SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

        For the Quarterly Period Ended            Commission file
                  March 31, 2009                    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 has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be submitted  and posted  pursuant to Rule 405 of  Regulation  S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to  submit  and  post  such  files).  Yes  [ ] No [ ]  (Not  yet  applicable  to
Registrant)

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

Large accelerated filer [ ]                     Accelerated filer         [ ]

Non-accelerated  filer  [ ]                     Smaller reporting company [X]
(Do not check if a smaller reporting company)

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

                                 Yes [ ] No [X]

The number of outstanding shares of the issuer's $1.11 par value common stock as
of May 4, 2009 was 7,070,139.

<PAGE>

PART I - FINANCIAL  INFORMATION

Item 1. Financial Statements

         Peoples Bancorporation, Inc. and Subsidiaries
                  Consolidated Balance Sheets
         (Dollars in thousands except per share data)

<TABLE>
<CAPTION>
                                                                                      March 31,         March 31,       December 31,
                                                                                        2009              2008              2008
                                                                                      Unaudited         Unaudited          Audited
                                                                                      ---------         ---------          -------
ASSETS
<S>                                                                                  <C>                <C>               <C>
CASH AND DUE FROM BANKS ....................................................         $   4,075          $   8,980         $   7,874
INTEREST-BEARING DEPOSITS IN OTHER BANKS ...................................            24,945                983               765
FEDERAL FUNDS SOLD .........................................................                 -              6,796             9,185
                                                                                     ---------          ---------         ---------
     Total cash and cash equivalents .......................................            29,020             16,759            17,824
SECURITIES
     Trading assets ........................................................                58                  -                47
     Available for sale ....................................................            94,227             80,807            96,003
     Held to maturity (market value of $12,110, $12,878
         and $12,666) ......................................................            12,039             12,878            12,651
     Other investments, at cost ............................................             3,856              4,877             3,546
LOANS-less allowance for loan losses of $7,613, $3,665 and $9,217 ..........           384,837            419,826           389,494
PREMISES AND EQUIPMENT, net of accumulated
     depreciation and amortization .........................................            12,954             13,740            13,200
ACCRUED INTEREST RECEIVABLE ................................................             2,592              3,147             2,685
ASSETS ACQUIRED IN SETTLEMENT OF LOANS .....................................             4,921                930             5,428
CASH SURRENDER VALUE OF LIFE INSURANCE .....................................            11,935             11,456            11,815
OTHER ASSETS ...............................................................             6,659                998             7,182
                                                                                     ---------          ---------         ---------
         TOTAL ASSETS ......................................................         $ 563,098          $ 565,418         $ 559,875
                                                                                     =========          =========         =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
DEPOSITS
     Noninterest-bearing ...................................................         $  43,743          $  47,070         $  51,091
     Interest-bearing ......................................................           411,430            381,740           394,278
                                                                                     ---------          ---------         ---------
         Total deposits ....................................................           455,173            428,810           445,369
SECURITIES SOLD UNDER REPURCHASE
     AGREEMENTS ............................................................            15,681             18,840            22,181
FEDERAL FUNDS PURCHASED ....................................................                 -                  -             1,028
NOTES PAYABLE TO FEDERAL HOME LOAN BANK ....................................            34,000             63,000            34,600
NOTES PAYABLE - OTHER ......................................................            11,000                  -            11,000
ACCRUED INTEREST PAYABLE ...................................................             2,928              3,668             2,636
OTHER LIABILITIES ..........................................................             2,007                488             1,549
                                                                                     ---------          ---------         ---------
         Total Liabilities .................................................           520,789            514,806           518,363
                                                                                     ---------          ---------         ---------
SHAREHOLDERS' EQUITY
Preferred stock - 15,000,000 authorized, no
       shares outstanding ..................................................                 -                  -                 -
Common stock - 15,000,000 shares authorized, $1.11
       Par value per share, 7,070,139 shares, 7,057,551 shares
       and 7,070,139 shares outstanding, respectively ......................             7,848              7,834             7,848
Additional paid-in capital .................................................            41,767             41,643            41,752
Retained earnings ..........................................................            (9,006)               132            (9,564)
Accumulated other comprehensive income .....................................             1,700              1,003             1,476
                                                                                     ---------          ---------         ---------
         Total Shareholders' Equity ........................................            42,309             50,612            41,512
                                                                                     ---------          ---------         ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................................         $ 563,098          $ 565,418         $ 559,875
                                                                                     =========          =========         =========
</TABLE>

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


                                       1
<PAGE>

<TABLE>
<CAPTION>
          Peoples Bancorporation, Inc. and Subsidiaries
             Consolidated Statements of Income                                                          (Unaudited)
       (Dollars in thousands except per share data)                                                 Three Months Ended
                                                                                                          March 31,
                                                                                               2009                       2008
                                                                                               ----                       ----
INTEREST INCOME
<S>                                                                                     <C>                        <C>
   Interest and fees on loans ...............................................           $          6,176           $          7,504
   Interest on securities
       Taxable ..............................................................                        876                        792
       Tax-exempt ...........................................................                        385                        370
   Interest on federal funds ................................................                          -                         20
                                                                                        ----------------           ----------------
Total interest income .......................................................                      7,437                      8,686
                                                                                        ----------------           ----------------
INTEREST EXPENSE
   Interest on deposits .....................................................                      2,811                      3,586
   Interest on federal funds purchased and securities
       sold under repurchase agreements .....................................                         28                        107
    Interest on notes payable Federal Home Loan Bank ........................                         50                        672
    Interest on notes payable - other .......................................                        143                          -
                                                                                        ----------------           ----------------
Total interest expense ......................................................                      3,032                      4,365
                                                                                        ----------------           ----------------
     Net interest income ....................................................                      4,405                      4,321

PROVISION FOR LOAN LOSSES ...................................................                        705                        235
                                                                                        ----------------           ----------------
Net interest income after provision for loan losses .........................                      3,700                      4,086
                                                                                        ----------------           ----------------
NON-INTEREST INCOME
   Service charges on deposit accounts ......................................                        401                        460
   Customer service fees ....................................................                         42                         48
   Mortgage banking .........................................................                        194                        131
   Brokerage services .......................................................                         38                         60
   Bank owned life insurance ................................................                        134                        124
   Other noninterest income .................................................                        178                        145
   Gain on sale of available for sale securities ............................                          -                          2
   Gain(loss) on sale of assets acquired in settlement of loans .............                         49                         (9)
                                                                                        ----------------           ----------------
           Total non-interest income ........................................                      1,036                        961
                                                                                        ----------------           ----------------
NON-INTEREST EXPENSES
   Salaries and benefits ....................................................                      2,145                      2,486
   Occupancy and equipment ..................................................                        547                        564
   Marketing and advertising ................................................                         31                        137
   Communications ...........................................................                         65                         71
   Printing and supplies ....................................................                         39                         57
   Bank paid loan costs .....................................................                        220                        135
   ATM/Debit card expenses ..................................................                         97                         81
   Legal and professional fees ..............................................                        151                         82
   Director fees ............................................................                         92                        111
   Regulatory assessments ...................................................                        250                         84
   Other post employment benefits ...........................................                         91                         87
   Other operating expenses .................................................                        356                        362
                                                                                        ----------------           ----------------
             Total non-interest expenses ....................................                      4,084                      4,257
                                                                                        ----------------           ----------------
   Income before income taxes ...............................................                        652                        790
PROVISION FOR INCOME TAXES ..................................................                         94                        177
                                                                                        ----------------           ----------------
   Net income ...............................................................           $            558           $            613
                                                                                        ================           ================
INCOME PER COMMON SHARE:
   BASIC ....................................................................           $           0.08           $           0.08
                                                                                        ================           ================
   DILUTED ..................................................................           $           0.08           $           0.08
                                                                                        ================           ================
WEIGHTED AVERAGE COMMON SHARES:
   BASIC ....................................................................                  7,070,139                  7,409,579
                                                                                        ================           ================
   DILUTED ..................................................................                  7,131,592                  7,410,586
                                                                                        ================           ================
DIVIDENDS PAID PER COMMON SHARE .............................................           $              -           $           0.05
                                                                                        ================           ================
</TABLE>

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

                                       2
<PAGE>

                  Peoples Bancorporation, Inc. and Subsidiaries
           Consolidated Statements of Changes in Shareholders' Equity
               for the Three months ended March 31, 2008 and 2009
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                          Accumulated
                                                         Common stock           Additional                   other         Total
                                                         ------------            paid-in     Retained   comprehensive  shareholders'
                                                     Shares        Amount        capital     earnings       income        equity
                                                     ------        ------        -------     --------       ------        ------
<S>                                                <C>           <C>           <C>          <C>             <C>           <C>
Balance, December 31, 2007 ...................     7,056,337     $   7,833     $  41,624    $        -      $     784     $  50,241
                                                                                                                          ---------
Net income ...................................             -             -                         613              -            613
Other comprehensive income,
 net of tax:
  Unrealized holding gains on
    securities available for sale,
    net of income taxes of $16 ...............             -             -             -             -            217           217
  Reclassification adjustments
    for gains included in net
    income net of incomes taxes
    of $0 ....................................             -             -             -             -              2             2
                                                                                                                          ---------
Comprehensive income .........................                                                                                  832
Cash dividends ...............................             -             -             -          (353)             -          (353)
Proceeds from stock options
     exercised ...............................         1,214             1             5             -              -             6
Stock-based compensation .....................             -             -            14             -              -            14
Cumulative effect of post
  retirement cost of life insurance ..........             -             -             -          (128)             -          (128)
                                                   ---------     ---------     ---------     ---------      ---------     ---------
Balance, March 31, 2008 ......................     7,057,551     $   7,834     $  41,643     $     132      $   1,003     $  50,612
                                                   =========     =========     =========     =========      =========     =========


Balance, December 31, 2008 ...................     7,070,139     $   7,848     $  41,752     $  (9,564)     $   1,476     $  41,512
                                                                                                                          ---------
Net income ...................................             -             -                         558              -           558
Other comprehensive income,
 net of tax:
   Unrealized holding gains on
    securities available for sale,
     net of income taxes of $116 .............             -             -             -             -            224           224
                                                                                                                          ---------
Comprehensive income .........................                                                                                  782
Stock-based compensation .....................             -             -            15             -              -            15
                                                   ---------     ---------     ---------     ---------      ---------     ---------
Balance, March 31, 2009 ......................     7,070,139     $   7,848     $  41,767     $  (9,006)     $   1,700     $  42,309
                                                   =========     =========     =========     =========      =========     =========
</TABLE>





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



                                       3
<PAGE>

<TABLE>
<CAPTION>
          Peoples Bancorporation, Inc. and Subsidiaries
                  Consolidated Statements of Cash Flows                                                          (Unaudited)
                         (Dollars in thousands)                                                               Three months Ended
                                                                                                                  March 31,
                                                                                                                  ---------
                                                                                                          2009                 2008
                                                                                                          ----                 ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                                     <C>                <C>
   Net income ................................................................................          $    558           $    613
   Adjustments to reconcile net income to net cash provided
     by operating activities:
   Gain on sale of securities available for sale .............................................                 -                 (2)
   Gain from trading assets ..................................................................               (11)                 -
   (Gain) loss on sale of assets acquired in settlement of loans .............................               (49)                 7
   Provision for loan losses .................................................................               705                235
   Depreciation and amortization .............................................................               260                275
   Amortization and accretion (net) of premiums and
     discounts on securities .................................................................                 1                  3
   Stock-based compensation ..................................................................                15                 14
   Postretirement cost of insurance for split-dollar life
       insurance coverage ....................................................................                 -               (128)
   Decrease in accrued interest receivable ...................................................                93                174
   Decrease in other assets ..................................................................               458                 31
   Increase (decrease) in accrued interest payable ...........................................               292               (797)
   Increase (decrease) in other liabilities ..................................................               458               (275)
                                                                                                        --------           --------
     Net cash provided by operating activities ...............................................             2,780                150
                                                                                                        --------           --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of securities held to maturity ..................................................                 -               (444)
   Purchases of securities available for sale ................................................            (2,022)              (513)
   Purchases of other investments ............................................................               (61)               (82)
   Proceeds from principal pay-downs on securities available for sale ........................             2,893              2,141
   Proceeds from the maturities and calls of securities available for sale ...................             1,000              2,250
   Proceeds from the sale of securities available for sale ...................................                 -                455
   Proceeds from the maturities and calls of securities held to maturity .....................               605                655
   Investment in bank owned life insurance ...................................................              (120)              (106)
   Proceeds from the sale of other real estate owned .........................................             2,746                 31
   Net increase (decrease) in loans ..........................................................             1,713             (5,373)
   Purchase of premises and equipment ........................................................               (14)              (258)
                                                                                                        --------           --------
     Net cash provided by (used in) investing activities .....................................             6,740             (1,244)
                                                                                                        --------           --------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in deposits ..................................................................             9,804             11,189
   Net decrease in securities sold under repurchase
     agreements ..............................................................................            (6,500)              (984)
   Net decrease in federal funds purchased ...................................................            (1,028)              (429)
   Net decrease in notes payable to Federal Home Loan Bank ...................................              (600)            (2,100)
   Proceeds from the exercise of stock options ...............................................                 -                  6
   Cash dividend .............................................................................                 -               (353)
                                                                                                        --------           --------
     Net cash provided by financing activities ...............................................             1,676              7,329
                                                                                                        --------           --------
     Net increase  in cash and cash equivalents ..............................................            11,196              6,235
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ...............................................            17,824             10,524
                                                                                                        --------           --------
CASH AND CASH EQUIVALENTS, END OF PERIOD .....................................................          $ 29,020           $ 16,759
                                                                                                        ========           ========

CASH PAID FOR
     Interest ................................................................................          $  2,740           $  3,539
                                                                                                        ========           ========
     Income Taxes ............................................................................          $     22           $     27
                                                                                                        ========           ========
</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 2008 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

     No cash dividends were declared by the Board of Directors  during the first
quarter of 2009.

EARNINGS PER SHARE

     Statement of Financial  Account  Standards  ("SFAS") No. 128,  Earnings per
Share requires that the Company  present basic and diluted net income per common
share.  The assumed  conversion of stock options creates the difference  between
basic and  diluted  net  income per share.  Income  per share is  calculated  by
dividing net income by the weighted average number of common shares  outstanding
for each  period  presented.  The  weighted  average  number  of  common  shares
outstanding  for basic net income per common  share for the three  months  ended
March 31, 2009 and 2008 was 7,070,139 and 7,409,579,  respectively. The weighted
average  number of common shares  outstanding  for diluted net income per common
share was  7,131,592 and 7,410,586 for the three months ended March 31, 2009 and
2008.

STOCK-BASED COMPENSATION

     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 36,549 shares remain  outstanding and exercisable  under this plan. The
"1997 Non-Employee  Directors Stock Option Plan" expired in 2007, but options to
purchase 53,208 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


                                       5
<PAGE>

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 March 31,
2009,  an aggregate of 375,650  shares were reserved for issuance on exercise of
options  under all four of these  plans.  During the first three months of 2009,
options to purchase 1,000 shares were granted with a weighted average fair value
of $3.25 per share.  The  following is a summary of the status of the  Company's
plans as of March 31, 2009 and changes  during the three  months ended March 31,
2009.

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

Outstanding, December 31, 2008 ...................     146,263        $   10.56
Granted ..........................................       1,000        $    3.25
Exercised ........................................           -        $    0.00
Forfeited ........................................      (2,915)       $   12.62
                                                       ------
Outstanding, March 31, 2009 ......................     144,348        $   10.47
                                                       =======

Options Exercisable, March 31, 2009 ..............     116,966        $   10.56
                                                       =======

 INCOME TAXES

         The provision  for income taxes  includes  deferred  taxes on temporary
differences  between the recognition of certain income and expense items for tax
and  financial  statement  purposes.  Income taxes are computed on the liability
method as described in SFAS No 109, Accounting for Income Taxes.

         As of January 1, 2007,  the  Company  adopted  the  provisions  of FASB
Interpretation  No.  48,  Accounting  for  Uncertainty  in  Income  Taxes  -  an
interpretation of FASB Statement No. 109 ("FIN 48"), which provides criteria for
the  recognition,  measurement,  presentation  and  disclosure  of uncertain tax
positions. The Company has analyzed the tax position expected to be taken in its
tax returns and concluded it has no liability related to uncertain tax positions
in accordance with FIN 48.

         The Company's  policy is to record  interest and  penalties  related to
income tax matters as income tax expense.  Accrued  interest and penalties  were
immaterial as of March 31, 2009.


                                       6
<PAGE>

POSTRETIRMENT SPLIT-DOLLAR LIFE INSURANCE

         In September  2006,  The FASB ratified the  consensuses  reached by the
FASB's  Emerging  Issues Task Force  ("EITF")  relating to EITF Issue No.  06-4,
Accounting for the Deferred  Compensation and Postretirement  Benefit Aspects of
Endorsement   Split-Dollar  Life  Insurance   Arrangements  ("EITF  06-4").  The
consensus  stipulates that an agreement by an employer to share a portion of the
proceeds of a life insurance  policy with an employee during the  postretirement
period is a  postretirement  benefit  arrangement  required to be accounted  for
under SFAS No. 106 or Accounting Opinion ("APB") No. 12, Omnibus Opinion - 1967.
The  consensus  concludes  that the purchase of a  split-dollar  life  insurance
policy does not  constitute a settlement  under SFAS No. 106 and,  therefore,  a
liability for the  postretirement  obligation must be recognized  under SFAS No.
106 if the benefit is offered under an  arrangement  that  constitutes a plan or
under  APB No. 12 if it is not part of a plan.  EITF  06-04  was  effective  for
annual or interim reporting periods beginning after December 15, 2007.

         In March 2007, the EITF reached a final  conclusion on Issue No. 06-10,
Accounting for Collateral Assignment  Split-Dollar Life Insurance  Arrangements.
The  consensus   concludes   that  a  liability   must  be  recognized  for  the
postretirement  obligation related to a collateral assignment  split-dollar life
insurance  arrangement in accordance  with SFAS No. 106 or APB No. 12. Any asset
should be  recognized  and  measured  based on the nature and  substance  of the
collateral  assignment  split-dollar life insurance  arrangement.  The effective
date of EITF 06-10 was for fiscal years beginning after December 15, 2007.

         The  adoption  of EITF 06-4 and 06-10 by the Company on January 1, 2008
resulted in a $128,000 decrease to the Company's retained earnings.

FAIR VALUE

         Effective January 1, 2008, the Company adopted SFAS No. 157, Fair Value
Measurements   ("SFAS  157")  which  provides  a  framework  for  measuring  and
disclosing fair value under generally accepted accounting  principles.  SFAS 157
requires  disclosures about the fair value of assets and liabilities  recognized
in the balance sheet in periods subsequent to initial  recognition,  whether the
measurements  are made on a  recurring  basis (for  example,  available-for-sale
investment securities) or on a nonrecurring basis (for example, impaired loans).

         SFAS  157  defines  fair  value as the  exchange  price  that  would be
received  for an asset or paid to  transfer a  liability  (an exit price) in the
principal or most  advantageous  market for the asset or liability in an orderly
transaction  between market  participants on the measurement date. SFAS 157 also
establishes a fair value  hierarchy which requires an entity to maximize the use
of observable inputs and minimize the use of unobservable  inputs when measuring
fair value.  The standard  describes  three levels of inputs that may be used to
measure fair value:


                                       7
<PAGE>

Level 1        Quoted  prices  in  active   markets  for  identical   assets  or
               liabilities.  Level 1 assets  and  liabilities  include  debt and
               equity securities and derivative  contracts that are traded in an
               active  exchange  market,  as well as U.S.  Treasury,  other U.S.
               Government and agency  mortgage-backed  debt  securities that are
               highly  liquid  and  are  actively  traded  in   over-the-counter
               markets.

Level 2        Observable inputs other than Level 1 prices such as quoted prices
               for similar assets or liabilities;  quoted prices in markets that
               are not active;  or other  inputs that are  observable  or can be
               corroborated by observable market data for substantially the full
               term of the assets or liabilities. Level 2 assets and liabilities
               include debt  securities  with quoted prices that are traded less
               frequently  than   exchange-traded   instruments  and  derivative
               contracts  whose value is  determined  using a pricing model with
               inputs  that  are  observable  in the  market  or can be  derived
               principally from or corroborated by observable  market data. This
               category  generally  includes  certain  derivative  contracts and
               impaired loans.

Level 3        Unobservable  inputs  that are  supported  by little or no market
               activity and that are significant to the fair value of the assets
               or liabilities.  Level 3 assets and liabilities include financial
               instruments  whose  value is  determined  using  pricing  models,
               discounted cash flow  methodologies,  or similar  techniques,  as
               well as  instruments  for which the  determination  of fair value
               requires  significant  management  judgment  or  estimation.  For
               example,  this category generally includes certain private equity
               investments,  retained  residual  interests  in  securitizations,
               residential  mortgage servicing rights, and  highly-structured or
               long-term derivative contracts.


         Assets and Liabilities  measured at fair value on a recurring basis are
as follows as of March 31, 2009:

<TABLE>
<CAPTION>
                                                                                                                       Significant
                                                                      Quoted market price       Significant other      unobservable
                                                                       in active markets        observable inputs        inputs
  March 31, 2009                                                            (Level 1)               (Level 2)           (Level 3)
                                                                            ---------               ---------           ---------
<S>                                                                        <C>                     <C>                  <C>
Available for sale
  investment securities ...................................                $93,736,000             $   491,000          $       -
Trading assets ............................................                     58,000                       -                  -
Impaired loans ............................................                          -              11,356,000                  -
                                                                           -----------             -----------          ---------

Total .....................................................                $93,794,000             $11,847,000          $       -
                                                                           ===========             ===========          =========
</TABLE>


                                       8
<PAGE>

         The  Company  has no  liabilities  carried at fair value or measured at
fair value on a nonrecurring basis.

         The Company is  predominantly a cash-flow based lender with real estate
serving as collateral on a substantial majority of loans. Loans which are deemed
to be impaired are primarily  valued on a nonrecurring  basis at the fair values
of the underlying  real estate  collateral.  Such fair values are obtained using
independent  appraisals,  which the Company considers to be level 2 inputs.  The
aggregate carrying amount of impaired loans at March 31, 2009 was $11,356,000.

Recent Developments

         On April 24,  2009,  the  Company  sold  12,660  shares  of Fixed  Rate
Cumulative  Perpetual  Preferred Stock, Series T, (the "Series T Stock") and 633
shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series W (the "Series
W Stock") to the U. S. Treasury,  pursuant to its Capital Purchase Program,  for
an aggregate  purchase price of  $12,660,000.  Each share of the preferred stock
has a  liquidation  preference  of $1,000.00 and may be redeemed by the Company,
subject to certain limitations, for $1,000.l00 per share. The annual dividend on
the Series T Stock is 5% for the first five years and 9% thereafter.  The annual
dividend on the Series W Stock is 9%.  Other terms of the Series T Stock and the
Series W Stock limit the Company's ability to pay common stock dividends or make
repurchases of common stock under certain circumstances.  Further, the Company's
purchase  agreement with the U. S. Treasury and the laws authorizing the Capital
Purchase  Program impose various  limitations and  requirements on the Company's
compensation of its senior executive officers.  See the Company's Form 8-K filed
with the  Securities  and Exchange  Commission on April 28, 2009 for  additional
details of the preferred stock and the purchase agreement.

         The Company used a portion of the proceeds of the sale of the preferred
stock to repay the  outstanding  $11,000,000  drawn on a line of  credit  with a
correspondent  bank the  proceeds of which were used to inject  capital into the
Company's Banks and, consequently, has $15,000,000 available under that line.

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.



                                       9
<PAGE>

Cautionary Notice with Respect to Forward Looking Statements

          This report contains  "forward-looking  statements" within the meaning
of the securities  laws. The Private  Securities  Litigation  Reform Act of 1995
provides a safe harbor for forward-looking  statements.  In order to comply with
the 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
forwarding-looking statements.

          All statements that are not historical facts are statements that could
be  "forward-looking   statements."  You  can  identify  these   forward-looking
statements  through the use of words such as "may," "will,"  "should,"  "could,"
"would," "expect,"  "anticipate,"  "assume," "indicate,"  "contemplate," "seek,"
"plan,"  "predict,"  "target,"  "outlook,"   "potential,"  "believe,"  "intend,"
"estimate,"  "project,  " "continue,"  or other similar  words.  Forward-looking
statements include,  but are not limited to, statements  regarding the Company's
future business prospects,  revenues, working capital, liquidity, capital needs,
interest costs, income, business operations and proposed services.

          These  forward-looking  statements are based on current  expectations,
estimates and projections about the banking industry,  management's beliefs, and
assumptions made by management.  Such information includes,  without limitation,
discussions  as to estimates,  expectations,  beliefs,  plans,  strategies,  and
objectives  concerning  future  financial  and  operating   performance.   These
statements  are not guarantees of future  performance  and are subject to risks,
uncertainties and assumptions that are difficult to predict.  Therefore,  actual
results  may  differ  materially  from those  expressed  or  forecasted  in such
forward-looking  statements.  The risks and uncertainties  include,  but are not
limited to:

          o    future economic and business conditions;
          o    lack of sustained growth in the economies of the Company's market
               areas;
          o    government monetary and fiscal policies;
          o    the  effects  of  changes  in  interest   rates  on  the  levels,
               composition and costs of deposits, loan demand, and the values of
               loan collateral,  securities,  and interest  sensitive assets and
               liabilities;
          o    the  effects  of  competition  from  a  wide  variety  of  local,
               regional, national and other providers of financial,  investment,
               and insurance services, as well as competitors that offer banking
               products and  services by mail,  telephone,  computer  and/or the
               Internet;
          o    credit risks;
          o    higher than anticipated levels of defaults on loans;
          o    perceptions by depositors about the safety of their deposits;
          o    ability to weather the current economic downturn;
          o    loss of consumer or investor confidence;
          o    the failure of assumptions  underlying the  establishment  of the
               allowance  for loan  losses and other  estimates,  including  the
               value of collateral securing loans;


                                       10
<PAGE>

          o    the risks of opening new offices, including,  without limitation,
               the related costs and time of building customer relationships and
               integrating operations as part of these endeavors and the failure
               to achieve expected gains,  revenue growth and/or expense savings
               from such endeavors;
          o    changes  in laws and  regulations,  including  tax,  banking  and
               securities laws and regulations;
          o    changes in accounting policies, rules and practices;
          o    changes  in  technology  or  products  may be more  difficult  or
               costly, or less effective, than anticipated;
          o    the effects of war or other conflicts, acts of terrorism or other
               catastrophic  events that may affect general economic  conditions
               and economic confidence; and
          o    other factors and information described in this report and in any
               of the  other  reports  that  we file  with  the  Securities  and
               Exchange Commission under the Securities Exchange Act of 1934.

          All  forward-looking  statements  are  expressly  qualified  in  their
entirety by this cautionary notice. The Company has no obligation,  and does not
undertake  to update,  revise or correct any of the  forward-looking  statements
after the date of this  report.  The Company  has  expressed  its  expectations,
beliefs and projections in good faith and believes they have a reasonable basis.
However,  there is no assurance that these expectations,  beliefs or projections
will result or be achieved or accomplished.

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  Note 1 to  the  Consolidated  Financial  Statements
included  in  Item  8--"Financial  Statements  and  Supplementary  Data"  of the
Company's 2008 Annual Report on Form 10-K.

         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.

         Of these  significant  accounting  policies,  the Company considers its
policies  regarding the allowance  for loan losses (the  "Allowance")  to be its
most  critical  accounting  policy due to the  significant  degree of management


                                       11
<PAGE>

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.  Many of the Company's  estimates also rely
heavily  on real  estate  appraisals  by  third  parties  which  are  themselves
estimates.  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 the "Provision and Allowance for Loan Losses, Loan
Loss  Experience"  section in Item  7--"Management's  Discussion and Analysis of
Financial  Condition and Results of  Operations"  of the  Company's  2008 Annual
Report on Form 10-K and the "Balance  Sheet  Review--Allowance  for Loan Losses"
and "Earnings Performance--Provision for Loan Losses" sections of this report on
Form 10-Q for a detailed  description  of the Company's  estimation  process and
methodology related to the Allowance.





                                       12
<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  Company's  2008 Annual Report on Form 10-K.  Results of operations  for the
three-month  period ended March 31, 2009 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  bank
subsidiaries: The Peoples National Bank, Easley, South Carolina, a national bank
which commenced business  operations in August 1986; Bank of Anderson,  National
Association,  Anderson, South Carolina, a national bank which commenced business
operations in September 1998; and, Seneca National Bank, Seneca, South Carolina,
a national bank which commenced business  operations in February 1999 (sometimes
referred to herein as the "Banks").

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





                                       13
<PAGE>


                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EARNINGS PERFORMANCE

Overview

         The consolidated Company's net income for the first quarter of 2009 was
$558,000  or $0.08 per diluted  share  compared to $613,000 or $0.08 per diluted
share for the first  quarter of 2008,  a decrease of $55,000 or 9.0%.  Return on
average  equity for the three months ended March 31, 2009 was 4.10%  compared to
4.91% for the three months ended March 31,  2008.  Return on average  assets for
the three months ended March 31, 2009 was 0.31%  compared to 0.44% for the three
months ended March 31, 2008.

Interest Income, Interest Expense and Net Interest Income

         The largest component of the Company's revenue is interest income.  Net
interest income,  which is the difference  between the interest earned on assets
and the interest paid for the  liabilities  used to fund those assets,  measures
the gross  profit  from  lending  and  investing  activities  and is the primary
contributor to the Company's earnings.  Net interest income before provision for
loan losses  increased  $84,000,  or 1.9%, to  $4,405,000  for the quarter ended
March 31, 2009 compared to $4,321,000  for the quarter ended March 31, 2008. The
Company's  net  interest  margin was 3.49% for the quarter  ended March 31, 2009
compared to 3.32% for the quarter ended March 31, 2008.

         The Company's  total interest  income for the first quarter of 2009 was
$7,437,000  compared to $8,686,000  for the first quarter of 2008, a decrease of
$1,249,000, or 14.4%. Interest and fees on loans, the largest component of total
interest  income,  decreased  by  $1,328,000  in the  first  quarter  of 2009 to
$6,176,000  compared to $7,504,000  for the first quarter of 2008, a decrease of
17.7%. The decrease in interest and fees on loans for the three-month period was
due to lower market interest rates, a decrease in outstanding loan balances, and
higher levels of  non-performing  assets.  Interest on taxable  securities,  the
second largest  component of total interest income,  increased by $84,000 in the
first quarter of 2009 to $876,000  compared to $792,000 for the first quarter of
2008, an increase of 10.6%.  The increase in interest on taxable  securities for
the three-month period was due to higher average balances.

         The Company's total interest  expense for the first quarter of 2009 was
$3,032,000  compared to $4,365,000  for the first quarter of 2008, a decrease of
$1,333,000,  or 30.5%.  Interest expense on deposits,  the largest  component of
total  interest  expense,  decreased by $775,000 in the first quarter of 2009 to
$2,811,000  compared to $3,586,000  for the first quarter of 2008, a decrease of
21.6%. The decrease in interest  expense on deposits for the three-month  period
ended March 31, 2009 compared to the same period in 2008 is largely attributable
to lower funding rates, partially offset by higher average balances. Interest on
notes  payable-other,  the second largest  component of total  interest  expense


                                       14
<PAGE>

increased to $143,000 in 2009 compared to no expense in the same period of 2008.
This  expense is due to the line of credit  that was drawn by the Company in the
fourth quarter of 2008.  Interest on notes payable to the Federal Home Loan Bank
of Atlanta  ("FHLB"),  the third largest  component of total  interest  expense,
decreased $622,000 or 92.6% to $50,000 for the three months ended March 31, 2009
compared to $672,000 for the three months ended March 31, 2008,  attributable to
significantly lower interest rates paid and lower average balances.  Interest on
federal funds purchased and securities  sold under  repurchase  agreements,  the
fourth  component  of total  interest  expense,  decreased  $79,000  or 73.8% to
$28,000 in the first  quarter of 2009 compared to $107,000 for the first quarter
of 2008, largely attributable to lower interest rates paid.

Provision for Loan Losses

         The  provision for loan losses  charged to operations  during the three
months  ended March 31,  2009 was  $705,000  compared to $235,000  for the three
months ended March 31, 2008,  an increase of $470,000 or 200.0%.  The changes in
the Company's  provision for loan losses for the first quarter of 2009 are based
on  management's  evaluation of the  Company's  overall  credit  quality and its
estimate  of loan losses  inherent in the loan  portfolio.  See  "BALANCE  SHEET
REVIEW - Allowance for Loan Losses."

Non-interest Income

         Non-interest  income  increased  $75,000 or 7.8% to $1,036,000  for the
first  quarter  of 2008  compared  to  $961,000  for the first  quarter of 2008.
Service fees on deposit accounts,  the largest component of non-interest income,
decreased $59,000 or 12.8% to $401,000 for the first quarter of 2009 compared to
$460,000 for the first quarter of 2008.

         Mortgage  banking fees  increased from $131,000 in the first quarter of
2008 to $194,000 in the first quarter of 2009, an increase of $63,000, or 48.1%,
due to increases in the levels of residential  mortgage loan originations at the
Banks.  Bank owned life insurance income increased  $10,000 or 8.1% in the first
quarter of 2009 to $134,000  compared to $124,000 for the first quarter of 2008,
representing higher growth rates on the cash surrender values of these policies.
Brokerage  service income decreased from $60,000 in the first quarter of 2008 to
$38,000  in the first  quarter of 2009,  a  decrease  of $22,000 or 36.7% due to
lower commissions from both the volume and mix of products.

         There was a gain of $49,000 in the first quarter of 2009 on the sale of
assets acquired in settlement of loans, compared to a loss of $9,000 in the same
period of 2008.  Other  non-interest  income  increased  $33,000  or 22.8%  from
$145,000  during the first  quarter of 2008 to $178,000 for the first quarter of
2009. This increase is largely attributable to an increase in interchange income
on debit  cards of $21,000  or 17.8% to  $139,000  in the first  quarter of 2009
compared to $118,000 in the first quarter of 2008.

         The Company  recorded a $2,000 gain on the sale of  available  for sale
securities  in the first  quarter of 2008.  There were no gains  realized on the
sale of securities available for sale during the first quarter of 2009.


                                       15
<PAGE>

Non-interest Expense

         Total non-interest  expense decreased $173,000,  or 4.1%, to $4,084,000
for the first  quarter of 2009 from  $4,257,000  for the first  quarter of 2008.
Salaries and benefits, the largest component of non-interest expense,  decreased
$341,000,  or 13.7%, to $2,145,000 for the first quarter of 2009 from $2,486,000
for the first  quarter of 2008.  This  decrease is largely due to a reduction in
work force and a freeze on most salary  increases  imposed by the Company during
the fourth quarter of 2008 in response to deteriorating economic conditions.

         Occupancy and furniture and  equipment  expenses  decreased  $17,000 or
3.0% to $547,000 in the first  quarter of 2009 compared to $564,000 in the first
quarter of 2008.  Marketing and advertising  expense decreased $106,000 or 77.4%
from $137,000 in the first quarter of 2008 to $31,000  during the same period in
2009.  Communication  expenses  decreased $6,000 or 8.4% to $65,000 in the first
quarter of 2009 compared to $71,000 in the first  quarter or 2008.  Printing and
supplies decreased $18,000 or 31.6% from $57,000 at March 31, 2008 to $39,000 at
March 31, 2009.  These decreases were the result of active efforts by management
to limit and reduce expenses.

         Bank paid loan  costs  increased  $85,000 or 63.0% to  $220,000  in the
first  quarter of 2009  compared to $135,000 in the first  quarter  2008. Of the
$220,000 expense  incurred in the first quarter of 2009,  $156,000 is associated
with the  repossession  and  maintenance  of collateral on defaulted real estate
loans, compared to $25,000 during the same period of 2008.

         Legal and professional  expenses increased $69,000 or 84.2% to $151,000
for the first quarter of 2009 compared to $82,000 for the first quarter of 2008.
The  increase in legal and  professional  fees is  primarily  due to  collection
efforts  on  certain  loans in  default  and the  outsourcing  of the  Company's
internal audit function beginning in the second quarter of 2008.

         Regulatory  assessments  increased  $166,000 or 197.6% from $84,000 for
the first quarter of 2008 to $250,000 for the first quarter of 2009.  Regulatory
assessments  include  fees paid to the  Federal  Deposit  Insurance  Corporation
("FDIC")  and the  Office of the  Comptroller  of the  Currency  ("OCC")  by the
Company's  three Banks.  During the first quarter of 2009,  the FDIC announced a
special one-time emergency  assessment to be collected  September 30, 2009. This
assessment  contributed  $112,000 of the Company's  increased expense during the
first quarter of 2009.

         All other operating expenses were $636,000 in the first quarter of 2009
compared  to  $641,000  for the first  quarter of 2008,  a decrease of $5,000 or
0.8%.

Income Taxes

         The  provision for income taxes  decreased  $83,000 or 46.9% to $94,000
for the first  quarter of 2009  compared  to $177,000  for the first  quarter of


                                       16
<PAGE>

2008.  The decrease in the  provision  for income taxes is  attributable  to the
decrease in net pre-tax  income and the  relatively  higher level of  tax-exempt
income. 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.






                                       17
<PAGE>

BALANCE SHEET REVIEW

Loans

         Outstanding  loans represent the largest component of earning assets at
74.4% of total  earning  assets.  As of March 31,  2009,  the Company held total
gross loans outstanding of $392,450,000 a decrease of $6,261,000,  or 1.6%, from
$398,711,000  in total  gross  loans  outstanding  at  December  31,  2008 and a
decrease  of  $31,041,000,  or 7.3%,  from  $423,491,000  in total  gross  loans
outstanding  at March 31,  2008.  The decrease in  outstanding  loans during the
twelve-month  and three-month  periods is the result of decreased loan demand at
the Company's three bank  subsidiaries as well as significant  loan  charge-offs
during the respective periods.

<TABLE>
<CAPTION>
Loan Portfolio Composition                                                                     March 31,               December 31,
                                                                                               ---------               ------------
(Dollars in Thousands)                                                                   2009              2008            2008
                                                                                         ----              ----            ----
                                                                                             (Unaudited)                 (Audited)

<S>                                                                                   <C>                <C>            <C>
Commercial and Industrial - not secured by real estate ....................           $ 42,052           $ 47,118       $ 43,451
Commercial and Industrial - secured by real estate ........................            112,291            108,621        111,844
Residential real estate - mortgage ........................................            129,632            112,842        124,445
Residential real estate - construction ....................................             93,943            136,179        104,390
Consumer loans ............................................................             14,532             18,731         14,581
                                                                                      --------           --------       --------
     Gross Loans ..........................................................           $392,450           $423,491       $398,711
                                                                                      ========           ========       ========
</TABLE>

         The  interest  rates  charged  on loans  vary with the  degree of risk,
maturity,  and amount of the loan.  Competitive  pressures,  money market rates,
availability of funds, and government  regulation also influence interest rates.
The average  yield on the  Company's  loans for the three months ended March 31,
2009 was 6.22%  compared to 7.13% for the three months ended March 31, 2008. The
Federal  Reserve  decreased  the federal  funds  target rate by 200 basis points
during the first  quarter of 2008, as part of a decrease of 400 basis points for
the entire year of 2008. A large portion of the Company's adjustable-rate loans,
which  constitute  approximately  36.2% 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.
However,  the Banks do employ mortgage loan originators who originate such loans
that are pre-sold at origination to third parties.

         The  Company's  commercial  lending  activity is  directed  principally
towards businesses whose demand for funds falls within each Bank's legal lending
limits and which are potential  deposit customers of the Banks. This category of
loans includes loans made to individuals, partnerships, and corporate borrowers,
which are obtained for a variety of business  purposes.  Particular  emphasis is


                                       18
<PAGE>

placed on loans to small- and medium-sized businesses.  The Company's commercial
loans are spread  throughout a variety of industries,  with no industry or group
of related  industries  accounting  for a significant  portion of the commercial
loan  portfolio.  Commercial  loans are made on either a secured or an unsecured
basis.   When  taken,   security  usually  consists  of  liens  on  inventories,
receivables,  equipment,  furniture and fixtures. Unsecured commercial loans are
generally  short-term with emphasis on repayment strengths and low debt-to-worth
ratios.  At March 31, 2009,  approximately  $7,579,000,  or 18.1%, of commercial
loans were unsecured.

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

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

Allowance for Loan Losses

         The  allowance  for loan  losses at March 31, 2009 was  $7,613,000,  or
1.94%  of  loans  outstanding,   compared  to  $9,217,000,  or  2.31%  of  loans
outstanding,  at  December  31,  2008,  and to  $3,665,000,  or  1.03%  of loans
outstanding,  at March 31,  2008.  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 all  borrowers  to repay,  the  volume of loans,  the
quality of  collateral  securing  non-performing  and problem  loans,  and other
factors deserving recognition.

         At March 31, 2009 the Company had $14,056,000 in non-accruing loans, no
loans more than ninety days past due and still accruing interest, and $4,921,000
in other real estate owned. This compares to $16,950,000 in non-accruing  loans,
no loans  more  than  ninety  days  past due and  still  accruing  interest  and
$5,428,000  in other real estate owned at December  31, 2008.  At March 31, 2008
the Company had $5,309,000 in non-accruing loans, no loans more than ninety days
past due and still accruing  interest,  and $930,000 in other real estate owned.
The substantial  increase in non-accruing loans from March 31, 2008 to March 31,
2009  is  due to the  overall  downturn  in  the  residential  construction  and
residential  development markets. The non-performing loans are primarily secured
by  residential  real estate  consisting of 1-to-4 family homes and  development
lots.  The  Company's  non-performing  loans  at March  31,  2009  consisted  of
$13,850,000  in mortgage  loans,  $202,000 in  commercial  loans,  and $4,000 in
consumer  loans.  Non-performing  assets as a percentage of loans and other real
estate  were 4.78%,  5.54% and 1.47% at March 31,  2009,  December  31, 2008 and
March 31, 2008, respectively.

         Net  charge-offs  during the three  months  ended  March 31,  2009 were
$2,309,000 compared to net charge-offs of $8,913,000 for the year ended December
31, 2008 and net  charge-offs  of $880,000  for the three months ended March 31,
2008. The allowance for loan losses as a percentage of non-performing  loans was


                                       19
<PAGE>

54%, 54%, and 69% as of March 31, 2009,  December 31, 2008,  and March 31, 2008,
respectively.

         Real estate  activity in the Company's  market area is  exhibiting  the
weaknesses  that have plagued other markets for over a year,  which has resulted
in the higher amounts of distressed assets discussed above. Management continues
to closely monitor the levels of non-performing  and potential problem loans and
will work to address the  weaknesses  in these  credits to enhance the amount of
ultimate  collection or recovery of these assets.  With increases in the overall
level of non-performing  and potential problem loans,  management  increases the
provision  and allowance  for loan losses,  which in turn  decreases net income.
Management  believes  further   deterioration  of  economic  conditions  in  the
Company's market areas is possible in the short-term, especially with respect to
real  estate  related   activities  and  real  property  values.   Consequently,
Management  expects that further  increases in provision  for loan losses may be
needed in the future.

         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.  The Company had impaired loans
of approximately $11,356,000 at March 31, 2009, $16,671,000 at December 31, 2008
and $6,976,000 at March 31, 2008.

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 had $58,000 in trading assets at March 31, 2009,  compared to $47,000 at
December 31, 2008 and no trading  assets at March 31, 2008. The Company uses its
investment  portfolio to provide liquidity for unexpected deposit liquidation or
loan  generation,  to meet the Company's  interest-rate  sensitivity  goals,  to
secure public  deposits,  and to generate  income.  At March 31, 2009 securities
totaled $110,180,000, which represents 20.9% of total earning assets. Securities
decreased  $2,067,000,  or 1.8%, from  $112,247,000  invested as of December 31,
2008, and increased $11,618,000, or 11.8%, from $98,562,000 invested as of March
31,  2008.  The  size of the  Company's  investment  portfolio  is  managed  and
fluctuates  from time to time based on the amount of public  deposits held, loan
demand, liquidity needs, investment strategy, and other pertinent factors.

         At March  31,  2009  the  Company's  total  investments  classified  as
available for sale had an amortized  cost of  $91,652,000  and a market value of
$94,227,000 for an unrealized gain of $2,575,000.  This compares to an amortized
cost of $93,767,000  and a market value of $96,003,000 for an unrealized gain of
$2,236,000  on the  Company's  investments  classified  as available for sale at
December 31, 2008. At March 31, 2008 the Company's total investments  classified
as available for sale had an amortized cost of $79,287,000 and a market value of
$80,807,000  for an  unrealized  gain of  $1,520,000.  Management  believes that


                                       20
<PAGE>

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 book  value,  the  Company  has the
ability and intent to hold  securities  that are in an unrealized loss positions
until a market price recovery or maturity,  and therefore  these  securities are
not considered impaired on an other-than-temporary basis.

Cash Surrender Value of Life Insurance

         The Company's cash surrender value of life insurance was $11,935,000 at
March 31, 2009, an increase of $120,000,  or 1.0%, from the $11,815,000  held at
December 31, 2008 and an increase of  $479,000,  or 4.2%,  from the  $11,456,000
held at March 31, 2008. The increase in cash  surrender  value of life insurance
is due to normal  appreciation in the cash surrender  value  associated with the
ownership of these assets.  Earnings  from the  ownership of these  policies are
informally  used  to  partially  offset  the  cost of  certain  employee-related
benefits.

Cash and Cash Equivalents

         The  Company's  cash and cash  equivalents  increased  $11,196,000,  or
62.8%,  to $29,020,000 at March 31, 2009 from  $17,824,000 at December 31, 2008,
and increased  $12,261,000,  or 73.2%,  from  $16,759,000 at March 31, 2008. The
substantial  swings in the level of cash and cash  equivalents are due to normal
fluctuations  in the Banks'  needs and  sources  for  immediate  and  short-term
liquidity.

Deposits

         The Banks' primary  source of funds for loans and  investments is their
deposits. Total deposits grew $9,804,000,  or 2.2%, to $455,173,000 at March 31,
2009 from  $445,369,000  at December  31, 2008 and  $26,363,000,  or 6.2%,  from
$428,810,000 at March 31, 2008.  Competition  for deposit  accounts is primarily
based on the interest rates paid, location convenience and services offered.

         During the three months ended March 31, 2009, interest-bearing deposits
averaged $399,509,000 compared to $370,671,000 for the same period of 2008. From
time to time the Banks  solicit  certificates  of deposit from  various  sources
through  brokers.  This is done to  reduce  the  need  for  funding  from  other
short-term  sources such as federal funds  purchased and  short-term  borrowings
from the Federal Home Loan Bank of Atlanta. At March 31, 2009, brokered deposits
totaled  $75,943,000,  compared  to  $77,411,000  and  $38,338,000  in  brokered
deposits at December  31, 2008 and March 31,  2008,  respectively.  At March 31,
2009, $30,395,000 of the brokered deposits mentioned above were acquired through
the Certificate of Deposit Account  Registry  Service  ("CDARS"),  compared with
$32,953,000  at December 31, 2008 and  $7,176,000 at March 31, 2008. The Company
considers these funds to be an attractive  alternative  funding source available
to use while continuing its efforts to maintain and grow its local deposit base.



                                       21
<PAGE>

         The average interest rate paid on  interest-bearing  deposits was 2.81%
during the three  months  ended  March 31,  2009  compared to 3.43% for the same
period of 2008 and 3.40% for the twelve  months  ended  December  31,  2008.  In
pricing  deposits,  the Company considers its liquidity needs, the direction and
levels of  interest  rates,  and local  market  conditions.  At March 31,  2009,
interest-bearing deposits comprised 90.4% of total deposits compared to 88.5% at
December 31, 2008 and 89.0% at March 31, 2008.

         The  Company's  core deposit  base  consists  largely of consumer  time
deposits  less than  $100,000,  savings  accounts,  NOW  accounts,  money market
accounts,  and  checking  accounts.  Although  such core  deposits  are becoming
increasingly  interest-sensitive  for both the  Company  and the  industry  as a
whole,  these core deposits  still  continue to provide the Company with a large
source of  relatively  stable  funds.  Core  deposits as a  percentage  of total
deposits averaged  approximately 76% at March 31, 2009, 78% at December 31, 2008
and 69% at March 31, 2008. Time deposits of $100,000 or more  represented  24.5%
of total  deposits at March 31,  2009,  22.0% at December  31, 2008 and 23.7% at
March 31, 2008. 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,  short-term  advances  from the
Federal Home Loan Bank ("FHLB") and a line of credit from a correspondent  bank.
At  March  31,  2009  borrowings  totaled  $60,681,000  and  were  comprised  of
$34,000,000 in short-term advances from the FHLB, $15,681,000 in securities sold
under  repurchase  agreements  and  $11,000,000  on a  line  of  credit  from  a
correspondent bank. At December 31, 2008 borrowings totaled $68,809,000 and were
comprised of $1,028,000 in federal funds  purchased,  $34,600,000  in short-term
advances  from  the  FHLB,  $22,181,000  in  securities  sold  under  repurchase
agreements and $11,000,000 on a line of credit from a correspondent  bank. March
31, 2008  borrowings  totaled  $81,840,000  and were comprised of $63,000,000 in
short-term  advances  from the FHLB and  $18,840,000  in  securities  sold under
repurchase agreements.  Federal funds purchased and short-term FHLB advances are
used primarily for the immediate cash needs of the Company.

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  and a line  of  credit  established  with a  correspondent  bank.  In
addition,  the Company  (through the Banks) has the ability to borrow funds on a


                                       22
<PAGE>

short-term  basis from the Federal Reserve System and to purchase  federal funds
from other  financial  institutions.  The Banks are also  members of the Federal
Home  Loan Bank  System  and have the  ability  to borrow  both  short-term  and
long-term funds on a secured basis. At March 31, 2009, The Peoples National Bank
had total borrowing capacity from the FHLB equal to $71,600,000,  and the unused
portion of this line of credit was $51,600,000. Bank of Anderson, N.A. had total
borrowing capacity from the FHLB equal to $27,160,000, and the unused portion of
this line of credit was $19,160,000 at March 31, 2009.  Seneca National Bank had
established  secured  lines  of  credit  with  the  FHLB at  March  31,  2009 of
$9,870,000,  and the unused  portion of this line of credit was  $3,870,000.  At
March 31,  2009,  the Banks also had unused  federal  funds lines of credit with
various correspondent banks totaling $35,000,000. At March 31, 2009, the Company
had $4,000,000 available on a line of credit with a correspondent bank.

         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  Banks  and  from  funds
available through a line of credit from a correspondent bank.

         During the first quarter of 2009, the Company made capital expenditures
of  approximately  $14,000  related  primarily  to  new  information  technology
equipment  and  upgrades  and a new  heating  and air  system at one of our bank
locations.  The Company  also makes  other  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.



                                       23
<PAGE>


OFF-BALANCE SHEET RISK AND DERIVATIVE FINANCIAL INSTRUMENTS

         The Company,  through the  operations of the Banks,  makes  contractual
commitments to extend credit in the ordinary course of its business  activities.
These  commitments are legally binding  agreements to lend money to customers of
the Banks at  predetermined  interest  rates for a specified  period of time. At
March 31, 2009, the Banks had issued commitments to extend credit of $81,834,000
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  $2,674,000 at
March 31, 2009. 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.




                                       24
<PAGE>


CAPITAL ADEQUACY AND RESOURCES

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

         The Company and the Banks are  required  to  maintain  certain  capital
ratios by federal banking regulators. The following table sets forth the capital
ratios for the Company and the Banks as of March 31, 2009:


                                 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 ..............         $45,845           10.95%          N/A            N/A       $33,494           8.00%
Tier 1 Risk-based Capital .............          40,609            9.70           N/A            N/A        16,746           4.00
Leverage Ratio ........................          40,609            7.27           N/A            N/A        22,343           4.00

The Peoples National Bank:
Total Risk-based Capital ..............         $35,168           12.77%      $27,540          10.00%      $22,032           8.00%
Tier 1 Risk-based Capital .............          31,703           11.51        16,526           6.00        11,018           4.00
Leverage Ratio ........................          31,703            9.12        17,381           5.00        13,905           4.00

Bank of Anderson,
N. A.(1):
Total Risk-based Capital ..............         $14,081           15.63%          N/A            N/A       $10,811          12.00%
Tier 1 Risk-based Capital .............          12,949           14.37           N/A            N/A         9,011          10.00
Leverage Ratio ........................          12,949            9.51           N/A            N/A        10,893           8.00

Seneca National Bank:
Total Risk-based Capital ..............         $ 7,275           13.71%      $ 5,306          10.00%      $ 4,245           8.00%
Tier 1 Risk-based Capital .............           6,636           12.51         3,183           6.00         2,122           4.00
Leverage Ratio ........................           6,636            9.71         3,417           5.00         2,734           4.00
</TABLE>

(1) Minimum  ratios have been  revised to reflect  minimum  required  regulatory
ratios for this bank as required by the OCC.


                                       25
<PAGE>

RECENTLY ISSUED ACCOUNTING STANDARDS

         In December  2008 the Financial  Accounting  Standards  Board  ("FASB")
issued FASB Staff Position ("FSP") SFAS 132(R)-1,  "Employers' Disclosures about
Postretirement  Benefit Plan Assets," ("FSP SFAS  132(R)-1").  This FSP provides
guidance on an  employer's  disclosures  about plan assets of a defined  benefit
pension or other postretirement plan. The objective of the FSP is to provide the
users of  financial  statements  with an  understanding  of: (a) how  investment
allocation  decisions  are made,  including the factors that are pertinent to an
understanding of investment policies and strategies; (b) the major categories of
plan assets;  (c) the inputs and valuation  techniques  used to measure the fair
value  of  plan  assets;  (d)  the  effect  of  fair  value  measurements  using
significant  unobservable  inputs  (Level 3) on changes  in plan  assets for the
period;  and (e) significant  concentrations of risk within plan assets. The FSP
also  requires  a  nonpublic  entity,  as  defined  in  Statement  of  Financial
Accounting Standard ("SFAS") 132, to disclose net periodic benefit cost for each
period  for which a  statement  of income is  presented.  FSP SFAS  132(R)-1  is
effective for fiscal years ending after  December 15, 2009.  The Staff  Position
will  require  the  Company to  provide  additional  disclosures  related to its
benefit plans.

         FSP EITF 99-20-1,  "Amendments to the Impairment Guidance of EITF Issue
No. 99-20," ("FSP EITF  99-20-1") was issued in January 2009.  Prior to the FSP,
other-than-temporary  impairment  was  determined by using either EITF Issue No.
99-20,  "Recognition of Interest  Income and Impairment on Purchased  Beneficial
Interests and  Beneficial  Interests that Continue to be Held by a Transferor in
Securitized  Financial Assets," ("EITF 99-20") or SFAS No. 115,  "Accounting for
Certain  Investments in Debt and Equity  Securities,"  ("SFAS 115") depending on
the  type  of  security.  EITF  99-20  required  the use of  market  participant
assumptions  regarding future cash flows regarding the probability of collecting
all cash flows previously projected.  SFAS 115 determined impairment to be other
than temporary if it was probable that the holder would be unable to collect all
amounts due according to the  contractual  terms.  To achieve a more  consistent
determination of other-than-temporary  impairment,  the FSP amends EITF 99-20 to
determine any other-than-temporary impairment based on the guidance in SFAS 115,
allowing management to use more judgment in determining any other-than-temporary
impairment.  The FSP was effective for reporting  periods  ending after December
15, 2008. Management has reviewed the Company's security portfolio and evaluated
the portfolio for any other-than-temporary impairments.

         On April 9, 2009, the FASB issued three staff positions related to fair
value which are discussed below.

         FSP SFAS  115-2  and  SFAS  124-2,  "Recognition  and  Presentation  of
Other-Than-Temporary Impairments," ("FSP SFAS 115-2 and SFAS 124-2") categorizes
losses on debt securities  available for sale or held to maturity  determined by
management  to be  other-than-temporarily  impaired  into  losses  due to credit
issues and losses related to all other factors.  Other-than-temporary impairment
(OTTI)  exists when it is more likely than not that the security  will mature or
be sold before its  amortized  cost basis can be  recovered.  An OTTI related to


                                       26
<PAGE>

credit losses should be recognized  through  earnings.  An OTTI related to other
factors  should be recognized in other  comprehensive  income.  The FSP does not
amend   existing    recognition    and   measurement    guidance    related   to
other-than-temporary   impairments  of  equity  securities.  Annual  disclosures
required  in SFAS 115 and FSP SFAS  115-1 and SFAS 124-1 are also  required  for
interim periods (including the aging of securities with unrealized losses).

         FSP SFAS  157-4,  "Determining  Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions  That are Not  Orderly"  recognizes  that quoted  prices may not be
determinative  of fair value when the volume and level of trading  activity  has
significantly  decreased. The evaluation of certain factors may necessitate that
fair value be  determined  using a  different  valuation  technique.  Fair value
should be the price that would be  received to sell an asset or paid to transfer
a liability in an orderly  transaction,  not a forced  liquidation or distressed
sale. If a transaction is considered to not be orderly,  little,  if any, weight
should  be  placed  on  the  transaction  price.  If  there  is  not  sufficient
information  to conclude as to whether or not the  transaction  is orderly,  the
transaction  price should be considered  when estimating fair value. An entity's
intention  to hold an asset or liability  is not  relevant in  determining  fair
value.  Quoted  prices  provided  by  pricing  services  may  still be used when
estimating  fair value in accordance with SFAS 157;  however,  the entity should
evaluate whether the quoted prices are based on current  information and orderly
transactions.  Inputs and valuation  techniques  are required to be disclosed in
addition to any changes in valuation techniques.

         FSP SFAS 107-1 and APB 28-1,  "Interim  Disclosures about Fair Value of
Financial  Instruments"  requires  disclosures about the fair value of financial
instruments for interim  reporting  periods of publicly traded companies as well
as in  annual  financial  statements  and also  requires  those  disclosures  in
summarized financial  information at interim reporting periods A publicly traded
company includes any company whose securities trade in a public market on either
a stock  exchange or in the  over-the-counter  market,  or any company that is a
conduit  bond  obligor.  Additionally,  when a  company  makes a  filing  with a
regulatory  agency in preparation  for sale of its securities in a public market
it is considered a publicly traded company for this purpose.

         The three staff  positions are effective for periods  ending after June
15, 2009, with early adoption permitted for periods ending after March 15, 2009,
in which  case all three  must be  adopted.  The  Company  will  adopt the staff
positions for its second quarter 10-Q but does not expect the staff positions to
have a material impact on the consolidated financial statements.

         Also on April 1, 2009, the FASB issued FSP SFAS  141(R)-1,  "Accounting
for Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from  Contingencies."  The FSP requires  that assets  acquired  and  liabilities
assumed in a business combination that arise from a contingency be recognized at
fair value. If fair value cannot be determined during the measurement  period as
determined in SFAS 141 (R), the asset or liability can still be recognized if it


                                       27
<PAGE>

can be  determined  that it is probable  that the asset existed or the liability
had been incurred as of the  measurement  date and if the amount of the asset or
liability can be reasonably  estimated.  If it is not  determined to be probable
that the  asset/liability  existed/was  incurred or no reasonable  amount can be
determined,  no asset or liability is recognized.  The entity should determine a
rational  basis for  subsequently  measuring  the  acquired  assets and  assumed
liabilities.  Contingent consideration agreements should be recognized initially
at fair value and subsequently  reevaluated in accordance with guidance found in
paragraph  65 of SFAS 141 (R). The FSP is  effective  for business  combinations
with an acquisition date on or after the beginning of the Company's first annual
reporting  period  beginning on or after  December  15,  2008.  The Company will
assess the impact of the FSP if and when a future acquisition occurs.

         The Securities and Exchange  Commission ("SEC") issued Staff Accounting
Bulletin  ("SAB")  No. 111 on April 9, 2009 to amend  Topic  5.M.,  "Other  Than
Temporary  Impairment of Certain  Investments in Debt and Equity Securities" and
to  supplement  FSP SFAS 115-2 and SFAS  124-2.  SAB 111  maintains  the staff's
previous  views  related  to equity  securities;  however  debt  securities  are
excluded from its scope. The SAB provides that "other-than-temporary" impairment
is not necessarily the same as "permanent" impairment and unless evidence exists
to support a value  equal to or greater  than the  carrying  value of the equity
security investment, a write-down to fair value should be recorded and accounted
for as a realized loss. The SAB was effective upon issuance and had no impact on
the Company's financial position.

         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 or cash flows.




















                                       28
<PAGE>


Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

         Each  of  the  Company's   banking   subsidiaries  has  established  an
Asset/Liability Management Committee. These committees use a variety of tools to
analyze  interest-rate  sensitivity,  including a static gap  presentation and a
simulation  model. A static gap  presentation  reflects the  difference  between
total  interest-sensitive  assets and  liabilities  within certain time periods.
While the static gap is a widely used measure of interest rate  sensitivity,  it
is not,  in  management's  opinion,  the  best  indicator  of a  company's  true
sensitivity position.  Accordingly,  the Company's banking subsidiaries also use
an earnings  simulation  model that estimates the variations in interest  income
under  different  interest-rate  environments  to measure  and manage the bank's
short-term  interest-rate risk. According to the model, as of March 31, 2009 the
Company was  positioned so that net interest  income would  increase  $1,022,000
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  $1,349,000  over the next  twelve  months  if  interest  rates  were to
gradually  decline by 100 basis  points  over the same  period.  Computation  of
prospective effects of hypothetical  interest-rate changes are based on numerous
assumptions,  including  relative  levels  of  market  interest  rates  and loan
prepayment,  and  should not be relied  upon as  indicative  of actual  results.
Further,  the  computations  do not contemplate all actions that the Company and
its customers could undertake in response to changes in interest rates.

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



                                       29
<PAGE>

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









                                       30
<PAGE>



Item 4T. CONTROLS AND PROCEDURES

Disclosure 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.

Changes in Internal Control over Financial Reporting

         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.






                                       31
<PAGE>


PART II.  OTHER INFORMATION

Item 6. Exhibits

    Exhibits.

    3         Articles of Incorporation, as amended
    4.1(a)    Form of Certificate  for the Series T Preferred Stock
              (Incorporated  by  reference  to Form 8-K filed April
              28, 2009)
    4.1(b)    Form of  Certificate  for the  Series W  Preferred
              Stock  (Incorporated  by  reference to Form 8-K filed
              April 28, 2009)
    4.2       Warrant for Purchase of Shares of Series W Preferred Stock
              (Incorporated by reference to Form 8-K filed April 28, 2009)
    10.1      Letter Agreement, dated April 24, 2009, between Peoples
              Bancorporation, Inc., and the United States Department of the
              Treasury with respect to the issuance and sale of the Series T
              Preferred Stock (Incorporated by reference to Form 8-K filed April
              28, 2009)
    31.1      Rule 13a-14(a) / 15d-14(a) Certifications
    31.2      Rule 13a-14(a) / 15d-14(a) Certifications
    32        Section 1350 Certifications



                                       32
<PAGE>




SIGNATURES

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


                                           PEOPLES BANCORPORATION, INC.


Dated:  May 11, 2009                       By:    /s/ R. Riggie Ridgeway
                                                ------------------------
                                                  R. Riggie Ridgeway
                                                  Chief Executive Officer


Dated:  May 11, 2009                       By:   /s/ Robert E. Dye, Jr.
                                               ------------------------
                                                  Robert E. Dye, Jr.
                                                  Senior Vice President and CFO
                                                  (principal financial officer)





                                       33
<PAGE>





                                  Exhibit Index

Exhibit No.            Description of Exhibit


    3         Articles of Incorporation, as amended
    4.1(a)    Form of Certificate  for the Series T Preferred Stock
              (Incorporated  by  reference  to Form 8-K filed April
              28, 2009)
    4.1(b)    Form of  Certificate  for the  Series W  Preferred
              Stock  (Incorporated  by  reference to Form 8-K filed
              April 28, 2009)
    4.2       Warrant for Purchase of Shares of Series W Preferred Stock
              (Incorporated by reference to Form 8-K filed April 28, 2009)
    10.1      Letter Agreement, dated April 24, 2009, between Peoples
              Bancorporation, Inc., and the United States Department of the
              Treasury with respect to the issuance and sale of the Series T
              Preferred Stock (Incorporated by reference to Form 8-K filed April
              28, 2009)
    31.1      Rule 13a-14(a) / 15d-14(a) Certifications
    31.2      Rule 13a-14(a) / 15d-14(a) Certifications
    32        Section 1350 Certifications







                                       34