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
                          September 30, 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 November 2, 2007 was 6,720,875.






<PAGE>



PART I - FINANCIAL INFORMATION
Item 1. Financial Statements


         Peoples Bancorporation, Inc. and Subsidiaries
                  Consolidated Balance Sheets
           (Dollars in thousands except share data)
<TABLE>
<CAPTION>
                                                                                       September 30,    September 30,   December 31,
                                                                                           2007             2006            2006
                                                                                         Unaudited        Unaudited        Audited
ASSETS
<S>                                                                                     <C>              <C>              <C>
CASH AND DUE FROM BANKS ..........................................................      $  10,679        $  10,180        $  10,819
INTEREST-BEARING DEPOSITS IN OTHER BANKS .........................................            466              412              108
FEDERAL FUNDS SOLD ...............................................................          3,439            3,750           12,514
                                                                                        ---------        ---------        ---------
     Total cash and cash equivalents .............................................         14,584           14,342           23,441
SECURITIES
     Available for sale ..........................................................         80,397           95,092           81,686
     Held to maturity (market value of $13,0421, $13,397 and $13,382) ............         13,121           13,523           13,500
       Other investments, at cost ................................................          3,344            3,920            4,283
LOANS-less allowance for loan losses of $3,994, $4,081 and $4,070 ................        396,483          356,959          354,011
PREMISES AND EQUIPMENT, net of accumulated
     depreciation and amortization ...............................................         12,432           11,043           11,117
ACCRUED INTEREST RECEIVABLE ......................................................          3,149            2,736            3,043
CASH SURRENDER VALUE OF LIFE INSURANCE ...........................................         11,242            9,646           10,934
OTHER ASSETS .....................................................................          2,421            1,956            1,799
                                                                                        ---------        ---------        ---------
         TOTAL ASSETS ............................................................      $ 537,173        $ 509,217        $ 503,814
                                                                                        =========        =========        =========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
DEPOSITS
     Noninterest-bearing .........................................................      $  51,146        $  60,034        $  54,993
     Interest-bearing ............................................................        373,621          327,330          330,052
                                                                                        ---------        ---------        ---------
         Total deposits ..........................................................        424,767          387,364          385,045
SECURITIES SOLD UNDER REPURCHASE
     AGREEMENTS ..................................................................         22,479           28,083           18,368
FEDERAL FUNDS PURCHASED ..........................................................            358                -                -
NOTES PAYABLE TO FEDERAL HOME LOAN BANK ..........................................         36,000           45,000           50,000
ACCRUED INTEREST PAYABLE .........................................................          4,070            2,743            2,926
OTHER LIABILITIES ................................................................            574            1,202            1,411
                                                                                        ---------        ---------        ---------
         Total Liabilities .......................................................        488,248          464,392          457,750
                                                                                        ---------        ---------        ---------
SHAREHOLDERS' EQUITY*
Common Stock - 15,000,000 shares authorized, $1.11
     Par value per share, 7,056,919 shares, 6,949,241 shares .....................          7,833            7,347            7,400
       and 6,999,897 shares outstanding, respectively.
Additional paid-in capital .......................................................         38,943           35,056           38,614
Retained Earnings ................................................................          2,302            2,747               32
Accumulated other comprehensive income (loss) ....................................           (153)            (325)              18
                                                                                        ---------        ---------        ---------
         Total Shareholders' Equity ..............................................         48,925           44,825           46,064
                                                                                        ---------        ---------        ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .......................................      $ 537,173        $ 509,217        $ 503,814
                                                                                        =========        =========        =========
</TABLE>


* Share and per share data for 2006 has been  restated  to reflect  the 5% stock
dividend  to be  issued  in  January  2008  and  2007  per  share  data has been
recalculated assuming the effect of the 5% stock dividend as if it had occurred.

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
  (Dollars in thousands except per share and share data)                      Three Months Ended               Nine Months Ended
                      Unaudited                                                  September 30,                   September 30,
                                                                              2007           2006             2007           2006
                                                                              ----           ----             ----           ----
INTEREST INCOME
<S>                                                                       <C>             <C>             <C>             <C>
   Interest and fees on loans ......................................      $    8,042      $    7,283      $   23,001      $   21,441
   Interest on securities
       Taxable .....................................................             752             628           2,204           1,629
       Tax-exempt ..................................................             356             163           1,059             351
   Interest on federal funds .......................................              43             136             105             189
                                                                          ----------      ----------      ----------      ----------
Total interest income ..............................................           9,193           8,210          26,369          23,610
                                                                          ----------      ----------      ----------      ----------

INTEREST EXPENSE
   Interest on deposits ............................................           3,753           2,899          10,542           7,796
   Interest on federal funds purchased and securities
       sold under repurchase agreements ............................             134             199             336             580
   Interest on notes payable Federal Home Loan Bank ................             523             171           1,223             669
                                                                          ----------      ----------      ----------      ----------
Total interest expense .............................................           4,410           3,269          12,101           9,045
                                                                          ----------      ----------      ----------      ----------
Net interest income ................................................           4,783           4,941          14,268          14,565
PROVISION FOR LOAN LOSSES ..........................................             150             225             450             718
                                                                          ----------      ----------      ----------      ----------
Net interest income after provision for loan losses ................           4,633           4,716          13,818          13,847
                                                                          ----------      ----------      ----------      ----------
NON-INTEREST INCOME
    Service charges on deposit accounts ............................             467             433           1,338           1,388
    Customer service fees ..........................................              23              35              95             131
    Mortgage banking ...............................................             110             124             352             327
    Brokerage services .............................................              64              59             147             196
    Bank owned life insurance ......................................             119              93             353             286
    Gain on sale of assets acquired in settlement of loans .........               9              35              16             159
    Other noninterest income .......................................             133             116             567             369
                                                                          ----------      ----------      ----------      ----------
              Total noninterest income .............................             925             895           2,868           2,856
                                                                          ----------      ----------      ----------      ----------
NON-INTEREST EXPENSES
   Salaries and benefits ...........................................           2,335           2,203           6,971           6,689
   Occupancy .......................................................             216             205             632             595
   Equipment .......................................................             349             335             991           1,032
   Marketing and advertising .......................................             100             103             316             319
   Communications ..................................................              61              60             183             181
   Printing and supplies ...........................................              43              40             138             130
   Bank paid loan costs ............................................              45              44             138             181
   Director fees ...................................................             112              82             330             260
   ATM/Debit card expenses .........................................              98              77             261             224
   Legal and professional fees .....................................             105              88             279             442
   Other operating expenses ........................................             489             445           1,444           1,295
                                                                          ----------      ----------      ----------      ----------
             Total noninterest expenses ............................           3,953           3,682          11,683          11,348
                                                                          ----------      ----------      ----------      ----------
   Income before income taxes ......................................           1,605           1,929           5,003           5,355
PROVISION FOR INCOME TAXES .........................................             424             608           1,353           1,707
                                                                          ----------      ----------      ----------      ----------

   Net income ......................................................      $    1,181      $    1,321      $    3,650      $    3,648
                                                                          ==========      ==========      ==========      ==========
INCOME PER COMMON SHARE *
   BASIC ...........................................................      $     0.17      $     0.19      $     0.52      $     0.53
                                                                          ==========      ==========      ==========      ==========
   DILUTED .........................................................      $     0.17      $     0.19      $     0.52      $     0.52
                                                                          ==========      ==========      ==========      ==========
WEIGHTED AVERAGE COMMON SHARES *
   BASIC ...........................................................       7,055,759       6,940,751       7,046,153       6,917,426
                                                                          ==========      ==========      ==========      ==========
   DILUTED .........................................................       7,058,568       7,025,386       7,050,166       7,005,920
                                                                          ==========      ==========      ==========      ==========

CASH DIVIDENDS PAID PER COMMON SHARE ...............................      $     0.05      $     0.05      $     0.15      $     0.15
                                                                          ==========      ==========      ==========      ==========
</TABLE>

* Share and per share data for 2006 has been  restated  to reflect  the 5% stock
dividend  to be  issued  in  January  2008  and  2007  per  share  data has been
recalculated assuming the effect of the 5% stock dividend as if it had occurred.

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 nine months ended September 30, 2006 and 2007

<TABLE>
<CAPTION>
                    (Dollars in thousands except share data)
                                  (Unaudited)                                                           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* .....................  6,885,505    $    7,279    $   34,705   $       40    $     (853)   $   41,171
Net Income ......................................                                               3,648                       3,648
Other comprehensive income, net of tax:
   Unrealized holding losses on
     securities available for sale,
     net of income taxes of $273 ................                                                               528           528
                                                                                                                       ----------
Comprehensive income ............................                                                                           4,176
Cash Dividends ..................................                                                (941)                       (941)
Proceeds from exercise of stock options .........     63,736            68           289                                      357
Stock-based compensation ........................                                     62                                       62
                                                   ---------    ----------    ----------   ----------    ----------    ----------
Balance, September 30, 2006* ....................  6,949,241    $    7,347    $   35,056   $    2,747    $     (325)   $   44,825
                                                   =========    ==========    ==========   ==========    ==========    ==========

Balance, December 31, 2006* .....................  6,999,897    $    7,773    $   38,614   $     (341)   $       18    $   46,064
Net Income ......................................                                               3,650                       3,650
Other comprehensive income, net of tax:
   Unrealized holding losses on
     securities available for sale,
     net of income taxes of $79 .................                                                              (171)         (171)
                                                                                                                       ----------
Comprehensive income ............................                                                                           3,479
Cash Dividends ..................................                                               (1,007)                    (1,007)
Proceeds from exercise of stock options .........     57,022            60           144                                      204
Tax benefit of stock options exercised ..........                                    119                                      119
Stock-based compensation ........................                                     66                                       66
                                                   ---------    ----------    ----------   ----------    ----------    ----------
Balance, September 30, 2007* ....................  7,056,919    $    7,833    $   38,943   $    2,302    $     (153)   $   48,925
                                                   =========    ==========    ==========   ==========    ==========    ==========
</TABLE>


* Share and per share data for 2006 has been  restated  to reflect  the 5% stock
dividend  to be  issued  in  January  2008  and  2007  per  share  data has been
recalculated assuming the effect of the 5% stock dividend as if it had occurred.


See Notes to Unaudited Consolidated  Financials 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)                                                              Nine Months Ended
                                                                                                                September 30,
                                                                                                         2007                 2006
                                                                                                         ----                 ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                                    <C>                 <C>
   Net income ..............................................................................           $  3,650            $  3,648
   Adjustments to reconcile net income to net cash provided
     by operating activities:
   Gain on sale of premises and equipment ..................................................               (177)                 (3)
   Gain on sale of assets acquired in settlement of loans ..................................                 (7)               (159)
   Provision for loan losses ...............................................................                450                 718
   Provision (benefit) for deferred income taxes ...........................................               (253)                  -
   Depreciation and amortization ...........................................................                810                 819
   Amortization and accretion (net) of premiums and
     discounts on securities ...............................................................                 43                 101
   Stock-based compensation ................................................................                 66                  62
   Increase in accrued interest receivable .................................................               (106)               (295)
   Increase in other assets ................................................................               (385)               (300)
   Increase in accrued interest payable ....................................................              1,144                 462
   Increase (decrease) in other liabilities ................................................               (837)                301
                                                                                                       --------            --------
     Net cash provided by operating activities .............................................              4,398               5,354
                                                                                                       --------            --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of securities held to maturity ................................................                  -              (2,893)
   Purchases of securities available for sale ..............................................             (9,171)            (60,201)
   Sales (purchases) of other investments ..................................................                939              (1,875)
   Proceeds from principal pay-downs on securities available for sale ......................              5,621               3,351
   Proceeds from the sale of securities available for sale .................................                  -                 335
   Proceeds from the maturities and calls of securities available for sale .................              4,600              27,350
   Proceeds from the maturity of securities held to maturity ...............................                315                 160
   Investment in bank owned life insurance .................................................               (308)               (243)
   Net (increase) decrease in loans ........................................................            (42,922)             15,964
   Proceeds from the sale of  assets acquired in settlement of loans .......................                112               1,915
   Proceeds from the sale of premises and equipment ........................................                510                  30
   Purchase of premises and equipment ......................................................             (2,458)             (1,355)
                                                                                                       --------            --------
     Net cash used in investing activities .................................................            (42,762)            (17,462)
                                                                                                       --------            --------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase (decrease) in deposits .....................................................             39,722              (2,985)
   Net increase (decrease) in securities sold under repurchase
     agreements ............................................................................              4,111              (3,653)
   Net increase (decrease) in federal funds purchased ......................................                358              (4,039)
   Net increase (decrease) in notes payable to Federal Home Loan Bank ......................            (14,000)             27,500
   Proceeds from the exercise of stock options .............................................                204                 357
   Tax benefit of stock options exercised ..................................................                119                   -
   Cash dividend ...........................................................................             (1,007)               (941)
                                                                                                       --------            --------
     Net cash provided by financing activities .............................................             29,507              16,239
                                                                                                       --------            --------
     Net increase (decrease) in cash and cash equivalents ..................................             (8,857)              4,131
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .............................................             23,441              10,211
                                                                                                       --------            --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ...................................................           $ 14,584            $ 14,342
                                                                                                       ========            ========

CASH PAID FOR
     Interest ..............................................................................           $ 10,957            $  8,583
                                                                                                       ========            ========
     Income Taxes ..........................................................................           $  1,082            $  1,553
                                                                                                       ========            ========
</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 cash dividends of $0.05 per common share to
shareholders  of record March 16, 2007,  June 15, 2007 and  September  14, 2007,
payable March 30, 2007, June 29, 2007 and September 28, 2007, respectively.

     The Company  declared a five percent  common stock  dividend on October 18,
2007, payable January 4, 2008 to shareholders of record December 21, 2007. Share
and per share data for 2006 has been  restated to reflect this  transaction  and
2007 per share data has been calculated  assuming the effect of the five percent
stock dividend as if it had occurred on January 1, 2007.

EARNINGS PER SHARE

     Statement of Financial  Accounting 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 nine  months  ended
September  30, 2007 and 2006 was  7,046,153  and  6,917,426,  respectively.  The
weighted average number of common shares  outstanding for diluted net income per
common share was 7,050,166 and 7,005,920 for the nine months ended September 30,
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),  "Share-Based  Payment," 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

                                       5
<PAGE>

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 four stock option plans, the "1993 Employee Incentive Stock
Option  Plan," the "1997  Non-Employee  Directors  Stock Option Plan," the "2004
Stock Option Plan" and the "2007 Non-Employee  Directors Stock Option Plan." The
"1993  Employee  Incentive  Stock Option Plan"  expired in 2003,  but options to
purchase 31,428 shares remain  outstanding and exercisable  under this plan. The
"1997 Non-Employee  Directors Stock Option Plan" expired in 2007, but options to
purchase 51,857 shares remain outstanding and exercisable under this plan. Under
the "2004  Stock  Option  Plan,"  the Board of  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 expire  not more than ten years from the date of grant.  Under
the "2007  Non-Employee  Directors  Stock Option Plan," upon  adjournment of the
Company's  annual meeting of shareholders  each year, each person who has served
as a  non-employee  director  of  the  Company  or  one  the  Banks  during  the
immediately  preceding year is granted  options to purchase 500 shares of common
stock up to a maximum  of 5,000 per  director  in the  aggregate  under both the
"2007  Non-Employee  Directors  Stock  Option  Plan" and the "1997  Non-Employee
Directors  Stock  Option  Plan." The  exercise  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 earliest of one
year after the director's death or permanent and total disability, 90 days after
the  director  ceases  to be a  director  for any  reason  other  than  death or
permanent  and total  disability  or ten years from the grant date. At September
30, 2007, an aggregate of 357,145  shares were reserved for issuance on exercise
of options under all four of these plans.  During the first nine months of 2007,
options to purchase  24,273  shares were  granted  with a weighted  average fair
value of $10.49 per share. The following is a summary of the aggregate status of
the Company's  plans as of September 30, 2007 and changes during the nine months
ended September 30, 2007.

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

Outstanding, December 31, 2006 ....................     209,038        $ 8.46
Granted ...........................................      24,273        $10.49
Exercised .........................................     (61,566)       $ 4.04
Forfeited .........................................      (3,999)       $11.67
                                                        -------
Outstanding, September 30, 2007 ...................     167,746        $10.29
                                                        =======

Options Exercisable, September 30, 2007 ...........     125,998
                                                       ========


                                       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>



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  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
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.

                                       8
<PAGE>

     Of these significant  accounting policies, the Company considers its policy
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 "Allowance for Loan Losses" and "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>


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  and nine-month  periods ended September 30, 2007
are not  necessarily  indicative  of the  results to be  attained  for any other
period.

Overview

       The  Company  is  a  bank  holding   company   with  three   wholly-owned
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 nine banking  offices  located in the Upstate Area of
South Carolina.




                                       10
<PAGE>


FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EARNINGS PERFORMANCE

Overview

The  Company's  consolidated  net  income  for the  third  quarter  of 2007  was
$1,181,000  or $0.17 per  diluted  share  compared  to  $1,321,000  or $0.19 per
diluted  share for the third  quarter of 2006,  a decrease of $140,000 or 10.6%.
Net income for the nine months ended  September 30, 2007 was $3,650,000 or $0.52
per diluted share compared to $3,648,000 or $0.52 per diluted share for the nine
months  ended  September  30,  2006,  an increase  of $2,000 or 0.1%.  Return on
average equity for the nine months and three months ended September 30, 2007 was
10.23% and 9.64%  respectively,  compared to 11.18% and 11.73%  respectively for
the nine months and three months  ended  September  30, 2006.  Return on average
assets for the nine months and three months ended  September  30, 2007 was 0.96%
and 0.89%  respectively,  compared to 1.00% and 1.06%  respectively for the nine
months and three months ended September 30, 2006.

Interest Income, Interest Expense and Net Interest Income

     The largest  component of the Company's income is net 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 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 $158,000 or 3.2% to $4,783,000 in the quarter ended September 30, 2007
compared to  $4,941,000 in the quarter  ended  September 30, 2006.  For the nine
months ended  September 30, 2007 net interest  income before  provision for loan
losses decreased $297,000 or 2.0% to $14,268,000 compared to $14,565,000 for the
nine months ended  September 30, 2006. The Company's net interest margin for the
three  months and nine  months  ending  September  30,  2007 was 3.81% and 4.00%
respectively,  compared to 4.25% and 4.25% respectively for the three months and
nine months ended September 30, 2006.

     The  Company's  total  interest  income  for the third  quarter of 2007 was
$9,193,000  compared to $8,210,000 for the third quarter of 2006, an increase of
$983,000 or 12.0%. Total interest income for the nine months ended September 30,
2007 was $26,369,000 compared to $23,610,000 for the nine months ended September
30, 2006, an increase of $2,759,000  or 11.7%.  Interest and fees on loans,  the
largest  component of total  interest  income,  increased  $759,000 in the third
quarter of 2007 to $8,042,000  compared to  $7,283,000  for the third quarter of
2006, an increase of 10.4%.  Interest and fees on loans increased $1,560,000 for
the nine months ended September 30, 2007 to $23,001,000  compared to $21,441,000
for the nine months ended September 30, 2006, an increase of 7.3%. The increases
in total  interest  income and interest and fees on loans were  primarily due to
higher average loan balances and higher origination fees charged on loans.



                                       11
<PAGE>

     Interest  on taxable  securities,  the second  largest  component  of total
interest  income  increased  $124,000  in the third  quarter of 2007 to $752,000
compared  to  $628,000  for the third  quarter of 2006,  an  increase  of 19.8%.
Interest on taxable  securities  increased  $575,000  for the nine months  ended
September  30, 2007 to  $2,204,000  compared to  $1,629,000  for the nine months
ended  September  30, 2006,  an increase of 35.3%.  The increases in interest on
taxable  securities  were due primarily to higher  interest  rates and partially
offset by lower average balances.

     Interest on tax-exempt  securities,  the third  largest  component of total
interest  income  increased  $193,000  in the third  quarter of 2007 to $356,000
compared  to  $163,000  for the third  quarter of 2006,  an  increase of 118.4%.
Interest on tax-exempt  securities  increased $708,000 for the nine months ended
September 30, 2007 to $1,059,000  compared to $351,000 for the nine months ended
September  30,  2006,  an  increase  of 201.7%.  The  increases  in  interest on
tax-exempt securities were due primarily to higher average balances.

     The  Company's  total  interest  expense for the third  quarter of 2007 was
$4,410,000  compared to $3,269,000 for the third quarter of 2006, an increase of
$1,141,000 or 34.9%.  Total interest expense for the nine months ended September
30, 2007 was  $12,101,000  compared  to  $9,045,000  for the nine  months  ended
September  30, 2006, an increase of  $3,056,000  or 33.8%.  Interest  expense on
deposits, the largest component of total interest expense, increased $854,000 in
the third  quarter of 2007 to $3,753,000  compared to  $2,899,000  for the third
quarter of 2006, an increase of 29.5%.  Interest  expense on deposits  increased
$2,746,000 for the nine months ended September 30, 2007 to $10,542,000  compared
to  $7,796,000  for the nine months ended  September  30,  2006,  an increase of
35.2%. The increases in interest  expense on deposits were largely  attributable
to higher  interest  rates  paid on these  accounts,  as well as higher  average
balances  during the nine  months of 2007 when  compared  to the same  period of
2006.

     Interest  on notes  payable to the  Federal  Home Loan Bank  ("FHLB"),  the
second largest component of total interest expense, increased $352,000 or 205.9%
to $523,000  in the third  quarter of 2007  compared to $171,000  for the second
quarter  of 2006.  Interest  on notes  payable  to the  Federal  Home  Loan Bank
increased  $554,000  or 82.8% to  $1,223,000  in the first  nine  months of 2007
compared to  $669,000  for the first nine months of 2006.  These  increases  are
largely  attributable to higher average balances during the first nine months of
2007 when compared to the same period of 2006.

     Interest on federal funds  purchased and securities  sold under  repurchase
agreements,  the third largest  component of total interest  expense,  decreased
$65,000 or 32.7% to $134,000 in the third  quarter of 2007  compared to $199,000
for the  third  quarter  of  2006.  Interest  on  federal  funds  purchased  and
securities  sold under  repurchase  agreements  decreased  $244,000  or 42.1% to
$336,000  in the first nine months of 2007  compared  to $580,000  for the first
nine months of 2006.  These decreases are largely  attributable to lower average
balances in these accounts during the first nine months of 2007 when compared to
the same period of 2006.


                                       12
<PAGE>

Provision for Loan Losses

     The provision for loan losses charged to operations during the three months
ended September 30, 2007 was $150,000 compared to $225,000, for the three months
ended September 30, 2006, a decrease of $75,000 or 33.3%. The provision for loan
losses  charged to  operations  during the nine months ended  September 30, 2007
decreased  $268,000 or 37.3% to  $450,000,  compared  to  $718,000  for the nine
months ended September 30, 2006. The changes in the Company's provision for loan
losses  for the  third  quarter  and  first  nine  months  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" for further discussion.

Non-interest Income

     Non-interest  income  increased  $30,000 or 3.4% to $925,000  for the third
quarter of 2007 compared to $895,000 for the third quarter of 2006. Non-interest
income increased $12,000 or 0.4% to $2,868,000 for the first nine months of 2007
compared to  $2,856,000  for the first nine months of 2006.  Service  charges on
deposit  accounts,  the largest  component  of  non-interest  income,  increased
$34,000 or 7.9% to $467,000 for the third  quarter of 2007  compared to $433,000
for the third  quarter  of 2006.  Service  fees on  deposit  accounts  decreased
$50,000 or 3.6% to  $1,338,000  for the first nine  months of 2007  compared  to
$1,388,000 for the first nine months of 2006.

     Mortgage banking income decreased  $14,000 or 11.3% in the third quarter of
2007 to  $110,000  compared  to  $124,000  in the  third  quarter  of 2006,  and
increased  $25,000 or 7.7% in the first nine months of 2007 to $352,000 compared
to  $327,000 in the first nine  months of 2006.  These  changes in the levels of
mortgage  banking income are largely due to the substantial  swings in the local
demand for residential mortgage loan originations that occur from time to time.

     Bank owned life insurance  income  increased  $26,000 or 28.0% in the third
quarter of 2007 to $119,000  compared to $93,000 for the third  quarter of 2006,
and  increased  $67,000  or 23.4% in the first nine  months of 2007 to  $353,000
compared  to $286,000  in the first nine  months of 2006.  The  increase in bank
owned life insurance  income is  attributable to the purchase of additional life
insurance policies during the fourth quarter of 2006, as well as increased gains
on the cash surrender values of these policies.

     Other  non-interest  income increased  $17,000 or 14.7% to $133,000 for the
third quarter of 2007 compared to $116,000 for the third quarter of 2006.  Other
non-interest  income increased  $198,000 or 53.7% to $567,000 for the first nine
months of 2007  compared  to  $369,000  for the first nine  months of 2006.  The
substantial  increase is largely attributable to a $169,000 gain realized during
the first  quarter  of 2007 from the sale of a portion  of a parcel of land that
had been acquired in 2006 for an office of The Peoples National Bank.



                                       13
<PAGE>

     There were no gains or losses  realized  on the sale of  available-for-sale
securities during the first nine months of 2007 and 2006.

Non-interest Expense

     Total non-interest expense increased $271,000 or 7.4% to $3,953,000 for the
third  quarter of 2007 from  $3,682,000  for the third  quarter  of 2006.  Total
non-interest  expense  increased  $335,000 or 2.9% to $11,683,000  for the first
nine months of 2007 from $11,348,000 for the first nine months of 2006. Salaries
and benefits, the largest component of non-interest expense,  increased $132,000
or 6.0%, to $2,335,000  for the third  quarter of 2007 from  $2,203,000  for the
third  quarter of 2006.  Salaries and benefits  increased  $282,000 or 4.2%,  to
$6,971,000 for the first nine months of 2007 from  $6,689,000 for the first nine
months of 2006.  The  increases in salaries and  benefits  are  attributable  to
additional  personnel for the two new banking  offices of The Peoples  National,
along with normal salary increases and other changes in personnel throughout the
Company.

     Occupancy and furniture and equipment  expense increased $25,000 or 4.6% to
$565,000 in the third  quarter of 2007 compared to $540,000 in the third quarter
of 2006. Occupancy and furniture and equipment expenses decreased $4,000 or 0.3%
to $1,623,000  for the first nine months of 2007 from  $1,627,000  for the first
nine months of 2006.

     Legal and professional  fees increased  $17,000 or 19.3% to $105,000 in the
third  quarter of 2007  compared to $88,000 in the third  quarter of 2006.  This
increase  is  largely  attributable  to  legal  fees  associated  with  the 2007
Non-employee  Directors  Stock Option Plan and increased  fees for the Company's
external  auditors.  Legal and professional fees decreased  $163,000 or 36.9% to
$279,000  for the first nine  months of 2007  compared  to $442,000 in the first
nine  months of 2006.  This  decrease  is  largely  attributable  to legal  fees
associated  with the  termination of a former  employee of the Company that were
incurred during the first half of 2006.

     Director fees increased  $30,000 or 36.6% to $112,000 for the third quarter
of 2007  compared  to  $82,000  in the  third  quarter  of 2006.  Director  fees
increased  $79,000  or 26.9% to  $330,000  for the  first  nine  months  of 2007
compared to $260,000 for the first nine months of 2006. The increase in director
fees is largely due to an increase in fees paid for  committee  meetings and the
resumption of the payment of director fees at the Bank of Anderson, N. A., which
were suspended during the first quarter of 2006.

     All other  operating  expenses  were  $836,000 in the third quarter of 2007
compared to $769,000  for the third  quarter of 2006,  an increase of $67,000 or
8.7%. All other operating  expenses increased $150,000 or 6.4% to $2,480,000 for
the first nine months of 2007 from $2,330,000 for the first nine months of 2006.
These increases are due to normal growth in miscellaneous operating expenses.



                                       14
<PAGE>


Income Taxes

     The provision for income taxes decreased  $184,000 or 30.1% to $424,000 for
the third  quarter of 2007  compared to $608,000 for the third  quarter of 2006.
The provision for income taxes decreased $354,000 or 20.7% to $1,353,000 for the
first nine months of 2007  compared to  $1,707,000  for the first nine months of
2006. The decrease in the provision for income taxes is partly  attributable  to
the  substantial  increase in the amount of tax-exempt  securities  owned by the
Company. The provision for income taxes is an estimate, and management considers
several factors in making this estimate including current pre-tax income levels,
the amount of tax-exempt  income,  and a comparison of prior period estimates to
income taxes ultimately determined.



                                       15
<PAGE>


BALANCE SHEET REVIEW

Loans

     Outstanding  loans  represent  the largest  component of earning  assets at
79.9% of total earning assets.  As of September 30, 2007, the Company held total
gross loans  outstanding of $400,477,000  an increase of $42,396,000,  or 11.8%,
from  $358,081,000 in total gross loans  outstanding at December 31, 2006 and an
increase  of  $39,437,000,  or 10.9%,  from  $361,040,000  in total  gross loans
outstanding  at  September  30,  2006.  The  increase  in  outstanding  loans 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                                                   September 30,          December 31,
(Dollars in Thousands)                                                       -------------          ------------
                                                                           2007          2006           2006
                                                                           ----          ----           ----
                                                                              (Unaudited)
(Audited)

<S>                                                                     <C>            <C>           <C>
Commercial and Industrial - not secured by real estate .............    $   44,034     $   39,186    $   38,505
Commercial and Industrial - secured by real estate .................       107,112         89,659        90,298
Residential real estate - mortgage .................................       103,182        102,479        97,835
Residential real estate - construction .............................       131,224        115,210       117,465
Consumer loans .....................................................        14,925         14,506        13,978
                                                                       -----------    -----------   -----------
     Gross Loans ...................................................    $  400,477     $  361,040    $  358,081
                                                                       ===========    ===========   ===========
</TABLE>

      The interest rates charged on loans vary with the degree of risk, maturity
and amount of the loan.  Competitive  pressures,  market rates,  availability of
funds,  and government  regulation also influence  interest  rates.  The average
yield on the  Company's  loans  for the  nine  months  and  three  months  ended
September 30, 2007 was 8.17% and 8.13% respectively, compared to 7.67% and 7.90%
respectively  for the nine months and three months ended September 30, 2006. The
Federal Reserve  decreased the federal funds target rate by 50 basis points near
the end the third quarter of 2007.  Prior to that, the federal funds target rate
was increased by 50 basis points during the second quarter of 2006,  culminating
a two-year  period  during  which it  increased  the federal  funds  target rate
seventeen  times  for a  total  of 425  basis  points.  A large  portion  of the
Company's  adjustable-rate  loans,  which  constitute 47% 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  loans that are  pre-sold at
origination to third  parties.  The Company does not actively  pursue  sub-prime
lending or investments,  and accordingly  does not generally hold these types of
assets or have any direct exposure to this national debacle.



                                       16
<PAGE>

     The Company's  commercial lending activity is directed  principally towards
businesses  whose  demands for funds fall within each Bank's legal lending limit
and which are potential  deposit  customers of the Banks. This category of loans
includes loans made to individuals,  partnerships,  and corporations,  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
September 30, 2007  approximately  $7,114,000 or 16.2% 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 September 30, 2007 was $3,994,000 or 1.00%
of loans  outstanding  compared to $4,070,000 or 1.14% of loans  outstanding  at
December 31, 2006 and compared to  $4,081,000 or 1.13% of loans  outstanding  at
September 30, 2006.  The  allowance  for loan losses is based upon  management's
continuing  evaluation of the  collectibility  of loans based on the  historical
loan loss experience of the Company,  current economic conditions  affecting the
ability  of  borrowers  to  repay,  the  volume  of loans,  the  quality  of the
collateral  securing   non-performing  and  problem  loans,  and  other  factors
deserving recognition.

     At September  30, 2007 the Company had  $1,436,000 in  non-accruing  loans,
$416,000  in  restructured  loans,  no loans more than  ninety days past due and
still accruing interest,  and $712,000 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 on which  interest  was  still  being  accrued,  and
$271,000 in other real estate owned at December 31, 2006. At September 30, 2006,
the Company had  $1,638,000  in  non-accruing  loans,  $423,000 in  restructured
loans,  $110,000  in loans  more than  ninety  days past due and still  accruing
interest,  and  $418,000 in other real  estate  owned.  Non-performing  loans at
September  30,  2007  consisted  of  $718,000  in  mortgage  loans,  $692,000 in
commercial  loans and  $26,000 in  consumer  loans.  Non-performing  assets as a
percentage of loans and other real estate owned was 0.64%,  0.47%,  and 0.72% at
each of  September  30,  2007,  December  31,  2006,  and  September  30,  2006,
respectively.

                                       17
<PAGE>

     Net charge-offs during the first nine months of 2007 were $562,000 compared
to net  charge-offs  of  $492,000  for the  first  nine  months  of 2006 and net
charge-offs  of $727,000 for the year ended December 31, 2006. The allowance for
loan losses as a percentage of non-performing  loans was 216%, 288%, and 188% as
of September 30, 2007, December 31, 2006, and September 30, 2006, respectively.

     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 September 30, 2007, December 31, 2006,
and September 30, 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 September 30, 2007 securities totaled  $96,862,000,  which represents
19.3% of total earning  assets.  Securities held at September 30, 2007 decreased
$2,607,000  or 2.6%  from  $99,469,000  invested  as of  December  31,  2006 and
decreased  $15,673,000 or 13.9% from  $112,535,000  invested as of September 30,
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  September  30,  2007 the  Company's  total  investments  classified  as
available for sale had an amortized  cost of  $83,972,000  and a market value of
$83,740,000  for an  unrealized  loss of  $232,000.  At  December  31,  2006 the
Company's  total  investments  classified as available for sale had an amortized
cost of $81,658,000  and a market value of $81,686,000 for an unrealized gain of
$28,000. This compares to an amortized cost of $99,038,000 and a market value of
$98,546,000  for an  unrealized  loss of $492,000 on the  Company's  investments
classified as available  for sale at September  30, 2006.  The changes in market
valuation of the  securities  portfolio are related to changes in interest rates
and not the credit quality of the issuers.  Management believes that maintaining
most of its  securities  in the available  for sale  category  provides  greater
flexibility  in the  management of the overall  investment  portfolio.  In cases
where the market value is less than the book value,  the Company has the ability
and intent to hold these  securities that are in unrealized loss positions until
a market price  recovery or maturity,  and therefore  these  securities  are not
considered impaired on an other-than-temporary basis.


                                       18
<PAGE>

Cash Surrender Value of Life Insurance

     The Company's  cash surrender  value of life  insurance was  $11,242,000 at
September 30, 2007, an increase of $308,000 or 2.8% from the $10,934,000 held at
December  31, 2006 and an increase of  $1,596,000  or 16.5% from the  $9,646,000
held at  September  30,  2006.  The  increase  in cash  surrender  value of life
insurance  since  September  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
offset portions of the cost of certain employee-related benefits.

Cash and Cash Equivalents

     The Company's cash and cash  equivalents  decreased  $8,857,000 or 37.8% to
$14,584,000  at  September  30, 2007 from  $23,441,000  at December 31, 2006 and
decreased  $242,000  or  1.7%  from  $14,342,000  at  September  30,  2006.  The
substantial  swings  in the  levels  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  are their
deposits.  Total  deposits  increased  $39,722,000 or 10.3% to  $424,767,000  at
September  30,  2007  from  $385,045,000  at  December  31,  2006 and  increased
$37,403,000 or 9.7% from  $387,364,000  at September 30, 2006.  Competition  for
deposit  accounts  is  primarily  based on the  interest  rates  paid,  location
convenience and services offered.

     During the first nine months of 2007,  interest-bearing  deposits  averaged
$352,765,000  compared to  $338,240,000  for the first nine months 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.  On  September  30, 2007  brokered
deposits totaled $32,656,000.  On December 31, 2006 and September 30, 2006 there
were $28,999,000 and $15,199,000 in brokered deposits, respectively.

     The average interest rate paid on  interest-bearing  deposits was 4.00% for
the first nine  months of 2007  compared  to 3.08% for the first nine  months of
2006.  In pricing  deposits,  the Company  considers its  liquidity  needs,  the
direction  and  levels of  interest  rates,  and  local  market  conditions.  At
September 30, 2007  interest-bearing  deposits comprised 88.0% of total deposits
compared to 85.7% at December 31, 2006 and 84.5% at September 30, 2006.

     The Company's core deposit base consists largely of consumer time deposits,
savings,  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 continue to provide the



                                       19
<PAGE>

Company with a large  source of  relatively  stable  funds.  Core  deposits as a
percentage of total deposits  averaged  approximately 78% at September 30, 2007,
77% at  December  31,  2006 and 77% at  September  30,  2006.  Time  deposits of
$100,000 or more  represented  23.4% of total  deposits at  September  30, 2007,
22.7% at December  31,  2006 and 22.8% at  September  30,  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  Federal  Home Loan Bank  ("FHLB").  At  September  30,  2007
short-term  borrowings totaled  $58,837,000 and were comprised of $22,479,000 in
securities  sold  under  repurchase   agreements,   $358,000  in  federal  funds
purchased, and $36,000,000 in short-term advances from the FHLB. At December 31,
2006 short-term borrowings totaled $63,368,000 and were comprised of $18,368,000
in securities sold under  repurchase  agreements,  and $45,000,000 in short-term
advances  from the FHLB.  At September 30, 2006  short-term  borrowings  totaled
$68,083,000   and  were  comprised  of  $28,083,000  in  securities  sold  under
repurchase  agreements  and  $40,000,000  in short-term  advances from the FHLB.
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 December 31, 2006,  and September 30, 2006.
This  long-term  advance from the FHLB was  converted  to a  short-term  advance
during the second quarter of 2007.


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 September  30, 2007,  The Peoples
National Bank had total  borrowing  capacity from the FHLB equal to $63,070,000,
and the unused portion of this line of credit was $40,070,000. Bank of Anderson,
N. A. had total borrowing  capacity from the FHLB equal to $29,310,000,  and the
unused  portion of this line of credit was  $16,310,000  at September  30, 2007.
Seneca  National Bank had  established  secured lines of credit with the FHLB at
September  30, 2007 of  $6,430,000,  all of which were unused.  At September 30,
2007,  the Banks also had unused  federal  funds  lines of credit  with  various
correspondent banks totaling $41,642,000.



                                       20
<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 nine months of 2007, the Company made capital expenditures
of approximately $1,444,000 toward construction of a full-service retail banking
office  and  $622,000  towards  the  purchase  and  renovation  of  an  existing
full-service retail banking office, both in Greenville,  South Carolina, for The
Peoples  National Bank.  These offices opened during the fourth quarter of 2007.
The Company additionally makes numerous 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.



                                       21
<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
September  30,  2007,  the  Banks had  issued  commitments  to extend  credit of
$123,613,000  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 $4,456,000 at September 30, 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 had an operating lease agreement for its loan-processing office in
Greenville,  South  Carolina  totaling  $15,750 at September 30, 2007.  With the
opening of the new retail banking facilities in Greenville, South Carolina, this
obligation ended during the fourth quarter of 2007.



                                       22
<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 September 30, 2007:


                                 CAPITAL RATIOS
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                                       Well                 Adequately
                                                                   Capitalized             Capitalized
                                                   Actual          Requirement             Requirement
                                          Amount   Ratio          Amount       Ratio      Amount    Ratio
                                          ------   -----          ------       -----      ------    -----
Company
<S>                                  <C>            <C>                               <C>            <C>
Total Risk-based Capital .........   $    53,073    12.29%         N/A         N/A    $   34,547     8.00%
Tier 1 Risk-based Capital ........        49,078    11.37          N/A         N/A        17,266     4.00
Leverage Ratio ...................        49,078     9.06          N/A         N/A        21,668     4.00

The Peoples National Bank
Total Risk-based Capital .........   $    30,619    11.05%    $   27,710    10.00%    $   22,168     8.00%
Tier 1 Risk-based Capital ........        28,185    10.17         16,628     6.00         11,086     4.00
Leverage Ratio ...................        28,185     8.90         15,834     5.00         12,667     4.00

Bank of Anderson, N. A.
Total Risk-based Capital .........   $    13,847    12.92%    $   10,717    10.00%    $    8,574     8.00%
Tier 1 Risk-based Capital ........        12,645    11.80          6,430     6.00          4,286     4.00
Leverage Ratio ...................        12,645     8.44          7,491     5.00          5,993     4.00

Seneca National Bank
Total Risk-based Capital .........   $     5,774    11.88%    $    4,860    10.00%    $    3,888     8.00%
Tier 1 Risk-based Capital ........         5,309    10.92          2,917     6.00          1,945     4.00
Leverage Ratio ...................         5,309     8.10          3,277     5.00          2,622     4.00
</TABLE>



                                       23
<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 September  2006, the Financial  Accounting  Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value
Measurements".  SFAS No. 157 provides  enhanced guidance for using fair value to
measure assets and liabilities.  The standard also requires expanded disclosures
about the  extent to which  companies  measure  assets and  liabilities  at fair
value,  the information used to measure fair value, and the effect of fair value
measurements  on earnings.  SFAS No. 157 is effective for  financial  statements
issued for fiscal years  beginning  after November 15, 2007, and interim periods
within those fiscal years. The Company does not expect the adoption of Statement
157 to materially impact the Company's consolidated financial statements.

         In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting
for Defined Benefit Pension and Other  Postretirement  Plans", which amends SFAS
No. 87 and SFAS No. 106 to require  recognition of the overfunded or underfunded
status of pension and other  postretirement  benefit plans on the balance sheet.
Under SFAS No. 158, gains and losses,  prior service costs and credits,  and any
remaining  transition  amounts  under SFAS No. 87 and SFAS No. 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 No. 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 No. 158 will not impact the  company's  consolidated  financial
statements.

         In February  2007, the FASB issued SFAS No. 159, "The Fair Value Option
for Financial Assets and Financial  Liabilities - Including an amendment of SFAS
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


                                       24
<PAGE>

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 No. 159 is effective for the Company on January
1, 2008.  Earlier  adoption is  permitted  in 2007 if the Company also elects to
apply the  provisions  of SFAS No. 157. The Company did not early adopt SFAS No.
159 and believes  that it is unlikely  that it will expand its use of fair value
accounting upon the January 1, 2008 effective date.

         In September,  2006, The FASB ratified the  consensuses  reached by the
FASB's Emerging Issues Task Force ("EITF") relating to EITF No. 06-4 "Accounting
for the Deferred Compensation and Postretirement  Benefit Aspects of Endorsement
Split-Dollar  Life Insurance  Arrangements".  EITF No. 06-4  addresses  employer
accounting for endorsement split-dollar life insurance arrangements that provide
a benefit to an employee that extends to postretirement periods 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, 2007.  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 is  currently  analyzing  the effects of EITF No. 06-4 on the  Company's
consolidated financial statements.

         In September  2006, the FASB ratified the consensus  reached related to
EITF No.  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 No. 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 No. 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 No. 06-5 is  effective  for fiscal years  beginning  after
December 15, 2007.  Although,  the Company does not believe the adoption of EITF
No. 06-5 will have a material  impact on the  Company's  consolidated  financial
statements management is currently analyzing the impact of adoption.

         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.



                                       25
<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 Banks'
short-term  interest-rate risk. According to the model, as of September 30, 2007
the  Company  was  positioned  so that net  interest  income  would  increase by
$648,000 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 by $594,000 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  Banks'  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


                                       26
<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.



                                       27
<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.





                                       28
<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





                                       29
<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:  November 9, 2007                    By:    /s/ R. Riggie Ridgeway
                                                 ------------------------
                                                   R. Riggie Ridgeway
                                                   President and CEO


Dated:  November 9, 2007                    By:   /s/ Robert E. Dye, Jr.
                                                ------------------------
                                                   Robert E. Dye, Jr.
                                                   Sr. Vice President & CFO
                                                   (principal financial officer)



                                       30
<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



                                       31