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, 2008                                     000-20616

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

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

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

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

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

                             Yes [X]   No [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated filer, 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 7, 2008 was 7,061,604.


<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,
                                                                                      2008               2007              2007
                                                                                    Unaudited          Unaudited          Audited
                                                                                    ---------          ---------          -------
ASSETS
<S>                                                                                 <C>               <C>               <C>
CASH AND DUE FROM BANKS .......................................................     $  10,203         $  13,666         $   8,618
INTEREST-BEARING DEPOSITS IN OTHER BANKS ......................................           705               260               643
FEDERAL FUNDS SOLD ............................................................         1,260             2,624             1,263
                                                                                    ---------         ---------         ---------
     Total cash and cash equivalents ..........................................        12,168            16,550            10,524
SECURITIES
     Available for sale .......................................................        76,325            76,322            84,796
     Held to maturity (market value of $12,674, $12,831 and $13,113) ..........        12,663            13,141            13,102
     Other investments, at cost ...............................................         5,174             3,713             4,795
LOANS-less allowance for loan losses of $5,558, $3,920 and $4,310 .............       417,689           382,787           414,688
PREMISES AND EQUIPMENT, net of accumulated
     depreciation and amortization ............................................        13,686            11,418            13,757
ACCRUED INTEREST RECEIVABLE ...................................................         2,892             3,076             3,321
CASH SURRENDER VALUE OF LIFE INSURANCE ........................................        11,562            11,138            11,350
OTHER ASSETS ..................................................................         2,936             2,393             2,110
                                                                                    ---------         ---------         ---------
         TOTAL ASSETS .........................................................     $ 555,095         $ 520,538         $ 558,443
                                                                                    =========         =========         =========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
DEPOSITS
     Noninterest-bearing ......................................................     $  47,572         $  54,405         $  53,950
     Interest-bearing .........................................................       365,496           356,132           363,671
                                                                                    ---------         ---------         ---------
         Total deposits .......................................................       413,068           410,537           417,621
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS ...................................        18,347            19,665            19,824
FEDERAL FUNDS PURCHASED .......................................................             -             1,694               429
NOTES PAYABLE TO FEDERAL HOME LOAN BANK .......................................        71,700            38,000            65,100
ACCRUED INTEREST PAYABLE ......................................................         3,523             3,409             4,465
OTHER LIABILITIES .............................................................           124               444               763
                                                                                    ---------         ---------         ---------
         Total Liabilities ....................................................       506,762           473,749           508,202
                                                                                    ---------         ---------         ---------
SHAREHOLDERS' EQUITY
Common  stock -  15,000,000 shares authorized, $1.11 Par
     value per share, 7,059,166 shares, 6,716,761 shares
     and 7,056,337 shares outstanding, respectively ...........................         7,836             7,456             7,833
Additional paid-in capital ....................................................        41,667            38,769            41,624
Retained earnings (loss) ......................................................          (784)            1,830                 -
Accumulated other comprehensive income (loss) .................................          (386)           (1,266)              784
                                                                                    ---------         ---------         ---------
         Total Shareholders' Equity ...........................................        48,333            46,789            50,241
                                                                                    ---------         ---------         ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ....................................     $ 555,095         $ 520,538         $ 558,443
                                                                                    =========         =========         =========
</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,
                                                                                  --------                       --------
                                                                          2008              2007           2008             2007
                                                                          ----              ----           ----             ----
INTEREST INCOME
<S>                                                                    <C>              <C>             <C>              <C>
   Interest and fees on loans ....................................     $     6,952      $     7,704     $    14,456      $    14,959
   Interest on securities
       Taxable ...................................................             807              714           1,599            1,452
       Tax-exempt ................................................             370              352             740              703
   Interest on federal funds .....................................              12               23              32               62
                                                                       -----------      -----------     -----------      -----------
Total interest income ............................................           8,141            8,793          16,827           17,176
                                                                       -----------      -----------     -----------      -----------
INTEREST EXPENSE
   Interest on deposits ..........................................           3,282            3,582           6,868            6,789
   Interest on federal funds purchased and securities
       sold under repurchase agreements ..........................              98              114             205              202
    Interest on notes payable Federal Home Loan Bank .............             455              303           1,127              700
                                                                       -----------      -----------     -----------      -----------
Total interest expense ...........................................           3,835            3,999           8,200            7,691
                                                                       -----------      -----------     -----------      -----------
Net interest income ..............................................           4,306            4,794           8,627            9,485
PROVISION FOR LOAN LOSSES ........................................           2,175              150           2,410              300
                                                                       -----------      -----------     -----------      -----------
Net interest income after provision for loan losses ..............           2,131            4,644           6,217            9,185
                                                                       -----------      -----------     -----------      -----------
NON-INTEREST INCOME
    Service charges on deposit accounts ..........................             457              455             917              871
    Customer service fees ........................................              31               29              79               72
    Mortgage banking .............................................              93              118             224              242
    Brokerage services ...........................................              57               56             117               83
    Bank owned life insurance ....................................             125              117             249              234
    Gain on sale of  available-for-sale securities ...............               -                -               2                -
    Gain (loss) on sale of assets acquired in
       settlement of loans .......................................             (44)               -             (53)               7
    Other noninterest income .....................................             175              142             320              434
                                                                       -----------      -----------     -----------      -----------
              Total noninterest income ...........................             894              917           1,855            1,943
                                                                       -----------      -----------     -----------      -----------
NON-INTEREST EXPENSES
   Salaries and benefits .........................................           2,296            2,353           4,782            4,636
   Occupancy .....................................................             238              208             473              416
   Equipment .....................................................             353              326             682              642
   Marketing and advertising .....................................             107              103             244              216
   Communications ................................................              59               57             130              122
   Printing and supplies .........................................              45               50             102               95
   Bank paid loan costs ..........................................              91               45             226               93
   Director fees .................................................             117              104             228              218
   ATM/Debit card expenses .......................................              94               85             175              163
   Legal and professional fees ...................................             142               96             224              174
   Regulatory assessments ........................................             102               55             186              109
   Other post employment benefits ................................              88               65             175              129
   Other operating expenses ......................................             362              368             724              717
                                                                       -----------      -----------     -----------      -----------
             Total noninterest expenses ..........................           4,094            3,915           8,351            7,730
                                                                       -----------      -----------     -----------      -----------
   Income (loss)  before income taxes ............................          (1,069)           1,646            (279)           3,398
PROVISION FOR INCOME TAXES (BENEFIT) .............................            (506)             449            (329)             929
                                                                       -----------      -----------     -----------      -----------
   Net income (loss) .............................................     $      (563)     $     1,197     $        50      $     2,469
                                                                       ===========      ===========     ===========      ===========
INCOME PER COMMON SHARE *
   BASIC .........................................................     $     (0.08)     $      0.16     $      0.01      $      0.34
                                                                       ===========      ===========     ===========      ===========
   DILUTED .......................................................     $     (0.08)     $      0.16     $      0.01      $      0.34
                                                                       ===========      ===========     ===========      ===========
WEIGHTED AVERAGE COMMON SHARES*
   BASIC .........................................................       7,059,166        7,052,599       7,057,954        7,041,350
                                                                       ===========      ===========     ===========      ===========
   DILUTED .......................................................       7,059,166        7,059,092       7,057,954        7,046,733
                                                                       ===========      ===========     ===========      ===========

CASH DIVIDENDS PAID PER COMMON SHARE .............................     $      0.05      $      0.05     $      0.10      $      0.10
                                                                       ===========      ===========     ===========      ===========
</TABLE>

* 2007 amounts restated for 5% stock dividend declared in December, 2007.

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, 2007 and 2008
                             (Dollars in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                                         Accumulated
                                                           Common stock          Additional                 other          Total
                                                           ------------           paid-in     Retained   comprehensive shareholders'
                                                       Shares         Amount      capital     earnings   income (loss)     equity
                                                       ------         ------      -------     --------   -------------     ------
<S>                                                   <C>          <C>          <C>          <C>           <C>           <C>
Balance, December 31, 2006 .......................    6,666,568    $    7,400   $   38,614   $       32    $       18    $   46,064
                                                                                                                         ----------
Net income .......................................            -             -                     2,469             -         2,469
Other comprehensive income, net of tax:
   Unrealized holding losses on
    securities available for sale,
    net of income tax (benefit) of $(652) ........            -             -            -            -        (1,284)       (1,284)
                                                                                                                         ----------
Comprehensive income .............................                                                                            1,185
Cash dividends ...................................            -             -            -         (671)            -          (671)
Proceeds from stock options exercised ............       50,193            56          115            -             -           171
Stock-based compensation .........................            -             -           40            -             -            40
                                                     ----------    ----------   ----------   ----------    ----------    ----------
Balance, June 30, 2007 ...........................    6,716,761    $    7,456   $   38,769   $    1,830    $   (1,266)   $   46,789
                                                     ==========    ==========   ==========   ==========    ==========    ==========


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 losses on
      securities available for sale,
      net of income tax (benefit) of $(199) ......            -             -            -            -        (1,172)       (1,172)
    Reclassification adjustment for gains
      included in net income, net of income
      taxes of $0 ................................            -             -            -            -             2             2
                                                                                                                         ----------
Comprehensive income (loss) ......................                                                                           (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
                                                     ==========    ==========   ==========   ==========    ==========    ==========
</TABLE>





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



                                       3
<PAGE>


<TABLE>
<CAPTION>
          Peoples Bancorporation, Inc. and Subsidiaries
                  Consolidated Statements of Cash Flows                                                         (Unaudited)
                         (Dollars in thousands)                                                               Six months Ended
                                                                                                                  June 30,
                                                                                                                  --------
                                                                                                         2008                 2007
                                                                                                         ----                 ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                                     <C>                <C>
   Net income ................................................................................          $     50           $  2,469
   Adjustments to reconcile net income to net cash provided
     by operating activities:
   Gain on sale of premises and equipment ....................................................                 -               (177)
   Gain on sale of securities available for sale .............................................                (2)                 -
   (Gain) loss on sale of assets acquired in settlement of loans .............................                53                 (7)
   Provision for loan losses .................................................................             2,410                300
   Benefit from deferred income taxes ........................................................                 -               (823)
   Depreciation and amortization .............................................................               561                531
   Amortization and accretion (net) of premiums and
     discounts on securities .................................................................                 9                 29
   Stock-based compensation ..................................................................                33                 40
   Postretirement cost of insurance for split-dollar life insurance coverage .................              (128)                 -
   Decrease (increase) in accrued interest receivable ........................................               429                (33)
   (Increase) decrease in other assets .......................................................            (2,041)               873
   Increase (decrease) in accrued interest payable ...........................................              (942)               483
   Decrease in other liabilities .............................................................              (639)              (967)
                                                                                                        --------           --------
     Net cash provided by (used in) operating activities .....................................              (207)             2,718
                                                                                                        --------           --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of securities held to maturity ..................................................              (444)                 -
   Purchases of securities available for sale ................................................              (615)            (4,757)
   Sales (purchases) of other investments ....................................................              (379)               570
   Proceeds from principal pay-downs on securities available for sale ........................             4,619              3,583
   Proceeds from the maturities and calls of securities available for sale ...................             2,250              4,600
   Proceeds from the sale of securities available for sale ...................................               455                315
   Proceeds from the maturity of securities held to maturity .................................               865                  -
   Investment in bank owned life insurance ...................................................              (212)              (204)
   Proceeds from the sale of other real estate owned .........................................               817                 32
   Net increase in loans .....................................................................            (4,463)           (29,076)
   Proceeds from the sale of premises and equipment ..........................................                90                510
   Purchase of premises and equipment ........................................................              (580)            (1,165)
                                                                                                        --------           --------
     Net cash provided by (used in) investing activities .....................................             2,403            (25,592)
                                                                                                        --------           --------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase (decrease) in deposits .......................................................            (4,553)            25,492
   Net increase (decrease) in securities sold under repurchase agreements ....................            (1,477)             1,297
   Net increase (decrease) in federal funds purchased ........................................              (429)             1,694
   Net increase (decrease) in notes payable to Federal Home Loan Bank ........................             6,600            (12,000)
   Proceeds from the exercise of stock options ...............................................                13                171
   Cash dividend .............................................................................              (706)              (671)
                                                                                                        --------           --------
     Net cash provided by (used in) financing activities .....................................              (552)            15,983
                                                                                                        --------           --------
     Net increase (decrease) in cash and cash equivalents ....................................             1,644             (6,891)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ...............................................            10,524             23,441
                                                                                                        --------           --------
CASH AND CASH EQUIVALENTS, END OF PERIOD .....................................................          $ 12,168           $ 16,550
                                                                                                        ========           ========

CASH PAID FOR
     Interest ................................................................................          $  9,142           $  7,208
                                                                                                        ========           ========
     Income Taxes ............................................................................          $    101           $    697
                                                                                                        ========           ========
</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 2007 Annual Report on Form
10-K and incorporated herein by reference.

STATEMENT OF CASH FLOWS

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

COMMON STOCK

     The Board of Directors  declared a cash  dividend of $0.05 per common share
to  shareholders  of record March 14, 2008 and June 16, 2008,  payable March 28,
2008 and June 30, 2008, respectively.

EARNINGS PER SHARE

     Statement of Financial  Account  Standards  ("SFAS") No. 128,  Earnings per
Share requires that the Company  present basic and diluted net income per common
share.  The assumed  conversion of stock options creates the difference  between
basic and  diluted  net  income per share.  Income  per share is  calculated  by
dividing net income by the weighted average number of common shares  outstanding
for each  period  presented.  The  weighted  average  number  of  common  shares
outstanding  for basic net income per common share for the six months ended June
30,  2008 and 2007 was  7,057,954  and  7,041,350,  respectively.  The  weighted
average  number of common shares  outstanding  for diluted net income per common
share was  7,057,954  and  7,046,733  for the six months ended June 30, 2008 and
2007. Weighted average shares in 2007 have been restated to reflect the 5% stock
dividend declared in December 2007.

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 50,780 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


                                       5
<PAGE>

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,
2008,  an aggregate of 378,650  shares were reserved for issuance on exercise of
options  under all four of these  plans.  During  the first six  months of 2008,
options to purchase  14,000  shares were  granted  with a weighted  average fair
value of $7.71  per  share.  The  following  is a summary  of the  status of the
Company's plans as of June 30, 2008 and changes during the six months ended June
30, 2008.

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

Outstanding, December 31, 2007 ..................     168,749         $  10.29
Granted .........................................      14,000         $   7.71
Exercised .......................................      (3,642)        $   5.35
Forfeited .......................................      (5,448)        $  11.32
                                                      -------
Outstanding, June 30, 2008 ......................     173,659         $  10.16
                                                      =======

Options Exercisable, June 30, 2008 ..............     138,162
                                                      =======


 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  positions  expected to be taken in
its tax returns and  concluded  it has no  liability  related to  uncertain  tax
positions in accordance with FIN 48.

                                       6
<PAGE>

         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, 2008.


POSTRETIRMENT SPLIT-DOLLAR LIFE INSURANCE

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

            In March 2007,  the EITF reached a final  conclusion on Issue 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 is 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.


MANAGEMENT'S OPINION

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


                                       7
<PAGE>

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    misperceptions by depositors about the safety of their deposits;
          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


                                       8
<PAGE>

               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 2007 Annual Report on Form 10-K.

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

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


                                       9
<PAGE>

with respect to its loan portfolio. The Company's assessments may be impacted in
future  periods by  changes in  economic  conditions,  the impact of  regulatory
examinations,  and the discovery of information with respect to borrowers, which
is not  known to  management  at the time of the  issuance  of the  consolidated
financial statements. Refer to the discussion under 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   2007   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.




                                       10
<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  2007 Annual Report on Form 10-K.  Results of operations  for the
three-month  and  six-month  periods  ended  June 30,  2008 are not  necessarily
indicative of the results to be attained for any other period.

Overview

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

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





                                       11
<PAGE>


                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EARNINGS PERFORMANCE

Overview

         The consolidated  Company's net income (loss) for the second quarter of
2008 was $(563,000) or $(0.08) per diluted share compared to $1,197,000 or $0.16
per diluted  share for the second  quarter of 2007, a decrease of  $1,760,000 or
147.0%.  Net income for the six months  ended June 30, 2008 was $50,000 or $0.01
per diluted share  compared to $2,469,000 or $0.34 per diluted share for the six
months ended June 30, 2007, a decrease of  $2,419,000 or 98.0% Return on average
equity  for the six months and three  months  ended June 30,  2008 was 0.20% and
(4.57)%  respectively,  compared to 10.54% and 10.07% respectively,  for the six
months and three months ended June 30,  2007.  Return on average  assets for the
six and three  months  ended June 30, 2008 was 0.02% and  (0.40)%  respectively,
compared to 0.99% and 0.95%  respectively,  for the six months and three  months
ended June 30, 2007. The decreases in the Company's net income, diluted earnings
per share,  return on average  equity and return on average  assets in the first
half of 2008 are largely  attributable to increased  provisions to the allowance
for loan losses as well as lower net interest margins.

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  $488,000,  or 10.2%,  to $4,306,000 in the quarter ended
June 30, 2008  compared to $4,794,000  for the quarter ended June 30, 2007.  For
the six months ended June 30, 2008 net interest income before provision for loan
losses decreased  $858,000 or 9.0% to $8,627,000  compared to $9,485,000 for the
six months ended June 30, 2007. The Company's net interest  margin for the three
months and six  months  ended  June 30,  2008 was 3.30% and 3.31%  respectively,
compared to 4.07% and 4.09% for the three  months and six months  ended June 30,
2007.  The decrease in the  Company's  net interest  income and its net interest
margin is largely  due to a decrease in market  interest  rates,  which  lowered
yields on loans more than funding  costs of interest  bearing  liabilities.  The
decrease  was also  attributable  to lower fees on loans and an  increase in the
Company's non-performing assets.

         The Company's  total interest income for the second quarter of 2008 was
$8,141,000  compared to $8,793,000 for the second quarter of 2007, a decrease of
$652,000,  or 7.4%. Total interest income for the six months ended June 30, 2008
was $16,827,000  compared to $17,176,000 for the six months ended June 30, 2007,
a  decrease  of  $349,000  or 2.0%.  Interest  and fees on  loans,  the  largest
component of total interest income,  decreased $752,000 in the second quarter of
2008 to  $6,952,000  compared to  $7,704,000  for the second  quarter of 2007, a
decrease of 9.8%.  Interest  and fees on loans  decreased  $503,000  for the six


                                       12
<PAGE>

months ended June 30, 2008 to $14,456,000  compared to  $14,959,000  for the six
months ended June 30, 2007,  a decrease of 3.4%.  The  decreases in interest and
fees on loans for the three-month and six-month periods were due to lower market
interest rates,  partially  offset by higher loan balances.  Interest on taxable
securities,  the second largest  component of total interest  income,  increased
$93,000 in the second  quarter of 2008 to $807,000  compared to $714,000 for the
second  quarter of 2007,  an increase of 13.0%.  Interest on taxable  securities
increased $147,000 for the six months ended June 30, 2008 to $1,599,000 compared
to $1,452,000 for the six months ended June 30, 2007, an increase of 10.1%.  The
increase in  interest on taxable  securities  was due to higher  average  yields
earned on these securities.

         The Company's total interest expense for the second quarter of 2008 was
$3,835,000  compared to $3,999,000 for the second quarter of 2007, a decrease of
$164,000, or 4.1%. Total interest expense for the six months ended June 30, 2008
was  $8,200,000,  compared to $7,691,000 for the six months ended June 30, 2007,
an  increase  of $509,000 or 6.6%.  Interest  expense on  deposits,  the largest
component of total interest expense, decreased by $300,000 in the second quarter
of 2008 to $3,282,000  compared to $3,582,000  for the second quarter of 2007, a
decrease  of 8.4%.  Interest on  deposits  increased  $79,000 for the six months
ended June 30,  2008 to  $6,868,000  compared to  $6,789,000  for the six months
ended June 30, 2007,  an increase of 1.2%.  The decrease in interest  expense on
deposits for the  three-month  period  ending June 30, 2008 compared to the same
period in 2007 is largely  attributable  to lower  interest  rates paid on these
accounts and lower balances.  Interest on notes payable to the Federal Home Loan
Bank of  Atlanta  ("FHLB"),  the  second  largest  component  of total  interest
expense, increased $152,000 or 50.2% to $455,000 for the three months ended June
30, 2008 compared to $303,000 for the three months ended June 30, 2007. Interest
on notes payable to the FHLB  increased  $427,000 or 61.0% to $1,127,000 for the
first  half of 2008,  compared  to  $700,000  for the  first  half of 2007.  The
increases are largely  attributable to higher average balances in these accounts
during the first half of 2008 when compared to the same period in 2007. Interest
on federal funds purchased and securities sold under repurchase agreements,  the
third largest component of total interest expense, decreased $16,000 or 14.0% to
$98,000  in the second  quarter  of 2008  compared  to  $114,000  for the second
quarter of 2007. The decrease in interest expense on federal funds purchased and
securities sold under  repurchase  agreements for the  three-month  period ended
June 30, 2008  compared to the same  period in 2007 is largely  attributable  to
lower interest rates paid on these accounts. Interest on federal funds purchased
and securities  sold under  repurchase  agreements  increased  $3,000 or 1.5% to
$205,000 in the second half of 2008  compared to $202,000 for the second half of
2007. The increase in interest expense on federal funds purchased and securities
sold under  repurchase  agreements  for the second half of 2008  compared to the
same  period  of 2007 is  attributable  to  higher  average  balances  in  these
accounts, offset by lower interest rates paid.


                                       13
<PAGE>

Provision for Loan Losses

         The  provision for loan losses  charged to operations  during the three
months  ended June 30, 2008 was  $2,175,000  compared to $150,000  for the three
months ended June 30, 2007, an increase of $2,025,000 or 1,350.0%. The provision
for loan losses  charged to  operations  for the six months  ended June 30, 2008
increased  $2,110,000 or 703.3% to $2,410,000,  compared to $300,000 for the six
months  ended June 30, 2007.  The changes in the  Company's  provision  for loan
losses for the second  quarter and first half of 2008 are based on  management's
evaluation  of the  Company's  overall  credit  quality and its estimate of loan
losses inherent in the loan portfolio. See "BALANCE SHEET REVIEW - Allowance for
Loan Losses."

Non-interest Income

         Non-interest  income  decreased  $23,000  or 2.5% to  $894,000  for the
second  quarter of 2008  compared  to $917,000  for the second  quarter of 2007.
Non-interest  income decreased  $88,000 or 4.5% to $1,855,000 for the first half
of 2008  compared  to  $1,943,000  for the first half of 2007.  Service  fees on
deposit accounts, the largest component of non-interest income, increased $2,000
or 0.4% to $457,000 for the second  quarter of 2008 compared to $455,000 for the
second quarter of 2007.  Service fees on deposit accounts  increased  $46,000 or
5.3% to $917,000  for the first six months of 2008  compared to $871,000 for the
first six months of 2007.

         Bank owned life insurance income increased $8,000 or 6.8% in the second
quarter of 2008 to $125,000 compared to $117,000 for the second quarter of 2007,
and increased  $15,000 or 6.4% to $249,000 in the first half of 2008 compared to
$234,000 in the first half of 2007.  The  increase in bank owned life  insurance
income is  attributable  to higher growth on the cash surrender  values of these
policies.

         Mortgage  banking income  decreased  $25,000 or 21.2% to $93,000 in the
second  quarter for 2008 compared to $118,000 in the second quarter of 2007, and
decreased  $18,000 or 7.4% in the first  half of 2008 to  $224,000  compared  to
$242,000 for the first half of 2007.  These  decreases in the levels of mortgage
banking  income are  largely  due to the decline in  residential  mortgage  loan
originations at the Banks.

         Brokerage  service income  increased from $56,000 in the second quarter
of 2007 to $57,000 in the second quarter of 2008, an increase of $1,000 or 1.8%,
and increased $34,000 or 41.0% to $117,000 in the first half of 2008 compared to
$83,000 in the first half of 2007.  This increase was largely due to a temporary
disruption  of service in the first  quarter of 2007 that resulted from a change
in broker-dealer affiliation.

         There was a loss of $44,000  in the second  quarter of 2008 on the sale
of assets  acquired  in  settlement  of loans and a loss of $53,000 in the first
half of 2008.  This  compares  to no gain or loss on the sale of  assets  in the
second quarter of 2007, and a gain of $7,000 in the first half of 2007.



                                       14
<PAGE>

         Other  non-interest  income  increased  $35,000 or 20.5% from  $171,000
during the second  quarter of 2007 to $206,000  for the second  quarter of 2008,
due  primarily  to an  increase in  interchange  income of $32,000 or 31.1% from
$103,000  during the second quarter of 2007 to $135,000 in the second quarter of
2007. Other non-interest income decreased $105,000 or 20.8% in the first half of
2008 to $401,000  compared to $506,000 in the first half of 2007.  This decrease
is largely  attributable to a $169,000 gain on the sale of a portion of a parcel
of land that was realized during the first quarter of 2007.

         The Company recorded a $2,000 gain on the sale of securities  available
for sale in the first half of 2008.  There were no gains or losses  realized  on
the sale of securities  available for sale during the second  quarter of 2008 or
the first half of 2007.

Non-interest Expense

         Total non-interest  expense increased $179,000,  or 4.6%, to $4,094,000
for the second  quarter of 2008 from  $3,915,000 for the second quarter of 2007.
Total non-interest  expense increased  $621,000,  or 8.0%, to $8,351,000 for the
first  half of 2008 from  $7,730,000  for the first half of 2007.  Salaries  and
benefits,  the largest component of non-interest expense,  decreased $57,000, or
2.4%,  to  $2,296,000  for the second  quarter of 2008 from  $2,353,000  for the
second quarter of 2007.  Salaries and benefits increased  $146,000,  or 3.1%, to
$4,782,000  for the first  half of 2008 from  $4,636,000  for the first  half of
2007.

         Occupancy and furniture and equipment expenses  increased  $57,000,  or
10.7%,  to  $591,000 in the second  quarter of 2008  compared to $534,000 in the
second quarter of 2007. Occupancy and furniture and equipment expenses increased
$97,000, or 9.2%, to $1,155,000 in the first half of 2008 compared to $1,058,000
in the first half of 2007. The increase is largely due to the opening of two new
full-service  banking  facilities  in the fourth  quarter of 2007 by The Peoples
National Bank.

         Marketing  and  advertising  expense  increased  $4,000  or  3.9%  from
$103,000  in the second  quarter of 2007 to  $107,000  during the same period in
2008,  and  increased  $28,000 or 13.0% to  $244,000  for the first half of 2008
compared to $216,000 for the first half of 2007,  primarily  due to  advertising
for the two new offices of The Peoples  National Bank and the  introduction of a
new checking account product.

         Bank paid loan  costs  increased  $46,000  or 102.2% to  $91,000 in the
second quarter of 2008 compared to $45,000 in the second quarter 2007. Bank paid
loan costs  increased  $133,000 or 143.0% to $226,000 for the first half of 2008
compared to $93,000  for the first half of 2007.  Of this  increase,  $44,000 is
associated with the  repossession of defaulted real estate loans, and $62,000 of
this  increase  is  attributable  to the  write-down  of an  asset  acquired  in
settlement of a loan to its current market value.

         Regulatory  assessments increased $47,000 or 85.5% from $55,000 for the
second  quarter of 2007 to $102,000 for the second  quarter of 2008.  Regulatory
assessments  increased  $77,000 or 70.6% to $186,000  for the first half of 2008


                                       15
<PAGE>

compared to $109,000 for the first half of 2007. 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.  The
FDIC  changed its  assessment  calculation  process  effective  January 1, 2007.
Eligible  insured  depository  institutions  were granted a one-time  assessment
credit. Of the Company's three Banks, only The Peoples National Bank was granted
a one-time credit of  approximately  $112,000.  This credit was exhausted during
the first quarter of 2008.

         Legal and professional  fees increased $46,000 or 47.9% to $142,000 for
the second  quarter of 2008 compared to $96,000 for the second  quarter of 2007.
Legal and  professional  fees  increased  $50,000 or 28.7% from $174,000 for the
first half of 2007 to $224,000 for the first half of 2008. The increase in legal
and  professional  fees is  primarily  due to legal fees paid by the three banks
associated with collection efforts on certain loans in default.

         Other post-employment  benefits expense increased $23,000 or 35.4% from
$65,000 in the second quarter of 2007 to $88,000 during the same period in 2008,
and  increased  $46,000 or 35.7% to $175,000 for the first half of 2008 compared
to $129,000 for the first half of 2007, primarily due to an increase in the cost
of the Company CEO's retirement package.

         All other  operating  expenses were  $677,000 in the second  quarter of
2008 compared to $664,000 for the second quarter of 2007, an increase of $13,000
or 2.0%. All other operating  expenses were $1,359,000 in the first half of 2008
compared  to  $1,315,000  for the first half of 2007,  an increase of $44,000 or
3.3%.

Income Taxes

         The provision for income taxes (benefit)  decreased  $955,000 or 212.7%
to $(506,000) for the second quarter of 2008 compared to $449,000 for the second
quarter of 2007. The provision for income taxes  decreased  $1,258,000 or 135.4%
to $(329,000) for the first half of 2008 compared to $929,000 for the first half
of 2007. The decrease in the provision for income taxes is  attributable  to the
decrease in net  pre-tax  income and the  increase  in the amount of  tax-exempt
income. The provision for income taxes is an estimate,  and management considers
several factors in making this estimate including current pre-tax income levels,
the amount of tax-exempt  income,  and a comparison of prior period estimates to
income taxes ultimately determined.



                                       16
<PAGE>


BALANCE SHEET REVIEW

Loans

         Outstanding  loans represent the largest component of earning assets at
81.5% of total earning assets. As of June 30, 2008, the Company held total gross
loans  outstanding  of  $423,247,000  an increase of $4,249,000,  or 1.0%,  from
$418,998,000  in total  gross  loans  outstanding  at  December  31, 2007 and an
increase  of  $36,540,000,  or 9.4%,  from  $386,707,000  in total  gross  loans
outstanding  at June 30, 2007.  The loan growth is the result of increased  loan
demand at the Company's three bank subsidiaries.

<TABLE>
<CAPTION>
Loan Portfolio Composition                                                                 June 30,                  December 31,
                                                                                           --------                  ------------
(Dollars in Thousands)                                                             2008               2007               2007
                                                                                   ----               ----               ----
                                                                                        (Unaudited)                   (Audited)

<S>                                                                             <C>                <C>                <C>
Commercial and Industrial - not secured by real estate ....................     $ 49,840           $ 42,252           $ 47,885
Commercial and Industrial - secured by real estate ........................      115,769            104,646            107,531
Residential real estate - mortgage ........................................      118,120            100,563            108,161
Residential real estate - construction ....................................      126,509            125,193            138,926
Consumer loans ............................................................       13,009             14,053             16,495
                                                                                --------           --------           --------
     Gross Loans ..........................................................     $423,247           $386,707           $418,998
                                                                                ========           ========           ========
</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 six months and three  months
ended  June 30,  2008 was 6.84% and 6.55%  respectively,  compared  to 8.17% and
8.20% for the six  months and three  months  ended June 30,  2007.  The  Federal
Reserve  decreased  the federal funds target rate by 100 basis points during the
fourth  quarter of 2007 and  another 225 basis  points  during the first half of
2008. A large portion of the Company's  adjustable-rate  loans, which constitute
approximately 42.9% 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 demands for funds fall 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
loans are spread  throughout a variety of industries,  with no industry or group


                                       17
<PAGE>

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, 2008,  approximately  $10,191,000,  or 20.5%, 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, 2008 was $5,558,000, or 1.31%
of loans outstanding,  compared to $4,310,000, or 1.03% of loans outstanding, at
December 31, 2007, and to $3,920,000, or 1.01% of loans outstanding, at June 30,
2007.  The  allowance  for loan  losses is based  upon  management's  continuing
evaluation of the  collectibility of past-due loans based on the historical loan
loss  experience  of the Company,  current  economic  conditions  affecting  the
ability  of all  borrowers  to  repay,  the  volume  of loans,  the  quality  of
collateral  securing   non-performing  and  problem  loans,  and  other  factors
deserving recognition.

         At June 30, 2008 the  Company had  $7,352,000  in  non-accruing  loans,
$408,000  in  restructured  loans,  no loans more than  ninety days past due and
still  accruing  interest,  and  $1,216,000  in Other Real  Estate  Owned.  This
compares to $7,505,000 in non-accruing loans, $412,000 in restructured loans, no
loans more than ninety days past due and still accruing interest, and $1,023,000
in other real estate owned at December  31,  2007.  At June 30, 2007 the Company
had $919,000 in non-accruing  loans,  $419,000 in  restructured  loans, no loans
more than  ninety days past due and still  accruing  interest,  and  $359,000 in
Other Real Estate Owned.  The substantial  increase in  non-accruing  loans from
June 30,  2007 to June 30,  2008 is  largely  the  result of a single  borrowing
relationship  that  accounts for  $3,295,000 of the total  increase.  The credit
relationship is secured by real estate  consisting  largely of completed  houses
and  residential  subdivision  lots,  all of which are in the Company's  primary
market area. Management has charged off $752,000 associated with this credit and
believes  that any  future  write-downs  associated  with  this  credit  will be
minimal.  The  balance of the  Company's  non-performing  loans at June 30, 2008
consisted of $3,736,000  in mortgage  loans,  $312,000 in  commercial  loans and
$9,000 in consumer  loans.  Non-performing  assets as a percentage  of loans and
other real estate owned were 2.11%,  2.13%, and 0.44% at June 30, 2008, December
31, 2007 and June 30, 2007, respectively.



                                       18
<PAGE>

         Net  charge-offs  during  the six  months  ended  June  30,  2008  were
$1,163,000  compared to net  charge-offs of $660,000 for the year ended December
31, 2007 and net charge-offs of $450,000 for the six months ended June 30, 2007.
The allowance for loan losses as a percentage of  non-performing  loans was 72%,
54%,  and  293% as of June 30,  2008,  December  31,  2007,  and June 30,  2007,
respectively.

         Management  continues to closely  monitor the levels of  non-performing
and  potential  problem  loans and will work to address the  weaknesses in these
credits to enhance  the  amount of  ultimate  collection  or  recovery  of these
assets.  With  increases in the overall  level of  non-performing  and potential
problem loans, management increases the provision and allowance for loan losses,
which in turn decreases net income.

         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  $7,476,000  at June 30, 2008 and  $2,024,000  at December 31,
2007. There were no impaired loans at June 30, 2007.

Securities

         The Company  invests  primarily in  obligations of the United States or
obligations  guaranteed as to principal and interest by the United States, other
taxable securities, and in certain obligations of states and municipalities. The
Company does not hold any trading  securities.  The Company uses its  investment
portfolio  to provide  liquidity  for  unexpected  deposit  liquidation  or loan
generation,  to meet the Company's  interest-rate  sensitivity  goals, to secure
public  deposits,  and to generate income.  At June 30, 2008 securities  totaled
$94,162,000,   which  represents  18.1%  of  total  earning  assets.  Securities
decreased  $8,531,000,  or 8.3%, from  $102,693,000  invested as of December 31,
2007, and increased $986,000,  or 1.1%, from $93,176,000 invested as of June 30,
2007. 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,  2008  the  Company's  total  investments  classified  as
available for sale had an amortized  cost of  $76,910,000  and a market value of
$76,325,000  for an unrealized  loss of $585,000.  This compares to an amortized
cost of $83,608,000  and a market value of $84,796,000 for an unrealized gain of
$1,188,000  on the  Company's  investments  classified  as available for sale at
December 31, 2007. At June 30, 2007 the Company's total  investments  classified
as available for sale had an amortized cost of $78,241,000 and a market value of
$76,322,000  for an  unrealized  loss of  $1,919,000.  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


                                       19
<PAGE>

until a market price recovery or maturity,  and therefore  these  securities are
not considered impaired on an other-than-temporary basis.

Cash Surrender Value of Life Insurance

         The Company's cash surrender value of life insurance was $11,562,000 at
June 30, 2008, an increase of $212,000,  or 1.9%, from the  $11,350,000  held at
December 31, 2007 and an increase of  $424,000,  or 3.8%,  from the  $11,138,000
held at June 30, 2007.  The increase in cash  surrender  value life insurance is
due to normal  appreciation  in the cash  surrender  value  associated  with the
ownership of these assets.  Earnings  from the  ownership of these  policies are
informally  used  to  partially  offset  the  cost of  certain  employee-related
benefits.

Cash and Cash Equivalents

         The Company's cash and cash equivalents increased $1,644,000, or 15.6%,
to  $12,168,000  at June 30, 2008 from  $10,524,000  at December 31,  2007,  and
decreased  $4,382,000,  or  26.5%,  from  $16,550,000  at  June  30,  2007.  The
substantial  swings  in the  level  of  cash  and  cash  equivalents  are due to
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 decreased $4,553,000,  or 1.1%, to $413,068,000 at June
30, 2008 from  $417,621,000 at December 31, 2007 and grew  $2,531,000,  or 0.6%,
from  $410,537,000  at June  30,  2007.  Competition  for  deposit  accounts  is
primarily  based on the interest rates paid,  location  convenience and services
offered.

         During the six months  ended June 30, 2008,  interest-bearing  deposits
averaged $373,924,000 compared to $346,613,000 for the same period of 2007. 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, 2008, brokered deposits
totaled  $22,384,000,  compared  to  $28,087,000  and  $22,240,000  in  brokered
deposits  at  December  31, 2007 and June 30,  2007,  respectively.  The Company
considers these funds to be an attractive  alternative  funding source available
to use while continuing its efforts to maintain and grow its local deposit base.

         The average interest rate paid on  interest-bearing  deposits was 3.67%
during the six months ended June 30, 2008  compared to 3.95% for the same period
of 2007 and 4.02% for the twelve  months ended  December  31,  2007.  In pricing
deposits, the Company considers its liquidity needs, the direction and levels of
interest rates, and local market conditions. At June 30, 2008,  interest-bearing
deposits  comprised  88.5% of total  deposits  compared to 87.1% at December 31,
2007 and 86.7% at June 30, 2007.



                                       20
<PAGE>

         The  Company's  core deposit  base  consists  largely of consumer  time
deposits  less than  $100,000,  savings  accounts,  NOW  accounts,  money market
accounts,  and  checking  accounts.  Although  such core  deposits  are becoming
increasingly  interest-sensitive  for both the  Company  and the  industry  as a
whole,  these core deposits  still  continue to provide the Company with a large
source of  relatively  stable  funds.  Core  deposits as a  percentage  of total
deposits  averaged  approximately 71% at June 30, 2008, 77% at December 31, 2007
and 78% at June 30, 2007. Time deposits of $100,000 or more represented 28.7% of
total  deposits at June 30,  2008,  23.7% at December 31, 2007 and 22.9% at June
30, 2007. The Company's larger denomination time deposits are generally garnered
from  customers  within the local market areas of its banks,  and  therefore may
have a greater degree of stability than is typically associated with this source
of funds at other financial institutions.

Borrowings

         The Company's  borrowings  are  comprised of federal  funds  purchased,
securities sold under repurchase  agreements,  and both short-term and long-term
advances from the Federal Home Loan Bank ("FHLB").  At June 30, 2008  short-term
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.  At December 31, 2007 short-term  borrowings totaled $85,353,000 and
were comprised of $429,000 in federal funds purchased, $65,100,000 in short-term
advances  from the FHLB and  $19,824,000  in  securities  sold under  repurchase
agreements.  June 30, 2007 short-term  borrowings  totaled  $59,359,000 and were
comprised of $1,694,000 in federal funds  purchased,  $38,000,000  in short-term
advances  from the FHLB and  $19,665,000  in  securities  sold under  repurchase
agreements.  Short-term  borrowings  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. In addition, the Company (through the Banks) has the ability to borrow
funds on a  short-term  basis from the  Federal  Reserve  System and to purchase
federal funds from other financial  institutions.  The Banks are also members of
the Federal Home Loan Bank System and have the ability to borrow both short-term
and long-term funds on a secured basis.  At June 30, 2008, The Peoples  National
Bank had total borrowing  capacity from the FHLB equal to  $70,840,000,  and the
unused portion of this line of credit was  $21,840,000.  Bank of Anderson,  N.A.
had total borrowing capacity from the FHLB equal to $29,850,000,  and the unused
portion of this line of credit was $8,150,000 at June 30, 2008.  Seneca National
Bank had  established  secured lines of credit with the FHLB at June 30, 2007 of
$7,320,000,  and the unused  portion of this line of credit was  $6,320,000.  At


                                       21
<PAGE>

June 30,  2008,  the Banks also had unused  federal  funds  lines of credit with
various correspondent banks totaling $40,000,000.

         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 each  subsidiary bank and from
dividends passed up to the parent company from The Peoples National Bank.

         During the first half of 2008, the Company made capital expenditures of
approximately $580,000.  These expenditures were related to the construction and
furnishing of a full-service  retail  banking  office in Greenville,  SC for The
Peoples  National  Bank,  the purchase of three  vehicles,  the purchase of some
electronic  data  processing  equipment,  and other lesser  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.




                                       22
<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, 2008, the Banks had issued  commitments to extend credit of $95,266,000
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  $3,292,000 at
June 30, 2008. 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.




                                       23
<PAGE>


CAPITAL ADEQUACY AND RESOURCES

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

         The Company and the Banks are  required  to  maintain  certain  capital
ratios by federal banking regulators. The following table sets forth the capital
ratios for the Company and the Banks as of June 30, 2008:


                                 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 ...............         $54,277          12.19%          N/A           N/A       $35,621          8.00%
Tier 1 Risk-based Capital ..............          48,719          10.94           N/A           N/A        17,813          4.00
Leverage Ratio .........................          48,719           8.68           N/A           N/A        22,451          4.00

The Peoples National Bank:
Total Risk-based Capital ...............         $32,631          11.08%      $29,450         10.00%      $23,560          8.00%
Tier 1 Risk-based Capital ..............          29,102           9.88        17,673          6.00        11,782          4.00
Leverage Ratio .........................          29,102           8.28        17,574          5.00        14,059          4.00

Bank of Anderson, N. A.:
Total Risk-based Capital ...............         $13,489          13.36%      $10,097         10.00%      $ 8,077          8.00%
Tier 1 Risk-based Capital ..............          12,224          12.11         6,056          6.00         4,038          4.00
Leverage Ratio .........................          12,224           8.41         7,268          5.00         5,814          4.00

Seneca National Bank:
Total Risk-based Capital ...............         $ 5,990          11.92%      $ 5,025         10.00%      $ 4,020          8.00%
Tier 1 Risk-based Capital ..............           5,371          10.69         3,015          6.00         2,010          4.00
Leverage Ratio .........................           5,371           7.67         3,501          5.00         2,801          4.00
</TABLE>



                                       24
<PAGE>

RECENTLY ISSUED ACCOUNTING STANDARDS

         The following is a summary of recent authoritative  pronouncements that
affect  accounting,  reporting,  and disclosure of financial  information by the
Company:

         In  December  2007,   the  FASB  issued  SFAS  No.   141(R),   Business
Combinations,  ("SFAS 141(R)") which replaces SFAS 141. SFAS 141(R)  establishes
principles  and  requirements  for how an  acquirer  in a  business  combination
recognizes  and measures in its financial  statements  the  identifiable  assets
acquired, the liabilities assumed, and any controlling interest;  recognizes and
measures goodwill acquired in the business  combination or a gain from a bargain
purchase;  and  determines  what  information to disclose to enable users of the
financial  statements  to  evaluate  the  nature  and  financial  effects of the
business  combination.  SFAS 141(R) is effective for acquisitions by the Company
taking  place on or  after  January  1,  2009.  Early  adoption  is  prohibited.
Accordingly,  a calendar  year-end  company is required  to record and  disclose
business  combinations  following existing  accounting guidance until January 1,
2009.  The  Company  will  assess the impact of SFAS 141(R) if and when a future
acquisition occurs.

         In  December  2007,  the  FASB  issued  SFAS  No.  160,  Noncontrolling
Interests  in  Consolidated  Financial  Statements  - an amendment of ARB No. 51
("SFAS 160").  SFAS 160 establishes  new accounting and reporting  standards for
the  noncontrolling  interest in a subsidiary and for the  deconsolidation  of a
subsidiary.  Before this  statement,  limited  guidance  existed  for  reporting
noncontrolling interests (minority interest). As a result, diversity in practice
exists. In some cases minority interest is reported as a liability and in others
it is  reported  in  the  mezzanine  section  between  liabilities  and  equity.
Specifically,  SFAS 160 requires the  recognition of a  noncontrolling  interest
(minority  interest)  as equity in the  consolidated  financial  statements  and
separate from the parent's equity. The amount of net income  attributable to the
noncontrolling  interest will be included in consolidated net income on the face
of the income statement. SFAS 160 clarifies that changes in a parent's ownership
interest  in a  subsidiary  that do not  result in  deconsolidation  are  equity
transactions  if the parent  retains  its  controlling  financial  interest.  In
addition,  this statement  requires that a parent  recognize gain or loss in net
income when a subsidiary is  deconsolidated.  Such gain or loss will be measured
using  the  fair  value  of  the   noncontrolling   equity   investment  on  the
deconsolidation  date. SFAS 160 also includes expanded  disclosure  requirements
regarding the interests of the parent and its noncontrolling interests. SFAS 160
is effective for the Company on January 1, 2009. Earlier adoption is prohibited.
The Company is currently evaluating the impact, if any, the adoption of SFAS 160
will have on its financial position, results of operations and cash flows.

         In  March  2008,  the  FASB  issued  SFAS No.  161,  Disclosures  about
Derivative  Instruments and Hedging  Activities  ("SFAS 161"). SFAS 161 requires
enhanced  disclosures  about an  entity's  derivative  and  hedging  activities,
thereby  improving the  transparency of financial  reporting.  It is intended to
enhance  the  current  disclosure  framework  in  SFAS  133  by  requiring  that
objectives for using derivative  instruments be disclosed in terms of underlying




                                       25
<PAGE>

risk and accounting  designation.  This disclosure better conveys the purpose of
derivative  use in terms of the risks  that the entity is  intending  to manage.
SFAS 161 is  effective  for the Company on January 1, 2009.  This  pronouncement
does  not  impact   accounting   measurements  but  will  result  in  additional
disclosures  if the  Company is  involved  in  material  derivative  and hedging
activities at that time.

         In  February  2008,  the FASB  issued FASB Staff  Position  No.  140-3,
Accounting  for  Transfers  of  Financial   Assets  and   Repurchase   Financing
Transactions  ("FSP  140-3").  This FSP provides  guidance on  accounting  for a
transfer of a financial asset and the transferor's  repurchase  financing of the
asset.  This FSP presumes  that an initial  transfer of a financial  asset and a
repurchase  financing  are  considered  part  of the  same  arrangement  (linked
transaction)  under SFAS 140. However,  if certain criteria are met, the initial
transfer and repurchase  financing are not evaluated as a linked transaction and
are  evaluated  separately  under  SFAS 140.  FSP 140-3  will be  effective  for
financial  statements issued for fiscal years beginning after November 15, 2008,
and interim  periods  within those fiscal years and earlier  application  is not
permitted.  Accordingly,  this FSP is  effective  for the  Company on January 1,
2009. The Company is currently  evaluating  the impact,  if any, the adoption of
FSP 140-3 will have on its financial  position,  results of operations  and cash
flows.

         In  April  2008,  the  FASB  issued  FASB  Staff  Position  No.  142-3,
Determination  of the Useful Life of Intangible  Assets ("FSP 142-3").  This FSP
amends the factors that should be considered in developing  renewal or extension
assumptions  used to determine the useful life of a recognized  intangible asset
under SFAS 142, Goodwill and Other Intangible  Assets. The intent of this FSP is
to improve the  consistency  between the useful life of a recognized  intangible
asset under SFAS 142 and the period of  expected  cash flows used to measure the
fair value of the asset under SFAS 141(R), Business Combinations, and other U.S.
generally accepted  accounting  principles.  This FSP is effective for financial
statements  issued for fiscal years  beginning  after  December  15,  2008,  and
interim  periods  within those fiscal  years and early  adoption is  prohibited.
Accordingly,  this FSP is  effective  for the  Company on  January 1, 2009.  The
Company does not believe the  adoption of FSP 142-3 will have a material  impact
on its financial position, results of operations or cash flows.

         In May, 2008, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standard  ("SFAS") No. 162, The Hierarchy of
Generally  Accepted  Accounting  Principles,  ("SFAS  No.  162").  SFAS No.  162
identifies the sources of accounting  principles and the framework for selecting
the   principles   used  in  the   preparation   of  financial   statements   of
nongovernmental  entities  that  are  presented  in  conformity  with  generally
accepted accounting principles (GAAP) in the United States (the GAAP hierarchy).
SFAS No. 162 will be  effective  60 days  following  the SEC's  approval  of the
Public Company  Accounting  Oversight Board's amendments to AU Section 411, "The
Meaning of Present  Fairly in  Conformity  With  Generally  Accepted  Accounting
Principles."  The FASB has  stated  that it does not  expect  SFAS No.  162 will
result in a change in current  practice.  The  application  of SFAS No. 162 will
have no effect on the  Company's  financial  position,  results of operations or
cash flows.


                                       26
<PAGE>

         The FASB  issued  FASB  Staff  Position  No. APB 14-1,  Accounting  for
Convertible  Debt  Instruments  That  May Be  Settled  in Cash  upon  Conversion
(Including  Partial Cash Settlement),  ("FSP No. APB 14-1").  The Staff Position
specifies that issuers of convertible  debt  instruments  that may be settled in
cash upon  conversion  should  separately  account for the  liability and equity
components  in a manner  that will  reflect  the  entity's  nonconvertible  debt
borrowing rate when interest cost is recognized in subsequent  periods.  FSP No.
APB 14-1 provides  guidance for initial and  subsequent  measurement  as well as
derecognition  provisions.   The  Staff  Position  is  effective  for  financial
statements  issued for fiscal years  beginning  after  December  15,  2008,  and
interim periods within those fiscal years. Early adoption is not permitted.  The
adoption of this Staff  Position  will have no material  effect on the Company's
financial position, results of operations or cash flows.

         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   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.


                                       27
<PAGE>

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, 2008:

<TABLE>
<CAPTION>
                                                         Quoted market price       Significant other       Significant unobservable
                                                          in active markets        observable inputs                inputs
                                                              (Level 1)               (Level 2)                    (Level 3)

<S>                                                         <C>                       <C>                       <C>
Available for sale
  investment securities ...........................         $75,841,000               $   484,000               $           -

Impaired loans ....................................                   -                 7,476,000                           -
                                                            -----------               -----------               -------------

Total .............................................         $75,841,000               $ 7,960,000               $           -
                                                            ===========               ===========               =============
</TABLE>

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

         The Company is  predominantly a cash-flow based lender with real estate
serving as collateral on a substantial majority of loans. Loans which are deemed
to be impaired are primarily  valued on a nonrecurring  basis at the fair values
of the underlying  real estate  collateral.  Such fair values are obtained using
independent  appraisals,  which the Company considers to be level 2 inputs.  The
aggregate carrying amount of impaired loans at June 30, 2008 was $7,476,000.

         FASB Staff Position No. FAS 157-2 delays the implementation of SFAS 157
until the first  quarter of 2009 with  respect  to  goodwill,  other  intangible
assets,  real estate and other assets  acquired  through  foreclosure  and other
non-financial assets measured at fair value on a nonrecurring basis.

         The Company has no assets or liabilities whose fair values are measured
using level 3 inputs.

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



                                       28
<PAGE>


Item 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                  MARKET RISK

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

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

         Each  of  the  Company's   banking   subsidiaries  has  established  an
Asset/Liability Management Committee. These committees use a variety of tools to
analyze  interest-rate  sensitivity,  including a static gap  presentation and a
simulation  model. A static gap  presentation  reflects the  difference  between
total  interest-sensitive  assets and  liabilities  within certain time periods.
While the static gap is a widely used measure of interest rate  sensitivity,  it
is not,  in  management's  opinion,  the  best  indicator  of a  company's  true
sensitivity position.  Accordingly,  the Company's banking subsidiaries also use
an earnings  simulation  model that estimates the variations in interest  income
under  different  interest-rate  environments  to measure  and manage the bank's
short-term  interest-rate risk.  According to the model, as of June 30, 2008 the
Company was positioned so that net interest income would increase  $641,000 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
$717,000 over the next twelve months if interest rates were to gradually decline
by 100 basis points over the same period.  Computation of prospective effects of
hypothetical interest-rate changes are based on numerous assumptions,  including
relative levels of market interest rates and loan prepayment,  and should not be
relied upon as indicative of actual results.  Further,  the  computations do not
contemplate  all actions that the Company and its customers  could  undertake in
response to changes in interest rates.

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



                                       29
<PAGE>

         It is the responsibility of the Asset/Liability Committees to establish
parameters  for various  interest risk  measures,  to set  strategies to control
interest rate risk within those parameters,  to maintain adequate and stable net
interest  income,  and to direct the  implementation  of  tactics to  facilitate
achieving their objectives.




                                       30
<PAGE>


Item 4T.          CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

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



                                       31
<PAGE>



PART II.  OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders

Annual Meeting of Shareholders
On May 15, 2008, the Company held its Annual Meeting of Shareholders. The voting
results of the 2008 Annual Meeting of Shareholders follows:

The following persons were elected as Directors to serve for the terms set forth
below  with  4,966,620  shares  voted,  representing  70.4% of the total  shares
entitled to vote:

                                                          Broker
                                  For         Withheld   Non-Votes  Term (years)
Charles E. Dalton ..........    4,798,805     167,815         0           3
George Weston Nalley .......    4,746,689     219,931         0           3
R. Riggie Ridgeway .........    4,751,569     215,051         0           3
William R. Rowan, III. .....    4,751,569     215,051         0           3
D. Gray Suggs ..............    4,799,408     167,212         0           3
L. Andrew Westbrook, III ...    4,735,708     230,912         0           3


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

                                                           Year Term Ends
              Robert E. Dye, Jr. ......................       2009
              W. Rutledge Galloway ....................       2009
              E. Smyth McKissick, III .................       2009
              Timothy J. Reed .........................       2009
              William B. West .........................       2009
              Paul C. Aughtry, III ....................       2010
              R. David Land ...........................       2010
              Eugene W. Merritt, Jr. ..................       2010
              George B. Nalley, Jr. ...................       2010
              A. J. Thompson, Jr. .....................       2010






                                       32
<PAGE>



Item 6.       Exhibits

              Exhibits.

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



                                       33
<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 14, 2008                     By:    /s/ R. Riggie Ridgeway
                                                 ------------------------
                                                   R. Riggie Ridgeway
                                                   President and CEO


Dated:  August 14, 2008                     By:   /s/ Robert E. Dye, Jr.
                                                ------------------------
                                                   Robert E. Dye, Jr.
                                                   Senior Vice President and CFO
                                                   (principal financial officer)





                                       34
<PAGE>




                                  Exhibit Index

Exhibit No.                           Description of Exhibit

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






                                       35