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
         June 30, 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 August 4, 2009 was 7,003,003.


<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>
                                                                                             June 30,      June 30,     December 31,
                                                                                               2009          2008           2008
                                                                                             Unaudited     Unaudited       Audited
                                                                                             ---------     ---------       -------
ASSETS
<S>                                                                                         <C>            <C>            <C>
CASH AND DUE FROM BANKS ...............................................................     $  11,637      $  10,203      $   7,874
INTEREST-BEARING DEPOSITS IN OTHER BANKS ..............................................            17            705            765
FEDERAL FUNDS SOLD ....................................................................         3,797          1,260          9,185
                                                                                            ---------      ---------      ---------
     Total cash and cash equivalents ..................................................        15,451         12,168         17,824
SECURITIES
     Trading assets ...................................................................           146              -             47
     Available for sale ...............................................................        93,535         76,325         96,003
     Held to maturity (market value of $9,791, $12,674
         and $12,666) .................................................................         9,697         12,663         12,651
     Other investments, at cost .......................................................         4,075          5,174          3,546
LOANS-less allowance for loan losses of $7,809, $5,558
     and $9,217 .......................................................................       382,147        417,689        389,494
PREMISES AND EQUIPMENT, net of accumulated
     depreciation and amortization ....................................................        12,743         13,686         13,200
ACCRUED INTEREST RECEIVABLE ...........................................................         2,540          2,892          2,685
ASSETS ACQUIRED IN SETTLEMENT OF LOANS ................................................         3,919          1,216          5,428
CASH SURRENDER VALUE OF LIFE INSURANCE ................................................        12,057         11,562         11,815
OTHER ASSETS ..........................................................................         4,955          1,720          7,182
                                                                                            ---------      ---------      ---------
TOTAL ASSETS ..........................................................................     $ 541,265      $ 555,095      $ 559,875
                                                                                            =========      =========      =========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
DEPOSITS
     Noninterest-bearing ..............................................................     $  48,653      $  47,572      $  51,091
     Interest-bearing .................................................................       403,071        365,496        394,278
                                                                                            ---------      ---------      ---------
         Total deposits ...............................................................       451,724        413,068        445,369
SECURITIES SOLD UNDER REPURCHASE
     AGREEMENTS .......................................................................        15,078         18,347         22,181
FEDERAL FUNDS PURCHASED ...............................................................             -              -          1,028
NOTES PAYABLE TO FEDERAL HOME LOAN BANK ...............................................        14,500         71,700         34,600
NOTES PAYABLE - OTHER .................................................................             -              -         11,000
ACCRUED INTEREST PAYABLE ..............................................................         3,152          3,523          2,636
OTHER LIABILITIES .....................................................................         2,177            124          1,549
                                                                                            ---------      ---------      ---------
         Total Liabilities ............................................................       486,631        506,762        518,363
                                                                                            ---------      ---------      ---------
SHAREHOLDERS' EQUITY
Preferred stock - 15,000,000  shares  authorized;  $1,000 per share  liquidation
       preference;  issued and outstanding-  13,293 at June 30, 2009 and none at
       June 30, 2008 and December 31, 2008. ...........................................        12,622              -              -
Common stock - 15,000,000 shares authorized, $1.11
     Par value per share, 7,002,503 shares, 7,059,166 shares
       and 7,070,139 shares outstanding, respectively .................................         7,773          7,836          7,848
Additional paid-in capital ............................................................        41,617         41,667         41,752
Retained earnings .....................................................................        (8,836)          (784)        (9,564)
Accumulated other comprehensive income ................................................         1,458           (386)         1,476
                                                                                            ---------      ---------      ---------
         Total Shareholders' Equity ...................................................        54,634         48,333         41,512
                                                                                            ---------      ---------      ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................................     $ 541,265      $ 555,095      $ 559,875
                                                                                            =========      =========      =========
</TABLE>

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




                                       1
<PAGE>
                  Peoples Bancorporation, Inc. and Subsidiaries
                        Consolidated Statements of Income
             (Dollars in thousands except per share and share data)
                                    Unaudited
<TABLE>
<CAPTION>
                                                                            Three Months Ended                 Six Months Ended
                                                                                June 30,                           June 30,
                                                                         2009              2008             2009             2008
                                                                         ----              ----             ----             ----
INTEREST INCOME
<S>                                                                <C>              <C>              <C>              <C>
   Interest and fees on loans ..................................   $       5,754    $       6,952    $      11,930    $      14,456
   Interest on securities
       Taxable .................................................             856              807            1,732            1,599
       Tax-exempt ..............................................             367              370              752              740
   Interest on federal funds ...................................               1               12                1               32
                                                                   -------------    -------------    -------------    -------------
Total interest income ..........................................           6,978            8,141           14,415           16,827
                                                                   -------------    -------------    -------------    -------------
INTEREST EXPENSE
   Interest on deposits ........................................           2,650            3,282            5,461            6,868
   Interest on federal funds purchased and securities
       sold under repurchase agreements ........................              21               98               49              205
    Interest on notes payable Federal Home Loan Bank ...........              19              455               69            1,127
    Interest on notes payable - other ..........................              39                -              182                -
                                                                   -------------    -------------    -------------    -------------
Total interest expense .........................................           2,729            3,835            5,761            8,200
                                                                   -------------    -------------    -------------    -------------
Net interest income ............................................           4,249            4,306            8,654            8,627
PROVISION FOR LOAN LOSSES ......................................             873            2,175            1,578            2,410
                                                                   -------------    -------------    -------------    -------------
Net interest income after provision for loan losses ............           3,376            2,131            7,076            6,217
                                                                   -------------    -------------    -------------    -------------
NON-INTEREST INCOME
   Service charges on deposit accounts .........................             407              457              808              917
    Customer service fees ......................................              28               31               70               79
    Mortgage banking ...........................................             159               93              353              224
    Brokerage services .........................................              59               57               97              117
    Bank owned life insurance ..................................             136              125              270              249
    Gain on sale of  available-for-sale securities .............               5                -                5                2
    Gain (loss) on sale of assets acquired
      in settlement of loans....................................             (11)             (44)              38              (53)
    Other noninterest income ...................................             113              175              291              320
                                                                   -------------    -------------    -------------    -------------
              Total noninterest income .........................             896              894            1,932            1,855
                                                                   -------------    -------------    -------------    -------------
NON-INTEREST EXPENSES
   Salaries and benefits .......................................           2,111            2,296            4,256            4,782
   Occupancy ...................................................             243              238              489              473
   Equipment ...................................................             295              353              596              682
   Marketing and advertising ...................................              41              107               72              244
   Communications ..............................................              59               59              124              130
   Printing and supplies .......................................              39               45               78              102
   Bank paid loan costs ........................................             287               91              507              226
   Director fees ...............................................              93              117              185              228
   ATM/Debit card expenses .....................................             104               94              201              175
   Legal and professional fees .................................             200              142              351              224
   Regulatory assessments ......................................             261              102              511              186
   Other post employment benefits ..............................              91               88              182              175
   Other operating expenses ....................................             326              362              682              724
                                                                   -------------    -------------    -------------    -------------
             Total noninterest expenses ........................           4,150            4,094            8,234            8,351
                                                                   -------------    -------------    -------------    -------------
   Income (loss)  before income taxes ..........................             122           (1,069)             774             (279)
PROVISION FOR INCOME TAXES (BENEFIT) ...........................             (96)            (506)              (2)            (329)
                                                                   -------------    -------------    -------------    -------------
   Net income (loss) ...........................................   $         218    $        (563)   $         776    $          50
                                                                   =============    =============    =============    =============
Deductions for amounts not available to common shareholders:
      Dividends declared or accumulated on preferred stock .....             128                -              128                -
      Net amortization (accretion) of preferred stock ..........               8                -                8                -
                                                                   -------------    -------------    -------------    -------------
   Net income (loss) available to common shareholders ..........   $          82    $        (563)   $         640    $          50
                                                                   =============    =============    =============    =============
INCOME (LOSS) PER COMMON SHARE
   BASIC .......................................................   $        0.01    $       (0.08)   $        0.09    $        0.01
                                                                   =============    =============    =============    =============
   DILUTED .....................................................   $        0.01    $       (0.08)   $        0.09    $        0.01
                                                                   =============    =============    =============    =============
WEIGHTED AVERAGE COMMON SHARES
   BASIC .......................................................       7,047,594        7,059,166        7,058,866        7,057,954
                                                                   =============    =============    =============    =============
   DILUTED .....................................................       7,098,596        7,059,166        7,114,645        7,057,954
                                                                   =============    =============    =============    =============
CASH DIVIDENDS PAID PER COMMON SHARE ...........................   $           -    $        0.05     $          -    $        0.10
                                                                   =============    =============    =============    =============
</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 Six months ended June 30, 2008 and 2009
                         (Dollars in thousands)
                              (Unaudited)
<TABLE>
<CAPTION>

                                                Common stock                                               Accumulated     Total
                                                ------------                   Additional                    other     comprehensive
                                                                  Preferred      paid-in      Retained      Retained   shareholders'
                                        Shares        Amount        stock        capital      earnings       income       equity
                                        ------        ------        -----        -------      --------       ------       ------
<S>                                   <C>          <C>           <C>           <C>           <C>           <C>           <C>
Balance, December 31, 2007 ........   7,056,337    $    7,833    $        -    $   41,624    $        -    $      784    $   50,241
                                                                                                                         ----------
Net income ........................           -             -             -                          50             -            50
Other comprehensive income,
 net of tax:
  Unrealized holding gains on
    securities available for sale,
    net of income taxes of $199 ...           -             -             -             -             -        (1,172)       (1,172)
  Reclassification adjustments
    for gains included in net
    income net of incomes taxes
    of $0 .........................           -             -             -             -             -             2             2
                                                                                                                         ----------
Comprehensive income ..............                                                                                          (1,120)
Cash dividends ....................           -             -             -             -          (706)            -          (706)
Proceeds from stock options
     exercised ....................       2,829             3             -            10             -             -            13
Stock-based compensation ..........           -             -             -            33             -             -            33
Cumulative effect of post
  retirement cost of life insurance           -             -             -             -          (128)            -          (128)
                                      ---------    ----------    ----------    ----------    ----------    ----------    ----------
Balance, June 30, 2008 ............   7,059,166    $    7,836    $        -    $   41,667    $     (784)   $     (386)   $   48,333
                                      =========    ==========    ==========    ==========    ==========    ==========    ==========


Balance, December 31, 2008 ........   7,070,139    $    7,848    $        -    $   41,752    $   (9,564)   $    1,476    $   41,512
                                                                                                                         ----------
Net income ........................           -             -             -             -           776             -           776
Other comprehensive income,
 net of tax:
   Unrealized holding gains
     on securities available
     for sale, net of income
     taxes of $(10)................           -             -             -             -             -           (18)          (18)
                                                                                                                         ----------
Comprehensive income ..............                                                                                             758
Issuance of preferred stock .......                                  12,614                                                  12,614
Cash dividends on preferred stock .                                                                 (40)                        (40)
Common shares surrendered
  by dissenting shareholders ......     (67,636)          (75)                       (168)                                     (243)
Net accretion(amortization) .......                                                                                               -
  of preferred stock ..............                                       8                          (8)                          -
Stock-based compensation ..........           -             -             -            33             -             -            33
                                      ---------    ----------    ----------    ----------    ----------    ----------    ----------
Balance, June 30, 2009 ............   7,002,503    $    7,773    $   12,622    $   41,617    $   (8,836)   $    1,458    $   54,634
                                      =========    ==========    ==========    ==========    ==========    ==========    ==========
</TABLE>


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



                                       3
<PAGE>

                  Peoples Bancorporation, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                                                (Unaudited)
                                                                                                              Six months Ended
                                                                                                                  June 30,
                                                                                                         2009                 2008
                                                                                                         ----                 ----

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                                     <C>                <C>
   Net income ................................................................................          $    776           $     50
   Adjustments to reconcile net income to net cash  used in
      operating activities:
   Gain on sale of premises and equipment ....................................................                (4)                 -
   Gain on sale of securities available for sale .............................................                (5)                (2)
   Gain from trading assets ..................................................................               (99)                 -
   (Gain) loss on sale of assets acquired in settlement of loans .............................               (38)                53
   Other than temporary write-down on Silverton Bank stock ...................................               160                  -
   Provision for loan losses .................................................................             1,578              2,410
   Depreciation and amortization .............................................................               524                561
   Amortization and accretion (net) of premiums and
       discounts on securities ...............................................................                (8)                 9
   Stock-based compensation ..................................................................                33                 33
   Postretirement cost of insurance for split-dollar life
       insurance coverage ....................................................................                 -               (128)
   Decrease in accrued interest receivable ...................................................               145                429
   (Increase) decrease in other assets .......................................................             2,276             (2,041)
   Increase (decrease) in accrued interest payable ...........................................               516               (942)
   Increase (decrease) in other liabilities ..................................................               628               (639)
                                                                                                        --------           --------
     Net cash provided by (used in) operating activities .....................................             6,482               (207)
                                                                                                        --------           --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of securities held to maturity ..................................................                 -               (444)
   Purchases of securities available for sale ................................................            (7,035)              (615)
   Purchases of other investments ............................................................              (529)              (379)
   Proceeds from principal pay-downs on securities available for sale ........................             7,336              4,619
   Proceeds from the maturities and calls of securities available for sale ...................             2,000              2,250
   Proceeds from the sale of securities available for sale ...................................                 -                455
   Proceeds from the maturities and calls of securities held to maturity .....................             2,945                865
   Investment in bank owned life insurance ...................................................              (242)              (212)
   Proceeds from the sale of other real estate owned .........................................             5,343                817
   Net increase (decrease) in loans ..........................................................             1,935             (4,463)
   Proceeds from the sale of premises and equipment ..........................................                 4                 90
   Purchase of premises and equipment ........................................................               (67)              (580)
                                                                                                        --------           --------
     Net cash provided by investing activities ...............................................            11,690              2,403
                                                                                                        --------           --------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase (decrease) in deposits ......................................................             6,355             (4,553)
    Net decrease in securities sold under repurchase
     agreements ..............................................................................            (7,103)            (1,477)
    Net decrease in federal funds purchased ..................................................            (1,028)              (429)
    Net increase (decrease) in notes payable to Federal Home Loan Bank .......................           (20,100)             6,600
    Net decrease of notes payable to South Carolina Bank & Trust .............................           (11,000)                 -
    Proceeds from the exercise of stock options ..............................................                 -                 13
    Proceeds from issuance of preferred stock and warrants ...................................            12,614                  -
    Common shares purchased ..................................................................              (243)                 -
    Cash dividend - common stock .............................................................                 -               (706)
    Cash dividend - preferred stock ..........................................................               (40)                 -
                                                                                                        --------           --------
     Net cash used in financing activities ...................................................           (20,545)              (552)
                                                                                                        --------           --------
     Net increase (decrease) in cash and cash equivalents ....................................            (2,373)             1,644
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ...............................................            17,824             10,524
                                                                                                        --------           --------
CASH AND CASH EQUIVALENTS, END OF PERIOD .....................................................          $ 15,451           $ 12,168
                                                                                                        ========           ========

CASH PAID FOR
     Interest ................................................................................          $  5,905           $  9,142
                                                                                                        ========           ========
     Income Taxes ............................................................................          $     25           $    101
                                                                                                        ========           ========
</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.

INVESTMENT SECURITIES

     The following table shows gross unrealized loss and fair value,  aggregated
by investment category,  and length of time that individual securities have been
in a continuous unrealized loss position, at June 30, 2009:

Securities Available for Sale (tabular amounts in thousands):
<TABLE>
<CAPTION>
                                                              Less than 12 Months       12 Months or More              Total
                                                              -------------------       -----------------              -----
                                                             Fair       Unrealized     Fair       Unrealized     Fair     Unrealized
                                                             Value        Losses       Value        Losses       Value      Losses
                                                             -----        ------       -----        ------       -----      ------
<S>                                                         <C>          <C>          <C>          <C>          <C>         <C>
Government sponsored enterprise securities ...........      $     -      $     -      $     -      $     -      $     -     $     -
Other securities .....................................        1,026            1          408          107        1,434         108
State and political subdivisions .....................       12,806          314          834           71       13,640         385
                                                            -------      -------      -------      -------      -------     -------
Total ................................................      $13,832      $   315      $ 1,242      $   178      $15,074     $   493
                                                            =======      =======      =======      =======      =======     =======
</TABLE>

No individual securities were in a continuous loss position for twelve months or
more.

Securities Held to Maturity (tabular amounts in thousands):
<TABLE>
<CAPTION>

                                                       Less than 12 Months      12 Months or More             Total
                                                       -------------------      -----------------             -----
                                                         Fair     Unrealized     Fair    Unrealized    Fair      Unrealized
                                                         Value      Losses       Value    Losses       Value      Losses
                                                         -----      ------       -----    ------       -----      ------
<S>                                                  <C>         <C>         <C>         <C>         <C>          <C>
States and political subdivisions .................  $    1,876  $       39  $      191  $       11  $    2,067   $      50
                                                     ==========  ==========  ==========  ==========  ==========   =========
</TABLE>

     The Company has the ability and intent to hold these  securities until such
time as the value recovers or the securities mature. The Company believes, based
on industry analyst reports and credit rating,  that the  deterioration in value
is  attributable  to  changes  in market  interest  rates and not in the  credit
quality  of  the  issuer  and   therefore,   these  losses  are  not  considered
other-than-temporary.  The  category  "other  securities"  above in comprised of
mortgage-backed securities, corporate debt securities and equity securities.

COMMON STOCK

     No cash  dividends  for common  shareholders  were declared by the Board of
Directors during the second quarter of 2009.


                                       5
<PAGE>


INCOME PER COMMON 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 common share is calculated by
dividing net income  available to common  shareholders  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 six  months  ended  June 30,  2009 and  2008  was  7,070,139  and
7,057,954,   respectively.   The  weighted   average  number  of  common  shares
outstanding  for diluted net income per common share was 7,114,645 and 7,057,954
for the six months ended June 30, 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
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 June 30,
2009,  an aggregate of 366,150  shares were reserved for issuance on exercise of
options  under all four of these  plans.  During  the first six  months of 2009,
options to purchase  10,500  shares were  granted  with a weighted  average fair
value of $2.80  per  share.  The  following  is a summary  of the  status of the
Company's plans as of June 30, 2009 and changes during the six months ended June
30, 2009.


                                       6
<PAGE>

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

Outstanding, December 31, 2008 ...................         146,263     $ 10.56
Granted ..........................................          10,500     $  2.80
Exercised ........................................               -     $     -
Forfeited ........................................         (6,395)     $  9.27
                                                           ------
Outstanding, June 30, 2009 .......................         150,368     $ 10.07
                                                           ======

Options Exercisable, June 30, 2009 ...............         126,358     $ 10.29
                                                           =======

 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 June 30, 2009.


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


                                       7
<PAGE>

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:


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



                                       8
<PAGE>

               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 June 30, 2009 (tabular amounts in thousands):

<TABLE>
<CAPTION>
                                                                    Quoted market
                                                                   price in active
                                                                     markets for                                   Significant
                                                                      identical           Significant other        unobservable
                                                                  assets/liabilities      observable inputs           inputs
                                                                      (Level 1)               (Level 2)             (Level 3)
                                                                      ---------               ---------             ---------
<S>                                                                     <C>                   <C>                   <C>
     Recurring basis:
     Available for sale
     investment securities ..................................           $93,127               $   408               $      -

     Trading assets .........................................               146                     -                      -
                                                                        -------               -------               --------

Total .......................................................           $93,273               $   408               $      -
                                                                        =======               =======               ========
</TABLE>

         Assets and liabilities  measured at fair value on a nonrecurring  basis
are as follows as of June 30, 2009 (tabular amounts in thousands):

<TABLE>
<CAPTION>
                                                                    Quoted market
                                                                   price in active
                                                                     markets for                                   Significant
                                                                      identical           Significant other        unobservable
                                                                  assets/liabilities      observable inputs           inputs
                                                                      (Level 1)               (Level 2)             (Level 3)
                                                                      ---------               ---------             ---------
     Nonrecurring basis:
<S>                                                                     <C>                    <C>                   <C>
     Impaired loans ..............................................      $      -               $12,102               $      -

     Other real estate owned .....................................             -                 3,919                      -
                                                                        --------               -------               --------

Total ............................................................      $      -               $16,021               $      -
                                                                        ========               =======               ========
</TABLE>

                                       9
<PAGE>

         The following is a description of the valuation  methodologies used for
instruments measured at fair value.

         Available  for sale  investment  securities - When quoted market prices
are available in an active  market,  the securities are classified as Level 1 in
the valuation  hierarchy.  Level 1 securities  for the Company  include  certain
treasury  securities,  equity  securities.  If  quoted  market  prices  are  not
available,  but fair  values can be  estimated  by  observing  quoted  prices of
securities with similar characteristics,  the securities are classified as Level
2 on the  valuation  hierarchy.  For the  Company,  Level 2  securities  include
mortgage backed  securities,  collateralized  mortgage  obligations,  government
sponsored  entity  securities,  and corporate  bonds.  In cases where Level 1 or
Level 2 inputs are not available,  securities  are classified  within Level 3 of
the hierarchy.

         Impaired  loans - SFAS 157  applies  to loans  that  are  measured  for
impairment using the practical  expedients permitted by SFAS 114, "Accounting by
Creditors for Impairment of a Loan." Fair values for impaired loans in the above
table are collateral dependent and are estimated based on underlying  collateral
values,  which are then  adjusted  for the cost  related to  liquidation  of the
collateral.

         Other real estate owned - Other real estate,  consisting  of properties
obtained  through  foreclosure or in  satisfaction  of loans, is reported at the
lower of cost or fair  value,  determined  on the basis of  current  appraisals,
comparable  sales,  and  other  estimates  of value  obtained  principally  from
independent  sources,  adjusted  for  estimated  selling  costs.  At the time of
foreclosure,  any  excess of the loan  balance  over the fair  value of the real
estate held as collateral is treated as a charge  against the allowance for loan
losses.

Disclosure about Fair Value of Financial Instruments

         SFAS No. 107,  Disclosures  about Fair Value of Financial  Instruments,
requires disclosure of fair value information,  whether or not recognized in the
balance  sheets,  when it is practical to estimate the fair value.  SFAS No. 107
defines a financial  instrument as cash, evidence of an ownership interest in an
entity or  contractual  obligations  which require the exchange of cash or other
financial  instruments.   Certain  items  are  specifically  excluded  from  the
disclosure  requirements,  including  the Company's  common stock,  premises and
equipment and other assets and liabilities.

         Fair value  approximates  carrying  value for the  following  financial
instruments due to the short-term  nature of the  instrument:  cash and due from
banks,  interest-bearing  deposits  in other  banks and  federal  funds sold and
purchased.

         Securities   are  valued  using  quoted  fair  market   prices.   Other
investments are valued at par value.

         Fair value for variable rate loans that reprice frequently,  loans held
for sale,  and for loans that  mature in less than three  months is based on the
carrying value.  Fair value for fixed rate mortgage loans,  personal loans,  and
all other loans (primarily  commercial)  maturing after three months is based on
the discounted present value of the estimated future cash flows.  Discount rates


                                       10
<PAGE>

used in these  computations  approximate the rates currently offered for similar
loans of comparable terms and credit quality.

         Fair value for demand deposit  accounts and  interest-bearing  accounts
with no fixed  maturity  date is equal to the  carrying  value.  Certificate  of
deposit accounts and securities sold under repurchase agreements maturing within
one year are valued at their  carrying  value.  The fair value of certificate of
deposit accounts and securities sold under repurchase  agreements maturing after
one year are estimated by discounting cash flows from expected  maturities using
current interest rates on similar instruments.

         Fair value for  long-term  FHLB  advances is based on  discounted  cash
flows using the Company's  current  incremental  borrowing rate.  Discount rates
used in these  computations  approximate  rates  currently  offered  for similar
borrowings of comparable terms and credit quality.

         Fair value of off-balance  sheet instruments is based on fees currently
charged to enter into similar  arrangements,  taking into account the  remaining
terms of the agreement and the counterparties' credit standing.

         The Company has used  management's best estimate of fair value based on
the above  assumptions.  Thus, the fair values  presented may not be the amounts
which could be realized in an immediate sale or settlement of the instrument. In
addition,  any income  taxes or other  expenses  which  would be  incurred in an
actual sale or  settlement  are not taken into  consideration  in the fair value
presented.

         The estimated fair values of the Company's financial instruments are as
follows (amounts in thousands):
<TABLE>
<CAPTION>
                                                                                   June 30,                       December 31,
                                                                                     2009                             2008
                                                                                     ----                             ----
                                                                         Carrying            Fair          Carrying           Fair
                                                                          amount             value          amount            value
                                                                          ------             -----          ------            -----
Financial assets:
<S>                                                                      <C>              <C>              <C>              <C>
     Cash and due from banks ...................................         $ 11,637         $ 11,637         $  7,874         $  7,874
     Interest-bearing deposits in other banks ..................               17               17              765              765
     Federal funds sold ........................................            3,797            3,797            9,185            9,185
     Trading assets ............................................              146              146               47               47
     Securities available for sale .............................           93,535           93,535           96,003           96,003
     Securities held to maturity ...............................            9,697            9,791           12,651           12,666
     Other investments .........................................            4,075            4,075            3,546            3,546
     Loans (gross) .............................................          389,956          385,464          398,711          395,447
     Cash surrender value life insurance .......................           12,057           12,057           11,815           11,815

Financial liabilities:
     Deposits ..................................................          451,724          449,907          445,369          442,221
     Securities sold under repurchase agreements ...............           15,078           15,078           22,181           22,181
     Federal funds purchased ...................................                -                -            1,028            1,028
     Advances from Federal Home Loan Bank ......................           14,500           14,500           34,600           34,600
     Notes Payable - Other .....................................                -                -           11,000           11,000
</TABLE>

                                       11
<PAGE>

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 and may be  redeemed  by the  Company,
subject to certain limitations, for $1,000 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%. The cumulative  dividend for the preferred
stock is accrued for and payable on February 15, May 15,  August 15 and November
15 of each year.  The Company has declared  and paid $40,000 in preferred  stock
dividends during the first six months of 2009. 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  owed on a line of  credit  with a
correspondent  bank,  the proceeds of which had been used to inject capital into
the Company's Banks.

SUBSEQUENT EVENTS

         In accordance with SFAS 165,  "Subsequent  Events",  issued in May 2009
and effective for periods  ending after June 15, 2009,  management  performed an
evaluation to determine whether or not there have been any reportable subsequent
events since the balance sheet date. The evaluation was performed through August
12,  2009,  the date on which the  Company's  10-Q was  issued as filed with the
Securities and Exchange Commission.


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


                                       12
<PAGE>

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.

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;

                                       13
<PAGE>

          o    the failure of assumptions  underlying the  establishment  of the
               allowance  for loan  losses and other  estimates,  including  the
               value of collateral securing loans;
          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.



                                       14
<PAGE>

         Of these  significant  accounting  policies,  the Company considers its
policies  regarding the allowance  for loan losses (the  "Allowance")  to be its
most  critical  accounting  policy due to the  significant  degree of management
judgment  involved in determining  the amount of the Allowance.  The Company has
developed  policies and  procedures for assessing the adequacy of the Allowance,
recognizing  that this process  requires a number of  assumptions  and estimates
with respect to its loan  portfolio.  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.


                                       15
<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  and  six-month  periods  ended  June 30,  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.



                                       16
<PAGE>

                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EARNINGS PERFORMANCE

Overview

         The  consolidated  Company's  net  income  (loss)  available  to common
shareholders  for the second  quarter of 2009 was  $82,000 or $0.01 per  diluted
share compared to $(563,000) or $(0.08) per diluted share for the second quarter
of 2008, an increase of $645,000.  Net income  available to common  shareholders
for the six months ended June 30, 2009 was  $640,000 or $0.09 per diluted  share
compared to $50,000 or $0.01 per diluted share for the six months ended June 30,
2008, an increase of $590,000 or 1,180.0%.  Return on average common equity, net
income available to common  shareholders as a percentage of average total common
equity,  for the six months and three  months  ended June 30, 2009 was 3.05% and
0.78%  respectively,  compared  to 0.20% and (4.57%)  respectively,  for the six
months  and  three  months  ended  June 30,  2008.  Return  on  average  assets,
calculated as net income (loss) divided by average assets, for the six and three
months ended June 30, 2009 was 0.28% and 0.16%  respectively,  compared to 0.02%
and (0.40%) respectively, for the six and three months ended June 30, 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 decreased $57,000, or 1.3%, to $4,249,000 for the quarter ended June
30, 2009 compared to $4,306,000 for the quarter ended June 30, 2008. For the six
months ended June 30, 2009 net interest income before  provision for loan losses
increased  $27,000 or 0.3% to  $8,654,000  compared  to  $8,627,000  for the six
months ended June 30, 2008. The Company's net interest  margin for the three and
six months  ended June 30,  2009 was 3.41% and 3.45%  respectively,  compared to
3.30% and 3.31% for the three months and six months ended June 30, 2008.

         The Company's  total interest income for the second quarter of 2009 was
$6,978,000  compared to $8,141,000 for the second quarter of 2008, a decrease of
$1,163,000,  or 14.3%.  Total interest  income for the six months ended June 30,
2009 was  $14,415,000  compared to $16,827,000 for the six months ended June 30,
2008 a decrease of $2,412,000 or 14.3%.  Interest and fees on loans, the largest
component  of total  interest  income,  decreased  by  $1,198,000  in the second
quarter of 2009 to $5,754,000  compared to $6,952,000  for the second quarter of
2008, a decrease of 17.2%. Interest and fees on loans decreased by $2,526,000 in
the six months ended June 30, 2009 to $11,930,000  compared to  $14,456,000  for


                                       17
<PAGE>

the six months  ended  June 30,  2008,  a decrease  of 17.5%.  The  decrease  in
interest and fees on loans for the three-month and six-month  periods 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 $49,000 in the second
quarter of 2009 to $856,000 compared to $807,000 for the second quarter of 2008,
an increase of 6.1%.  Interest on taxable securities  increased $133,000 for the
six months ended June 30, 2009 to $1,732,000  compared to $1,599,000 for the six
months  ended June 30,  2008,  an increase of 8.3%.  The increase in interest on
taxable  securities for the three-month and six-month  periods was due to higher
average balances.

         The Company's total interest expense for the second quarter of 2009 was
$2,729,000  compared to $3,835,000 for the second quarter of 2008, a decrease of
$1,106,000,  or 28.8%.  Total interest expense for the six months ended June 30,
2009 was  $5,761,000,  compared to $8,200,000  for the six months ended June 30,
2008, a decrease of  $2,439,000  or 29.7%.  Interest  expense on  deposits,  the
largest component of total interest expense, decreased by $632,000 in the second
quarter of 2009 to $2,650,000  compared to $3,282,000  for the second quarter of
2008, a decrease of 19.3%. Interest on deposits decreased $1,407,000 for the six
months  ended June 30, 2009 to  $5,461,000  compared to  $6,868,000  for the six
months  ended June 30,  2008,  a decrease  of 20.5%.  The  decrease  in interest
expense on deposits for the  three-month  and  six-month  periods ended June 30,
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 increased
to $39,000 in the second  quarter and  increased  to $182,000 for the six months
ended June 30,  2009  compared to no expense in the same  periods of 2008.  This
expense is  associated  with the line of credit that was drawn by the Company in
the fourth quarter of 2008, and subsequently  paid off during the second quarter
of 2009 with a portion of the proceeds of the sale of preferred  stock to the U.
S. Treasury.  Interest on notes payable to the Federal Home Loan Bank of Atlanta
("FHLB"),  the third  largest  component of total  interest  expense,  decreased
$436,000 or 95.8% to $19,000 for the three months  ended June 30, 2009  compared
to $455,000 for the three months ended June 30, 2008,  and decreased  $1,058,000
or  93.9%  to  $69,000  for the six  months  ended  June 30,  2009  compared  to
$1,127,000 for the six months ended June 30, 2008. The decrease is  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  $77,000  or 78.6% to
$21,000 in the second quarter of 2009 compared to $98,000 for the second quarter
of  2008.  Interest  on  federal  funds  purchased  and  securities  sold  under
repurchase  agreements decreased $156,000 or 76.1% to $49,000 in the second half
of 2009  compared  to  $205,000  for the second  half of 2008.  The  decrease in
interest  on federal  funds  purchased  and  securities  sold  under  repurchase
agreements is largely attributable to lower interest rates paid.

Provision for Loan Losses

         The  provision for loan losses  charged to operations  during the three
months ended June 30, 2009 was  $873,000  compared to  $2,175,000  for the three
months ended June 30, 2008, a decrease of $1,302,000 or 59.9%. The provision for
loan  losses  charged  to  operations  for the six months  ended  June 30,  2009


                                       18
<PAGE>

decreased  $832,000 or 34.5% to  $1,578,000,  compared to $2,410,000 for the six
months  ended June 30, 2008.  The changes in the  Company's  provision  for loan
losses for the second  quarter and first half 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 $2,000 or 0.2% to $896,000 for the second
quarter  of  2009  compared  to  $894,000  for  the  second   quarter  of  2008.
Non-interest  income increased  $77,000 or 4.2% to $1,932,000 for the first half
of 2009  compared  to  $1,855,000  for the first half of 2008.  Service  fees on
deposit  accounts,  the largest  component  of  non-interest  income,  decreased
$50,000 or 10.9% to $407,000 for the second quarter of 2009 compared to $457,000
for the second  quarter of 2008.  Service  fees on  deposit  accounts  decreased
$109,000  or 11.9% to  $808,000  for the first six  months of 2009  compared  to
$917,000 for the first six months of 2008.

         Mortgage  banking fees  increased from $93,000 in the second quarter of
2008 to $159,000 in the second quarter of 2009, an increase of $66,000 or 71.0%,
and increased  $129,000 or 57.6% in the first half of 2009 to $353,000  compared
to  $224,000  for the  first  half of 2008.  These  increases  in the  levels of
mortgage  banking  income are due to  increases  in  residential  mortgage  loan
originations at the Banks. Bank owned life insurance income increased $11,000 or
8.8% in the second  quarter of 2009 to $136,000  compared  to  $125,000  for the
second quarter of 2008,  and increased  $21,000 or 8.4% to $270,000 in the first
half of 2009 compared to $249,000 in the first half of 2008, representing higher
growth rates on the cash surrender values of these policies.  Brokerage  service
income  increased  from $57,000 in the second  quarter of 2008 to $59,000 in the
second  quarter of 2009, an increase of $2,000 or 3.5% and decreased  $20,000 or
17.1% to $97,000 in the first half of 2009  compared  to  $117,000  in the first
half of  2008.  This  decrease  in  brokerage  service  income  is due to  lower
commissions from both the volume and mix of products.

         There was a net loss of $11,000  in the  second  quarter of 2009 on the
sale of assets  acquired in settlement of loans and a net gain of $38,000 in the
first half of 2009.  This compares to a loss of $44,000 in the second quarter of
2008 on the sale of assets acquired in settlement of loans and a $53,000 loss in
the first half of 2008. Other  non-interest  income  decreased  $62,000 or 35.4%
from  $175,000  during the second  quarter  of 2008 to  $113,000  for the second
quarter of 2009 and  decreased  $29,000 or 9.1% to $291,000 in the first half of
2009  compared to $320,000 in the first half of 2008.  This  decrease is largely
attributable to a $160,000 impairment  write-down during the second quarter 2009
on Silverton  Bank stock owned by one of the Company's bank  subsidiaries  which
became worthless, partially offset by an increase in interchange income on debit
cards of $19,000 or 14.1% to $154,000 in the second  quarter of 2009 compared to
$135,000  in the  second  quarter  of 2008.  Interchange  income on debit  cards
increased  40,000 or 15.8% to  $293,000  in the first half of 2009  compared  to
$253,000 in the first half of 2008.



                                       19
<PAGE>

         The Company recorded a $5,000 gain on the sale of securities  available
for sale in the  second  quarter  and first  half of 2009.  There  were no gains
realized on the sale of securities  available for sale during the second quarter
of 2008 and a $2,000 gain on the sale of available  for sale  securities  during
the first half of 2008.

Non-interest Expense

         Total non-interest  expense increased $56,000 or 1.4% to $4,150,000 for
the second quarter of 2009 from $4,094,000 for the second quarter of 2008. Total
non-interest  expense decreased  $117,000,  or 1.4%, to $8,234,000 for the first
half of 2009 from $8,351,000 for the first half of 2008.  Salaries and benefits,
the largest component of non-interest  expense,  decreased $185,000, or 8.1%, to
$2,111,000 for the second quarter of 2009 from $2,296,000 for the second quarter
of 2008. Salaries and benefits decreased  $526,000,  or 11.0%, to $4,256,000 for
the first half of 2009 from $4,782,000 for the first half 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  $53,000 or
9.0% to  $538,000  in the second  quarter of 2009  compared  to  $591,000 in the
second quarter of 2008. Occupancy and furniture and equipment expenses decreased
$70,000 or 6.1% to  $1,085,000  in the first half of 2009 compared to $1,155,000
in the first half of 2008.  Marketing and advertising  expense decreased $66,000
or 61.7%  from  $107,000  in the second  quarter  of 2008 to $41,000  during the
second  quarter of 2009 and  decreased  $172,000  or 70.5% from  $244,000 in the
first half of 2008 to  $72,000  during  the same  period of 2009.  Communication
expenses decreased $6,000 or 4.6% to $124,000 in the first half of 2009 compared
to $130,000 in the first half of 2008.  The second  quarter of June 30, 2009 and
2008 both recorded an expense of $59,000 for communication expense. Printing and
supplies  decreased  $6,000 or 13.3% from $45,000 at June 30, 2008 to $39,000 at
June 30, 2009 and decreased $24,000 or 23.5% from $102,000 for the first half of
2008 to $78,000 for the same period of 2009.  These decreases were the result of
active efforts by management to limit and reduce expenses.

         Bank paid loan costs  increased  $196,000  or 215.4% to $287,000 in the
second  quarter of 2009  compared  to $91,000  in the  second  quarter  2008 and
increased  $281,000 or 124.3% to $507,000 in the first half of 2009  compared to
$226,000 during the same period of 2008. Of the $507,000 expense incurred in the
first half of 2009, $339,000 is associated with the repossession and maintenance
of collateral on defaulted  real estate loans,  compared to $129,000  during the
same period of 2008.

         Legal and professional  expenses increased $58,000 or 40.9% to $200,000
for the second  quarter of 2009  compared to $142,000 for the second  quarter of
2008 and  increased  $127,000  or 56.7% to  $351,000  for the first half of 2009
compared  to  $224,000  for the first half of 2008.  The  increase  in legal and
professional  fees is primarily  due to  collection  efforts on certain loans in
default and the outsourcing of portions of the Company's internal audit function
beginning in the second quarter of 2008.



                                       20
<PAGE>

         Regulatory  assessments  increased $159,000 or 155.9% from $102,000 for
the  second  quarter  of 2008 to  $261,000  for the  second  quarter of 2009 and
increased  $325,000  or  174.7%  from  $186,000  for the  first  half of 2008 to
$511,000 for the first half 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
$222,000 of the Company's increased expense during the first half of 2009.

         All other  operating  expenses were  $326,000 in the second  quarter of
2009 compared to $362,000 for the second  quarter of 2008, a decrease of $36,000
or 9.9% and  decreased  $42,000 or 5.8% to  $682,000  for the first half of 2009
compared to $724,000 for the first half of 2008.

Income Taxes

         The  provision  for income  taxes  increased  $410,000 to a $96,000 tax
benefit for the second  quarter of 2009  compared to a $506,000  tax benefit for
the second quarter of 2008. The provision for income taxes increased $327,000 to
a $2,000 tax  benefit  for the first half of 2009  compared  to a tax benefit of
$329,000 for the first half of 2008.  The increase in the  provision  for income
taxes is attributable  to the increase in net pre-tax 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.



                                       21
<PAGE>


BALANCE SHEET REVIEW

Loans

         Outstanding  loans represent the largest component of earning assets at
77.8% of total earning assets. As of June 30, 2009, the Company held total gross
loans  outstanding  of  $389,956,000  a  decrease  of  $8,755,000  or 2.2%  from
$398,711,000  in total  gross  loans  outstanding  at  December  31,  2008 and a
decrease  of  $33,291,000  or  7.9%  from  $423,247,000  in  total  gross  loans
outstanding  at June 30,  2008.  The  decrease in  outstanding  loans during the
twelve-month and six-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                                                                  June 30,             December 31,
                                                                                                   --------            ------------
       (Dollars in Thousands)                                                               2009             2008            2008
                                                                                            ----             ----            ----
                                                                                                (Unaudited)               (Audited)

<S>                                                                                       <C>              <C>            <C>
Commercial  and  Industrial  - not  secured  by  real estate ....................         $ 41,198         $ 49,840       $ 43,451
Commercial and Industrial - secured by real estate ..............................          113,290          115,769        111,844
Residential real estate - mortgage ..............................................          129,295          118,120        124,445
Residential real estate - construction ..........................................           91,390          126,509        104,390
Consumer loans ..................................................................           14,783           13,009         14,581
                                                                                          --------         --------       --------
     Gross Loans ................................................................         $389,956         $423,247       $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 and six months
ended  June 30,  2009 was 5.88% and 6.05%  respectively,  compared  to 6.84% and
6.55% for the three  months and six  months  ended June 30,  2008.  The  Federal
Reserve  decreased  the federal funds target rate by a total of 400 basis points
during 2008.  A large  portion of the  Company's  adjustable-rate  loans,  which
constitute approximately 35.0% 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
placed on loans to small and medium-sized  businesses.  The Company's commercial


                                       22
<PAGE>

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 June 30, 2009,  approximately  $7,163,000,  or 17.5%,  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 June 30, 2009 was $7,809,000, or 2.00%
of loans outstanding,  compared to $9,217,000, or 2.31% of loans outstanding, at
December 31, 2008, and to $5,558,000, or 1.31% of loans outstanding, at June 30,
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 June 30, 2009 the Company had $17,746,000 in non-accruing  loans, no
loans more than ninety days past due and still accruing  interest and $3,919,000
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 June 30, 2008 the
Company had  $7,352,000 in  non-accruing  loans,  no loans more than ninety days
past due and still accruing  interest and $1,216,000 in other real estate owned.
The substantial  increase in  non-accruing  loans from June 30, 2008 to June 30,
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  June  30,  2009  consisted  of
$17,533,000  in mortgage  loans,  $197,000 in commercial  loans,  and $16,000 in
consumer  loans.  Non-performing  assets as a percentage of loans and other real
estate were 5.50%, 5.54% and 2.02% at June 30, 2009,  December 31, 2008 and June
30, 2008, respectively.

         Net  charge-offs  during  the six  months  ended  June  30,  2009  were
$2,986,000 compared to net charge-offs of $8,913,000 for the year ended December
31, 2008 and net  charge-offs  of  $1,163,000  for the six months ended June 30,
2008. The allowance for loan losses as a percentage of non-performing  loans was


                                       23
<PAGE>

44%,  54%,  and 76% as of June 30, 2009,  December 31, 2008,  and June 30, 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
works 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  $12,102,000 at June 30, 2009, $16,671,000 at December 31, 2008
and $7,476,000 at June 30, 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 $146,000 in trading assets at June 30, 2009,  compared to $47,000 at
December 31, 2008 and no trading  assets at June 30, 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 June 30, 2009  securities
totaled $107,453,000, which represents 21.3% of total earning assets. Securities
decreased  $4,794,000,  or 4.3%, from  $112,247,000  invested as of December 31,
2008, and increased $13,291,000,  or 14.1%, from $94,162,000 invested as of June
30,  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  June  30,  2009  the  Company's  total  investments  classified  as
available for sale had an amortized  cost of  $91,327,000  and a market value of
$93,535,000 for an unrealized gain of $2,208,000.  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 June 30, 2008 the Company's total  investments  classified
as available for sale had an amortized cost of $76,910,000 and a market value of


                                       24
<PAGE>

$76,325,000  for an  unrealized  loss  of  $585,000.  Management  believes  that
maintaining most of its securities in the  available-for-sale  category provides
greater  flexibility in the management of the overall investment  portfolio.  In
cases  where the  market  value is less than 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 $12,057,000 at
June 30, 2009, an increase of $242,000,  or 2.0%, from the  $11,815,000  held at
December 31, 2008 and an increase of  $495,000,  or 4.3%,  from the  $11,562,000
held at June 30, 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 decreased $2,373,000, or 13.3%,
to  $15,451,000  at June 30, 2009 from  $17,824,000  at December 31,  2008,  and
increased  $3,283,000,  or  27.0%,  from  $12,168,000  at  June  30,  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 $6,355,000,  or 1.4%, to $451,724,000 at June 30,
2009 from $445,369,000 at December 31, 2008 and increased $38,656,000,  or 9.4%,
from  $413,068,000  at June  30,  2008.  Competition  for  deposit  accounts  is
primarily  based on the interest rates paid,  location  convenience and services
offered.

         During the six months  ended June 30, 2009,  interest-bearing  deposits
averaged $400,606,000 compared to $373,924,000 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 June 30, 2009, brokered deposits
totaled  $57,255,000,  compared  to  $77,411,000  and  $22,384,000  in  brokered
deposits at December 31, 2008 and June 30, 2008, respectively. At June 30, 2009,
$25,978,000 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  $11,632,000 at June 30, 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.



                                       25
<PAGE>

         The average interest rate paid on  interest-bearing  deposits was 2.87%
during the six months ended June 30, 2009  compared to 3.67% 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 June 30, 2009,  interest-bearing
deposits  comprised  89.2% of total  deposits  compared to 88.5% at December 31,
2008 and 88.5% at June 30, 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 June 30, 2009, 78% at December 31, 2008
and 71% at June 30, 2008. Time deposits of $100,000 or more represented 23.9% of
total  deposits at June 30,  2009,  22.0% at December 31, 2008 and 28.7% at June
30, 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  June  30,  2009  borrowings  totaled   $29,578,000  and  were  comprised  of
$14,500,000 in short-term  advances from the FHLB, and $15,078,000 in securities
sold under  repurchase  agreements.  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.  June 30,  2008  borrowings  totaled  $90,047,000  and were
comprised of $71,700,000 in short-term advances from the FHLB and $18,347,000 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
short-term  basis from the Federal Reserve System and to purchase  federal funds


                                       26
<PAGE>

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 June 30, 2009, The Peoples  National Bank
had total borrowing capacity from the FHLB equal to $70,610,000,  and the unused
portion of this line of credit was $56,110,000. Bank of Anderson, N.A. had total
borrowing  capacity from the FHLB equal to $27,340,000,  all of which was unused
at June 30, 2009.  Seneca National Bank had established  secured lines of credit
with the FHLB at June 30, 2009 of $10,960,000,  all of which was unused. At June
30, 2009,  the Banks also had unused  federal funds lines of credit with various
correspondent banks totaling $35,000,000.

         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 to each subsidiary bank and from
dividends passed up to the parent company from the Banks.

         During the first half of 2009, the Company made capital expenditures of
approximately $67,000 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.



                                       27
<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
June 30, 2009, the Banks had issued  commitments to extend credit of $82,939,000
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  $2,707,000 at
June 30, 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.




                                       28
<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 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 June 30, 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>      <C>               <C>
Total Risk-based Capital .................    $   58,356          14.18%           N/A            N/A    $   33,923         8.00%
Tier 1 Risk-based Capital ................        53,177          12.92            N/A            N/A        16,463         4.00
Leverage Ratio ...........................        53,177           9.74            N/A            N/A        21,839         4.00

The Peoples National Bank:
Total Risk-based Capital .................    $   35,238          13.09%    $   26.920          10.00%    $   21,536        8.00%
Tier 1 Risk-based Capital ................        31,845          11.83         16,151           6.00         10,768        4.00
Leverage Ratio ...........................        31,845           9.35         17,029           5.00         13,624        4.00

Bank of Anderson,
N. A.(1):
Total Risk-based Capital .................    $   14,168          15.98%           N/A            N/A     $   10,638       12.00%
Tier 1 Risk-based Capital ................        13,054          14.72            N/A            N/A          8,868       10.00
Leverage Ratio ...........................        13,054           9.84            N/A            N/A         10,613        8.00

Seneca National Bank:
Total Risk-based Capital .................    $    7,306          13.61%    $    5,368          10.00%    $    4,294        8.00%
Tier 1 Risk-based Capital ................         6,634          12.36          3,220           6.00          2,147        4.00
Leverage Ratio ...........................         6,634           9.57          3,466           5.00          2,773        4.00
</TABLE>


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

     Pursuant to the  requirements of the South Carolina  Business  Corporations
Act, the Company made an estimated  fair value  payment of $243,000  relating to
67,636  shares of common stock to  shareholders  who perfected  their  statutory
dissenters' rights in connection with the amendment to the Company's Articles of
Incorporation  to authorize the issuance of preferred  stock.  The  shareholders
have asserted that the fair value is greater than the amount paid by the Company


                                       29
<PAGE>

and, unless an agreement is reached as to the fair value, the additional  amount
due, if any, will be determined by a court.


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  securities  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


                                       30
<PAGE>

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
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.
The Company  adopted the staff  positions  for second  quarter  10-Q.  The staff
positions  had no  material  impact  on  the  financial  statements.  Additional
disclosures have been provided where applicable.

         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


                                       31
<PAGE>

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
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.

         SFAS 165 (FASB ASC 855-10-05, 15, 25, 45, 50, 55), "Subsequent Events,"
("SFAS 165") was issued in May 2009 and  provides  guidance on when a subsequent
event should be recognized in the financial  statements.  Subsequent events that
provide  additional  evidence about  conditions  that existed at the date of the
balance sheet should be recognized at the balance sheet date.  Subsequent events
that provide  evidence about  conditions that arose after the balance sheet date
but before financial  statements are issued, or are available to be issued,  are
not required to be  recognized.  The date through which  subsequent  events have
been evaluated must be disclosed as well as whether it is the date the financial
statements were issued or the date the financial statements were available to be
issued.  For  nonrecognized  subsequent events which should be disclosed to keep
the financial  statements from being misleading,  the nature of the event and an
estimate of its financial effect, or a statement that such an estimate cannot be
made,  should be  disclosed.  The  standard is  effective  for interim or annual
periods  ending after June 15, 2009. See  Management's  evaluation of subsequent
events under NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

         The FASB issued SFAS 166 (not yet  reflected in FASB ASC),  "Accounting
for  Transfers of Financial  Assets - an amendment of FASB  Statement  No. 140,"
("SFAS  166")  in June  2009.  SFAS  166  limits  the  circumstances  in which a
financial asset should be  derecognized  when the transferor has not transferred


                                       32
<PAGE>

the  entire  financial  asset by  taking  into  consideration  the  transferor's
continuing  involvement.  The standard requires that a transferor  recognize and
initially  measure at fair value all assets  obtained  (including a transferor's
beneficial  interest)  and  liabilities  incurred  as a result of a transfer  of
financial  assets  accounted  for  as  a  sale.  The  concept  of  a  qualifying
special-purpose  entity is removed from SFAS 140 along with the  exception  from
applying FIN 46(R).  The standard is  effective  for the first annual  reporting
period that begins after November 15, 2009, for interim periods within the first
annual  reporting   period,   and  for  interim  and  annual  reporting  periods
thereafter.  Earlier application is prohibited.  The Company does not expect the
standard to have any impact on the Company's financial position.

         SFAS  167  (not  yet  reflected  in  FASB  ASC),  "Amendments  to  FASB
Interpretation  No.  46(R),"  ("SFAS  167") was also  issued in June  2009.  The
standard  amends FIN 46(R) to require a company to analyze  whether its interest
in a variable interest entity ("VIE") gives it a controlling financial interest.
A company must assess  whether it has an implicit  financial  responsibility  to
ensure that the VIE  operates as designed  when  determining  whether it has the
power to direct the activities of the VIE that significantly impact its economic
performance.   Ongoing  reassessments  of  whether  a  company  is  the  primary
beneficiary  is also required by the  standard.  SFAS 167 amends the criteria to
qualify as a primary  beneficiary as well as how to determine the existence of a
VIE. The standard also eliminates  certain  exceptions that were available under
FIN 46(R). SFAS 167 is effective as of the beginning of each reporting  entity's
first annual  reporting  period that begins after November 15, 2009, for interim
periods within that first annual  reporting  period,  and for interim and annual
reporting periods  thereafter.  Earlier  application is prohibited.  Comparative
disclosures  will be required for periods after the effective  date. The Company
does not  expect the  standard  to have any  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.


                                       33
<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 June 30, 2009 the
Company was positioned so that net interest income would increase  $560,000 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
$678,000 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.

                                       34
<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.









                                       35
<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.






                                       36
<PAGE>


PART II.  OTHER INFORMATION

Item 2   Unregistered Sales of Equity Securities and Use of Proceeds

         On April 24,  2009,  the  Company  sold  12,660  shares  of Fixed  Rate
Cumulative  Perpetual  Preferred  Stock,  Series T, and 633 shares of Fixed Rate
Cumulative  Perpetual  Preferred Stock, Series W, to the U. S. Treasury pursuant
to its Capital Purchase Program, for an aggregate purchase price of $12,660,000.
Issuance of the securities was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933 because no public offering was involved.

Item 4   Submission of Matters to a Vote of Security Holders

Annual Meeting of Shareholders
On June 10,  2009,  the Company  held its Annual  Meeting of  Shareholders.  The
voting results of the 2009 Annual Meeting of Shareholders follows:

(1) The  following  persons were elected as Directors to serve for the terms set
forth below with 4,411,839 shares voted,  representing 62.4% of the total shares
entitled to vote:

                                                         Broker
                               For          Withheld    Non-Votes   Term (years)
                               ---          --------    ---------   ------------
Robert E. Dye, Jr.            4,294,331      117,508          0             3
W. Rutledge Galloway          4,291,584      120,255          0             3
E. Smyth McKissick            4,287,779      124,060          0             3
Timothy J. Reed.              4,295,159      116,680          0             3
William B. West               4,295,146      116,693          0             3


The following persons continue to serve as directors for the terms indicated.

                                                            Year Term Ends
              Charles E. Dalton                               2011
              George Weston Nalley                            2011
              R. Riggie Ridgeway                              2011
              William R. Rowan, III                           2011
              D. Gray Suggs                                   2011
              L. Andrew Westbrook, III                        2011
              Paul C. Aughtry, III                            2010
              R. David Land                                   2010
              Eugene W. Merritt, Jr.                          2010
              George B. Nalley, Jr.                           2010
              A. J. Thompson, Jr.                             2010


                                       37
<PAGE>

(2)      Shareholders  also  voted on a  nonbinding  proposal  for  approval  of
         executive compensation. The results were as follows:

                                                                        Broker
            For               Against              Abstain             Non-Votes
            ---               -------              -------             ---------
         4,160,869            151,795              99,175                  0




Item 6.       Exhibits

              Exhibits.

                  3        Articles of Incorporation,  as amended  (Incorporated
                           by reference to Form 10-Q for the quarter ended March
                           31, 2009)
                  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)
                  10.2     Extensions of Employment  Agreements  with William B.
                           West and L. Andrew  Westbrook,  III  (Incorporated by
                           reference to Forms 8-K filed July 27,  2009,  July 7,
                           2007 and September 4, 2008)
                  31.1     Rule 13a-14(a) / 15d-14(a) Certifications
                  31.2     Rule 13a-14(a) / 15d-14(a) Certifications
                  32       Section 1350 Certifications




                                       38
<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:  August 12, 2009                     By:    /s/ R. Riggie Ridgeway
                                                 ------------------------
                                                   R. Riggie Ridgeway
                                                   Chief Executive Officer


Dated:  August 12, 2009                     By:   /s/ Robert E. Dye, Jr.
                                                ------------------------
                                                   Robert E. Dye, Jr.
                                                   Senior Vice President and CFO
                                                   (principal financial officer)





                                       39
<PAGE>





                                  Exhibit Index

Exhibit No.                     Description of Exhibit

    3         Articles of Incorporation, as amended
              (Incorporated by reference to Form 10-Q for the quarter ended
               March 31, 2009)
    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)
    10.2      Extensions of Employment Agreements with William B. West and
              L. Andrew Westbrook, III (Incorporated by reference to Forms 8-K
              filed July 27, 2009, July 7, 2007 and September 4, 2008)
    31.1      Rule 13a-14(a) / 15d-14(a) Certifications
    31.2      Rule 13a-14(a) / 15d-14(a) Certifications
    32        Section 1350 Certifications









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