SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB
                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the Quarterly Period Ended Commission file
                             June 30, 1998 000-20616

                          PEOPLES BANCORPORATION, INC.
          (Exact name of small business issuer as specified in charter)

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

               1800 East Main Street, Easley, South Carolina 29640
               (Address of principal executive offices) (Zip Code)

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

                                 Not Applicable
              (Former name, former address and former fiscal year,
                          if changed since last report)

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 [ ]

The number of outstanding shares of the issuer's $1.67 par value common stock as
of August 1, 1998 was 1,695,619.

Transitional Small Business Disclosure Format:

        Yes [ ]    No [X]



<PAGE>


                   PEOPLES BANCORPORATION, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                           June 30,                    December 31,
                                                                                  1998                 1997                1997
                                                                             ------------         ------------        --------------
                                                                                          Unaudited                      Audited
                                                                                          ---------                   --------------
ASSETS
<S>                                                                         <C>                  <C>                  <C>          
CASH AND DUE FROM BANKS .............................................       $   4,549,012        $   2,759,024        $   3,908,784
FEDERAL FUNDS SOLD ..................................................           6,550,000            2,490,000            4,570,000
SECURITIES
  Available for sale ................................................          27,071,123           18,883,702           20,320,579
  Held for investment (market value of $4,100,687
    $3,918,359 and $3,953,648) ......................................           3,950,169            3,857,861            3,852,356
LOANS - less allowance for loan losses of $981,840
    $847,924 and $987,138 ...........................................          74,527,125           73,572,029           75,861,965
PREMISES AND EQUIPMENT, net of accumulated
    depreciation and amortization ...................................           3,264,758            1,858,546            2,673,712
ACCRUED INTEREST RECEIVABLE .........................................             922,949              810,315              878,459
OTHER ASSETS ........................................................           1,448,866            1,693,064            1,350,449
                                                                            -------------        -------------        -------------

TOTAL ASSETS ........................................................       $ 122,284,002        $ 105,924,541        $ 113,416,304
                                                                            =============        =============        =============

LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
  Noninterest-bearing ...............................................       $  14,316,459        $  10,305,480        $  11,007,809
  Interest-bearing ..................................................          91,188,829           76,120,095           85,182,039
                                                                            -------------        -------------        -------------
     Total deposits .................................................         105,505,288           86,425,575           96,189,848
SECURITIES SOLD UNDER REPURCHASE
  AGREEMENTS ........................................................           3,612,891            3,258,276            4,433,554
NOTES PAYABLE TO FEDERAL HOME LOAN BANK .............................           2,000,000            6,500,000            2,030,612
ACCRUED INTEREST PAYABLE ............................................             925,592              670,678              860,877
OTHER LIABILITIES ...................................................              74,305               76,471              391,924
                                                                            -------------        -------------        -------------
     Total liabilities ..............................................         112,118,076           96,931,000          103,906,815
                                                                            -------------        -------------        -------------

SHAREHOLDERS' EQUITY
Common Stock-10,000,000 shares authorized,  $1.67 par
  value per share, 1,695,619 shares and 1,687,250 shares
  outstanding  at June 30, 1998 and  December 31, 1997,
  respectively; 5,000,000 shares authorized, $3.33 par value
  per share,  803,071 shares outstanding at June 30, 1997  ..........           2,831,684            2,674,226            2,817,708
Additional paid-in capital ..........................................           5,179,939            4,248,008            5,158,024
Retained earnings ...................................................           2,189,989            2,112,290            1,553,206
Unrealized loss on securities available for sale ....................             (35,686)             (40,983)             (19,449)
                                                                            -------------        -------------        -------------
     Total shareholders' equity .....................................          10,165,926            8,993,541            9,509,489
                                                                            -------------        -------------        -------------

TOTAL LIABILITIES & SHAREHOLDERS' EQUITY ............................       $ 122,284,002        $ 105,924,541        $ 113,416,304
                                                                            =============        =============        =============
</TABLE>


<PAGE>


                   PEOPLES BANCORPORATION, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                          Three Months Ended                  Six Months Ended
                                                                               June 30,                           June 30,
                                                                        1998             1997              1998              1997
                                                                    ----------        ----------        ----------        ----------
INTEREST INCOME
<S>                                                                 <C>               <C>               <C>               <C>       
Interest and fees on loans .................................        $1,750,209        $1,725,564        $3,491,639        $3,332,395
Interest on securities
     Taxable ...............................................           387,855           299,088           692,232           575,219
     Tax-exempt ............................................            57,454            60,336           118,361           119,815
Interest on fed funds ......................................           113,534            33,027           198,639            84,920
                                                                    ----------        ----------        ----------        ----------
Total interest income ......................................         2,309,052         2,118,015         4,500,871         4,112,349

INTEREST EXPENSE
Interest on deposits .......................................         1,046,269           855,334         2,063,651         1,642,207
Interest on federal funds purchased
     and securities sold
     under repurchase agreements ...........................            41,490            32,178            78,140            72,919
Interest on notes payable Federal Home
     Loan Bank .............................................            27,587            92,230            56,117           171,175
                                                                    ----------        ----------        ----------        ----------
Total interest expense .....................................         1,115,346           979,742         2,197,908         1,886,301
                                                                    ----------        ----------        ----------        ----------

Net interest income ........................................         1,193,706         1,138,273         2,302,963         2,226,048
PROVISION FOR LOAN LOSSES ..................................             4,600            54,700             2,100           101,440
                                                                    ----------        ----------        ----------        ----------
Net interest income after provision for
     loan losses ...........................................         1,189,106         1,083,573         2,300,863         2,124,608

NON-INTEREST INCOME
Service fees and other income ..............................           352,023           168,358           669,696           361,533
Gain on sales of securities
    available for sale .....................................                 0             2,740                 0             2,740
                                                                    ----------        ----------        ----------        ----------
                                                                       352,023           171,098           669,696           364,273
NON-INTEREST EXPENSE
Salaries and benefits ......................................           529,298           417,923         1,029,381           833,738
Occupancy ..................................................            50,474            38,842           107,448            80,144
Equipment ..................................................            79,320            60,933           146,018           125,486
Other operating expenses ...................................           288,359           207,316           560,521           401,817
                                                                    ----------        ----------        ----------        ----------
                                                                       947,451           725,014         1,843,368         1,441,185

Income before income taxes .................................           593,678           529,657         1,127,191         1,047,696

PROVISION FOR INCOME TAXES .................................           195,910           174,800           371,970           345,750
                                                                    ----------        ----------        ----------        ----------

Net income .................................................        $  397,768        $  354,857        $  755,221        $  701,946
                                                                    ==========        ==========        ==========        ==========

INCOME PER COMMON SHARE:
     BASIC .................................................        $     0.24        $     0.22        $     0.45        $     0.44
                                                                    ==========        ==========        ==========        ==========
     DILUTED ...............................................        $     0.21        $     0.21        $     0.41        $     0.42
                                                                    ==========        ==========        ==========        ==========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
     BASIC .................................................         1,657,367         1,612,986         1,693,010         1,606,142
                                                                    ==========        ==========        ==========        ==========
     DILUTED ...............................................         1,894,133         1,689,795         1,821,867         1,657,954
                                                                    ==========        ==========        ==========        ==========

DIVIDENDS PAID PER COMMON
     SHARE .................................................        $    0.035        $     0.03        $     0.07        $     0.06
                                                                    ==========        ==========        ==========        ==========
</TABLE>



                                       2
<PAGE>



                   PEOPLES BANCORPORATION, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                          Three Months Ended                  Six Months Ended
                                                                               June 30,                           June 30,
                                                                        1998             1997              1998              1997
                                                                      ---------         --------        ---------         ----------

<S>                                                                   <C>               <C>             <C>               <C>      
Net income ...................................................        $ 397,768         $354,857        $ 755,221         $ 701,946
Other comprehensive income, net of tax:
Unrealized income (loss) on securities:
     Unrealized income (loss) arising during period ..........          (16,798)          61,060          (16,237)          (15,719)
                                                                      ---------         --------        ---------         ---------
Other comprehensive income ...................................          (16,798)          61,060          (16,237)          (15,719)
                                                                      ---------         --------        ---------         ---------
Comprehensive income .........................................        $ 380,970         $415,917        $ 738,984         $ 686,227
                                                                      =========         ========        =========         =========
</TABLE>































                                       3
<PAGE>



                  PEOPLES BANCORPORATION, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                                       Six Months Ended
                                                                                                             June 30,
                                                                                                    1998                   1997
                                                                                              ------------             -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                           <C>                      <C>         
Net Income .......................................................................            $    755,221             $    701,946
Adjustments to reconcile net cash provided
 by operating activities:
  Loss (gain) on sales of securities .............................................                       0                   (2,740)
  Provision for loan losses ......................................................                   2,100                  101,440
  Depreciation ...................................................................                 103,782                   60,661
  Net amortization and (accretion) of premiums and
  discounts on securities ........................................................                  85,165                   29,321
  Increase in accrued interest receivable ........................................                 (44,490)                 (81,384)
  (Increase) in other assets .....................................................                (158,625)              (1,374,487)
  Increase (decrease) in accrued interest payable ................................                  64,715                   (4,918)
  Increase (decrease) in other liabilities .......................................                (317,618)                  91,797
                                                                                              ------------             ------------
     Net cash provided by operating activities ...................................                 490,250                 (478,364)
                                                                                              ------------             ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities held for investments .....................................                (102,508)                (550,420)
Purchases of securities available for sale .......................................             (16,463,731)              (8,745,581)
Proceeds from the maturity of securities available for sale ......................               6,474,585                1,150,000
Proceeds from the sale of securities available for sale ..........................                       0                2,250,547
Proceeds from the call of securities available for sale ..........................               3,200,000                1,900,000
Net (increase) decrease in loans .................................................               1,334,840               (8,168,084)
Proceeds from the sale of property ...............................................                       0                   39,000
Purchase of premises and equipment ...............................................                (694,827)                 (58,539)
                                                                                              ------------             ------------
     Net cash used by investing activities .......................................              (6,251,641)             (12,183,077)
                                                                                              ------------             ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits .........................................................               9,315,440                6,221,192
Net decrease in securities sold under
  repurchase agreements ..........................................................                (820,662)                (668,615)
Net (decrease) increase in notes payable to Federal home Loan Bank ...............                 (30,612)                 102,041
Proceeds from stock options exercised ............................................                  35,891                   25,080
Cash dividend ....................................................................                (118,438)                 (96,189)
                                                                                              ------------             ------------
     Net cash provided by financing activities ...................................               8,381,619                5,583,509
                                                                                              ------------             ------------

     Net increase (decrease) in cash and cash equivalents ........................               2,620,228               (7,077,932)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ...................................               8,478,784               12,326,956
                                                                                              ------------             ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD .........................................            $ 11,099,012             $  5,249,024
                                                                                              ============             ============

CASH PAID FOR
Interest .........................................................................            $  1,928,555             $  1,726,129
                                                                                              ============             ============
Income taxes .....................................................................            $    356,269             $    255,400
                                                                                              ============             ============
</TABLE>




                                       4
<PAGE>



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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A summary  of these  policies  is  included  in the 1997  Annual  Report to
shareholders.

STATEMENT OF CASH FLOWS

    Cash  includes  currency  and coin,  cash items in  process  of  collection,
amounts due from banks and federal funds sold.

COMMON STOCK

    The board of Directors  declared a cash  dividend of $0.035 per common share
to  shareholders  of record June 18, 1998 and March 19,  1998,  payable June 30,
1998 and March 31, 1998, respectively.

    The Company adopted SFAS No. 128,  Earnings per Share, on December 31, 1997.
This  statement  requires that the Company  present basic and diluted net income
per 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 was 1,693,010 at June
30, 1998 and 1,606,142 at June 30, 1997.  The weighted  average number of common
shares outstanding for diluted net income per common share was 1,821,867 at June
30, 1998 and 1,657,954 at June 30, 1997.

     The Company issued a  five-percent  common stock dividend and a two-for-one
stock split in 1997.  Net income per common  share in 1997 has been  restated to
reflect these transactions.

NONPERFORMING LOANS

     As of June 30, 1998, there were eleven nonaccrual loans totalling  $496,521
and there  were no loans 90 days past due or more as to  principal  or  interest
payments.

MANAGEMENT'S OPINION

    In the  opinion  of  management,  the  accompanying  unaudited  consolidated
financial  statements of Peoples  Bancorporation,  Inc.  contain all adjustments
necessary  to fairly  present the  financial  results  for the  interim  periods
presented.  The results of operations for any interim period are not necessarily
indicative of the results to be expected for an entire year.




                                       5
<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 1997
Annual  Report of Peoples  Bancorporation,  Inc.  on Form  10-KSB/A.  Results of
operations  for the six-month  period  ending June 30, 1998 are not  necessarily
indicative of the results to be attained for any other period.

Forward Looking Statements

     From time to time,  the  Company  may  publish  forward-looking  statements
relating  to  such  matters  as  anticipated  financial  performance,   business
prospects,  technological  developments,  new products and similar matters.  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 forward-looking statements. The
risks  and   uncertainties   that  may  affect  the  operations,   performances,
development and results of the Company's  business include,  but are not limited
to, the  following:  risks from  changes in economic  and  industry  conditions;
changes in interest rates;  risks inherent in making loans  including  repayment
risks  and  value  of   collateral;   dependence  on  senior   management;   and
recently-enacted or proposed  legislation.  Statements  contained in this filing
regarding  the  demand  for  Peoples  Bancorporation's  products  and  services,
changing  economic  conditions,  interest rates,  consumer spending and numerous
other factors may be forward-looking statements and are subject to uncertainties
and risks.

OVERVIEW

     Peoples  Bancorporation,  Inc. (the  "Company"),  headquartered  in Easley,
South  Carolina,  was  incorporated  on March 6, 1992 for the primary purpose of
effecting the  reorganization  of The Peoples  National Bank (the "Bank") into a
bank holding company structure,  which reorganization  resulted in the ownership
by the Company of 100% of the issued and  outstanding  shares of common stock of
the Bank.

    The Bank, a  nationally  chartered  financial  institution,  operates  three
offices, one each in Easley, Pickens and Powdersville, South Carolina.

    The Bank  received  regulatory  approval in September  1997 to open a branch
office in Seneca, South Carolina.  Construction has begun on this office and the
land,   building   construction   and  equipment   costs  are  estimated  to  be
approximately $965,000. The new branch is anticipated to open in the latter part
of 1998 upon completion of the construction.

                                       6
<PAGE>

     In  October  1997,  the  Company  announced  plans  to  form a new  bank in
Anderson,  South Carolina as a result of the  announcement by Regions  Financial
Corporation, headquartered in Birmingham, Alabama, of their intention to acquire
First  United   Bancorporation,   parent  company  of  Anderson  National  Bank,
headquartered  in  Anderson,  SC.  Management  and the Board of directors of the
Company felt that the  acquisition  of First United and its lead bank,  Anderson
National Bank, by Regions  created an  opportunity  for a new,  locally  managed
community bank in Anderson, a $960 million deposit market roughly three times as
large as the Easley market.  The Bank of Anderson,  N.A. (in  organization)  has
received  preliminary  approval  from  the  Office  of  the  Comptroller  of the
Currency,  the Federal  Reserve and the Federal Deposit  Insurance  Corporation.
Bank of Anderson,  N.A. is expected to open in temporary facilities in September
1998.

     In July,  1998,  the Company  completed  the sale of 500,000  shares of its
Common Stock. In connection with the offering, the Company received net proceeds
of  approximately  $6,450,000 of which $4,500,000 will be used to capitalize the
Bank of Anderson,  N. A. and the remainder  used to support  expected  continued
internal growth. That offering was oversubscribed shortly after it commenced and
was, therefore, terminated on July 22, 1998. To provide subscribers who were not
able to purchase  shares in the prior  offering with an  opportunity to purchase
shares,  the Company's Board of Directors  decided to commence  another offering
for 425,000  shares.  The proceeds  from this  offering  will be used to support
growth of the Company and for general corporate purposes.

     The Company entered into a construction  contract during the second quarter
of 1998 for the  construction  of a building in Anderson South Carolina to house
the  operations  of Bank  of  Anderson,  N. A.  which  will  be a  wholly  owned
subsidiary of the Company.  The land, building  construction and equipment costs
are estimated to total approximately $1,125,000

    The Company  began  construction  of a central  operations  center,  located
adjacent to the Bank's main office in Easley, during the second quarter of 1998.
This  building,  which  will house the  central  operations  and  administrative
offices of the parent company, is expected to be completed in the fourth quarter
of 1998 with a projected cost of approximately $600,000.

    The  Company  and the Bank  presently  employ  59  full-time  and  part-time
persons. With the addition of the Seneca branch and the new bank in Anderson, we
expect to employ an additional 20 persons.


EARNINGS REVIEW

    The  Company's net income for the second  quarter of 1998 was  $397,768,  or
$0.24 per basic  share  ($0.21 per  diluted  share),  compared  to net income of
$354,857,  or $0.22 per basic  share  ($0.21 per  diluted  share) for the second
quarter of 1997.  Net income for the six months ended June 30, 1998 was $755,221


                                       7
<PAGE>

or $0.45 per basic share ($0.41 per diluted  share),  compared to  $701,946,  or
$0.44 per basic share  ($0.42 per diluted  share) for the six months  ended June
30,  1997.  Return on average  equity for the six months and three  months ended
June 30,  1998 was  15.20%  and  16.01%,  respectively,  compared  to 16.03% and
16.20%, respectively, for the same periods in 1997. Return on average assets for
the six months  ended  June 30,  1998 was 1.25%  compared  to 1.37% for the same
period in 1997.  For the second  quarter of 1998,  return on average  assets was
1.32%, compared to 1.38% for the same period in 1997.

     The largest  component of the Company's net income is net interest  income.
Net interest  income,  which is the  difference  between the interest  earned on
interest-earning  assets and the interest paid on interest-bearing  liabilities,
measures  the gross  profit from  lending and  investing  activities  and is the
primary  contributor to the Company's  earnings.  Net interest income before the
provision for loan losses for the second quarter of 1998 amounted to $1,193,706,
an increase of $55,433,  or 4.87%,  over the first quarter of 1997. Net interest
income  before the  provision  for loan losses for the six months ended June 30,
1998 amounted to  $2,302,963,  an increase of $76,915,  or 3.46%,  over the same
period in 1997. This represents a 4.12% net interest margin (net interest income
divided by average earning  assets) on average  earning assets of  $111,809,600.
For this same period in 1997, the net interest margin was 4.47% based on average
earning assets of $99,651,500.  The decrease in the net interest margin resulted
primarily from an increase in the amounts paid on  interest-bearing  liabilities
and lower yields earned on interest earning assets.

Non-interest Income

     Non-interest income, excluding securities transactions, increased $183,655,
or 109.09%,  to $352,023 for the second quarter of 1998 compared to $168,358 for
the  second  quarter  of 1997.  For the first six  months of 1998,  non-interest
income,  excluding securities  transactions,  increased $308,163,  or 85.24%, to
$669,696  compared  to  $361,533  for the first six  months of 1997.  A $129,028
increase in  origination  fees on mortgage  loans;  increased  earnings from the
Bank's business  manager  product of $39,363;  earnings of $32,235 on the Bank's
salary  continuation  plan; and earnings of $45,108 from the Bank's  specialized
investment  program were the main  contributors  to the increase in non-interest
income in both 1998 periods when compared to the 1997  periods.  No gain or loss
was realized on the sale of available for sale  securities  during the first six
months of 1998. The Company  recorded a $2,740 gain on the sale of available for
sale securities during the first six months of 1997.

Non-interest Expense

    Non-interest  expense  increased  $222,437,  or 30.68%,  to $947,451 for the
second  quarter of 1998 compared to $725,014 for the second quarter of 1997. For
the first six  months  of 1998,  non-interest  expense  increased  $402,183,  or
27.91%,  to  $1,843,368  compared  to  $1,441,185  for the same  period in 1997.
Salaries and  benefits,  the largest  single  category of  non-interest  expense
items,  increased  $195,643,  or 23.47%,  to  $529,298 in the 1998 period due to


                                       8
<PAGE>

normal salary  increases,  the addition of several key employees during the last
six months of 1997, and the partial  staffing of the Bank of Anderson,  N.A. (In
Organization),  in 1998.  Occupancy and equipment expense increased $47,836,  or
23.26%,  primarily  due  to an  increase  in the  purchase  and  maintenance  of
equipment  for The  Peoples  National  Bank  and  Bank  of  Anderson,  N.A.  (In
Organization). Other operating expenses increased $158,704, or 39.50%, primarily
as a result of a $23,140  increase  in  marketing  expenses  due to  advertising
commitments made by Company management;  a $31,705 increase in computer expenses
associated  with the installment of a wide area network;  a $10,040  increase in
legal fees associated  with  collection  efforts;  a $4,818  additional  expense
associated with the Business Manager  (accounts  receivable)  product;  a $5,700
increase in board fees paid to the Company and Bank board  members;  and $33,912
in expenses associated with the Company's Salary Continuation Plan.

Provision for Loan Losses

    The amount  charged to the provision for loan losses by the Company is based
on  management's  judgement  as to the amount  required to maintain an allowance
adequate to provide for potential losses in the Company's loan portfolio.

    The  provision for loan losses  charged to operations  during the six months
ended June 30, 1998 was $2,100  compared  to a charge of  $101,440  for the same
period in 1997.  The  decrease  is due  primarily  to $7,398 in net  charge-offs
through June 30, 1998  compared to $14,194 in net  charge-offs  through June 30,
1997.  Also  contributing  to the decrease is the  additional  provision made in
December  1997 of  $40,000.  At  1.30% of total  outstanding  loans,  management
considers this reserve to be adequate  based upon  evaluations of specific loans
and weighing of various loan categories as suggested by the Bank's internal loan
rating system.

BALANCE SHEET REVIEW

Loans

    Outstanding  loans  represent  the largest  component  of earning  assets at
66.68% of total earning assets. As of June 30, 1998, the Company had total loans
outstanding  of  $75,508,965.   Loans  increased  $1,089,011,   or  1.46%,  from
$74,419,954  at  June  30,  1997,  and  decreased  $1,340,138,  or  1.77%,  from
$76,849,103  at  December  31,  1997.  For the  first six  months  of 1998,  the
Company's loans averaged $76,277,000 compared to $70,634,000 for the same period
of 1997. The increase resulted primarily from internal growth.

    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 six months  ended June 30, 1998 was 9.16%
compared  to 9.30% for the first six  months of 1997 and to 9.21% for the twelve
months  ended  December 31, 1997.  The decline in the  Company's  loan yield was


                                       9
<PAGE>

primarily  attributable to a shift in the composition of the loan portfolio to a
higher  concentration  of mortgage  loans which  generally  carry lower rates of
interest than other types of loans.  At June 30, 1998  approximately  40% of the
Company's outstanding loans carried adjustable rates of interest.

    The Company's loan portfolio  consists  principally of loans secured by real
estate,  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 has no foreign  loans or loans for highly  leveraged
transactions.

Allowance for Loan Losses

    The allowance for loan losses at June 30, 1998 was  $981,840,  or 1.30%,  of
total loans outstanding compared to $847,924,  or 1.14%, of loans outstanding at
June 30, 1997 and to $987,138, or 1.30%, at December 31, 1997. The allowance for
loan  losses  is  based  upon   management's   continuing   evaluation   of  the
collectibility  of past due loans based on the historical loan loss  experienced
by the Bank, current economic  conditions  affecting the ability of borrowers to
repay,  the volume of  outstanding  loans,  the quality of  collateral  securing
non-performing and problem loans, and other factors deserving recognition.

     At June 30, 1998 the  Company  had  $496,521  in  non-accruing  loans,  two
restructured  loans  totalling  $219,405 and no loans more than ninety days past
due on which  interest  was still being  accrued.  This  compares to $408,320 in
non-accruing  loans,  no  restructured  loans and one loan more than ninety days
past due on which  interest was still being  accrued in the amount of $89,719 at
June 30, 1997. At December 31, 1997,  there was $757,206 in non-accruing  loans;
one $9,898  restructured loan and a $142,317 loan more than ninety days past due
on which interest was still being accrued.  Nonperforming assets as a percentage
of loans and other real  estate  owned were 0.82% and 0.70% at June 30, 1998 and
1997, respectively.

    Net charge-offs during the first six months of 1998 were $7,398, compared to
net  charge-offs of $14,194 for the first six months 1997 and to net charge-offs
of $98,016 for the year ended  December 31, 1997.  The allowance for loan losses
as a percentage of nonperforming loans was 158% and 162% as of June 30, 1998 and
1997, respectively.

     The Company  accounts for impaired loans in accordance  with the provisions
of Statement of Financial  Accounting  Standards  ("SFAS")  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.  The Company  includes the provisions of SFAS NO. 114, if any, in
the allowance for loan losses.  When the ultimate  collectibility of an impaired
loan's principal is in doubt, wholly or partially, all cash receipts are applied
to  principal.  When this doubt does not exist,  cash receipts are applied under
the contractual  terms of the loan agreement first to principal then to interest
income.  Once the recorded  principal  balance has been reduced to zero,  future
cash  receipts are applied to interest  income,  to the extent that any interest


                                       10
<PAGE>

has been  foregone.  Further cash  receipts are  recorded as  recoveries  on any
amounts  previously  charged off. On each of June 30, 1998 and June 30, 1997 the
Company had no impaired loans.


Securities

     Investment securities constituted 33.32% and 26.17% of earning assets as of
June 30,  1998 and 1997,  respectively.  At June 30,  1998,  securities  totaled
$31,021,292,  up $8,279,729 from $22,741,563 invested as of June 30, 1997 and up
$6,848,357  from December 31,  1997's  balance of  $24,172,935.  The increase is
investment  securities resulted from the investment of excess funds attributable
to an  increase  in  deposits  coupled  with  soft  loan  demand.  The  yield on
investment securities decreased from 6.0% at June 30, 1997 and 5.94% at December
31,  1997 to  5.87% at June 30,  1998.  The  portfolio  yield  decreased  due to
maturities of higher yielding  government  securities  being reinvested at lower
rates. The investment portfolio has a weighted average maturity of approximately
1.03 years.

     At June 30,  1998  the  book  value  of the  Company's  Available  for Sale
portfolio  was  $27,125,190  and the  market  value  of its  Available  for Sale
portfolio was $27,071,124 resulting in an unrealized loss before tax of $54,066.
The Company's total securities averaged  $35,198,300 for the first six months of
1998, 54.60% above the first six months of 1997 average of $22,767,700.

     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 and to generate income.  The Company  emphasizes
safety  in  its  selection  of  investment  securities  and,  accordingly,   the
investment portfolio is limited to securities of the United States government or
its  agencies,  mortgage  backed  securities  and  investment  grade  state  and
municipal securities. The Company does not invest in corporate bonds nor does it
hold any trading securities.

Deposits

     The  Company's  primary  source  of funds  for  loans  and  investments  is
deposits.  Deposits  increased  22.08%  to  $105,505,288  at June 30,  1998 from
$86,425,575  at  June  30,  1997.  At  December  31,  1997,   deposits   totaled
$96,189,848.   The  increase  resulted   principally  from  account  promotions.
Competition for deposit  accounts is primarily based on the interest rates paid,
location convenience and services offered.

     During the first six  months of 1998,  interest-bearing  deposits  averaged
$90,588,430  compared  to  $72,079,700  for the  same  period  in  1997,  and to
$76,516,106 for the twelve months ended December 31, 1997. The average  interest
rate paid on  interest-bearing  deposits  was 4.59% for the first six  months of
1998  compared  to 4.59% for the first six months of 1997.  During the first six
months  of  1998,  deposit  pricing  continued  to be  very  competitive  in the
Company's  market  areas,  resulting  in little  downward  pressure  on  deposit
interest rates.  The Company  expects this  competitive  deposit  environment to
continue.  In pricing  deposits,  the Company considers its liquidity needs, the


                                       11
<PAGE>

direction and levels of interest rates, anticipated loan demand and local market
conditions.  As of June 30, 1998,  interest-bearing deposits comprised 86.43% of
total deposits. The Company does not believe that it has any brokered deposits.

     The Company's core deposit base consists of consumer time deposits, savings
accounts,  NOW accounts,  money market accounts and checking accounts.  Although
such core deposits are becoming  increasingly  interest rate  sensitive for both
the Company and the industry as a whole,  such core deposits continue to provide
the  Company  with a large  and  stable  source  of funds.  Core  deposits  as a
percentage of total deposits  averaged  approximately  84.49% for the six months
ended June 30, 1998. The Company  closely  monitors its reliance on certificates
greater  than  $100,000,  which are  generally  considered  less stable and less
reliable than core deposits.

Liquidity and Capital Resources

     Liquidity  management  entails  meeting the cash flow  requirements  of the
Company.  The primary cash flow  requirements  include  withdrawals of deposits,
extensions  of credit,  payment of  operating  expenses,  repayment of purchased
funds and  dividends.  The  Company's  principal  sources of funds for liquidity
purposes  are  customer  deposits,  principal  and  interest  payments on loans,
maturities and sale of debt securities, temporary investments and earnings.

     The Company  monitors and controls the mix and maturities of its assets and
liabilities  through  asset/liability  management.  The  essential  purposes  of
asset/liability  management are (i) to ensure adequate liquidity to fund demands
from  depositors  and  borrowers  and (ii) to  maintain an  appropriate  balance
between interest sensitive assets and liabilities. Interest sensitive assets and
liabilities are those that are subject to repricing in the near term,  including
both  floating  rate  instruments  and those with  approaching  maturities.  The
objective of interest  sensitivity  management is to maintain  reasonably stable
growth in net  interest  income  despite  changes  in market  interest  rates by
maintaining the proper mix of interest  sensitive assets and  liabilities.  Over
the past  several  years,  volatile  interest  rates  and  greater  reliance  on
market-sensitive deposits,  increasing both the importance and the difficulty of
interest  sensitivity  management,  have  characterized the environment in which
financial institutions operate. Throughout this period, management has sought to
maintain a general equilibrium between interest sensitive assets and liabilities
in order to insulate net interest  income from  significant  adverse  changes in
market rates.

     The  Company  routinely  reviews  its  interest   sensitivity  gap  or  the
difference  between total interest sensitive assets and liabilities for a static
time   period.   While   the   static   gap  is  a  widely   used   measure   of
interest-sensitivity,  it is not, in management's  opinion,  a true indicator of
the Company's interest rate sensitive position.  Consequently,  the Company also
uses an  asset/liability  simulation model,  which quantifies  balance sheet and
earnings  variations under different interest rate environments,  to measure and
manage interest rate risk.

                                       12
<PAGE>

     The Company plans to meet its future cash needs through the  liquidation of
temporary  investments,  maturities  of loans  and  investment  securities,  and
generation of deposits.  By increasing  the rates paid on deposits,  the Company
would  expect to be able to raise  deposits  as needed.  In  addition,  the Bank
maintains  lines of credit from unrelated  banks in the amount of $2,500,000 and
is able to borrow from the Federal  Home Loan Bank  ("FHLB").  At June 30, 1998,
unused borrowing capacity from the FHLB totaled $14 million. While FHLB advances
remain a source  of  funding,  the Bank has  increased  its  emphasis  on retail
banking and raised deposits through market promotions and sales efforts, thereby
decreasing FHLB advances.  The Company  believes that the potential  benefits of
cross-selling  these  customers  other  products and  services  would offset any
increase  in the  cost of  funds.  At  June  30,  1998,  FHLB  advances  totaled
$2,000,000,  compared to $6,500,000 at June 30, 1997 and  $2,030,612 at December
31, 1997.

Capital Adequacy

     Federal banking  regulations  have  established  certain  capital  adequacy
standards required to be maintained by banks and bank holding companies. At June
30, 1998, the Company and Peoples  National Bank were in compliance with each of
the  applicable  capital   requirements  and  exceeded  the  "well  capitalized"
regulatory guidelines. The following table sets forth the capital ratios for the
Company and Peoples National Bank as of June 30, 1998:

                                 CAPITAL RATIOS
                             (Amounts in Thousands)
<TABLE>
<CAPTION>

                                                                                          Well                        Adequately
                                                                                       Capitalized                   Capitalized
                                                           Actual                      Requirement                   Requirement
                                                    Amount        Ratio            Amount         Ratio          Amount        Ratio
                                                    ------        -----            ------         -----          ------        -----
Company:
<S>                                                <C>            <C>             <C>           <C>             <C>           <C>  
Total Risk-based Capital .................         $11,185        12.13%          $9,223        10.00%          $7,378        8.00%
Tier 1 Risk-based Capital ................          10,195        11.05%           5,534         6.00%           3,689        4.00%
Leverage Ratio ...........................          10,195         8.34%           6,112         5.00%           4,890        4.00%
                                                                                                               
Peoples National Bank:                                                                                         
Total Risk-based Capital .................         $10,312        13.34%          $7,716        10.00%          $6,169        8.00%
Tier 1 Risk-based Capital ................           9,330        12.09%           4,630         6.00%           3,087        4.00%
Leverage Ratio ...........................           9,330         7.55%           6,179         5.00%           4,943        4.00%
</TABLE>

EFFECTS OF REGULATORY ACTION

    The  management  of the  Company  and the Bank are not aware of any  current
recommendations by regulatory authorities, which if they were to be implemented,
would have a material effect on liquidity, capital resources, or operations.

                                       13
<PAGE>

YEAR 2000

     The  Company  acknowledges  that there is a business  risk in  computerized
systems as the new century approaches.  Many computer-based  information systems
in use today  exclude  the century as part of the date  definition,  which could
cause  inaccurate  interest  calculations  on loans  and  deposits.  A number of
computer  systems  used by the  Company  in its  day-to-day  operations  will be
affected by the "Year 2000  Problem."  Management  has  established  a Year 2000
Project Team (the "Y2K Team") which has identified  all affected  systems and is
currently working to ensure that this event will not disrupt operations. The Y2K
Team reports regularly to the Company's Board of Directors.  The Company is also
working  closely with all outside  computer  vendors to ensure that all software
corrections  and warranty  commitments  are  obtained and to implement  internal
"mock"  testing.  Testing  of all  systems  has begun and will be  completed  by
December 1998. The estimated cost to the Company for these corrective actions is
$100,000,  which is included in the Company's 1998 and 1999 budgets.  Incomplete
or untimely  compliance,  however,  could have a material  adverse effect on the
company, the dollar amount of which cannot be accurately quantified at this time
because of the inherent variables and uncertainties involved.



                 PART II.  OTHER INFORMATION

Item 1. Legal Proceedings

     The Company is involved in various claims and legal actions  arising in the
normal course of business.  Management  believes that these proceedings will not
result in a material loss to the Company.

Item 4. Submission to a Vote of Security Holders

     On  April  13,  1998,   the  Company  held  its  1998  Annual   Meeting  of
Shareholders.  The  results of the 1998  Annual  meeting of  Shareholders  is as
follows.



                                       14
<PAGE>

     Proposal # 1 - Election of Directors

The following  persons were elected as Directors with each  receiving  1,201,137
votes in favor,  representing  71.11% of the total voting  shares.  1,212 shares
were withheld from voting on Robert E. Dye, Jr.

     Robert E. Dye, Jr.                           Eugene W. Merritt, Jr.
     George B. Nalley, Jr                         Nell W. Smith
     A.   J. Thompson, Jr.

     Garnet A. Barnes,  William A. Carr, Charles D. Dalton,  Robert E. Dye, Sr.,
     W.  Rutledge  Galloway,  E. Smyth  McKissick,  III, and R. Riggie  Ridgeway
     continued in their present terms as directors.

Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits.

          Exhibit 27.  Financial Data Schedule

     (b)  Reports  on Form  8-K.  No report  on Form 8-K was  filed  during  the
          quarter ended June 30, 1998



                                       15
<PAGE>




SIGNATURES

    Pursuant to the requirements of the Securities and 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:  August 10, 1998                  By:   /s/ Robert E. Dye
                                             -------------------
                                             Robert E. Dye
                                             President and Chairman of the Board


Dated:  August 10, 1998                  By:   /s/ William B. West
                                             ---------------------
                                             William B. West
                                             Sr. Vice President & CFO
                                             (principal financial officer)




                                       16
<PAGE>



                                             EXHIBIT INDEX


       Exhibit No. from
          Item 601 of
        Regulation S-B                       Description

              27                             Financial Data Schedule