SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

   For the Quarterly Period Ended                       Commission file
            March 31, 2007                                 000-20616

                          PEOPLES BANCORPORATION, INC.
             (Exact name of registrant as specified in its charter)

       South Carolina                                    57-09581843
     -------------------------------                   -------------------
     (State or other jurisdiction of                   (I.R.S. Employer
      incorporation or organization)                   Identification No.)

               1818 East Main Street, Easley, South Carolina           29640
               ---------------------------------------------        ----------
               (Address of principal executive offices)             (Zip Code)

                  Registrant's telephone number: (864) 859-2265

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  Registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                             Yes [X] No [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act.  (Check
one):

  Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

                             Yes [ ] No [X]

The number of outstanding shares of the issuer's $1.11 par value common stock as
of May 7, 2007 was 6,716,761.




<PAGE>


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements


         Peoples Bancorporation, Inc. and Subsidiaries
                  Consolidated Balance Sheets
         (Dollars in thousands except per share data)
<TABLE>
<CAPTION>
                                                                                          March 31,      March 31,      December 31,
                                                                                            2007           2006             2006
                                                                                          Unaudited      Unaudited         Audited
                                                                                          ---------      ---------         -------
ASSETS
<S>                                                                                       <C>             <C>              <C>
CASH AND DUE FROM BANKS ...........................................................       $  10,603       $  10,685        $  10,819
INTEREST-BEARING DEPOSITS IN OTHER BANKS ..........................................             494             422              108
FEDERAL FUNDS SOLD ................................................................           1,323           1,691           12,514
                                                                                          ---------       ---------        ---------
     Total cash and cash equivalents ..............................................          12,420          12,798           23,441
SECURITIES
     Available for sale ...........................................................          77,195          58,397           81,686
     Held to maturity (market value of $13,244, $12,041 and $13,382) ..............          13,337          12,220           13,500
     Other investments, at cost ...................................................           2,562           3,200            4,283
LOANS-less allowance for loan losses of $4,077, $4,026 and $4,070 .................         361,771         377,520          354,011
PREMISES AND EQUIPMENT, net of accumulated depreciation and amortization ..........          11,152          11,093           11,117
ACCRUED INTEREST RECEIVABLE .......................................................           2,705           2,284            3,043
CASH SURRENDER VALUE OF LIFE INSURANCE ............................................          11,036           9,488           10,934
OTHER ASSETS ......................................................................           1,653           2,289            1,799
                                                                                          ---------       ---------        ---------
         TOTAL ASSETS .............................................................       $ 493,831       $ 489,289        $ 503,814
                                                                                          =========       =========        =========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
DEPOSITS
     Noninterest-bearing ..........................................................       $  54,666       $  58,730        $  54,993
     Interest-bearing .............................................................         352,855         337,893          330,052
                                                                                          ---------       ---------        ---------
         Total deposits ...........................................................         407,521         396,623          385,045
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS .......................................          20,942          30,962           18,368
FEDERAL FUNDS PURCHASED ...........................................................             460               -                -
NOTES PAYABLE TO FEDERAL HOME LOAN BANK ...........................................          14,000          16,500           50,000
ACCRUED INTEREST PAYABLE ..........................................................           3,079           1,939            2,926
OTHER LIABILITIES .................................................................             556             935            1,411
                                                                                          ---------       ---------        ---------
         Total Liabilities ........................................................         446,558         446,959          457,750
                                                                                          ---------       ---------        ---------
SHAREHOLDERS' EQUITY
Common stock - 15,000,000 shares authorized, $1.11
     Par value per share, 6,696,674 shares, 6,267,580 shares
     and 6,666,568 shares outstanding, respectively ...............................           7,433           6,957            7,400
Additional paid-in capital ........................................................          38,722          34,823           38,614
Retained earnings .................................................................             970           1,277               32
Accumulated other comprehensive income (loss) .....................................             148            (727)              18
                                                                                          ---------       ---------        ---------
         Total Shareholders' Equity ...............................................          47,273          42,330           46,064
                                                                                          ---------       ---------        ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........................................       $ 493,831       $ 489,289        $ 503,814
                                                                                          =========       =========        =========
</TABLE>


See Notes to Unaudited  Consolidated  Financial Statements which are an integral
part of these statements.


                                       1
<PAGE>

<TABLE>
<CAPTION>
          Peoples Bancorporation, Inc. and Subsidiaries
             Consolidated Statements of Income                                                               (Unaudited)
       (Dollars in thousands except per share data)                                                       Three Months Ended
                                                                                                               March 31,
                                                                                                               ---------
                                                                                                       2007                 2006
                                                                                                       ----                 ----
INTEREST INCOME
<S>                                                                                                <C>                    <C>
   Interest and fees on loans ........................................................             $    7,255             $    6,937
   Interest on securities
       Taxable .......................................................................                    738                    495
       Tax-exempt ....................................................................                    351                     87
   Interest on federal funds .........................................................                     39                     18
                                                                                                   ----------             ----------
Total interest income ................................................................                  8,383                  7,537
                                                                                                   ----------             ----------
INTEREST EXPENSE
   Interest on deposits ..............................................................                  3,207                  2,331
   Interest on federal funds purchased and securities
       sold under repurchase agreements ..............................................                     88                    184
Interest on notes payable Federal Home Loan Bank .....................................                    397                    246
                                                                                                   ----------             ----------
Total interest expense ...............................................................                  3,692                  2,761
                                                                                                   ----------             ----------
     Net interest income .............................................................                  4,691                  4,776

PROVISION FOR LOAN LOSSES ............................................................                    150                    237
                                                                                                   ----------             ----------
Net interest income after provision for loan losses ..................................                  4,541                  4,539
                                                                                                   ----------             ----------
NON-INTEREST INCOME
   Service charges on deposit accounts ...............................................                    416                    464
   Customer service fees .............................................................                     43                     55
   Mortgage banking ..................................................................                    124                     78
   Brokerage services ................................................................                     27                     77
   Bank owned life insurance .........................................................                    117                     99
   Other noninterest income ..........................................................                    292                    127
   Gain(loss) on sale of assets acquired in settlement of loans ......................                      7                    128
                                                                                                   ----------             ----------
                                                                                                        1,026                  1,028
                                                                                                   ----------             ----------
NON-INTEREST EXPENSES
   Salaries and benefits .............................................................                  2,283                  2,258
   Occupancy .........................................................................                    208                    197
   Equipment .........................................................................                    316                    363
   Marketing and advertising .........................................................                    113                    113
   Communications ....................................................................                     65                     61
   Printing and supplies .............................................................                     45                     43
   Bank paid loan costs ..............................................................                     48                     67
   Director fees .....................................................................                    114                     97
   ATM/Debit card expenses ...........................................................                     78                     73
   Legal and professional fees .......................................................                     78                    212
   Other operating expenses ..........................................................                    467                    396
                                                                                                   ----------             ----------
             Total noninterest expenses ..............................................                  3,815                  3,880
                                                                                                   ----------             ----------
   Income before income taxes ........................................................                  1,752                  1,687
PROVISION FOR INCOME TAXES ...........................................................                    480                    506
                                                                                                   ----------             ----------
   Net income ........................................................................             $    1,272             $    1,181
                                                                                                   ==========             ==========
INCOME PER COMMON SHARE*:
   BASIC .............................................................................             $     0.19             $     0.18
                                                                                                   ==========             ==========
   DILUTED ...........................................................................             $     0.19             $     0.18
                                                                                                   ==========             ==========
WEIGHTED AVERAGE COMMON SHARES*:
   BASIC .............................................................................              6,695,335              6,567,030
                                                                                                   ==========             ==========
   DILUTED ...........................................................................              6,708,535              6,647,510
                                                                                                   ==========             ==========
DIVIDENDS PAID PER COMMON SHARE ......................................................             $     0.05             $     0.05
                                                                                                   ==========             ==========
</TABLE>

* 2006 amounts restated for 5% stock dividend declared in December, 2006.

See Notes to Unaudited  Consolidated  Financial Statements which are an integral
part of these statements.

                                       2
<PAGE>

                 Peoples Bancorporation, Inc. and Subsidiaries
           Consolidated Statements of Changes in Shareholders' Equity
               for the Three months ended March 31, 2006 and 2007
                             (Dollars in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                                          Accumulated
                                                             Common stock        Additional                  other         Total
                                                             ------------         paid-in      Retained  comprehensive shareholders'
                                                        Shares         Amount     capital      earnings   income(loss)    equity
                                                        ------         ------     -------      --------   ------------    ------
<S>                                                    <C>          <C>          <C>          <C>           <C>           <C>
Balance, December 31, 2005 ........................    6,245,356    $   6,932    $  34,684    $     408     $    (853)    $  41,171
Net income ........................................            -            -                     1,181             -         1,181
Other comprehensive income, net of tax:
   Unrealized holding losses on
     securities available for sale,
     net of income taxes of $16 ...................            -            -            -            -           126           126
                                                                                                                          ---------
Comprehensive income ..............................                                                                           1,307
Cash dividends ....................................            -            -            -         (312)            -          (312)
Proceeds from stock options exercised .............       22,224           25          124            -             -           149
Stock-based compensation ..........................            -            -           15            -             -            15
                                                       ---------    ---------    ---------    ---------     ---------     ---------
Balance, March 31, 2006 ...........................    6,267,580    $   6,957    $  34,823    $   1,277     $    (727)    $  42,330
                                                       =========    =========    =========    =========     =========     =========


Balance, December 31, 2006 ........................    6,666,568    $   7,400    $  38,614    $      32     $      18     $  46,064
Net income ........................................            -            -                     1,272             -         1,272
Other comprehensive income, net of tax:
   Unrealized holding losses on
     securities available for sale,
     net of income taxes of $61 ...................            -            -            -            -           130           130
                                                                                                                          ---------
Comprehensive income ..............................                                                                           1,402
Cash dividends ....................................            -            -            -         (334)            -          (334)
Proceeds from stock options exercised .............       30,106           33           92            -             -           125
Stock-based compensation ..........................            -            -           16            -             -            16
                                                       ---------    ---------    ---------    ---------     ---------     ---------
Balance, March 31, 2006 ...........................    6,696,674    $   7,433    $  38,722    $     970     $     148     $  47,273
                                                       =========    =========    =========    =========     =========     =========
</TABLE>





See Notes to Unaudited  Consolidated  Financial Statements which are an integral
part of these statements.


                                       3
<PAGE>


<TABLE>
<CAPTION>
              Peoples Bancorporation, Inc. and Subsidiaries
                  Consolidated Statements of Cash Flows                                                         (Unaudited)
                         (Dollars in thousands)                                                             Three months Ended
                                                                                                                 March 31,
                                                                                                                 ---------
                                                                                                          2007                 2006
                                                                                                          ----                 ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                                    <C>                 <C>
   Net income ..............................................................................           $  1,272            $  1,181
   Adjustments to reconcile net income to net cash provided by operating activities:
   Gain on sale of premises and equipment ..................................................               (169)                 (3)
   Gain on sale of assets acquired in settlement of loans ..................................                 (7)               (128)
   Provision for loan losses ...............................................................                150                 237
   Provision (benefit) from deferred income taxes ..........................................               (198)                  -
   Depreciation and amortization ...........................................................                262                 289
   Amortization and accretion (net) of premiums and discounts on securities ................                 13                  36
   Stock-based compensation ................................................................                 16                  15
   Decrease in accrued interest receivable .................................................                338                 157
   Decrease in other assets ................................................................                258               1,357
   Increase (decrease) in accrued interest payable .........................................                153                (342)
   Increase (decrease) in other liabilities ................................................               (855)                 35
                                                                                                       --------            --------
     Net cash provided by operating activities .............................................              1,233               2,834
                                                                                                       --------            --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of securities held to maturity ................................................                  -              (1,385)
   Purchases of securities available for sale ..............................................                  -              (2,314)
   Sales (purchases) of other investments ..................................................              1,721              (1,003)
   Proceeds from principal pay-downs on securities available for sale ......................              1,692                 852
   Proceeds from the maturities and calls of securities available for sale .................              3,000               8,250
   Proceeds from the maturity of securities held to maturity ...............................                140                   -
   Investment in bank owned life insurance .................................................               (102)                (85)
   Proceeds from the sale of other real estate owned .......................................                 32                 128
   Net increase in loans ...................................................................             (7,910)             (4,116)
   Proceeds from the sale of premises and equipment ........................................                498                  30
   Purchase of premises and equipment ......................................................               (626)               (902)
                                                                                                       --------            --------
     Net cash used in investing activities .................................................             (1,555)               (545)
                                                                                                       --------            --------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in deposits ................................................................             22,476               6,274
   Net increase (decrease) in securities sold under repurchase agreements ..................              2,574                (774)
   Net increase (decrease) in federal funds purchased ......................................                460              (4,039)
   Net decrease in notes payable to Federal Home Loan Bank .................................            (36,000)             (1,000)
   Proceeds from the exercise of stock options .............................................                125                 149
   Cash dividend ...........................................................................               (334)               (312)
                                                                                                       --------            --------
     Net cash provided by (used in) financing activities ...................................            (10,699)                298
                                                                                                       --------            --------
     Net increase (decrease) in cash and cash equivalents ..................................            (11,021)              2,587
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .............................................             23,441              10,211
                                                                                                       --------            --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ...................................................           $ 12,420            $ 12,798
                                                                                                       ========            ========

CASH PAID FOR
     Interest ..............................................................................           $  3,539            $  3,103
                                                                                                       ========            ========
     Income Taxes ..........................................................................           $     27            $    213
                                                                                                       ========            ========
</TABLE>

See Notes to Unaudited  Consolidated  Financial Statements which are an integral
part of these statements.



                                       4
<PAGE>

                  PEOPLES BANCORPORATION, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      A summary of these  policies is included in the 2006 Annual Report on Form
10-K and incorporated herein by reference.

STATEMENT OF CASH FLOWS

      Cash  includes  currency  and coin,  cash items in process of  collection,
amounts due from banks and  federal  funds sold.  All have  maturities  of three
months or less.

COMMON STOCK

     The Board of Directors  declared a cash  dividend of $0.05 per common share
to shareholders of record March 16, 2007, payable March 30, 2007.

EARNINGS PER SHARE

     Statement of Financial  Account Standards  ("SFAS") No. 128,  "Earnings per
Share" requires that the Company present basic and diluted net income per common
share.  The assumed  conversion of stock options creates the difference  between
basic and  diluted  net  income per share.  Income  per share is  calculated  by
dividing net income by the weighted average number of common shares  outstanding
for each  period  presented.  The  weighted  average  number  of  common  shares
outstanding  for basic net income per common  share for the three  months  ended
March 31, 2007 and 2006 was 6,695,335 and 6,567,030,  respectively. The weighted
average  number of common shares  outstanding  for diluted net income per common
share was  6,708,535 and 6,647,510 for the three months ended March 31, 2007 and
2006. Weighted average shares in 2006 have been restated to reflect the 5% stock
dividend declared in December, 2006.

STOCK-BASED COMPENSATION

     On  January  1,  2006,  the  Company  adopted  the fair  value  recognition
provisions  of  Financial  Accounting  Standards  Board  ("FASB")  Statement  of
Financial Accounting Standards ("SFAS") No. 123(R),  "Accounting for Stock-Based
Compensation,"  to account for compensation  costs under its stock option plans.
Compensation cost is recognized from the adoption date forward for all new stock
options  granted and for any  outstanding  unvested  awards as if the fair value
method had been applied to those awards as of the date of grant.

     The Company has three stock  option  plans,  the "1993  Employee  Incentive
Stock Option Plan," the "1997 Non-Employee Directors Stock Option Plan," and the
"2004 Stock  Option  Plan." The "1993  Employee  Incentive  Stock  Option  Plan"
expired in 2003,  but options to purchase  30,747  shares  remain  available for
exercise  under  this plan.  Under the "2004  Stock  Option  Plan," the Board of


                                       5
<PAGE>

Directors may grant  options to officers and employees to purchase  common stock
of the  Company  at prices  not less than 100  percent  of the fair value of the
stock on the date of  grant.  The  outstanding  options  become  exercisable  in
various  increments  beginning  on the date of grant and expiring ten years from
the date of grant.  Under the "1997  Non-Employee  Directors Stock Option Plan,"
non-employee  directors  of the Company or one the Banks are granted  options to
purchase  500  shares  of common  stock  for each year  served on the board to a
maximum  of 5,000 per  director.  The  option  price  shall not be less than 100
percent  of the fair  value of the  stock on the  grant  date.  The  outstanding
options  become  exercisable  on the grant date and expire at the earlier of the
end of the director's  term or ten years from the grant date. At March 31, 2007,
an aggregate of 370,645 shares were reserved for issuance on exercise of options
under  all these  plans.  During  the first  three  months of 2007,  options  to
purchase 9,617 shares were granted with a weighted  average fair value of $10.86
per share. The following is a summary of the status of the Company's plans as of
March 31, 2007 and changes during the three months ended March 31, 2007.


                                                                      Weighted
                                                                      Average
                                                                      Exercise
                                                       Shares          Price
                                                       ------          -----

Outstanding, December 31, 2006 ..................     199,084         $    8.88
Granted .........................................       9,617         $   10.86
Exercised .......................................     (30,106)        $    4.17
Forfeited .......................................           -         $       -
                                                      -------
Outstanding, March 31, 2007 .....................     178,595         $    9.78
                                                      =======

Options Exercisable, March 31, 2007 .............     135,103
                                                      =======


     The "1997 Non-Employee Directors Stock Option Plan" terminated on April 14,
2007, and no further  options may be granted under the plan (though  outstanding
options may still be exercised  until their  expiration  dates).  In order to be
able to  continue to award  options to our  non-employee  directors  on the same
terms as those provided by the "1997 Non-Employee  Directors Stock Option Plan,"
our  Board  is  proposing  that the  shareholders  adopt  the 2007  Non-Employee
Directors Stock Option Plan at the Annual  Meeting.  Further  information  about
this new plan and the  proposal to adopt it is  provided in our Proxy  Statement
for the 2007  Annual  Meeting of  Shareholders  under the caption  "Proposal  to
Approve the 2007 Non-Employee Director Stock Option Plan."


                                       6
<PAGE>

MANAGEMENT'S OPINION

     The accompanying  unaudited  consolidated  financial  statements of Peoples
Bancorporation, Inc. have been prepared in accordance with accounting principles
generally  accepted  in the  United  States of  America  for  interim  financial
information  and with the  instructions to Form 10-Q according to guidelines set
forth  by the  Securities  and  Exchange  Commission.  Accordingly,  they do not
include all  information and notes required by accounting  principles  generally
accepted in the United  States of America  for  complete  financial  statements.
However,  in the opinion of management,  all  adjustments  (consisting of normal
recurring adjustments)  considered necessary for the fair presentation have been
included.  The results of operations for any interim period are not  necessarily
indicative of the results to be expected for an entire year.







                                       7
<PAGE>


Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

     The following  discussion and analysis  should be read in conjunction  with
the consolidated financial statements and related notes and with the statistical
information  and  financial  data  appearing  in this report as well as the 2006
Annual  Report  of  Peoples  Bancorporation,  Inc.  on  Form  10-K.  Results  of
operations for the  three-month  period ended March 31, 2007 are not necessarily
indicative of the results to be attained for any other period.

Forward-Looking Statements

     From time to time,  including  in this  report,  the  Company  may  publish
forward-looking  statements  relating to such matters as  anticipated  financial
performance,  business prospects,  technological developments,  new products and
similar   matters.   All   statements   that  are  not   historical   facts  are
"forward-looking  statements."  Words such as "estimate,"  "project,"  "intend,"
"expect,"  "believe,"  "anticipate,"  "plan," and similar  expressions  identify
forward-looking statements. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking  statements.  In order to comply with
terms of the safe  harbor,  the  Company  notes that a variety of factors  could
cause the Company's actual results and experience to differ  materially from the
anticipated   results  or  other   expectations   expressed  in  the   Company's
forward-looking  statements.  The risks and  uncertainties  that may  affect the
operations,  performances,  development  and results of the  Company's  business
include,  but are not limited to, the following:  risks from changes in economic
and industry  conditions;  changes in interest  rates;  risks inherent in making
loans  including  repayment  risks  and  value of  collateral;  adequacy  of the
allowance for loan losses; dependence on senior management; and recently-enacted
or proposed  legislation.  Statements  contained  in this report  regarding  the
demand for Peoples  Bancorporation's  products and services,  changing  economic
conditions,  interest rates, consumer spending and numerous other factors may be
forward-looking statements and are subject to uncertainties and risks.

     The Company  undertakes  no  obligation  to  publicly  update or revise any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.  In light of these risks,  uncertainties,  and assumptions,
the forward-looking events discussed in this report might not occur.

Critical Accounting Policies

     Peoples Bancorporation, Inc. (the "Company") has adopted various accounting
policies that govern the application of accounting principles generally accepted
in the United States of America in the  preparation  of the Company's  financial
statements.  The significant accounting policies of the Company are described in
Item 8, Note 1 to the  Consolidated  Financial  Statements  included in the 2006
Annual Report on Form 10-K of Peoples Bancorporation, Inc.

     Certain accounting policies involve  significant  judgments and assumptions
by  management  that have a  material  impact on the  carrying  value of certain


                                       8
<PAGE>

assets and  liabilities;  management  considers such  accounting  policies to be
critical accounting  policies.  The judgments and assumptions used by management
are based on historical  experience and other factors,  which are believed to be
reasonable under the  circumstances.  Because of the nature of the judgments and
assumptions made by management, actual results could differ from these judgments
and estimates and such differences  could have a material impact on the carrying
values of assets and liabilities and the results of operations of the Company.

     Of  these  significant  accounting  policies,  the  Company  considers  its
policies  regarding the allowance  for loan losses (the  "Allowance")  to be its
most  critical  accounting  policy due to the  significant  degree of management
judgment  involved in determining  the amount of the Allowance.  The Company has
developed  policies and  procedures for assessing the adequacy of the Allowance,
recognizing  that this process  requires a number of  assumptions  and estimates
with respect to its loan portfolio. The Company's assessments may be impacted in
future  periods by  changes in  economic  conditions,  the impact of  regulatory
examinations,  and the discovery of information with respect to borrowers, which
is not  known to  management  at the time of the  issuance  of the  consolidated
financial statements.  Refer to the discussion under Provision and Allowance for
Loan Losses, Loan Loss Experience section of the Company's 2006 Annual Report on
Form  10-K  and the  "Balance  Sheet  Review--Allowance  for  Loan  Losses"  and
"Earnings  Performance--Provision  for Loan  Losses"  sections of this report on
Form 10-Q for a detailed  description  of the Company's  estimation  process and
methodology related to the Allowance.




                                       9
<PAGE>


Overview

     The Company is a financial  holding  company with three  wholly-owned  bank
subsidiaries: The Peoples National Bank, Easley, South Carolina, a national bank
which commenced business  operations in August 1986; Bank of Anderson,  National
Association,  Anderson, South Carolina, a national bank which commenced business
operations in September 1998; and, Seneca National Bank, Seneca, South Carolina,
a national bank which commenced business  operations in February 1999 (sometimes
referred to herein as the "Banks").

     Currently,  the Company engages in no significant operations other than the
ownership  of its  three  subsidiaries  and the  support  thereof.  The  Company
conducts  its  business  from  seven   full-service   banking  offices  and  one
loan-production office located in the Upstate Area of South Carolina.





                                       10
<PAGE>


                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EARNINGS PERFORMANCE

Overview

     The  consolidated  Company's  net income for the first  quarter of 2007 was
$1,272,000  or $0.19 per  diluted  share  compared  to  $1,181,000  or $0.18 per
diluted  share for the first  quarter of 2006,  an  increase of $91,000 or 7.7%.
Return on average  equity for the three  months  ended March 31, 2007 was 11.02%
compared to 11.23% for the three months ended March 31, 2006.  Return on average
assets for the three months ended March 31, 2007 was 1.04% compared to 0.98% for
the three months ended March 31, 2006.

Interest Income, Interest Expense and Net Interest Income

     The largest  component of the  Company's  revenue is interest  income.  Net
interest income,  which is the difference  between the interest earned on assets
and the interest paid for the  liabilities  used to fund those assets,  measures
the gross  profit  from  lending  and  investing  activities  and is the primary
contributor to the Company's earnings.  Net interest income before provision for
loan losses  decreased  $85,000,  or 1.8%, to  $4,691,000  for the quarter ended
March 31, 2007 compared to $4,776,000  for the quarter ended March 31, 2006. The
Company's  net  interest  margin was 4.14% for the quarter  ended March 31, 2007
compared to 4.25% for the  quarter  ended March 31,  2006.  The  decrease in the
Company's net interest  income and its net interest margin is due to compression
of the margin  resulting  largely  from an  increase  in the  Company's  cost of
interest-bearing funds.

     The  Company's  total  interest  income  for the first  quarter of 2007 was
$8,383,000  compared to $7,537,000 for the first quarter of 2006, an increase of
$846,000,  or 11.2%.  Interest and fees on loans, the largest component of total
interest income,  increased  $318,000 in the first quarter of 2007 to $7,255,000
compared to $6,937,000  for the first quarter of 2006, an increase of 4.6%.  The
increase in interest and fees on loans for the three-month  period was primarily
due to higher interest rates and fees charged.  Interest on taxable  securities,
the second largest component of total interest income, increased $243,000 in the
first quarter of 2007 to $738,000  compared to $495,000 for the first quarter of
2006, an increase of 49.1%.  The increase in interest on taxable  securities for
the  three-month  period was primarily due to higher  average  balances in these
types of earning assets.

      The  Company's  total  interest  expense for the first quarter of 2007 was
$3,692,000  compared to $2,761,000 for the first quarter of 2006, an increase of
$931,000, or 33.7%. Interest expense on deposits, the largest component of total
interest expense,  increased $876,000 in the first quarter of 2007 to $3,207,000
compared to $2,331,000 for the first quarter of 2006, an increase of 37.6%.  The
increase in interest expense on deposits for the three-month period ending March
31, 2007 compared to the same period in 2006 is largely  attributable  to higher
interest  rates  paid on these  accounts  as well as  higher  average  balances.
Interest on notes payable to the Federal Home Loan Bank of Atlanta ("FHLB"), the


                                       11
<PAGE>

second  largest  component of total interest  expense,  increased  $151,000,  or
61.4%,  to  $397,000  for the three  months  ended  March 31,  2007  compared to
$246,000  for the three months ended March 31,  2006,  largely  attributable  to
higher market interest rates and higher average borrowings.  Interest on federal
funds  purchased and  securities  sold under  repurchase  agreements,  the third
largest component of total interest  expense,  decreased  $96,000,  or 52.2%, to
$88,000 in the first  quarter of 2007 compared to $184,000 for the first quarter
of 2006.  This  decrease  is  attributable  to lower  average  balances in these
accounts.

Provision for Loan Losses

     The provision for loan losses charged to operations during the three months
ended March 31, 2007 was  $150,000  compared  to $237,000  for the three  months
March 31,  2006,  a decrease of $87,000 or 36.7%.  The changes in the  Company's
provision  for  loan  losses  for  the  first  quarter  of  2007  are  based  on
management's evaluation of the Company's overall credit quality and its estimate
of loan losses  inherent in the loan  portfolio.  See  "BALANCE  SHEET  REVIEW -
Allowance for Loan Losses."

Non-interest Income

     Non-interest  income decreased $2,000, or 0.2%, to $1,026,000 for the first
quarter of 2007  compared to $1,028,000  for the first quarter of 2006.  Service
fees  on  deposit  accounts,  the  largest  component  of  non-interest  income,
decreased $48,000,  or 10.3%, to $416,000 for the first quarter of 2007 compared
to $464,000  for the first  quarter of 2006.  This  decrease in service  fees on
deposit   accounts   is   largely   attributable   to  a   smaller   number   of
transaction-based deposit accounts.

     Gain (loss) on the sale of assets acquired in settlement of loans decreased
$121,000  when  comparing  the first quarter of 2007 to the same period in 2006.
Seven  properties  were sold during the first  quarter of 2006 for a net gain of
$128,000 and a single  property  was sold for a gain of $7,000  during the first
quarter of 2007.

     Mortgage banking income increased from $78,000 in the first quarter of 2006
to $124,000 in the first quarter of 2007, an increase of $46,000, or 59.0%. This
increase  is due to an  increase  in the  volume of  residential  mortgage  loan
originations.

     Other  noninterest  income  increased  $165,000,  or 130.0%,  from $127,000
during the first quarter of 2006 to $292,000 for the first quarter of 2007. This
increase is largely  attributable to a $169,000 gain on the sale of a portion of
a  parcel  of land  acquired  in 2005 for a new  branch  office  of The  Peoples
National Bank.  Construction of the facility has begun on the remaining  portion
of the land and is expected to be completed during the fourth quarter of 2007.

     There were no gains  realized on the sale of securities  available for sale
during the first quarters of 2007 or 2006.


                                       12
<PAGE>

Non-interest Expense

      Total non-interest  expense decreased $65,000,  or 1.7%, to $3,815,000 for
the  first  quarter  of 2007 from  $3,880,000  for the  first  quarter  of 2006.
Salaries and benefits, the largest component of non-interest expense,  increased
$25,000,  or 1.1%, to $2,283,000  for the first quarter of 2007 from  $2,258,000
for the first quarter of 2006.

     Occupancy and furniture and equipment expenses decreased $36,000,  or 6.4%,
to  $524,000  in the first  quarter of 2007  compared  to  $560,000 in the first
quarter of 2006.

     Legal and professional fees decreased $134,000, or 63.2%, to $78,000 in the
first quarter of 2007  compared to $212,000 in the first  quarter of 2006.  This
decrease is largely  attributable  to legal fees associated with the termination
of a former employee of the Company during the first quarter of 2006.

     Director  fees  increased  $17,000,  or 17.5%,  to  $114,000  for the first
quarter of 2007  compared  to  $97,000  during  the first  quarter of 2006.  The
increase is attributable to an increase in fees paid for committee  meetings and
the  resumption of the payment of director  fees at the Bank of Anderson,  which
were suspended during the first quarter of 2006.

     Bank paid loan costs decreased  $19,000,  or 28.4%, to $48,000 in the first
quarter of 2007 compared to $67,000 in the first  quarter of 2006.  The decrease
is primarily due to a decrease in lending activity.

     All other  operating  expenses  were  $467,000 in the first quarter of 2007
compared to $396,000 for the first quarter of 2006,  an increase of $71,000,  or
17.9%, due to growth in normal recurring operating expenses.


                                       13
<PAGE>

BALANCE SHEET REVIEW

Loans

     Outstanding  loans  represent  the largest  component of earning  assets at
79.4% of total  earning  assets.  As of March 31,  2007,  the Company held total
gross loans outstanding of $365,848,000 an increase of $7,767,000, or 2.2%, from
$358,081,000  in total  gross  loans  outstanding  at  December  31,  2006 and a
decrease  of  $15,698,000,  or 4.1%,  from  $381,546,000  in total  gross  loans
outstanding  at March 31,  2006.  The decrease in loans from March 31, 2006 when
compared to March 31, 2007 is largely  attributable  to a  tightening  of credit
standards and a change in lending  philosophy at Bank of Anderson,  N.A. coupled
with a softening in loan demand at all three  subsidiary banks during the second
half of 2006.  The  increase in  outstanding  loans since  December  31, 2006 is
reflective  of an increase in overall loan  demand,  coupled with an increase in
marketing efforts. The following table summarizes outstanding loans by type:

<TABLE>
<CAPTION>
Loan Portfolio Composition                                                                       March 31,             December 31,
                                                                                                 ---------             ------------
(Dollars in Thousands)                                                                      2007             2006           2006
                                                                                            ----             ----           ----
                                                                                                 (Unaudited)              (Audited)

<S>                                                                                       <C>              <C>            <C>
Commercial  and  Industrial  - not  secured  by  real estate ....................         $ 44,766         $ 40,602       $ 38,505
Commercial and Industrial - secured by real estate ..............................           94,503           92,733         90,298
Residential real estate - mortgage ..............................................           98,524          107,186         97,835
Residential real estate - construction ..........................................          114,082          123,341        117,465
Consumer loans ..................................................................           13,973           17,684         13,978
                                                                                          --------         --------       --------
     Gross Loans ................................................................         $365,848         $381,546       $358,081
                                                                                          ========         ========       ========
</TABLE>

     The interest rates charged on loans vary with the degree of risk, maturity,
and amount of the loan. Competitive pressures,  money market rates, availability
of funds, and government  regulation also influence  interest rates. The average
yield on the Company's loans for the three months ended March 31, 2007 was 8.05%
compared to 7.44% for the three months ended March 31, 2006. The Federal Reserve
increased  the federal funds target rate 50 basis points from March 2006 to June
2006,  and has not  increased  the rate since.  A large portion of the Company's
adjustable  rate  loans,  which  constitute  approximately  49.3%  of  the  loan
portfolio,  reprice almost immediately  following an interest-rate change by the
Federal Reserve.

      The Company's loan portfolio consists  principally of residential mortgage
loans,  commercial  loans, and consumer loans.  Substantially all of these loans
are to borrowers located in South Carolina and are concentrated in the Company's
market areas.

      The Company's real estate loans are primarily construction loans and other
loans secured by real estate,  both commercial and  residential,  located within
the  Company's  trade areas.  The Company does not  actively  pursue  long-term,
fixed-rate  mortgage  loans for  retention in its loan  portfolio.  The Banks do
employ  mortgage loan  originators who originate such loans that are pre-sold at
origination to third parties.

      The Company's  commercial lending activity is directed principally towards
businesses  whose demand for funds falls within each Bank's legal lending limits


                                       14
<PAGE>

and which are potential  deposit  customers of the Banks. This category of loans
includes loans made to individuals, partnerships, and corporate borrowers, which
are obtained for a variety of business purposes.  Particular  emphasis is placed
on loans to small- and medium-sized  businesses.  The Company's commercial loans
are spread  throughout  a variety of  industries,  with no  industry or group of
related industries  accounting for a significant  portion of the commercial loan
portfolio.  Commercial loans are made on either a secured or an unsecured basis.
When taken,  security  usually  consists of liens on  inventories,  receivables,
equipment,  furniture and  fixtures.  Unsecured  commercial  loans are generally
short-term with emphasis on repayment strengths and low debt-to-worth ratios. At
March 31, 2007,  approximately  $1,735,000,  or 3.9%, of  commercial  loans were
unsecured.

     The  Company's   direct   consumer  loans  consist   primarily  of  secured
installment loans to individuals for personal,  family, and household  purposes,
including automobile loans to individuals and pre-approved lines of credit.

     Management believes that the loan portfolio is adequately diversified.  The
Company has no foreign  loans or loans for highly  leveraged  transactions.  The
Company has few if any agricultural loans.

Allowance for Loan Losses

     The allowance for loan losses at March 31, 2007 was $4,077,000, or 1.11% of
loans outstanding,  compared to $4,070,000,  or 1.14% of loans  outstanding,  at
December 31, 2006, and to $4,026,000,  or 1.06% of loans  outstanding,  at March
31, 2006.  The allowance for loan losses is based upon  management's  continuing
evaluation of the  collectibility of past-due loans based on the historical loan
loss  experience  of the Company,  current  economic  conditions  affecting  the
ability  of all  borrowers  to  repay,  the  volume  of loans,  the  quality  of
collateral  securing   non-performing  and  problem  loans,  and  other  factors
deserving recognition.

      At March 31, 2007 the Company had $914,000 in non-accruing loans, $421,000
in  restructured  loans,  no loans  more  than  ninety  days  past due and still
accruing  interest,  and $239,000 in Other Real Estate  Owned.  This compares to
$993,000 in non-accruing  loans,  $421,000 in restructured  loans, no loans more
than ninety days past due and still  accruing  interest,  and  $271,000 in other
real  estate  owned at  December  31,  2006.  At March 31,  2006 the Company had
$1,715,000 in non-accruing loans,  $892,000 in restructured loans, no loans more
than ninety days past due and still  accruing  interest,  and  $751,000 in Other
Real Estate Owned.  Non-performing loans at March 31, 2007 consisted of $586,000
in mortgage loans,  $314,000 in commercial  loans and $14,000 in consumer loans.
Non-performing  assets as a percentage of loans and other real estate owned were
0.43%, 0.47%, and 0.88% at March 31, 2007, December 31, 2006 and March 31, 2006,
respectively.

      Net charge-offs during the three months ended March 31, 2007 were $143,000
compared to net charge-offs of $727,000 for the year ended December 31, 2006 and


                                       15
<PAGE>

net  charge-offs  of $65,000  for the three  months  ended March 31,  2006.  The
allowance  for loan losses as a  percentage  of  non-performing  loans was 305%,
288%,  and 154% as of March 31, 2007,  December  31,  2006,  and March 31, 2006,
respectively.

     Management  continues to closely monitor the levels of  non-performing  and
potential  problem  loans and will address the  weaknesses  in these  credits to
enhance the amount of ultimate  collection or recovery of these  assets.  Should
increases in the overall level of  non-performing  and  potential  problem loans
accelerate from the current trend,  management intends to adjust the methodology
for  determining  the  allowance for loan losses and will increase the provision
and allowance for loan losses. This would likely decrease net income.

     The Company  accounts for impaired loans in accordance  with the provisions
of SFAS No. 114,  "Accounting  by Creditors for  Impairment of a Loan." SFAS No.
114, as amended by SFAS No. 118,  requires that impaired loans be measured based
on the present value of expected future cash flows or the underlying  collateral
values as defined in the pronouncement.  When the ultimate  collectibility of an
impaired loan's  principal is in doubt,  wholly or partially,  all cash receipts
are then applied to principal. At each of March 31, 2007, December 31, 2006, and
March 31, 2006, the Company had no impaired loans.

Securities

     The  Company  invests  primarily  in  obligations  of the United  States or
obligations  guaranteed as to principal and interest by the United States, other
taxable securities, and in certain obligations of states and municipalities. The
Company  does not  invest  in  corporate  bonds,  nor  does it hold any  trading
securities.  The Company uses its investment  portfolio to provide liquidity for
unexpected  deposit  liquidation  or  loan  generation,  to meet  the  Company's
interest-rate  sensitivity  goals,  to secure public  deposits,  and to generate
income. At March 31, 2007 securities totaled $93,094,000, which represents 20.2%
of  total  earning  assets.  Securities  decreased  $6,375,000,  or  6.4%,  from
$99,469,000  invested as of December 31, 2006,  and  increased  $19,277,000,  or
26.1%, from $73,817,000 invested as of March 31, 2006. The size of the Company's
investment  portfolio is managed and  fluctuates  from time to time based on the
amount of  public  deposits  held,  loan  demand,  liquidity  needs,  investment
strategy, and other pertinent factors.

     At March 31, 2007 the Company's total  investments  classified as available
for sale had an amortized cost of $76,970,000  and a market value of $77,195,000
for an  unrealized  gain of  $225,000.  This  compares to an  amortized  cost of
$81,658,000  and a market value of $81,686,000 for an unrealized gain of $28,000
on the  Company's  investments  classified as available for sale at December 31,
2006. At March 31, 2006 the Company's total investments  classified as available
for sale had an amortized cost of $59,645,000  and a market value of $58,397,000
for an unrealized loss of $1,248,000. The changes in the market valuation of the
investment  portfolio are related to the reinvestment of maturing  securities in
higher yielding investments coupled with an increase in the outstanding balances
of higher yielding securities.  Management believes that maintaining most of its
securities in the available for sale category  provides  greater  flexibility in


                                       16
<PAGE>

the management of the overall  investment  portfolio.  In cases where the market
value is less than book  value,  the  Company has the ability and intent to hold
these  securities  that are in an unrealized loss positions until a market price
recovery or maturity, and therefore these securities are not considered impaired
on an other-than-temporary basis

Cash Surrender Value of Life Insurance

     The Company's  cash surrender  value of life  insurance was  $11,036,000 at
March 31, 2007, an increase of $102,000,  or 0.9%, from the $10,934,000  held at
December 31, 2006 and an increase of $1,548,000,  or 16.3%,  from the $9,488,000
held at March 31, 2006.  The  increase in cash  surrender  value life  insurance
since  March  31,  2006 is due to the  purchase  of  additional  life  insurance
policies  during the fourth quarter of 2006 on certain  officers of the Company.
Earnings from the ownership of these policies are  informally  used to partially
offset the cost of certain employee-related benefits.

Cash and Cash Equivalents

     The Company's cash and cash equivalents decreased $11,021,000, or 47.0%, to
$12,420,000  at March 31,  2007 from  $23,441,000  at  December  31,  2006,  and
decreased $378,000, or 3.0%, from $12,798,000 at March 31, 2006. The substantial
swings in the level of cash and cash  equivalents are due to fluctuations in the
Banks' needs for immediate liquidity.

Deposits

     The  Banks'  primary  source of funds for  loans and  investments  is their
deposits. Total deposits grew $22,476,000, or 5.8%, to $407,521,000 at March 31,
2007 from  $385,045,000  at December  31, 2006 and  $10,898,000,  or 2.7%,  from
$396,623,000 at March 31, 2006.  Competition  for deposit  accounts is primarily
based on the interest rates paid, location convenience and services offered.

     During the three  months ended March 31,  2007,  interest-bearing  deposits
averaged $338,503,000 compared to $336,118,000 for the same period of 2006. From
time to time the Banks  solicit  certificates  of deposit from  various  sources
through  brokers.  This is done to  reduce  the  need  for  funding  from  other
short-term  sources such as federal funds  purchased and  short-term  borrowings
from the Federal Home Loan Bank of Atlanta. At March 31, 2007, brokered deposits
totaled  $31,294,000,  compared  to  $28,999,000  and  $13,780,000  in  brokered
deposits at  December  31, 2006 and March 31,  2006,  respectively.  The Company
considers these funds to be an attractive  alternative  funding source available
to use while continuing its efforts to maintain and grow its local deposit base.

     The  average  interest  rate paid on  interest-bearing  deposits  was 3.79%
during the three  months  ended  March 31,  2007  compared to 2.81% for the same
period of 2006. In pricing deposits,  the Company considers its liquidity needs,
the  direction and levels of interest  rates,  and local market  conditions.  At
March 31, 2007,  interest-bearing  deposits  comprised  86.6% of total  deposits
compared to 85.7% at December 31, 2006 and 85.5% at March 31, 2006.

                                       17
<PAGE>

     The Company's core deposit base consists  largely of consumer time deposits
less than $100,000,  savings accounts, NOW accounts,  money market accounts, and
checking  accounts.  Although  such  core  deposits  are  becoming  increasingly
interest-sensitive  for both the Company and the industry as a whole, these core
deposits still continue to provide the Company with a large source of relatively
stable  funds.  Core  deposits  as  a  percentage  of  total  deposits  averaged
approximately  79% at March 31, 2007,  77% at December 31, 2006 and 77% at March
31, 2006. Time deposits of $100,000 or more represented  21.8% of total deposits
at March 31, 2007,  22.7% at December 31, 2006 and 22.4% at March 31, 2006.  The
Company's  larger   denomination  time  deposits  are  generally  garnered  from
customers  within the local market areas of its banks,  and therefore may have a
greater  degree of stability  than is typically  associated  with this source of
funds at other financial institutions.

Borrowings

     The  Company's   borrowings  are  comprised  of  federal  funds  purchased,
securities sold under repurchase  agreements,  and both short-term and long-term
advances  from the  FHLB.  At  March  31,  2007  short-term  borrowings  totaled
$30,402,000  and  were  comprised  of  $460,000  in  federal  funds   purchased,
$9,000,000 in short-term  advances from the FHLB and  $20,942,000  in securities
sold under  repurchase  agreements.  At December 31, 2006 short-term  borrowings
totaled  $63,368,000  and were comprised of  $45,000,000 in short-term  advances
from the FHLB and  $18,368,000 in securities sold under  repurchase  agreements.
March 31, 2006 short-term  borrowings totaled  $42,462,000 and were comprised of
$11,500,000 in short-term  advances from the FHLB and  $30,962,000 in securities
sold under repurchase  agreements.  Short-term borrowings are used primarily for
the  immediate  cash needs of the Company.  The Company also had  $5,000,000  of
long-term  advances  from the Federal Home Loan Bank of Atlanta at each of March
31, 2007, December 31, 2006, and March 31, 2006.

LIQUIDITY

     Liquidity  management  involves  meeting the cash flow  requirements of the
Company.  The Company's  liquidity position is primarily dependent upon its need
to respond to  short-term  demand for funds caused by increased  loan demand and
withdrawals  from deposit  accounts.  The Company's  primary  liquidity  sources
include cash and due from banks,  federal funds sold, and  securities  available
for sale. In addition, the Company (through the Banks) has the ability to borrow
funds on a  short-term  basis from the  Federal  Reserve  System and to purchase
federal funds from other financial  institutions.  The Banks are also members of
the Federal Home Loan Bank System and have the ability to borrow both short-term
and long-term funds on a secured basis. At March 31, 2007, The Peoples  National
Bank had total borrowing  capacity from the FHLB equal to  $60,620,000,  and the
unused portion of this line of credit was $55,620,000.  Bank of Anderson,  N. A.
had total borrowing capacity from the FHLB equal to $30,660,000,  and the unused
portion  of this line of  credit  was  $21,660,000  at March  31,  2007.  Seneca
National Bank had established secured lines of credit with the FHLB at March 31,
2007 of $5,480,000,  all of which were unused. At March 31, 2007, the Banks also
had unused  federal  funds  lines of credit  with  various  correspondent  banks
totaling $41,540,000.

                                       18
<PAGE>

     Peoples  Bancorporation,  Inc.,  the parent  holding  company,  has limited
liquidity needs outside of those of its subsidiaries,  and requires funds to pay
limited operating expenses and dividends.  The parent company's  liquidity needs
are fulfilled  through  management  fees assessed each  subsidiary bank and from
dividends passed up to the parent company from The Peoples National Bank.

     During the first quarter of 2007, the Company made capital  expenditures of
approximately  $332,000  toward  construction  of a full-service  retail banking
office in Greenville,  SC for The Peoples National Bank. Additional expenditures
in the amount of approximately $1.3 million are expected for the construction of
this  facility,  which is expected be completed  in the fourth  quarter of 2007.
During the first quarter of 2006, the Company also made capital  expenditures of
approximately  $95,000 associated with the purchase of two new LED display signs
located at the  Powdersville  office of The Peoples  National  Bank and the main
office of Seneca  National  Bank.  During the first  three  months of 2007,  the
Company  also made capital  expenditures  of  approximately  $73,000 for general
building needs and $166,000 for furniture and equipment  purchases.  The Company
may make other lesser capital expenditures in the normal course of business.

     Company management  believes its liquidity sources are adequate to meet its
operating needs and does not know of any trends that may result in the Company's
liquidity materially increasing or decreasing.




                                       19
<PAGE>


OFF-BALANCE SHEET RISK AND DERIVATIVE FINANCIAL INSTRUMENTS

     The  Company,  through  the  operations  of the  Banks,  makes  contractual
commitments to extend credit in the ordinary course of its business  activities.
These  commitments are legally binding  agreements to lend money to customers of
the Banks at  predetermined  interest  rates for a specified  period of time. At
March  31,  2007,  the  Banks  had  issued   commitments  to  extend  credit  of
$116,994,000  through various types of arrangements.  The commitments  generally
expire in one year. Past experience  indicates that many of these commitments to
extend credit will expire not fully used. As described  under  "Liquidity,"  the
Company  believes that it has adequate  sources of liquidity to fund commitments
that are drawn upon by the borrowers.

     In addition to commitments  to extend credit,  the Banks also issue standby
letters of credit, which are assurances to a third party that it will not suffer
a loss if the Bank's  customer fails to meet its  contractual  obligation to the
third party.  Standby  letters of credit  totaled  $9,449,000 at March 31, 2007.
Past  experience  indicates  that many of these  standby  letters of credit will
expire unused.  However,  through its various sources of liquidity,  the Company
believes  that it will have the  necessary  resources to meet these  obligations
should the need arise.  Various types of  collateral  secure most of the standby
letters of credit.  The Company  believes that the risk of loss  associated with
standby  letters of credit is comparable to the risk of loss associated with its
loan portfolio.  Moreover, the fair value associated with any standby letters of
credit issued by the Company is immaterial to the Company.

     Neither  the Company  nor the Banks are  involved in any other  off-balance
sheet  contractual  relationships or transactions that could result in liquidity
needs or  other  commitments  or  significantly  impact  earnings.  The  Peoples
National Bank has an operating lease agreement for its loan processing office in
Greenville,  South Carolina  totaling  approximately  $12,250 at March 31, 2007.
This obligation is payable in installments over the next seven months.




                                       20
<PAGE>


CAPITAL ADEQUACY AND RESOURCES

     The capital  needs of the Company  have been met through the  retention  of
earnings and from the proceeds of prior public stock offerings.

     The Company and the Banks are required to maintain  certain  capital ratios
by federal banking regulators. The following table sets forth the capital ratios
for the Company and the Banks as of March 31, 2007:


                                 CAPITAL RATIOS
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                       Well                  Adequately
                                                                    Capitalized              Capitalized
                                                 Actual              Requirement             Requirement
                                                 ------              -----------             -----------
                                          Amount     Ratio        Amount       Ratio      Amount      Ratio
                                          ------     -----        ------       -----      ------      -----
<S>                                      <C>         <C>       <C>             <C>       <C>          <C>
Company:
Total Risk-based Capital .............   $ 50,247    12.85%         N/A         N/A      $ 31,282     8.00%
Tier 1 Risk-based Capital ............     46,170    11.81          N/A         N/A        15,638     4.00
Leverage Ratio .......................     46,170     9.27          N/A         N/A        19,922     4.00

The Peoples National Bank:
Total Risk-based Capital .............   $ 29,572    11.98%    $ 24,684        10.00%    $ 19,748     8.00%
Tier 1 Risk-based Capital ............     27,101    10.98       14,809         6.00        9,873     4.00
Leverage Ratio .......................     27,101     9.20       14,729         5.00       11,783     4.00

Bank of Anderson, N. A.:
Total Risk-based Capital .............   $ 13,425    13.16%    $ 10,201        10.00%    $  8,161     8.00%
Tier 1 Risk-based Capital ............     12,168    11.93        6,120         6.00        4,080     4.00
Leverage Ratio .......................     12,168     8.47        7,183         5.00        5,746     4.00

Seneca National Bank:
Total Risk-based Capital .............   $  5,608    13.19%    $  4,252        10.00%    $  3,401     8.00%
Tier 1 Risk-based Capital ............      5,139    12.09        2,550         6.00        1,700     4.00
Leverage Ratio .......................      5,139     9.32        2,757         5.00        2,206     4.00
</TABLE>



                                       21
<PAGE>

RECENTLY ISSUED ACCOUNTING STANDARDS

     The  following  is a summary of recent  authoritative  pronouncements  that
could  impact  the  accounting,  reporting,  and / or  disclosure  of  financial
information by the Company.

     In February 2006, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  ("SFAS")  No. 155,  "Accounting  for Certain
Hybrid Financial  Instruments--an amendment of FASB Statements No. 133 and 140."
This Statement amends SFAS No. 133,  "Accounting for Derivative  Instruments and
Hedging  Activities," and SFAS No. 140,  "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." This Statement resolves
issues addressed in SFAS No. 133  Implementation  Issue No. D1,  "Application of
Statement 133 to Beneficial Interests in Securitized Financial Assets." SFAS No.
155 permits fair value  re-measurement for any hybrid financial  instrument that
contains  an embedded  derivative  that  otherwise  would  require  bifurcation,
clarifies which interest-only  strips and principal-only  strips are not subject
to the  requirements  of Statement  133,  establishes a requirement  to evaluate
interests  in  securitized  financial  assets  to  identify  interests  that are
freestanding  derivatives or that are hybrid financial  instruments that contain
an embedded derivative requiring  bifurcation,  clarifies that concentrations of
credit  risk in the form of  subordination  are not  embedded  derivatives,  and
amends  Statement  140 to eliminate  the  prohibition  on a  qualifying  special
purpose entity from holding a derivative financial instrument that pertains to a
beneficial interest other than another derivative financial instrument. SFAS No.
155 is  effective  for all  financial  instruments  acquired or issued after the
beginning of an entity's first fiscal year that begins after September 15, 2006.
The  Company  does not  believe  that the  adoption  of SFAS No. 155 will have a
material impact on its financial position, results of operations and cash flows.

     In March 2006, the FASB issued SFAS No. 156,  "Accounting  for Servicing of
Financial Assets--an amendment of FASB Statement No. 140." This Statement amends
FASB No. 140,  "Accounting  for Transfers and Servicing of Financial  Assets and
Extinguishments  of Liabilities,"  with respect to the accounting for separately
recognized servicing assets and servicing liabilities.  SFAS No. 156 requires an
entity to  recognize  a  servicing  asset or  servicing  liability  each time it
undertakes  an  obligation  to  service a  financial  asset by  entering  into a
servicing  contract;  requires all separately  recognized  servicing  assets and
servicing  liabilities to be initially  measured at fair value,  if practicable;
permits an entity to choose its subsequent measurement methods for each class of
separately recognized servicing assets and servicing liabilities; at its initial
adoption,  permits a one-time  reclassification of available for sale securities
to trading  securities by entities with  recognized  servicing  rights,  without
calling into question the treatment of other available for sale securities under
SFAS No. 115,  provided that the available for sale securities are identified in
some  manner as  offsetting  the  entity's  exposure to changes in fair value of
servicing assets or servicing liabilities that a servicer elects to subsequently
measure at fair value;  and requires  separate  presentation of servicing assets
and servicing  liabilities  subsequently measured at fair value in the statement
of financial position and additional  disclosures for all separately  recognized
servicing assets and servicing liabilities.  An entity should adopt SFAS No. 156


                                       22
<PAGE>

as of the  beginning of its first fiscal year that begins  after  September  15,
2006.  The Company  does not  believe  the  adoption of SFAS No. 156 will have a
material impact on its financial position, results of operations and cash flows.

     In July  2006,  the FASB  issued  FASB  Interpretation  No. 48 ("FIN  48"),
"Accounting  for  Uncertainty in Income Taxes".  FIN 48 clarifies the accounting
for uncertainty in income taxes recognized in enterprises'  financial statements
in  accordance  with  SFAS  No.  109,  "Accounting  for  Income  Taxes".  FIN 48
prescribes  a  recognition  threshold  and  measurement   attributable  for  the
financial  statement  recognition  and  measurement  of a tax position  taken or
expected  to be  taken  in a tax  return.  FIN  48  also  provides  guidance  on
derecognition,  classification,  interest and  penalties,  accounting in interim
periods,  disclosures  and  transitions.  FIN 48 is  effective  for fiscal years
beginning  after  December 15, 2006. The Company has analyzed the effects of FIN
48 and has  determined  that it will have no impact on its  financial  position,
results of operations or cash flows.

     In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements."
SFAS No. 157 defines fair value,  establishes  a framework  for  measuring  fair
value in generally accepted accounting principles, and expands disclosures about
fair value  measurements.  This  standard  does not  require  any new fair value
measurements,  but rather  eliminates  inconsistencies  found in  various  prior
pronouncements. SFAS No. 157 is effective for the Company on January 1, 2008 and
is not  expected  to  have a  significant  impact  on  the  Company's  financial
statements.

     In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined  Benefit  Pension and Other  Postretirement  Plans" ("SFAS 158"),  which
amends  SFAS  87 and  SFAS  106 to  require  recognition  of the  overfunded  or
underfunded  status of pension  and other  postretirement  benefit  plans on the
balance  sheet.  Under  SFAS 158,  gains and  losses,  prior  service  costs and
credits,  and any remaining  transition  amounts under SFAS 87 and SFAS 106 that
have  not  yet  been  recognized  through  net  periodic  benefit  cost  will be
recognized in accumulated other comprehensive income, net of tax effects,  until
they are amortized as a component of net periodic cost. The measurement  date --
the date at which the  benefit  obligation  and plan  assets are  measured -- is
required to be the company's fiscal year end. SFAS 158 is effective for publicly
held companies for fiscal years ending after  December 15, 2006,  except for the
measurement date  provisions,  which are effective for fiscal years ending after
December 15, 2008.  The Company does not have a defined  benefit  pension  plan.
Therefore,  SFAS 158 will not  impact  the  Company's  financial  conditions  or
results of operations.

     In September, 2006, The FASB ratified the consensuses reached by the FASB's
Emerging  Issues Task Force ("EITF")  relating to EITF 06-4  "Accounting for the
Deferred   Compensation  and  Postretirement   Benefit  Aspects  of  Endorsement
Split-Dollar  Life  Insurance   Arrangements".   EITF  06-4  addresses  employer
accounting for endorsement split-dollar life insurance arrangements that provide
a benefit to an  employee  that  extends to  postretirement  periods.  Employers
should  recognize a liability for future  benefits in  accordance  with SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", or
Accounting  Principles  Board ("APB") Opinion No. 12,  "Omnibus  Opinion--1967".
EITF 06-4 is  effective  for fiscal  years  beginning  after  December 15, 2006.


                                       23
<PAGE>

Entities should  recognize the effects of applying this Issue through either (a)
a change in  accounting  principle  through a  cumulative-effect  adjustment  to
retained  earnings  or to  other  components  of  equity  or net  assets  in the
statement of financial  position as of the  beginning of the year of adoption or
(b) a change in accounting  principle through  retrospective  application to all
prior periods.  The Company does not believe the adoption of EITF 06-4 will have
a material  impact on its financial  position,  results of  operations  and cash
flows.

     In September 2006, the FASB ratified the consensus  reached related to EITF
06-5, "Accounting for Purchases of Life  Insurance--Determining  the Amount That
Could  Be  Realized  in  Accordance  with  FASB  Technical  Bulletin  No.  85-4,
Accounting  for  Purchases  of  Life   Insurance."   EITF  06-5  states  that  a
policyholder  should consider any additional amounts included in the contractual
terms of the insurance policy other than the cash surrender value in determining
the amount that could be realized under the insurance  contract.  EITF 06-5 also
states that a  policyholder  should  determine the amount that could be realized
under the life insurance  contract assuming the surrender of an  individual-life
by  individual-life  policy (or  certificate  by certificate in a group policy).
EITF 06-5 is effective for fiscal years  beginning  after December 15, 2006. The
Company does not believe the  adoption of EITF 06-5 will have a material  impact
on its financial position, results of operations and cash flows.

     In February  2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial  Assets and  Financial  Liabilities  - Including  an amendment of FASB
Statement No. 115." This statement  permits,  but does not require,  entities to
measure many financial  instruments  at fair value.  The objective is to provide
entities with an opportunity to mitigate  volatility in reported earnings caused
by measuring related assets and liabilities  differently without having to apply
complex hedge accounting provisions. Entities electing this option will apply it
when the  entity  first  recognizes  an  eligible  instrument  and  will  report
unrealized  gains and  losses on such  instruments  in  current  earnings.  This
statement 1) applies to all entities,  2) specifies  certain  election dates, 3)
can be applied on an instrument-by-instrument  basis with some exceptions, 4) is
irrevocable and 5) applies only to entire  instruments.  One exception is demand
deposit  liabilities which are explicitly excluded as qualifying for fair value.
With respect to SFAS No. 115, available for sale and held to maturity securities
at the  effective  date are eligible for the fair value option at that date.  If
the fair value option is elected for those  securities  at the  effective  date,
cumulative  unrealized  gains and losses at that date shall be  included  in the
cumulative-effect  adjustment and thereafter,  such securities will be accounted
for as trading  securities.  SFAS 159 is effective for the Company on January 1,
2008.  The Company is currently  analyzing the fair value option  provided under
SFAS No. 159.

     Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies are not expected to have a material impact on the
Company's financial position, results of operations and cash flows.


                                       24
<PAGE>

Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
          MARKET RISK

    Market risk is the risk of loss  arising  from  adverse  changes in the fair
value of financial instruments due to a change in interest rates, exchange rates
and equity prices.  The Company's  primary type of market risk is  interest-rate
risk.

     The primary  objective of  Asset/Liability  Management at the Company is to
manage  interest-rate  risk and achieve  reasonable  stability  in net  interest
income throughout  interest-rate cycles in order to maintain adequate liquidity.
The Company seeks to achieve this objective by maintaining the proper balance of
rate-sensitive earning assets and rate-sensitive  liabilities.  The relationship
of rate-sensitive earning assets to rate-sensitive  liabilities is the principal
factor in projecting  the effect that  fluctuating  interest  rates will have on
future net interest income. Rate-sensitive assets and rate-sensitive liabilities
are those that can be repriced to current market rates within a relatively short
time period.  Management  monitors the rate  sensitivity  of earning  assets and
interest-bearing  liabilities  over the entire  life of these  instruments,  but
places particular emphasis on the first year.

     Each  of  the   Company's   banking   subsidiaries   has   established   an
Asset/Liability Management Committee. These committees use a variety of tools to
analyze  interest-rate  sensitivity,  including a static gap  presentation and a
simulation  model. A static gap  presentation  reflects the  difference  between
total  interest-sensitive  assets and  liabilities  within certain time periods.
While the static gap is a widely used measure of interest rate  sensitivity,  it
is not,  in  management's  opinion,  the  best  indicator  of a  company's  true
sensitivity position.  Accordingly,  the Company's banking subsidiaries also use
an earnings  simulation  model that estimates the variations in interest  income
under  different  interest-rate  environments  to measure  and manage the bank's
short-term  interest-rate risk. According to the model, as of March 31, 2007 the
Company was positioned so that net interest income would increase  $633,000 over
the next twelve months if market  interest  rates were to gradually  rise by 100
basis points over the same period. Conversely, net interest income would decline
$511,000 in the next twelve months if interest  rates were to gradually  decline
by 100 basis points over the same period.  Computation of prospective effects of
hypothetical interest-rate changes are based on numerous assumptions,  including
relative levels of market interest rates and loan prepayment,  and should not be
relied upon as indicative of actual results.  Further,  the  computations do not
contemplate  all actions that the Company and its customers  could  undertake in
response to changes in interest rates.

     Additionally,   each  of  the  Company's  banking   subsidiaries   measures
anticipated  changes  in its  theoretical  economic  value of equity in order to
ascertain its  long-term  interest rate risk.  This is done by  calculating  the
difference  between  the  theoretical  market  value of the  bank's  assets  and
liabilities  and  subjecting  the  balance  sheet  to  different   interest-rate
environments to measure and manage long-term interest rate risk.

     It is the  responsibility  of the  Asset/Liability  Committees to establish
parameters  for various  interest risk  measures,  to set  strategies to control


                                       25
<PAGE>

interest rate risk within those parameters,  to maintain adequate and stable net
interest  income,  and to direct the  implementation  of  tactics to  facilitate
achieving their objectives.

     Management  is not aware of any  known  events  or  uncertainties  that are
expected  to have or are  reasonably  likely  to have a  material  effect on the
Company's liquidity,  capital resources or results of operations.  Management is
not aware of any current recommendations by the regulatory authorities, which if
they were to be  implemented,  would  have a  material  effect on the  Company's
liquidity, capital resources or results of operations.






                                       26
<PAGE>



Item 4T.  CONTROLS AND PROCEDURES

     Based on the  evaluation  required by 17 C.F.R.  Section  240.13a-15(b)  or
240.15d-15(b) of the Company's disclosure controls and procedures (as defined in
17  C.F.R.  Sections  240.13a-15(e)  and  240.15d-15(e)),  the  Company's  chief
executive  officer and chief financial  officer concluded that such controls and
procedures,  as of the end of the period covered by this quarterly report,  were
effective.

     There has been no change in the Company's  internal  control over financial
reporting during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially  affect,  the Company's internal control over
financial reporting.






                                       27
<PAGE>



PART II.  OTHER INFORMATION


Item 6.       Exhibits

              Exhibits.

                31.1     Rule 13a-14(a)/15d-14(a) Certifications
                31.2     Rule 13a-14(a)/15d-14(a) Certifications
                32       Section 1350 Certifications





                                       28
<PAGE>


SIGNATURES

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


                                           PEOPLES BANCORPORATION, INC.


Dated:  May 11, 2007                       By:    /s/ R. Riggie Ridgeway
                                                ------------------------
                                                  R. Riggie Ridgeway
                                                  President and CEO


Dated:  May 11, 2007                       By:   /s/ Robert E. Dye, Jr.
                                               ------------------------
                                                  Robert E. Dye, Jr.
                                                  Senior Vice President and CFO
                                                  (principal financial officer)





                                       29
<PAGE>




                                  Exhibit Index

Exhibit No.                  Description of Exhibit

   31.1                     Rule 13a-14(a)/15d-14(a) Certifications
   31.2                     Rule 13a-14(a)/15d-14(a) Certifications
   32                       Section 1350 Certifications






                                       30