans,                  less allowance for loan losses of $1,765,354 and                  $1,649,420                                                        |   |   | 204,600,169                           |   |   | 203,143,629                             |   |
| Premises                  and equipment                                                                                                                     |   |   | 3,815,283                             |   |   | 3,812,831                               |   |
| Accrued                  interest receivable                                                                                                                |   |   | 1,329,949                             |   |   | 1,268,377                               |   |
| Deferred                  income taxes                                                                                                                      |   |   | 319,086                               |   |   | 304,888                                 |   |
| Other                  assets                                                                                                                               |   |   | 774,287                               |   |   | 765,214                                 |   |
| **  Total                  Assets**                                                                                                               |   | $      | 239,960,378                           |   | $      | 238,291,437                             |   |
|                                                                                                                                                        |   |   |                                  |   |   |                                    |   |
| **LIABILITIES                  AND STOCKHOLDERS’ EQUITY**                                                                                             |   |   |                                  |   |   |                                    |   |
|                                                                                                                                                        |   |   |                                  |   |   |                                    |   |
| Deposits                                                                                                                                                    |   |   |                                  |   |   |                                    |   |
| Non-interest-bearing                                                                                                                                        |   | $      | 31,118,117                            |   | $      | 33,509,679                              |   |
| Interest-bearing                                                                                                                                            |   |   | 129,024,739                           |   |   | 130,451,691                             |   |
|                                                                                                                                                        |   |   | 160,142,856                           |   |   | 163,961,370                             |   |
| Securities                  sold under repurchase agreements and federal funds                  purchased                                                   |   |   | 8,464,036                             |   |   | 9,251,240                               |   |
| Federal                  Home Loan Bank advances                                                                                                            |   |   | 45,700,000                            |   |   | 40,700,000                              |   |
| Accrued                  Interest payable                                                                                                                   |   |   | 332,622                               |   |   | 319,987                                 |   |
| Income                  taxes payable                                                                                                                       |   |   | 728,373                               |   |   | 100,786                                 |   |
| Other                  liabilities                                                                                                                          |   |   | 314,819                               |   |   | 389,833                                 |   |
|                                                                                                                                                        |   |   | 215,682,706                           |   |   | 214,723,216                             |   |
| Stockholders'                  equity                                                                                                                       |   |   |                                  |   |   |                                    |   |
| Common                  stock, par value $10 per share authorized 1,000,000 shares issued,                  and                  789,012 shares outstanding |   |   | 7,890,120                             |   |   | 7,890,120                               |   |
| Additional                  Paid-in Capital                                                                                                                 |   |   | 2,920,866                             |   |   | 2,920,866                               |   |
| Retained                  earnings                                                                                                                          |   |   | 13,500,584                            |   |   | 12,763,903                              |   |
|                                                                                                                                                        |   |   | 24,311,570                            |   |   | 23,574,889                              |   |
| Accumulated                  other comprehensive income                                                                                                     |   |   | (33,898                               | )      |   | (6,668                                  | )      |
|                                                                                                                                                        |   |   | 24,277,672                            |   |   | 23,568,221                              |   |
| **   Total                  Liabilities and Stockholders’ Equity**                                                                     |   | $      | 239,960,378                           |   | $      | 238,291,437                             |   |

----

**PEOPLES          BANCORP, INC. AND SUBSIDIARY**

**Consolidated          Statements of Income (unaudited)**

|                                                                                      |       | **For                    the three months ended March 31, ** |
|-------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------|
| ** **                                                                                | ** ** | ** **                                                        | **2006** |   |   | **2005** |   |
| Interest                    and dividend revenue                                          |       |                                                              |   |   |   |   |   |
| Loans,                    including fees                                                  |       | $                                                                 | 3,610,038 |   | $ | 2,883,264 |   |
| U.                    S. government agency securities                                     |       |                                                              | 203,418 |   |   | 184,961 |   |
| Deposits                    in other banks                                                |       |                                                              | 1,207 |   |   | 246 |   |
| Federal                    funds sold                                                     |       |                                                              | 24,548 |   |   | 8,416 |   |
| Equity                    securities                                                      |       |                                                              | 25,652 |   |   | 5,050 |   |
| Total                    interest and dividend revenue                                    |       |                                                              | 3,864,863 |   |   | 3,081,937 |   |
| Interest                    expense                                                       |       |                                                              |   |   |   |   |   |
| Deposits                                                                                  |       |                                                              | 707,265 |   |   | 577,912 |   |
| Borrowed                    funds                                                         |       |                                                              | 566,820 |   |   | 171,930 |   |
| Total                    interest expense                                                 |       |                                                              | 1,274,085 |   |   | 749,842 |   |
| Net                    interest income                                                    |       |                                                              | 2,590,778 |   |   | 2,332,095 |   |
| Provision                    for loan losses                                              |       |                                                              | 120,000 |   |   | 120,000 |   |
| Net                    interest income after provision                    for loan losses |       |                                                              | 2,470,778 |   |   | 2,212,095 |   |
| Noninterest                    revenue                                                    |       |                                                              |   |   |   |   |   |
| Service                    charges on deposit accounts                                    |       |                                                              | 208,200 |   |   | 179,016 |   |
| Other                    noninterest revenue                                              |       |                                                              | 113,889 |   |   | 77,778 |   |
| Total                    noninterest revenue                                              |       |                                                              | 322,089 |   |   | 256,794 |   |
| Noninterest                    expenses                                                   |       |                                                              |   |   |   |   |   |
| Salaries                    and employee benefits                                         |       |                                                              | 661,354 |   |   | 672,283 |   |
| Occupancy                                                                                 |       |                                                              | 63,617 |   |   | 55,080 |   |
| Furniture                    and equipment                                                |       |                                                              | 51,716 |   |   | 52,772 |   |
| Other                    operating                                                        |       |                                                              | 340,975 |   |   | 309,401 |   |
| Total                    noninterest expenses                                             |       |                                                              | 1,117,662 |   |   | 1,089,536 |   |
| Income                    before income taxes                                             |       |                                                              | 1,675,205 |   |   | 1,379,353 |   |
| Income                    taxes                                                           |       |                                                              | 630,810 |   |   | 519,268 |   |
| Net                    income                                                             |       | $                                                                 | 1,044,395 |   | $ | 860,085 |   |
| Earnings                    per common share-basic and diluted                            |       | $                                                                 | 1.32 |   | $ | 1.09 |   |

----

**PEOPLES        BANCORP, INC. AND SUBSIDIARY**

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

**    THREE        MONTHS        ENDED MARCH 31, 2006 and 2005**

|                                                                          |   |   | **Par                  value ** | ** ** | ** ** | **Additional****paid-in****capital** |   |   | **Retained****earnings** |   |   | **Accumulated****Other****Comprehensive****income** |   |   | **Comprehensive****income** |   |
|-------------------------------------------------------------------------------|--------|--------|--------------------------------------|------------|------------|--------------------------------------|--------|--------|--------------------------|--------|--------|-----------------------------------------------------|--------|--------|-----------------------------|--------|
| **Balance,                  December 31, 2004**                               |   | $      | 7,890,120                            |       | $          | 2,920,866                            |   | $      | 10,309,734               |   | $      | 86,598                                              |   |   |                        |   |
| Net                  income                                                   |   |   | —                              |       |       | —                              |   |   | 860,085                  |   |   | —                                             |   | $      | 860,085                     |   |
| Unrealized                  loss on investment                                |   |   |                                 |       |       |                                 |   |   |                     |   |   |                                                |   |   |                        |   |
|  securities available  for  sale  net |   |   |                                 |       |       |                                 |   |   |                     |   |   |                                                |   |   |                        |   |
| of                  income taxes of $194,303                                  |   |   | —                              |       |       | —                              |   |   | —                  |   |   | (55,716                                             | )      |   | (55,716                     | )      |
| Comprehensive                  income                                         |   |   |                                 |       |       |                                 |   |   |                     |   |   |                                                |   | $      | 804,369                     |   |
| Cash                  dividend, $1.38 per share                               |   |   | —                              |       |       | —                              |   |   | (284,044                 | )      |   | —                                             |   |   |                        |   |
| **Balance,                  March 31, 2005**                                  |   | $      | 7,890,120                            |       | $          | 2,920,866                            |   | $      | 10,885,775               |   | $      | 30,882                                              |   |   |                        |   |
| **Balance,                  December 31, 2005**                               |   | $      | 7,890,120                            |       | $          | 2,920,866                            |   | $      | 12,763,903               |   |   | ($6,668                                             | )      |   |                        |   |
| Net                  income                                                   |   |   | —                              |       |       | —                              |   |   | 1,044,395                |   |   | —                                             |   | $      | 1,044,395                   |   |
| Unrealized                  loss on investment                                |   |   |                                 |       |       |                                 |   |   |                     |   |   |                                                |   |   |                        |   |
| securities                  available for sale net                            |   |   |                                 |       |       |                                 |   |   |                     |   |   |                                                |   |   |                        |   |
| of                  income taxes of $58,682                                   |   |   | —                              |       |       | —                              |   |   | —                  |   |   | (27,230                                             | )      |   | (27,230                     | )      |
| Comprehensive                  income                                         |   |   |                                 |       |       |                                 |   |   |                     |   |   |                                                |   | $      | 1,017,165                   |   |
| Cash                  dividend, $1.48 per share                               |   |   | —                              |       |       | —                              |   |   | (307,714                 | )      |   | —                                             |   |   |                        |   |
| **Balance,                  March 31, 2006**                                  |   | $      | 7,890,120                            |       | $          | 2,920,866                            |   | $      | 13,500,584               |   | $      | (33,898                                             | )      |   |                        |   |

----

**PEOPLES        BANCORP, INC. AND SUBSIDIARY**

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

|                                                                                                              |   | **For                  the three months ended March 31,**  |
|-------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------|
|                                                                                                              |   |                                                            | **2006** |   |   | **2005** |   |
| **CASH                  FLOWS FROM OPERATING ACTIVITIES**                                                         |   |                                                            |   |   |   |   |   |
| Interest                  received                                                                                |   | $                                                               | 3,699,521 |   | $ | 2,925,075 |   |
| Fees                  and commissions received                                                                    |   |                                                            | 322,089 |   |   | 256,794 |   |
| Cash                  paid to suppliers and employees                                                             |   |                                                            | (1,147,766 | ) |   | (1,021,562 | ) |
| Interest                  paid                                                                                    |   |                                                            | (1,261,449 | ) |   | (739,564 | ) |
| Taxes                  paid                                                                                       |   |                                                            | (268 | ) |   | (72,968 | ) |
|                                                                                                              |   |                                                            | 1,612,127 |   |   | 1,347,775 |   |
| **CASH                  FLOWS FROM INVESTING ACTIVITIES**                                                         |   |                                                            |   |   |   |   |   |
| Cash                  paid for premises, equipment, and software                                                  |   |                                                            | (56,434 | ) |   | (30,734 | ) |
| Loans                  made, net of principal collected                                                           |   |                                                            | (1,482,688 | ) |   | (12,134,142 | ) |
| Proceeds                  from maturities and calls of securities                                                 |   |                                                            |  |   |   |  |   |
| Available                  for sale                                                                               |   |                                                            | 1,000,000 |   |   | 500,000 |   |
| Held                  to maturity                                                                                 |   |                                                            | 312 |   |   | 417 |   |
| Purchase                  of securities held to maturity                                                          |   |                                                            | (990,920 | ) |   | (495,937 | ) |
| Purchase                  of FHLB Stock                                                                           |   |                                                            | (250,700 | ) |   | (562,600 | ) |
|                                                                                                              |   |                                                            | (1,780,430 | ) |   | (12,722,996 | ) |
| **CASH                  FLOWS FROM FINANCING ACTIVITIES**                                                         |   |                                                            |   |   |   |   |   |
| Net                  increase (decrease) in                                                                       |   |                                                            |   |   |   |   |   |
| Time                  deposits                                                                                    |   |                                                            | 145,784 |   |   | 854,501 |   |
| Other                  deposits                                                                                   |   |                                                            | (3,964,298 | ) |   | (1,613,760 | ) |
| Securities                  sold under repurchase agreements                                                      |   |                                                            | (787,204 | ) |   | 1,081,626 |   |
| Advances                  under (repayments of) notes payable                                                     |   |                                                            | 5,000,000 |   |   | 11,500,000 |   |
| Repurchase                  of stock                                                                              |   |                                                            | 0 |   |   | 0 |   |
| Dividends                  paid                                                                                   |   |                                                            | (307,714 | ) |   | (284,044 | ) |
|                                                                                                              |   |                                                            | 86,568 |   |   | 11,538,323 |   |
| **NET                  INCREASE (DECREASE) IN CASH**                                                              |   |                                                            | (81,735 | ) |   | 163,102 |   |
| CASH                  AND EQUIVALENTS AT BEGINNING OF PERIOD                                                      |   |                                                            | 6,809,595 |   |   | 5,912,835 |   |
| CASH                  AND EQUIVALENTS AT END OF PERIOD                                                            |   | $                                                               | 6,727,860 |   | $ | 6,075,937 |   |
| **RECONCILIATION                  OF NET INCOME TO NET CASH PROVIDED FROM OPERATING                  ACTIVITIES** |   |                                                            |   |   |   |   |   |
| Net                  income                                                                                       |   | $                                                               | 1,044,395 |   | $ | 860,085 |   |
| **ADJUSTMENTS**                                                                                                   |   |                                                            |   |   |   |   |   |
| Depreciation                  and amortization                                                                    |   |                                                            | 53,982 |   |   | 45,246 |   |
| Provision                  for loan losses                                                                        |   |                                                            | 120,000 |   |   | 120,000 |   |
| Security                  discount accretion, net of premium amortization                                         |   |                                                            | (9,917 | ) |   | 1,053 |   |
| Decrease                  (increase) in                                                                           |   |                                                            |   |   |   |   |   |
| Accrued                  interest receivable                                                                      |   |                                                            | (61,572 | ) |   | (146,926 | ) |
| Other                  assets                                                                                     |   |                                                            | (9,073 | ) |   | (26,161 | ) |
| Increase                  (decrease) in                                                                           |   |                                                            |   |   |   |   |   |
| Deferred                  origination fees and costs, net                                                         |   |                                                            | (93,852 | ) |   | (10,989 | ) |
| Accrued                  Interest payable and other liabilities                                                   |   |                                                            | (62,378 | ) |   | 59,167 |   |
| Income                  taxes payable                                                                             |   |                                                            | 630,542 |   |   | 446,300 |   |
|                                                                                                              |   | $                                                               | 1,612,127 |   | $ | 1,347,775 |   |

----

**Peoples        Bancorp, Inc. and Subsidiary**

**Notes        to Financial Statements**

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

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

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

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

|                                          |   | **At                  March 31, 2006** |       |
|-----------------------------------------------|--------|----------------------------------------|------------|
| Revolving                  Home Equity Lines  |   | $                                      | 3,861,519  |   |
| Commercial                  Real Estate       |   | $                                      | 5,103,988  |   |
| Other                  Unused Commitments     |   | $                                      | 19,628,149 |   |
| Commercial                  Letters of Credit |   | $                                      | 4,076,420  |   |

----

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

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

** **

----

**Item        2.**
**Management’s        Discussion and Analysis or Plan of Operation.**

**Application        of Critical Accounting Policies**

----

**Forward-Looking        Information**

**RESULTS        OF OPERATIONS**

**General**

**Net          Interest Income**

----

----

**Average        Balances, Interest, and Yield**

|                                                                                                                                                                           |       | **For                  the Quarter Ended****March                  31, 2006** | ** **  | **For                  the Quarter Ended****March                  31, 2005** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|-------------|-------------------------------------------------------------------------------|------------|
| ** **                                                                                                                                                                     | ** ** | **Average****Balance**                                                        | ** **  | **Interest**                                                                  | ** ** | **Yield** | ** ** | **Average****Balance** | ** ** | **Interest** | ** ** | **Yield** |   |
| **Assets**                                                                                                                                                                     |       |                                                                          |        |                                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal                  funds sold                                                                                                                                            |       | $                                                                             | 2,042,954   |                                                                          | $          | 24,548 |   |   | 4.87 | % | $ | 1,445,277 |   | $ | 8,416 |   |   | 2.36 | % |
| Interest-bearing                  deposits                                                                                                                                     |       |                                                                          | 110,353     |                                                                          |       | 1,265 |   |   | 4.65 | % |   | 19,196 |   |   | 246 |   |   | 5.20 | % |
| Investment                  securities:                                                                                                                                        |       |                                                                          |        |                                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.                  S. government agency                                                                                                                                       |       |                                                                          | 19,882,732  |                                                                          |       | 213,264 |   |   | 4.35 | % |   | 20,102,275 |   |   | 184,961 |   |   | 3.73 | % |
| Other                                                                                                                                                                          |       |                                                                          | 2,414,328   |                                                                          |       | 26,895 |   |   | 4.52 | % |   | 1,168,672 |   |   | 5,050 |   |   | 1.75 | % |
| Total                  investment securities                                                                                                                                   |       |                                                                          | 22,297,060  |                                                                          |       | 240,159 |   |   | 4.37 | % |   | 21,270,947 |   |   | 190,011 |   |   | 3.62 | % |
| Loans:                                                                                                                                                                         |       |                                                                          |        |                                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                  and time                                                                                                                                               |       |                                                                          | 39,046,898  |                                                                          |       | 832,027 |   |   | 8.64 | % |   | 34,946,288 |   |   | 609,097 |   |   | 7.07 | % |
| Mortgage                                                                                                                                                                       |       |                                                                          | 160,475,060 |                                                                          |       | 2,688,320 |   |   | 6.79 | % |   | 138,374,420 |   |   | 2,174,318 |   |   | 6.37 | % |
| Installment                                                                                                                                                                    |       |                                                                          | 5,121,205   |                                                                          |       | 101,167 |   |   | 8.01 | % |   | 4,927,079 |   |   | 99,849 |   |   | 8.22 | % |
| Total                  loans                                                                                                                                                   |       |                                                                          | 204,643,163 |                                                                          |       | 3,621,514 |   |   | 7.18 | % |   | 178,247,787 |   |   | 2,883,264 |   |   | 6.56 | % |
| Allowance                  for loan losses                                                                                                                                     |       |                                                                          | 1,679,505   |                                                                          |       |   |   |   |   |   |   | 1,238,509 |   |   |   |   |   |   |   |
| Total                  loans, net of allowance                                                                                                                                 |       |                                                                          | 202,963,658 |                                                                          |       | 3,621,514 |   |   | 7.24 | % |   | 177,009,278 |   |   | 2,883,264 |   |   | 6.61 | % |
| Total                  interest-earning assets                                                                                                                                 |       |                                                                          | 227,414,025 |                                                                          |       | 3,887,486 |   |   | 6.93 | % |   | 199,744,698 |   |   | 3,081,937 |   |   | 6.26 | % |
| Non-interest-bearing                  cash                                                                                                                                     |       |                                                                          | 4,853,969   |                                                                          |       |   |   |   |   |   |   | 4,006,811 |   |   |   |   |   |   |   |
| Premises                  and equipment                                                                                                                                        |       |                                                                          | 3,808,072   |                                                                          |       |   |   |   |   |   |   | 3,791,906 |   |   |   |   |   |   |   |
| Other                  assets                                                                                                                                                  |       |                                                                          | 2,060,762   |                                                                          |       |   |   |   |   |   |   | 1,687,024 |   |   |   |   |   |   |   |
| Total                  assets                                                                                                                                                  |       | $                                                                             | 238,136,828 |                                                                          |       |   |   |   |   |   | $ | 209,230,439 |   |   |   |   |   |   |   |
| Liabilities                  and Stockholders’ Equity                                                                                                                    |       |                                                                          |        |                                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  Deposits                                                                                                                                     |       |                                                                          |        |                                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                  and NOW deposits                                                                                                                                      |       | $                                                                             | 42,504,641  |                                                                          | $          | 58,656 |   |   | 0.56 | % | $ | 45,028,323 |   | $ | 38,247 |   |   | 0.34 | % |
| Money                  market and supernow                                                                                                                                     |       |                                                                          | 18,093,090  |                                                                          |       | 44,074 |   |   | 0.99 | % |   | 20,595,085 |   |   | 27,356 |   |   | 0.54 | % |
| Other                  time deposits                                                                                                                                           |       |                                                                          | 68,867,484  |                                                                          |       | 604,535 |   |   | 3.56 | % |   | 64,855,331 |   |   | 512,309 |   |   | 3.20 | % |
| Total                  interest-bearing deposits                                                                                                                               |       |                                                                          | 129,465,215 |                                                                          |       | 707,265 |   |   | 2.22 | % |   | 130,478,739 |   |   | 577,912 |   |   | 1.80 | % |
| Borrowed                  funds                                                                                                                                                |       |                                                                          | 53,871,106  |                                                                          |       | 566,820 |   |   | 4.27 | % |   | 27,782,863 |   |   | 171,930 |   |   | 2.51 | % |
| Total                  interest-bearing liabilities                                                                                                                            |       |                                                                          | 183,336,321 |                                                                          |       | 1,274,085 |   |   | 2.82 | % |   | 158,261,602 |   |   | 749,842 |   |   | 1.92 | % |
| Noninterest-bearing                  deposits                                                                                                                                  |       |                                                                          | 30,053,833  |                                                                          |       |   |   |   |   |   |   | 28,479,072 |   |   |   |   |   |   |   |
|                                                                                                                                                                           |       |                                                                          | 213,390,154 |                                                                          |       |   |   |   |   |   |   | 186,740,674 |   |   |   |   |   |   |   |
| Other                  liabilities                                                                                                                                             |       |                                                                          | 777,205     |                                                                          |       |   |   |   |   |   |   | 870,443 |   |   |   |   |   |   |   |
| Stockholders’                  equity                                                                                                                                    |       |                                                                          | 23,969,469  |                                                                          |       |   |   |   |   |   |   | 21,619,322 |   |   |   |   |   |   |   |
| Total                  liabilities and stockholders equity                                                                                                                     |       | $                                                                             | 238,136,828 |                                                                          |       |   |   |   |   |   | $ | 209,230,439 |   |   |   |   |   |   |   |
| Net                  interest spread                                                                                                                                           |       |                                                                          |        |                                                                          |       |   |   |   | 4.11 | % |   |   |   |   |   |   |   | 4.34 | % |
| Net                  interest income                                                                                                                                           |       |                                                                          |        |                                                                          | $          | 2,613,401 |   |   |   |   |   |   |   | $ | 2,332,095 |   |   |   |   |
| Net                  margin on interest-earning assets                                                                                                                         |       |                                                                          |        |                                                                          |       |   |   |   | 4.66 | % |   |   |   |   |   |   |   | 4.74 | % |
| 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**

|                                                                             |   | **Three                  months ended****March                  31,****2006** | ** ** | **Three                  months ended****March                  31,****2005** | ** ** | **Year                  ended****December                  31,****2005** |   |
|----------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|--------|
| Balance                  at beginning of year                                    |   | $                                                                             | 1,649,420  |                                                                          | $          | 1,204,274                                                                |   | $ | 1,204,274 |   |
| Loan                  losses:                                                    |   |                                                                          |       |                                                                          |       |                                                                     |   |   |   |   |
| Commercial                                                                       |   |                                                                          | 3,268      |                                                                          |       | 0                                                                        |   |   | 0 |   |
| Mortgages                                                                        |   |                                                                          | 0          |                                                                          |       | 0                                                                        |   |   | 0 |   |
| Consumer                                                                         |   |                                                                          | 1,575      |                                                                          |       | 11,607                                                                   |   |   | 37,762 |   |
| Total                  loan losses                                               |   |                                                                          | 4,843      |                                                                          |       | 11,607                                                                   |   |   | 37,762 |   |
| Recoveries                  on loans previously charged off                      |   |                                                                          |       |                                                                          |       |                                                                     |   |   |   |   |
| Commercial                                                                       |   |                                                                          | 0          |                                                                          |       | 0                                                                        |   |   | 0 |   |
| Mortgages                                                                        |   |                                                                          | 0          |                                                                          |       | 0                                                                        |   |   | 0 |   |
| Consumer                                                                         |   |                                                                          | 777        |                                                                          |       | 142                                                                      |   |   | 2,908 |   |
| Total                  loan recoveries                                           |   |                                                                          | 777        |                                                                          |       | 142                                                                      |   |   | 2,908 |   |
| Net                  loan losses                                                 |   |                                                                          | 4,066      |                                                                          |       | 11,465                                                                   |   |   | 34,854 |   |
| Provision                  for loan losses charged to expense                    |   |                                                                          | 120,000    |                                                                          |       | 120,000                                                                  |   |   | 480,000 |   |
| Balance                  at end of year                                          |   | $                                                                             | 1,765,354  |                                                                          | $          | 1,312,809                                                                |   | $ | 1,649,420 |   |
| Allowance                  for loan losses to loans outstanding at end of period |   |                                                                          | 0.86       | %                                                                             |       | 0.71                                                                     | %      |   | 0.81 | % |

**Risk        Elements of Loan Portfolio**

|                                                     |   | **March                  31,****2006** |    | **December                  31,****2005** |   |
|----------------------------------------------------------|--------|----------------------------------------|---------|-------------------------------------------|--------|
| Non-Accrual                  Loans                       |   | $                                      | 10,421  |                                      | $      | 368,204 |   |
| Accruing                  Loans Past Due 90 Days or More |   |                                   | 288,883 |                                      |   | 15,336 |   |

----

**Deposits        and Other Interest-Bearing Liabilities**

**Short-term        Borrowings**

|                                                     |   | **March                  31, 2005** |       | **December                  31, 2005** |   |
|----------------------------------------------------------|--------|-------------------------------------|------------|----------------------------------------|--------|
|                                                     |   | **Amount**                          |       | **Rate**                               |   | **Amount** |   | **Rate** |   |
| Federal                  Home Loan Bank (daily re-price) |   | $                                   | 5,000,000  |                                   |   | 5.10 | % | $ | 2,000,000 |   |   | 4.44 | % |
| Retail                  Repurchase Agreements            |   |                                | 7,904,036  |                                   |   | 3.49 | % |   | 6,531,240 |   |   | 2.04 | % |
| Federal                  Funds Borrowed                  |   |                                | 560,000    |                                   |   | 5.25 | % |   | 2,720,000 |   |   | 2.63 | % |
| Total                                                    |   | $                                   | 11,251,240 |                                   |   |   |   | $ | 11,251,240  |   |   |   |   |

**Liquidity        and Capital Resources**

----

|                                           |   | **Actual** |   | **Minimum****Requirements** |   | **To                  be well****Capitalized** |   |
|------------------------------------------------|--------|------------|--------|-----------------------------|--------|------------------------------------------------|--------|
| **Tier                  1 risk-based capital** |   |       | 12.19  | %                           |   | 4.00                                           | %      |   | 6.00 | % |
| **Total                  risk-based capital**  |   |       | 13.09  | %                           |   | 8.00                                           | %      |   | 10.00 | % |
| **Leverage                  ratio**            |   |       | 10.07  | %                           |   | 4.00                                           | %      |   | 5.00 | % |

**Item        3.**
**Quantitative        and Qualitative Disclosures About Market Risk.**

|                                               |   | **Immediate                  Change in Rates** |   |
|----------------------------------------------------|--------|------------------------------------------------|--------|
|                                               |   | **+200****Basis                  Points**      |   | **+100****Basis                  Points** |   | **-100****Basis                  Points** |   | **-200****Basis                  Points** |   | **Policy****Limit** |   |
| **March                  31, 2006**                |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| %                  Change in Net Interest Income   |   |                                           | 4.04   | % |   | 2.08 | % |   | -2.57 | % |   | -                  6.31 | % |   | +10 | % |
| %                  Change in Fair Value of Capital |   |                                           | 8.80   | % |   | 4.47 | % |   | -5.01 | % |   | -10.52 | % |   | +20 | % |
| **December                  31, 2005**             |   |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| %                  Change in Net Interest Income   |   |                                           | 4.17   | % |   | 2.12 | % |   | -2.94 | % |   | -                  7.41 | % |   | +10 | % |
| %                  Change in Fair Value of Capital |   |                                           | 6.42   | % |   | 3.27 | % |   | -3.77 | % |   | -                  7.96 | % |   | +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.**

|   |  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-KSB 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 August 10, 2005) |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  31.1 | Certifications of the CEO/CFO pursuant                to                Section 302 of the Sarbanes-Oxley Act of 2002 (filed                herewith) |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  32.1 | Certifications of the CEO/ CFO pursuant                to                Section 906 of the Sarbanes-Oxley Act of 2002 (furnished                herewith) |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

**SIGNATURES**

** **

**PEOPLES        BANCORP, INC.**

|                                         |                                                                                    |                                        |
|----------------------------------------------|-----------------------------------------------------------------------------------------|---------------------------------------------|
|                                         |                                                                                    |
|                                    |                                                                               |                                   |
| Date: May                11, 2006  | By:                                                                           | /s/ Thomas                G. Stevenson |
|                                         | Thomas G. Stevenson President/Chief Executive Officer& Chief Financial Officer |
|                                         |                                                                                    |

----

**EXHIBIT        INDEX**

|  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-KSB 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 August 10,                2005) |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  31.1 | Certifications of the CEO/CFO pursuant                to                Section 302 of the Sarbanes-Oxley Act of 2002 (filed                herewith) |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|  32.1  | Certifications of the CEO/ CFO pursuant                to                Section 906 of the Sarbanes-Oxley Act of 2002 (furnished                herewith) |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

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