SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                 For the Quarterly Period Ended Commission file
                            March 31, 2010 000-20616

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

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

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

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

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

                             Yes [X]    No [ ]

 Indicate by check mark whether the registrant has submitted electronically and
 posted on its corporate Web site, if any, every Interactive Data File required
  to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
     preceding 12 months (or for such shorter period that the registrant was
             required to submit and post such files). Yes [ ] No [ ]
                       (Not yet applicable to Registrant)

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

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

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

                             Yes [ ]    No [X]

  The number of outstanding shares of the issuer's $1.11 par value common stock
                        as of May 7, 2010 was 7,003,003.
<PAGE>

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

         Peoples Bancorporation, Inc. and Subsidiaries
                  Consolidated Balance Sheets
    (Dollars in thousands except per share and share data)
<TABLE>
<CAPTION>
                                                                                        March 31,        December 31,      March 31,
                                                                                           2010             2009             2009
                                                                                        Unaudited          Audited        Unaudited
                                                                                        ---------          -------        ---------
ASSETS
<S>                                                                                     <C>              <C>              <C>
CASH AND DUE FROM BANKS .........................................................       $   8,562        $  11,862        $   4,075
INTEREST-BEARING DEPOSITS IN OTHER BANKS ........................................             476              420           24,945
FEDERAL FUNDS SOLD ..............................................................          18,586           14,592                -
                                                                                        ---------        ---------        ---------
     Total cash and cash equivalents ............................................          27,624           26,874           29,020
SECURITIES
     Trading assets .............................................................             152              128               58
     Available for sale .........................................................         103,119          103,227           94,227
     Held to maturity (market value of $8,029, $8,621
         and $12,110) ...........................................................           7,809            8,402           12,039
       Other investments, at cost ...............................................           4,456            4,456            3,856
LOANS-less allowance for loan losses of $8,665, $7,431 and $7,613 ...............         360,457          366,143          384,837
PREMISES AND EQUIPMENT, net of accumulated
     depreciation and amortization ..............................................          12,154           12,270           12,954
ACCRUED INTEREST RECEIVABLE .....................................................           2,272            2,371            2,592
ASSETS ACQUIRED IN SETTLEMENT OF LOANS ..........................................          12,596           11,490            4,921
CASH SURRENDER VALUE OF LIFE INSURANCE ..........................................          12,424           12,304           11,935
OTHER ASSETS ....................................................................           9,363            8,936            6,659
                                                                                        ---------        ---------        ---------
TOTAL ASSETS ....................................................................       $ 552,426        $ 556,601        $ 563,098
                                                                                        =========        =========        =========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
DEPOSITS
     Noninterest-bearing ........................................................       $  50,015        $  55,367        $  43,743
     Interest-bearing ...........................................................         429,958          429,629          411,430
                                                                                        ---------        ---------        ---------
         Total deposits .........................................................         479,973          484,996          455,173
SECURITIES SOLD UNDER REPURCHASE
     AGREEMENTS .................................................................          15,051           12,785           15,681
FEDERAL FUNDS PURCHASED .........................................................               -              399                -
FEDERAL HOME LOAN BANK ADVANCES .................................................               -                -           34,000
NOTES PAYABLE - OTHER ...........................................................               -                -           11,000
ACCRUED INTEREST PAYABLE ........................................................           2,025            2,049            2,928
OTHER LIABILITIES ...............................................................           2,112            1,929            2,007
                                                                                        ---------        ---------        ---------
         Total Liabilities ......................................................         499,161          502,158          520,789
                                                                                        ---------        ---------        ---------
SHAREHOLDERS' EQUITY
Preferred stock - 15,000,000 shares authorized
  Preferred stock Series T - $1,000 per share liquidation preference;
       issued and outstanding-12,660 shares at March 31, 2010 and
       December 31, 2009 and none at March 31, 2009. ............................          12,028           11,991                -
  Preferred stock Series W - $1,000 per share liquidation preference;
       Issued and outstanding - 633 shares at March 31, 2010 and
       December 31, 2009 and none at March 31, 2009 .............................             693              697                -
Common stock - 15,000,000 shares authorized, $1.11
     Par value per share, 7,003,003 shares, 7,003,003 shares
       and 7,070,139 shares outstanding, respectively ...........................           7,774            7,774            7,848
Additional paid-in capital ......................................................          41,666           41,658           41,767
Retained earnings (deficit) .....................................................         (11,007)          (9,702)          (9,006)
Accumulated other comprehensive income ..........................................           2,111            2,025            1,700
                                                                                        ---------        ---------        ---------
         Total Shareholders' Equity .............................................          53,265           54,443           42,309
                                                                                        ---------        ---------        ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......................................       $ 552,426        $ 556,601        $ 563,098
                                                                                        =========        =========        =========
</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 (Loss)
   (Dollars in thousands except per share data)
<TABLE>
<CAPTION>
                                                                                                        (Unaudited)
                                                                                                     Three Months Ended
                                                                                                          March 31,
                                                                                                          ---------
                                                                                               2010                     2009
                                                                                               ----                     ----
 NTEREST INCOME
<S>                                                                                       <C>                       <C>
   Interest and fees on loans ...................................................         $          5,489          $          6,176
   Interest on securities
       Taxable ..................................................................                      864                       876
       Tax-exempt ...............................................................                      367                       385
   Interest on federal funds ....................................................                        8                         -
                                                                                          ----------------          ----------------
Total interest income ...........................................................                    6,728                     7,437
                                                                                          ----------------          ----------------
INTEREST EXPENSE
   Interest on deposits .........................................................                    1,970                     2,811
   Interest on federal funds purchased and securities
       sold under repurchase agreements .........................................                       20                        28
    Interest on Federal Home Loan Bank advances .................................                        -                        50
    Interest on notes payable - other ...........................................                        -                       143
                                                                                          ----------------          ----------------
Total interest expense ..........................................................                    1,990                     3,032
                                                                                          ----------------          ----------------
     Net interest income ........................................................                    4,738                     4,405

PROVISION FOR LOAN LOSSES .......................................................                    3,425                       705
                                                                                          ----------------          ----------------
Net interest income after provision for loan losses .............................                    1,313                     3,700
                                                                                          ----------------          ----------------
NON-INTEREST INCOME
   Service charges on deposit accounts ..........................................                      363                       401
   Customer service fees ........................................................                       40                        42
   Mortgage banking .............................................................                       85                       194
   Brokerage services ...........................................................                       53                        38
   Bank owned life insurance ....................................................                      136                       134
   Gain(loss) on sale of assets acquired in settlement of loans .................                       (5)                       49
   Other noninterest income .....................................................                      275                       178
                                                                                          ----------------          ----------------
           Total non-interest income ............................................                      947                     1,036
                                                                                          ----------------          ----------------
NON-INTEREST EXPENSES
   Salaries and benefits ........................................................                    2,061                     2,145
   Occupancy and equipment ......................................................                      511                       547
   Marketing and advertising ....................................................                       45                        31
   Communications ...............................................................                       63                        65
   Printing and supplies ........................................................                       37                        39
   Bank paid loan costs .........................................................                      345                       220
   ATM/Debit card expenses ......................................................                       60                        97
   Legal and professional fees ..................................................                      146                       151
   Director fees ................................................................                       94                        92
   Regulatory assessments .......................................................                      322                       250
   Other post employment benefits ...............................................                       88                        91
   Other operating expenses .....................................................                      373                       356
                                                                                          ----------------          ----------------
             Total non-interest expenses ........................................                    4,145                     4,084
                                                                                          ----------------          ----------------
   Income (loss) before income taxes ............................................                   (1,885)                      652
PROVISION (BENEFIT) FOR INCOME TAXES ............................................                     (785)                       94
                                                                                          ----------------          ----------------
   Net income (loss) ............................................................                   (1,100)                      558
                                                                                          ----------------          ----------------
Deductions to determine amounts available to common shareholders
   Dividends declared or accumulated on preferred stock .........................                      172                         -
   Net accretion of discount on preferred stock .................................                       33                         -
                                                                                          ----------------          ----------------
   Net income (loss) available to common shareholders ...........................         $         (1,305)         $            558
                                                                                          ================          ================
INCOME  (LOSS) PER COMMON SHARE:
   BASIC ........................................................................         $          (0.19)         $           0.08
                                                                                          ================          ================
   DILUTED ......................................................................         $          (0.19)         $           0.08
                                                                                          ================          ================
WEIGHTED AVERAGE COMMON SHARES:
   BASIC ........................................................................                7,003,003                 7,070,139
                                                                                          ================          ================
   DILUTED ......................................................................                7,003,003                 7,131,592
                                                                                          ================          ================
DIVIDENDS PAID PER COMMON SHARE .................................................         $              -           $             -
                                                                                          ================          ================
See Notes to Unaudited  Consolidated  Financial Statements which are an integral
part of these statements.
</TABLE>
                                       2
<PAGE>

                  Peoples Bancorporation, Inc. and Subsidiaries
 Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)
               For the three months ended March 31, 2010 and 2009
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>

                              Preferred Stock   Preferred Stock                                           Accumulated
                                 Series T          Series W        Common Stock    Additional  Retained      Other       Total
                                 --------          --------        ------------      Paid-in   Earnings  Comprehensive Shareholders'
                              Shares  Amount   Shares  Amount    Shares   Amount     Capital   (Deficit)    Income       Equity
                              ------  ------   ------  ------    ------   ------     -------   ---------    ------       ------
<S>                          <C>      <C>       <C>   <C>     <C>         <C>      <C>        <C>          <C>         <C>
Balance, December 31, 2008        -   $     -     -   $    -  7,070,139   $ 7,848  $ 41,752   $  (9,564)   $   1,476   $ 41,512
Net income ................       -         -     -        -          -         -         -         558            -        558
Other comprehensive
Income, net of tax:
Unrealized holding gains
  on securities available
  for sale, net income
   tax of $116 ............       -         -     -        -          -         -         -           -          224        224
                                                                                                                       --------
Comprehensive income ......                                                                                                 782
Stock-based compensation ..       -         -     -        -          -         -        15           -            -         15
Cumulative effect of post-
   retirement cost of life
   insurance ..............       -         -     -        -          -         -         -        (128)           -       (128)
                             ------   -------  ----   ------  ---------   -------  --------   ---------    ---------   --------
Balance, March 31, 2009 ...       -   $     -     -   $    -  7,070,139   $ 7,848  $ 41,767   $  (9,006)   $   1,700   $ 42,309
                             ======   =======   ===   ======  =========   =======  ========   =========    =========   ========

Balance, December 31, 2009   12,660   $11,991   633   $  697  7,003,003   $ 7,774  $ 41,658   $  (9,702)   $   2,025   $ 54,443
Net loss ..................       -         -     -        -          -         -         -      (1,100)           -     (1,100)
Other comprehensive
Income, net of tax:
Unrealized holding gains
  on securities available
  for sale, net income tax
   of $44 .................       -         -     -        -          -         -         -           -           86         86
                                                                                                                       --------
Comprehensive income (loss)       -         -     -        -          -         -         -           -            -     (1,014)
Issuance of preferred stock       -         -     -        -          -         -         -           -            -          -
Cash dividends on
   preferred stock ........       -         -     -        -          -         -         -        (172)           -       (172)
Accretion (amortization)
   of preferred stock .....       -        37     -       (4)         -         -         -         (33)           -          -
Stock-based compensation ..       -         -     -        -          -         -         8           -            -          8
                             ------   -------   ---   ------  ---------   -------  --------   ---------    ---------   --------
Balance, March 31, 2010 ...  12,660   $12,028   633   $  693  7,003,003   $ 7,774  $ 41,666   $ (11,007)   $   2,111   $ 53,265
                             ======   =======   ===   ======  =========   =======  ========   =========    =========   ========
</TABLE>


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



                                       3
<PAGE>

                  Peoples Bancorporation, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                              Three months Ended
                                                                                                                  March 31,
                                                                                                                  ---------

                                                                                                          2010               2009
                                                                                                          ----               ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                                     <C>                <C>
   Net income (loss) .........................................................................          $ (1,100)          $    558
   Adjustments to reconcile net income (loss) to net cash  provided by
      operating activities:
   Gain from trading assets ..................................................................               (24)               (11)
   (Gain) loss on sale of assets acquired in settlement of loans .............................                 5                (49)
   Provision for loan losses .................................................................             3,425                705
   Depreciation and amortization .............................................................               229                260
   Amortization and accretion (net) of premiums and
     discounts on securities .................................................................                74                  1
    Stock-based compensation .................................................................                 8                 15
   Decrease in accrued interest receivable ...................................................                99                 93
   (Increase) decrease in other assets .......................................................              (476)               458
   Increase (decrease) in accrued interest payable ...........................................               (24)               292
   Increase in other liabilities .............................................................               183                458
                                                                                                        --------           --------
     Net cash provided by operating activities ...............................................             2,399              2,780
                                                                                                        --------           --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of securities available for sale ................................................            (7,153)            (2,022)
   Purchases of other investments ............................................................                 -                (61)
   Proceeds from principal pay-downs on securities available for sale ........................             5,315              2,893
   Proceeds from the maturities and calls of securities available for sale ...................             2,000              1,000
   Proceeds from the maturities and calls of securities held to maturity .....................               595                605
   Increase in cash surrender value of life insurance ........................................              (120)              (120)
   Proceeds from the sale of other real estate owned .........................................             1,792              2,746
   Net increase (decrease) in loans ..........................................................              (637)             1,713
   Purchase of premises and equipment ........................................................              (113)               (14)
                                                                                                        --------           --------
     Net cash provided by investing activities ...............................................             1,679              6,740
                                                                                                        --------           --------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase (decrease) in deposits .......................................................            (5,023)             9,804
   Net increase (decrease) in securities sold under repurchase
     agreements ..............................................................................             2,266             (6,500)
   Net decrease in federal funds purchased ...................................................              (399)            (1,028)
   Net decrease in Federal Home Loan Bank advances ...........................................                 -               (600)
   Cash dividends paid on preferred stock ....................................................              (172)                 -
                                                                                                        --------           --------
     Net cash provided by (used in) financing activities .....................................            (3,328)             1,676
                                                                                                        --------           --------
     Net increase in cash and cash equivalents ...............................................               750             11,196
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ...............................................            26,874             17,824
                                                                                                        --------           --------
CASH AND CASH EQUIVALENTS, END OF PERIOD .....................................................          $ 27,624           $ 29,020
                                                                                                        ========           ========

CASH PAID FOR
     Interest ................................................................................          $  2,015           $  2,740
                                                                                                        ========           ========
     Income taxes ............................................................................          $     41           $     22
                                                                                                        ========           ========
NON-CASH TRANSACTIONS
     Change in unrealized gain (loss) on available for sale securities, net of tax ...........          $     86           $    224
                                                                                                        ========           ========

     Loans transferred to other real estate ..................................................          $  2,899           $  2,239
                                                                                                        ========           ========
</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

         The consolidated  financial  statements  include the account of Peoples
Bancorporation,  Inc (the  "Company')  and its wholly  owned  subsidiaries,  The
Peoples  National  Bank,  Bank of  Anderson,  N. A.,  and Seneca  National  Bank
(collectively referred to as the "Banks"). All significant intercompany balances
and  transactions  have been  eliminated.  The Banks  operate  under  individual
national bank charters and provide full banking services to customers. The Banks
are  subject to  regulation  by the Office of the  Comptroller  of the  Currency
("OCC").  The  Company is subject to  regulation  by the Federal  Reserve  Board
("FRB").

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         A summary of these  policies is  included in the 2009 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.


EARNINGS (LOSS) PER COMMON SHARE

         Earnings   (loss)  per  common  share  is  computed  and  presented  in
accordance  with the related topic in the  Financial  Accounts  Standards  Board
("FASB")  Accounting  Standards  Codification.  The assumed  conversion of stock
options  creates the difference  between basic and diluted net income per share.
Income per common share is calculated by dividing net income (loss) available to
common  shareholders by the weighted average number of common shares outstanding
for each period  presented.  Stock  options on 154,868  shares of the  Company's
common stock are excluded from the  computation of net loss per diluted share at
March 31, 2010 because their  inclusion  would be  anti-dilutive  due to the net
loss in that period.

                                                          Three Months Ended
                                                              March 31,
                                                         2010           2009
                                                         ----           ----
Net (loss) income available to common
  shareholders (in thousands) ................     $     (1,305)     $       558
                                                   ============      ===========

Weighted average shares outstanding:
Basic ........................................        7,003,003        7,070,139
Effect of dilutive securities:
     Stock options ...........................                -           61,453
                                                   ------------      -----------
Diluted ......................................        7,003,003        7,131,592
                                                   ============      ===========

Income (loss) per common share:
Basic ........................................     $      (0.19)     $      0.08
                                                   ============      ===========
Diluted ......................................     $      (0.19)     $      0.08
                                                   ============      ===========


                                       5
<PAGE>


INVESTMENT SECURITIES

         At the time of  purchase  of a security,  the  Company  designates  the
security as available for sale or held to maturity,  depending  upon  investment
objectives,  liquidity needs and intent.  Securities held to maturity are stated
at cost,  adjusted  for premium  amortized  or discount  accreted,  if any.  The
Company has the positive intent and ability to hold such securities to maturity.
Securities  available  for sale are stated at estimated  fair value.  Unrealized
gains and losses are excluded from income and reported net of tax as accumulated
other comprehensive income as a separate component of stockholders' equity until
realized.  Interest  earned on  investment  securities  is  included in interest
income.  Realized gains and losses on the sale of securities are reported in the
consolidated  statements of income and determined using the adjusted cost of the
specific security sold. Trading securities are carried at market value.

         Securities  are  summarized  as follows as of March 31,  2010  (tabular
amounts in thousands):

<TABLE>
<CAPTION>

                                                                                                Unrealized holding
                                                                            Amortized           ------------------           Fair
                                                                              Cost            Gains           Losses         value
                                                                              ----            -----           ------         -----
TRADING ASSETS:
<S>                                                                         <C>             <C>             <C>             <C>
EQUITY SECURITIES ..................................................        $    152        $      -        $      -        $    152
                                                                            ========        ========        ========        ========
SECURITIES AVAILABLE FOR SALE:

GOVERNMENT SPONSORED ENTERPRISE
     SECURITIES
     Maturing after five years but within 10 years .................        $  4,801        $    338        $      -        $  5,139
                                                                            --------        --------        --------        --------

MORTGAGE BACKED SECURITIES
     Maturing within one year ......................................           1,097              30               -           1,127
     Maturing after one year but within five years .................          50,557           2,132              13          52,676
     Maturing after five years but within ten years ................          10,368             130              81          10,417
     Maturing after ten years ......................................           3,552             133               -           3,685
                                                                            --------        --------        --------        --------
                                                                              65,574           2,425              94          67,905
                                                                            --------        --------        --------        --------
OBLIGATIONS OF STATES AND POLITICAL
     SUBDIVISIONS
     Maturing after one year but within five years .................             457              38               -             495
     Maturing after five years but within ten years ................           5,426             171               6           5,591
     Maturing after ten years ......................................          23,059             458              98          23,419
                                                                            --------        --------        --------        --------
                                                                              28,942             667             104          29,505
                                                                            --------        --------        --------        --------
OTHER SECURITIES
     Maturing after ten years ......................................             603               -              33             570
                                                                            --------        --------        --------        --------

         Total securities available for sale .......................        $ 99,920        $  3,430        $    231        $103,119
                                                                            ========        ========        ========        ========

SECURITIES HELD TO MATURITY:

OBLIGATIONS OF STATES AND POLITICAL
     SUBDIVISIONS
     Maturing within one year ......................................        $    377        $      8        $      -        $    385
     Maturing after one but within five years ......................           2,942             117               -           3,059
     Maturing after five years but within ten years ................           3,056              58               -           3,114
     Maturing after ten years ......................................           1,434              37               -           1,471
                                                                            --------        --------        --------        --------
         Total securities held to maturity .........................        $  7,809        $    220        $      -        $  8,029
                                                                            ========        ========        ========        ========
</TABLE>


                                       6
<PAGE>

      The following table shows gross unrealized loss and fair value, aggregated
by investment category,  and length of time that individual securities have been
in a continuous unrealized loss position, at March 31, 2010:

Securities Available for Sale (tabular amounts in thousands):

<TABLE>
<CAPTION>
                                                         Less than 12 Months          12 Months or More              Total
                                                         -------------------          -----------------              -----
                                                         Fair       Unrealized      Fair        Unrealized      Fair      Unrealized
                                                         Value       Losses         Value         Losses        Value       Losses
                                                         -----       ------         -----         ------        -----       ------
<S>                                                    <C>           <C>           <C>           <C>           <C>           <C>
Mortgage backed securities .....................       $ 9,237       $    94       $     -       $     -       $ 9,237       $    94
Other securities ...............................             -             -           481            33           481            33
State and political subdivisions ...............         4,796           104             -             -         4,796           104
                                                       -------       -------       -------       -------       -------       -------
Total ..........................................       $14,033       $   198       $   481       $    33       $14,514       $   231
                                                       =======       =======       =======       =======       =======       =======
</TABLE>

One individual security available for sale was in a continuous loss position for
twelve months or more.

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

STOCK-BASED COMPENSATION

         The fair value of each option is  estimated  on the date of grant using
the Black-Scholes option pricing model. No option grants were issued through the
first three months of 2010.

         At March 31, 2010,  an aggregate  of 361,150  shares were  reserved for
issuance on exercise of options. The following is a summary of the status of the
Company's  plans as of March 31, 2010 and changes  during the three months ended
March 31, 2010.

<TABLE>
<CAPTION>
                                                                                           Weighted       Weighted
                                                                                            Average        Average        Aggregate
                                                                                           Exercise      Contractual       Intrinsic
                                                                        Shares               Price       Term (Years)       Value
                                                                        ------               -----       ------------       -----
<S>                                                                     <C>               <C>                 <C>         <C>
Outstanding, December 31, 2009 ..............................           154,868           $    9.86
Granted .....................................................                 -                   -
Exercised ...................................................                 -                   -
Forfeited ...................................................                 -                   -
                                                                        -------
Outstanding, March 31, 2010 .................................           154,868           $    9.86           6.23        $     -
                                                                        =======

Options exercisable, March 31, 2010 .........................           132,851           $   10.27           6.23        $     -
                                                                        =======
</TABLE>

         As of March 31, 2010, we recognized  compensation cost of approximately
$8,000 related to unvested stock options.

FAIR VALUE

         The FASB Accounting  Standards  Codification  for fair value provides a
framework for  measuring  and  disclosing  fair value under  generally  accepted
accounting  principles and requires  disclosures  about the fair value of assets


                                       7
<PAGE>

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).

         Fair value is identified  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. The standard  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:
<TABLE>
<CAPTION>

<S>              <C>
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  Securities and other 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 U. S. Government and agency  mortgage-backed
                 debt  securities  and  impaired  loans  that  are  carried  at the  appraisal  value of the
                 underlying collateral.

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.
</TABLE>

         Assets  and  liabilities  measured  at fair  value are as follows as of
March 31, 2010 (tabular amounts in thousands):

<TABLE>
<CAPTION>
                                                     Quoted market price
                                                      in active markets          Significant           Significant
                                                        for identical               other              unobservable
                                                      assets/liabilities      observable inputs           inputs
                                                          (Level 1)               (Level 2)             (Level 3)          Total
                                                          ---------               ---------             ---------          -----
Recurring Basis:
Available for sale investment securities:
<S>                                                      <C>                       <C>                   <C>              <C>
  Government Sponsored Securities ..............         $      -                  $  5,139              $      -         $  5,139
  Mortgage Backed Securities ...................                -                    67,905                     -           67,905
  Obligations of States and
    Political Subdivisions .....................                -                    29,505                     -           29,505
  Other Securities .............................                -                       570                     -              570
Trading Assets .................................              152                         -                     -              152
                                                         --------                  --------              --------         --------
Total ..........................................         $    152                  $103,119              $      -         $103,271
                                                         ========                  ========              ========         ========
</TABLE>


                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                         Quoted market price
                                                          in active markets          Significant           Significant
                                                            for identical               other              unobservable
                                                          assets/liabilities      observable inputs           inputs
                                                              (Level 1)               (Level 2)             (Level 3)          Total
                                                              ---------               ---------             ---------          -----
Nonrecurring Basis:
<S>                                                        <C>                  <C>                  <C>              <C>
Impaired loans .....................................       $           -        $      16,496        $         -      $      16,496
Other real estate owned ............................                   -               12,596                  -             12,596
                                                           -------------        -------------        -----------      -------------
Total ..............................................       $           -        $      29,092        $         -      $      29,092
                                                           =============        =============        ===========      =============
</TABLE>
         Assets  and  liabilities  measured  at fair  value are as follows as of
December 31, 2009 (tabular amounts in thousands):

<TABLE>
<CAPTION>
                                                     Quoted market price
                                                      in active markets          Significant           Significant
                                                        for identical               other              unobservable
                                                      assets/liabilities      observable inputs           inputs
                                                          (Level 1)               (Level 2)             (Level 3)           Total
                                                          ---------               ---------             ---------           -----
Recurring Basis:
Available for sale investment securities:
<S>                                                        <C>                  <C>                     <C>               <C>
  Government Sponsored Securities ....................     $      -             $  7,132                $      -          $  7,132
  Mortgage Backed Securities .........................            -               66,132                       -            66,132
  Obligations of States and
    Political Subdivisions ...........................            -               29,398                       -            29,398
  Other Securities ...................................            -                  565                       -               565
Trading Assets .......................................          128                    -                       -               128
                                                           --------             --------                --------          --------
Total ................................................          128             $103,227                $      -          $103,355
                                                           ========             ========                ========          ========


Nonrecurring Basis:
Impaired loans .......................................     $      -             $ 14,746                $      -          $ 14,746
Other real estate owned ..............................            -               11,490                       -            11,490
                                                           --------             --------                --------          --------
Total ................................................     $      -             $ 26,236                $      -          $ 26,236
                                                           ========             ========                ========          ========
</TABLE>

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

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

         Impaired  loans -  Impaired  loans  are  loans  that are  measured  for
impairment  using  the  practical  methods  permitted  by  the  FASB  Accounting
Standards  Codification.  Fair values for impaired  loans in the above table are
collateral  dependent and are estimated based on underlying  collateral  values,
which are then adjusted for the cost related to liquidation of the collateral.

         Other real estate owned - Other real estate,  consisting  of properties
obtained  through  foreclosure or in  satisfaction  of loans, is reported at the
lower of cost or fair  value,  determined  on the basis of  current  appraisals,
comparable  sales,  and  other  estimates  of value  obtained  principally  from
independent sources, adjusted for estimated selling costs.


                                       9
<PAGE>

Disclosure about Fair Value of Financial Instruments

         The FASB Accounting  Standards  Codification for the Disclosures  about
Fair  Value  of  Financial   Instruments   requires  disclosure  of  fair  value
information,  whether  or not  recognized  in the  balance  sheets,  when  it is
practical  to  estimate  the  fair  value.  The  Standard  defines  a  financial
instrument  as  cash,  evidence  of  an  ownership  interest  in  an  entity  or
contractual  obligations  which require the exchange of cash or other  financial
instruments.  Certain  items  are  specifically  excluded  from  the  disclosure
requirements,  including the Company's common stock,  premises and equipment and
other assets and liabilities.

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

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

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

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

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

         Fair value of off-balance  sheet instruments is based on fees currently
charged to enter into similar  arrangements,  taking into account the  remaining
terms of the  agreement  and the  counterparties'  credit  standing.  These  are
generally  short-term at variable rates; both the carrying amount and fair value
are immaterial.

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

         The estimated fair values of the Company's financial instruments are as
follows (amounts in thousands):


                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                                                   March 31,                      December 31,
                                                                                     2010                             2009
                                                                                     ----                             ----
                                                                          Carrying          Fair            Carrying          Fair
                                                                           amount           value            amount           value
                                                                           ------           -----            ------           -----
Financial assets:
<S>                                                                      <C>              <C>              <C>              <C>
     Cash and due from banks ...................................         $  8,562         $  8,562         $ 11,862         $ 11,862
     Interest-bearing deposits in other banks ..................              476              476              420              420
     Federal funds sold ........................................           18,586           18,586           14,592           14,592
     Trading assets ............................................              152              152              128              128
     Securities available for sale .............................          103,119          103,119          103,227          103,227
     Securities held to maturity ...............................            7,809            8,029            8,402            8,621
     Other investments .........................................            4,456            4,456            4,456            4,456
     Loans (gross) .............................................          369,122          364,587          373,574          370,420
     Cash surrender value life insurance .......................           12,424           12,424           12,304           12,304
</TABLE>

<TABLE>
<CAPTION>
                                                                                   March 31,                      December 31,
                                                                                     2010                             2009
                                                                                     ----                             ----
                                                                          Carrying          Fair            Carrying          Fair
                                                                           amount           value            amount           value
                                                                           ------           -----            ------           -----
Financial liabilities:
<S>                                                                      <C>              <C>              <C>              <C>
     Deposits ..................................................         $479,973         $474,830         $484,996         $477,788
     Securities sold under repurchase agreements ...............           15,051           15,051           12,785           12,785
     Federal funds purchased ...................................                -                -              399              399
</TABLE>

RECENTLY ISSUED ACCOUNTING STANDARDS

         In January  2010,  compensation  guidance  was  updated to reflect  the
Securities  and Exchange  Commission's  (the "SEC") views of when escrowed share
arrangements are considered to be  compensatory.  Historically the SEC staff has
expressed the view that an escrowed share  arrangement  involving the release of
shares to certain shareholders based on performance-related criteria is presumed
to be compensatory. Facts and circumstances may indicate that the arrangement is
an incentive  made to facilitate a  transaction  on behalf of the company if the
escrowed  shares  will be  released  or  canceled  without  regard to  continued
employment. In such cases, the SEC staff generally believes that the arrangement
should be  recognized  and measured  according to its nature and  reflected as a
reduction of the proceeds  allocated  to the newly  issued  securities.  The SEC
staff  believes  that an  escrowed  share  arrangement  in which the  shares are
automatically  forfeited if employment terminates is compensation.  The guidance
is  effective  upon  issuance  and  had no  impact  on the  Company's  financial
statements.

         In January 2010, fair value guidance was amended to require disclosures
for significant amounts transferred in and out of Levels 1 and 2 and the reasons
for such  transfers  and to require  that gross  amounts  of  purchases,  sales,
issuances and  settlements  be provided in the Level 3  reconciliation.  The new
disclosures  are effective for the Company for the current quarter and have been
reflected in the Fair Value footnote.

         Guidance  related to subsequent  events was amended in February 2010 to
remove the  requirement  for an SEC filer to  disclose  the date  through  which
subsequent  events were  evaluated.  The amendments were effective upon issuance
and had no significant impact on the Company's financial statements.

         Consolidation  guidance was amended in February 2010 to defer  guidance
regarding the analysis of interests in variable interest entities issued in June


                                       11
<PAGE>

2009 for  entities  having  attributes  of  investment  companies  or that apply
investment company measurement  principles.  Disclosure requirements provided in
the June 2009 guidance were not deferred.  The amendments were effective January
1, 2010 and had no effective on the Company's financial statements.

         In March 2010,  guidance related to derivatives and hedging was amended
to exempt embedded credit derivative  features related to the transfer of credit
risk from  potential  bifurcation  and separate  accounting.  Embedded  features
related to other types of risk and other  embedded  credit  derivative  features
were  not  exempt  from  potential  bifurcation  and  separate  accounting.  The
amendments  will be  effective  for the Company on July 1, 2010  although  early
adoption is permitted.  The Company does not expect these amendments to have any
impact on the financial statements.

         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.

SUBSEQUENT EVENTS

         In accordance with accounting  guidance,  the Company  evaluated events
and  transactions  for  potential  recognition  or  disclosure  in our financial
statements through the date the financial statements were issued.

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 SEC.  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.


                                       12
<PAGE>

Item 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         The following  discussion  and analysis  should be read in  conjunction
with the  consolidated  financial  statements  and  related  notes  and with the
statistical  information  and financial data appearing in this report as well as
the  Company's  2009 Annual Report on Form 10-K.  Results of operations  for the
three-month  period ended March 31, 2010 are not  necessarily  indicative of the
results to be attained for any other period.

Overview

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

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

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;


                                       13
<PAGE>

          o    the  effects  of  changes  in  interest   rates  on  the  levels,
               composition and costs of deposits, loan demand, and the values of
               loan collateral,  securities,  and interest  sensitive assets and
               liabilities;
          o    the  effects  of  competition  from  a  wide  variety  of  local,
               regional, national and other providers of financial,  investment,
               and insurance services, as well as competitors that offer banking
               products and  services by mail,  telephone,  computer  and/or the
               Internet;
          o    credit risks;
          o    higher than anticipated levels of defaults on loans;
          o    perceptions by depositors about the safety of their deposits;
          o    ability to weather the current economic downturn;
          o    the failure of assumptions  underlying the  establishment  of the
               allowance  for loan  losses and other  estimates,  including  the
               value of collateral securing loans;
          o    the risks of opening new offices, including,  without limitation,
               the related costs and time of building customer relationships and
               integrating operations as part of these endeavors and the failure
               to achieve expected gains,  revenue growth and/or expense savings
               from such endeavors;
          o    changes  in laws and  regulations,  including  tax,  banking  and
               securities laws and regulations;
          o    changes in the requirements of regulatory agencies;
          o    changes in accounting policies, rules and practices;
          o    cost and  difficulty  of  implementing  changes in  technology or
               products;
          o    loss of consumer or investor confidence;
          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  SEC  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 2009 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


                                       14
<PAGE>

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
with respect to its loan  portfolio.  Many of the Company's  estimates also rely
heavily  on real  estate  appraisals  by  third  parties  which  are  themselves
estimates.  The  Company's  assessments  may be  impacted  in future  periods by
changes in economic conditions,  the impact of regulatory examinations,  and the
discovery  of  information  with  respect  to  borrowers,  which is not known to
management at the time of the issuance of the consolidated financial statements.
Refer to the discussion under the "Provision and Allowance for Loan Losses, Loan
Loss  Experience"  section in Item  7--"Management's  Discussion and Analysis of
Financial  Condition and Results of  Operations"  of the  Company's  2009 Annual
Report on Form 10-K and the "Balance  Sheet  Review--Allowance  for Loan Losses"
and "Earnings Performance--Provision for Loan Losses" sections of this report on
Form 10-Q for a detailed  description  of the Company's  estimation  process and
methodology related to the Allowance.







                                       15
<PAGE>


                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EARNINGS PERFORMANCE

Overview

         The Company's consolidated  operations for the three months ended March
31, 2010 resulted in a net loss of $1,100,000 compared to net income of $558,000
for the three months  ended March 31, 2009.  After  deducting  for  dividends on
preferred stock and net accretion of preferred  stock,  the  three-month  period
ended March 31, 2010 resulted in a net loss available to common  shareholders of
$1,305,000  or $0.19 per  diluted  share  compared  to net income of $558,000 or
$0.08 per diluted  share for the first quarter of 2009, a decrease of $1,863,000
or $0.27 per  diluted  share.  The return on  average  common  equity,  which is
annualized net income (or loss) available to common shareholders as a percentage
of average  total common  equity,  for the three months ended March 31, 2010 was
(12.72)%, compared to 4.10% for the three months ended March 31, 2009. Return on
average  assets,  which is  annualized  net income (or loss)  divided by average
assets, for the three months ended March 31, 2010 was (3.16)%, compared to 0.31%
for the three months ended March 31, 2009.

Interest Income, Interest Expense and Net Interest Income

         The largest component of the Company's revenue is interest income.  Net
interest income,  which is the difference  between the interest earned on assets
and the interest paid for the  liabilities  used to fund those assets,  measures
the gross  profit  from  lending  and  investing  activities  and is the primary
contributor to the Company's earnings.  Net interest income before provision for
loan losses  increased  $333,000,  or 7.6%, to $4,738,000  for the quarter ended
March 31, 2010 compared to $4,405,000  for the quarter ended March 31, 2009. The
Company's  net  interest  margin for the three  months  ended March 31, 2010 was
3.65%, compared to 3.49% for the quarter ended March 31, 2009.

         The Company's  total interest  income for the first quarter of 2010 was
$6,728,000  compared to $7,437,000  for the first quarter of 2009, a decrease of
$709,000,  or 9.5%.  Interest and fees on loans, the largest  component of total
interest  income,  decreased  by  $687,000  in the  first  quarter  of  2010  to
$5,489,000  from  $6,176,000 for the first quarter of 2009, a decrease of 11.1%.
The decrease in interest and fees on loans for the three-month period was due to
lower  market  interest  rates,  an  increase  in  foregone  interest  income on
non-accrual  loans  and  lower  average  loan  balances.   Interest  on  taxable
securities,  the second largest component of total interest income, decreased by
$12,000 or 1.4% to  $864,000 in the first  quarter of 2010  compared to $876,000
for the first quarter of 2009.  Interest on tax-exempt  securities  decreased by
$18,000 or 4.7% to  $367,000 in the first  quarter of 2010  compared to $385,000
for the first quarter of 2009.  Interest on federal funds sold was $8,000 in the
first quarter of 2010 compared to $0 for the first quarter of 2009.

         The Company's total interest  expense for the first quarter of 2010 was
$1,990,000  compared to $3,032,000  for the first quarter of 2009, a decrease of
$1,042,000,  or 34.4%.  Interest expense on deposits,  the largest  component of
total  interest  expense,  decreased by $841,000 in the first quarter of 2010 to
$1,970,000  compared to $2,811,000  for the first quarter of 2009, a decrease of
29.9%. The decrease in interest  expense on deposits for the three-month  period
is attributable to lower interest rates,  and partially offset by higher average
balances.  Interest  on  federal  funds  purchased  and  securities  sold  under
repurchase  agreements,  the second largest component of total interest expense,
decreased  $8,000 or 28.6% to $20,000 in the first  quarter of 2010  compared to


                                       16
<PAGE>

$28,000 for the first quarter of 2009. The decrease in interest on federal funds
purchased and securities  sold under  repurchase  agreements is  attributable to
lower  average  balances.  Interest on advances  from Federal Home Loan Bank was
$50,000 for the first  quarter of 2009  compared  to no expense  during the same
period of 2010, as the Company had no Federal Home Loan Bank  borrowings  during
the first quarter of 2010.  Interest on notes  payable-other was $143,000 in the
first three months of 2009  compared to zero  expense  during the same period of
2010.  This expense is associated  with the line of credit that was drawn by the
Company during the fourth quarter of 2008,  and  subsequently  repaid during the
second  quarter of 2009 with a portion of the  proceeds of the sale of preferred
stock to the U. S. Treasury.

Provision for Loan Losses

         The  provision for loan losses  charged to operations  during the three
months  ended March 31, 2010 was  $3,425,000  compared to $705,000 for the three
months ended March 31, 2009, an increase of $2,720,000 or 385.8%. The changes in
the Company's  provision for loan losses for the first quarter of 2010 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 $89,000 or 8.6% to $947,000 for the first
quarter of 2010  compared to $1,036,000  for the first quarter of 2009.  Service
fees on deposits, the largest component of non-interest income decreased $38,000
or 9.5% to $363,000 for the first  quarter of 2010  compared to $401,000 for the
first quarter of 2009, as a result of customers  managing their deposit accounts
more carefully.

         Mortgage  banking fees  decreased from $194,000 in the first quarter of
2009 to $85,000 in the first  quarter of 2010,  a decrease of $109,000 or 56.2%.
The drop in  mortgage  banking  income is due to reduced  levels of  residential
mortgage  loan  originations  at the Banks.  Bank owned  life  insurance  income
increased  $2,000 or 1.5% in the first  quarter of 2010 to $136,000  compared to
$134,000 for the first  quarter of 2009,  representing  slightly  higher  growth
rates on the cash-surrender  values of these policies.  Brokerage service income
increased  from  $38,000  in the first  quarter  of 2009 to $53,000 in the first
quarter of 2010, an increase of $15,000 or 39.5% due to higher  commissions from
both the volume and mix of products.

         There was a net gain of  $49,000  in the first  quarter  of 2009 on the
sale of assets  acquired in settlement of loans compared to a loss of $5,000 for
the same period in 2010. The Company sold $2,899,000 of other real estate during
the first quarter of 2010 compared to $2,238,803 during the same period of 2009.
Customer  service fees decreased  $2,000 or 4.8% to $40,000 in the first quarter
of 2010  compared to $42,000 for the first quarter of 2009.  Other  non-interest
income increased $97,000 or 54.5% from $178,000 during the first quarter of 2009
to  $275,000  for the first  quarter  of 2010,  attributable  to the impact of a
$160,000  write-down  due to  impairment  of stock in Silverton  Bank during the
first quarter of 2009.  Interchange  income on debit cards increased  $28,000 or
20.1% to $167,000 in the first quarter of 2010 compared to $139,000 in the first
quarter of 2009.

         There were no gains  realized on the sale of  securities  available for
sale during the first quarter of 2010 or 2009.


                                       17
<PAGE>



Non-interest Expense

         Total non-interest  expense increased $61,000 or 1.5% to $4,145,000 for
the  first  quarter  of 2010 from  $4,084,000  for the  first  quarter  of 2009.
Salaries and benefits, the largest component of non-interest expense,  decreased
$84,000,  or 3.9%, to $2,061,000  for the first quarter of 2010 from  $2,145,000
for the first quarter of 2009.

         Occupancy and furniture and  equipment  expenses  decreased  $36,000 or
6.6% to $511,000 in the first  quarter of 2010 compared to $547,000 in the first
quarter of 2009.  Communication expense decreased $2,000 or 3.1% from $65,000 in
the first quarter of 2009 to $63,000 during the first quarter of 2010.  Printing
and supplies decreased $2,000 or 5.1% from $39,000 for the first quarter of 2009
to $37,000 for the first  quarter of 2010.  These  decreases  were the result of
continued  efforts by  management  to limit and reduce  expenses  in response to
weakened economic conditions.

         Bank paid loan costs  increased  $125,000  or 56.8% to  $345,000 in the
first  quarter of 2010  compared to $220,000 in the first  quarter  2009. Of the
$345,000  expense  incurred  in the  first  three  months of 2010,  $300,000  is
associated  with the  repossession,  write-down and maintenance of collateral on
defaulted  real estate  loans,  compared  to $156,000  during the same period of
2009.

         Marketing  and  advertising  expense  increased  $14,000  or 45.2% from
$31,000  in the first  quarter of 2009 to  $45,000  during the first  quarter of
2010. This increase is  attributable to a higher level of marketing  activity at
the Banks, although marketing activity was still somewhat restricted by the weak
economy.  Legal and professional  expenses  decreased $5,000 or 3.3% to $146,000
for the first  quarter of 2010  compared  to $151,000  for the first  quarter of
2009.

         Regulatory assessments increased $72,000 or 28.8% from $250,000 for the
first  quarter of 2009 to  $322,000  for the first  quarter of 2010.  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.

         All other operating expenses were $373,000 in the first quarter of 2010
compared to $356,000  for the first  quarter of 2009,  an increase of $17,000 or
4.8%.

Income Taxes

         Income taxes  amounted to a $785,000 tax benefit for the first  quarter
of 2010  compared  to a $94,000  expense  for the  first  quarter  of 2009.  The
decrease in income  taxes is  attributable  to the net  pre-tax  loss during the
first quarter of 2010 compared to positive  pre-tax income for the first quarter
of 2009. 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.



                                       18
<PAGE>


BALANCE SHEET REVIEW

Loans

         Outstanding  loans represent the largest component of earning assets at
73.8% of total  earning  assets.  As of March 31,  2010,  the Company held total
gross loans  outstanding of $369,122,000,  a decrease of $4,452,000 or 1.2% from
$373,574,000  in total  gross loans  outstanding  at December  31,  2009,  and a
decrease  of  $23,328,000  or  5.9%  from  $392,450,000  in  total  gross  loans
outstanding at March 31, 2009. The decrease in outstanding loans comes primarily
as the result of lower loan demand from creditworthy  borrowers at the Company's
three banks  subsidiaries,  with some decrease  resulting from a number of loans
that were  charged-off  or  converted  into  other  real  estate  owned  through
foreclosures or deeds in lieu of foreclosure.

<TABLE>
<CAPTION>
Loan Portfolio Composition                                                             March 31,         December 31,      March 31,
(Dollars in thousands)                                                                  2010                2009             2009
                                                                                        ----                ----             ----
                                                                                    (Unaudited)          (Audited)       (Unaudited)
<S>                                                                                   <C>                <C>                <C>
Commercial  and  industrial  - not  secured  by  real estate ..............           $ 40,371           $ 39,981           $ 42,052
Commercial and industrial - secured by real estate ........................            121,864            120,102            112,291
Residential real estate - mortgage ........................................            128,093            126,544            129,632
Residential real estate - construction ....................................             65,028             72,668             93,943
Consumer loans ............................................................             13,766             14,279             14,532
                                                                                      --------           --------           --------
     Gross loans ..........................................................           $369,122           $373,574           $392,450
                                                                                      ========           ========           ========
</TABLE>

         The  interest  rates  charged  on loans  vary with the  degree of risk,
maturity,  and amount of the loan.  Competitive  pressures,  money market rates,
availability of funds, and government  regulation also influence interest rates.
The average  yield on the  Company's  loans for the three months ended March 31,
2010 was 5.91%, compared to 6.22% for the three months ended March 31, 2009. The
Federal Reserve continues to keep the federal funds target rate near zero for an
"extended  period" of time.  A large  portion of the  Company's  adjustable-rate
loans,  which  constitute  approximately  34.4% 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. The vast majority of these
loans is made to borrowers  located in South Carolina and is concentrated in the
Company's market areas.

         The Company's  real estate loans are primarily  construction  loans and
other loans secured by real estate,  both  commercial and  residential,  located
within  the  Company's  trade  areas.  The  Company  does  not  actively  pursue
long-term,  fixed-rate  mortgage  loans  for  retention  in its loan  portfolio.
However,  the Banks do employ mortgage loan originators who originate such loans
that are pre-sold at origination to third parties.

         The  Company's  commercial  lending  activity is  directed  principally
towards businesses whose demand for funds falls within each Bank's legal lending
limits and which are potential  deposit customers of the Banks. This category of
loans includes loans made to individuals, partnerships, and corporate borrowers,
which are obtained for a variety of business  purposes.  Particular  emphasis is
placed on loans to small and medium-sized  businesses.  The Company's commercial
loans are spread  throughout a variety of industries,  with no industry or group
of related  industries  accounting  for a significant  portion of the commercial
loan  portfolio.  Commercial  loans are made on either a secured or an unsecured
basis.   When  taken,   security  usually  consists  of  liens  on  inventories,
receivables,  equipment,  furniture and fixtures. Unsecured commercial loans are


                                       19
<PAGE>

generally  short-term with emphasis on repayment strengths and low debt-to-worth
ratios.  At March 31, 2010,  approximately  $1,961,000,  or 4.85%, of commercial
loans-not secured by real estate 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

         Management of the Company  recognizes that, despite its best efforts to
minimize risk through its credit review process,  losses will inevitably  occur.
As we have  witnessed,  in times of local  economic  slowdown,  the credit  risk
inherent in the Company's loan portfolio will increase. The timing and amount of
loan losses that occur are  dependent  upon several  factors based upon economic
conditions  as  reflected  in the loan  portfolio  and the  economy  as a whole.
Factors  considered in the evaluation of the allowance for loan losses  include,
but are not limited to, estimated  probable  incurred losses from loan and other
credit arrangements, general economic conditions, credit risk grades assigned to
commercial and industrial  and commercial  real estate loans,  changes in credit
concentrations or pledged collateral,  historical loan and lease loss experience
and trends in portfolio volume, composition, delinquencies and non-accruals. The
allowance  for loan  losses is  established  to  absorb  probable  loan  losses.
Additions to the  allowance  are made through the  provision  for loan and lease
losses,  which is a charge to current  operating  earnings.  The adequacy of the
provision and the resulting allowance for loan and lease losses is determined by
management's continuing review of the loan portfolio,  including  identification
and review of individual problem situations that may affect a borrower's ability
to  repay,   delinquency  and  non-performing  loan  data,   collateral  values,
regulatory examination results,  external review results and changes in the size
and  character of the loan  portfolio.  Despite such a review,  the level of the
allowance  for loan and lease losses  remains an  estimate,  cannot be precisely
determined  and may be  subject to change  from  quarter  to  quarter.  Based on
current economic  conditions,  management believes that the current level of the
allowance  for loan and lease  losses is adequate  in  relation to the  probable
losses inherent in the portfolio.

         Commercial  loans are assigned credit risk ranking using a scale of ten
grades  with   allocations  for  probable  losses  made  for  pools  of  similar
risk-graded  loans.  Risk levels in the pass  category are covered by one of the
following numerical grades: 1, 2, 3a, 3b, 3c, or 3d. Loans with a "4" risk grade
have potential weaknesses and are watched carefully by management and are called
"Other  Loans  Especially  Mentioned"  or  OLEM.  Loans  with  signs  of  credit
deterioration  generally  are in grades 5 through 7 and are termed  "classified"
loans in accordance with guidelines established by the Banks' regulators.  These
classified   loans  are  either  included  in  pool   calculations  or  analyzed
individually due to higher risk characteristics. A loan is considered "impaired"
when,  based upon current  information and events,  the probability is high that
both the  principal and interest due under the original  contractual  terms will
not   be   collected   in   full.   The   Company    measures    impairment   of
collateral-dependent  loans  based on the  fair  value  of the  collateral  less
estimated   costs  to  sell.   Allocations   for  loans  which  are   performing
satisfactorily,  generally  in  grades 1  through  3d,  are  based  on  historic
experience for other performing loans, as well as environmental pressures on the
different  loan types and are  assigned  allocation  factors  representing  risk
levels.

                                       20
<PAGE>

         It is the present intent of management to continue to monitor the level
of the  allowance  for loan losses in order to properly  reflect its estimate of
the  exposure,  if any,  represented  by  fluctuations  in the local real estate
market and the  underlying  value that market  provides as collateral to certain
segments of the loan portfolio.  The provision is continually evaluated relative
to portfolio  risk and  regulatory  guidelines  and will  continue to be closely
reviewed. In addition,  the Banks' regulatory agency, as an integral part of its
examination process,  and the Banks' independent  accountants closely review the
allowance  for loan and lease losses.  Either of these  entities may require the
Company to  recognize  additions  to the  allowance  based on their  independent
judgment of information available to them at the time of their reviews.

         The  allowance  for loan  losses at March 31, 2010 was  $8,665,000,  or
2.35%  of  loans  outstanding,   compared  to  $7,431,000,  or  1.99%  of  loans
outstanding,  at  December  31,  2009,  and to  $7,613,000,  or  1.94%  of loans
outstanding, at March 31, 2009. At March 31, 2010 the Company had $16,496,000 in
non-accruing  loans,  $120,000 in loans more than ninety days past due and still
accruing  interest and $12,596,000 in other real estate owned.  This compares to
$14,881,000 in  non-accruing  loans, no loans more than ninety days past due and
still accruing  interest and  $11,490,000 in other real estate owned at December
31, 2009. At March 31, 2009 the Company had $14,056,000 in  non-accruing  loans,
no loans  more  than  ninety  days  past due and  still  accruing  interest  and
$4,921,000 in other real estate owned.  The increase in non-accruing  loans from
March 31, 2009 to March 31, 2010 is due to the overall  downturn in the economy.
The  non-performing  loans are  primarily  secured by  residential  real  estate
consisting  of  1-to-4  family  homes  and   development   lots.  The  Company's
non-performing  loans at March 31, 2010  consisted  of  $15,586,000  in mortgage
loans,   $1,017,000  in  commercial   loans,  and  $13,000  in  consumer  loans.
Non-performing assets as a percentage of loans and other real estate were 7.65%,
6.85%  and 4.78% at March  31,  2010,  December  31,  2009 and  March 31,  2009,
respectively.

         Net  charge-offs  during the three  months  ended  March 31,  2010 were
$2,192,000 compared to net charge-offs of $6,744,000 for the year ended December
31, 2009 and net  charge-offs of $2,309,000 for the three months ended March 31,
2009. The allowance for loan losses as a percentage of non-performing  loans was
52%, 50%, and 54% as of March 31, 2010,  December 31, 2009,  and March 31, 2009,
respectively.

         Management  considers the  allowance for loan losses  adequate to cover
inherent  losses on the loans  outstanding  at March 31, 2010. In the opinion of
management,  there are no material  risks or  significant  loan  concentrations,
other than loans secured by real estate, in the present portfolio. The allowance
for loan losses uses the  Company's  procedures  and methods  which  include the
following risk factors, though they are not intended to be an all inclusive list
of the risks that could ultimately determine the adequacy of the allowance:

          -    The impact of changes in the  international,  national,  regional
               and local economic and business  conditions and developments that
               affect the collectibility of the loan portfolio,  including those
               within our geographic market.
          -    The cumulative  impact of the extended  duration of this economic
               deterioration  on our  borrowers,  in particular  those with real
               estate related loans or businesses.
          -    Changes in the nature and volume in our loan portfolio.
          -    The impact of changes in the  experience,  ability,  and depth of
               the Company's lending management and other relevant staff.
          -    Changes   in   the   value   of   underlying    collateral    for
               collateral-dependent loans.
          -    The impact of changes  in the  volume  and  severity  of past due
               loans,  the  volume of  non-accrual  loans,  and the  volume  and
               severity of adversely classified or graded loans.

                                       21
<PAGE>

          -    Changes in the quality of the Company's loan review system.

         Generally accepted accounting principles, which the Company is required
to  follow,  do not permit the  Company to set aside a reserve  for loan  losses
simply based on an unsupported  assumption or belief that it is so large that it
could not fail to exceed future loan losses.

         No assurance can be given that the Company will not sustain loan losses
in any particular period which are sizable in relation to the amount reserved or
that  subsequent  evaluation of the loan  portfolio,  in light of conditions and
factors then prevailing,  will not require  significant changes in the allowance
for loan losses or future charges to earnings.  The allowance for loan losses is
also subject to review and approval by various regulatory agencies through their
periodic  examinations of the Company's  subsidiaries.  Such examinations  could
result in required changes to the allowance for loan losses.

         The local economy continues to struggle. The housing market,  including
construction and development  projects,  has  demonstrated  stress given reduced
cash  flows  of  individual   borrowers,   limited  bank  financing  and  credit
availability,  and slow  property  sales.  The Company  continues to  diligently
assess its risk,  particularly in the real estate market.  The Company's special
assets  department has been  proactive in foreclosure  actions and sales in 2010
and 2009.  These actions  should start to decrease the Company's  non-performing
assets levels in future periods.

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 certain  obligations of states and municipalities.  The
Company had $152,000 in trading  assets at March 31, 2010,  compared to $128,000
at  December  31,  2009 and  $58,000 in trading  assets at March 31,  2009.  The
Company  uses its  investment  portfolio  to provide  liquidity  for  unexpected
deposit  liquidation  or loan  generation,  to meet the Company's  interest-rate
sensitivity  goals, to secure public deposits,  and to generate income. At March
31, 2010  securities  totaled  $115,536,000,  which  represented  22.9% of total
earning assets.  Total securities  decreased  $677,000 or 0.6% from $116,213,000
invested  as of  December  31,  2009  and  increased  $5,356,000  or  4.9%  from
$110,180,000 invested as of March 31, 2009. The size of the Company's investment
portfolio  is managed  and  fluctuates  from time to time based on the amount of
public deposits held, loan demand,  liquidity needs,  investment  strategy,  and
other pertinent factors.

         At March  31,  2010  the  Company's  total  investments  classified  as
available for sale had an amortized  cost of  $99,920,000  and a market value of
$103,119,000  for a net  unrealized  gain of  $3,199,000.  This  compares  to an
amortized  cost of  $100,159,000  and a  market  value  of  $103,227,000  for an
unrealized  gain  of  $3,068,000  on the  Company's  investments  classified  as
available for sale at December 31, 2009.  At March 31, 2009 the Company's  total
investments   classified  as  available  for  sale  had  an  amortized  cost  of
$91,652,000  and a  market  value  of  $94,227,000  for an  unrealized  gain  of
$2,575,000.  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 position until a market price  recovery or maturity,  and
therefore    these    securities   are   not    considered    impaired   on   an
other-than-temporary basis.

         Securities with carrying  amounts of $32,657,000 at March 31, 2010 were
pledged to secure public  deposits and for other purposes  required or permitted
by law.

                                       22
<PAGE>


Cash Surrender Value of Life Insurance

         The Company's cash surrender value of life insurance was $12,424,000 at
March 31, 2010, an increase of $120,000,  or 1.0%, from the $12,304,000  held at
December 31, 2009 and an increase of  $489,000,  or 4.1%,  from the  $11,935,000
held at March 31, 2009. The increase in cash  surrender  value of life insurance
is due to normal  appreciation in the cash surrender  value  associated with the
ownership of these assets.  Earnings  from the  ownership of these  policies are
informally  used  to  partially  offset  the  cost of  certain  employee-related
benefits.

Cash and Cash Equivalents

         The Company's cash and cash equivalents increased $750,000, or 2.8%, to
$27,624,000  at March 31,  2010 from  $26,874,000  at  December  31,  2009,  and
decreased  $1,396,000,  or  4.8%,  from  $29,020,000  at  March  31,  2009.  The
substantial  swings in the level of cash and cash  equivalents are due to normal
fluctuations  in the Banks'  needs and  sources  for  immediate  and  short-term
liquidity.

Deposits

         The Banks' primary  source of funds for loans and  investments is their
deposits. Total deposits decreased $5,023,000, or 1.0%, to $479,973,000 at March
31, 2010 from  $484,996,000 at December 31, 2009 and increased  $24,800,000,  or
5.5%, from  $455,173,000 at March 31, 2009.  Competition for deposit accounts is
primarily  based on the interest rates paid,  location  convenience and services
offered.

         During the three months ended March 31, 2010, interest-bearing deposits
averaged $429,879,000 compared to $399,509,000 for the same period of 2009. From
time to time the Banks  solicit  certificates  of deposit from  various  sources
through  brokers.  This is done to  reduce  the  need  for  funding  from  other
short-term  sources such as federal funds  purchased and  short-term  borrowings
from the Federal Home Loan Bank of Atlanta. At March 31, 2010, brokered deposits
totaled  $46,797,000,  compared  to  $59,565,000  and  $75,943,000  in  brokered
deposits at December  31, 2009 and March 31,  2009.  At March 31,  2010,  of the
total brokered  deposits  $24,489,000  was acquired  through the  Certificate of
Deposit  Account  Registry  Service  ("CDARS"),  compared  with  $34,517,000  at
December  31, 2009 and  $30,395,000  at March 31,  2009.  The Company  considers
brokered 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 1.83%
during the three  months  ended  March 31,  2010  compared to 2.81% for the same
period of 2009 and 2.43% for the twelve  months  ended  December  31,  2009.  In
pricing  deposits,  the Company considers its liquidity needs, the direction and
levels of  interest  rates,  and local  market  conditions.  At March 31,  2010,
interest-bearing deposits comprised 89.6% of total deposits compared to 88.6% at
December 31, 2009 and 90.4% at March 31, 2009.

         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 75% at March 31, 2010, 78% at December 31, 2009
and 76% at March 31, 2009. Time deposits of $100,000 or more  represented  25.3%


                                       23
<PAGE>

of total  deposits at March 31,  2010,  26.0% at December  31, 2009 and 24.5% at
March 31, 2009. 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  typically  comprised of federal  funds
purchased, securities sold under repurchase agreements, short-term advances from
the Federal Home Loan Bank  ("FHLB")  and a line of credit from a  correspondent
bank. At March 31, 2010 borrowings totaled $15,051,000 and were comprised solely
of securities sold under repurchase agreements.  At December 31, 2009 borrowings
totaled  $13,184,000 and were comprised of $399,000 in federal funds  purchased,
and $12,785,000 in securities  sold under  repurchase  agreements.  At March 31,
2009  borrowings  totaled  $60,681,000  and were  comprised  of  $34,000,000  in
short-term  advances  from the FHLB and  $15,681,000  in  securities  sold under
repurchase  agreements and  $11,000,000 on a line of credit from a correspondent
bank.  Federal funds  purchased and short-term  FHLB advances are used primarily
for the immediate cash needs of the Company.

LIQUIDITY

         Liquidity management involves meeting the cash flow requirements of the
Company.  The Company's  liquidity position is primarily dependent upon its need
to respond to  short-term  demand for funds caused by increased  loan demand and
withdrawals  from deposit  accounts.  The Company's  primary  liquidity  sources
include cash and due from banks,  federal funds sold,  securities  available for
sale and a line of credit  established  with a correspondent  bank. In addition,
the Company  (through the Banks) has the ability to borrow funds on a short-term
basis from the Federal  Reserve System and to purchase  federal funds from other
financial institutions. The Banks are also members of the Federal Home Loan Bank
System and have the ability to borrow both  short-term and long-term  funds on a
secured basis. At March 31, 2010, The Peoples  National Bank had total borrowing
capacity from the FHLB equal to  $70,040,000,  all of which was unused.  Bank of
Anderson,  N.A. had total borrowing capacity from the FHLB equal to $26,400,000,
all of which was unused at March 31, 2010.  Seneca National Bank had established
secured lines of credit with the FHLB at March 31, 2010 of  $11,110,000,  all of
which was unused.  At March 31, 2010,  the Banks also had unused  federal  funds
lines of credit with various correspondent banks totaling $22,000,000.

         Peoples  Bancorporation,  Inc., the parent holding company, has limited
liquidity  needs outside those of its  subsidiaries,  and requires  funds to pay
limited operating expenses and dividends.  The parent company's  liquidity needs
are fulfilled through  management fees assessed to each subsidiary bank and from
dividends passed up to the parent company from the Banks.

         During the first three  months half of 2010,  the Company  made capital
expenditures  of  approximately  $113,000  related  primarily to new information
technology equipment and upgrades, office equipment and building upgrades at two
of our Bank locations.  The Company also makes other capital expenditures in the
normal course of business.

         Company management  believes its liquidity sources are adequate to meet
its  operating  needs  and does not know of any  trends  that may  result in the
Company's liquidity materially increasing or decreasing.


                                       24
<PAGE>


OFF-BALANCE SHEET RISK AND DERIVATIVE FINANCIAL INSTRUMENTS

         The Company,  through the  operations of the Banks,  makes  contractual
commitments to extend credit in the ordinary course of its business  activities.
These  commitments are legally binding  agreements to lend money to customers of
the Banks at  predetermined  interest  rates for a specified  period of time. At
March 31, 2010, the Banks had issued commitments to extend credit of $71,122,000
through various types of arrangements.  The commitments  generally expire within
one year.  Past  experience  indicates that many of these  commitments to extend
credit will expire not fully used. As described under  "Liquidity,"  the Company
believes that it has adequate  sources of liquidity to fund commitments that are
drawn upon by the borrowers.

         In  addition  to  commitments  to extend  credit,  the Banks also issue
standby  letters of credit,  which are  assurances to a third party that it will
not  suffer  a loss  if the  Bank's  customer  fails  to  meet  its  contractual
obligation to the third party.  Standby letters of credit totaled  $2,396,000 at
March 31, 2010. 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.

         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.




                                       25
<PAGE>


CAPITAL ADEQUACY AND RESOURCES

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

The Company and the Banks are  required to maintain  certain  capital  ratios by
federal  banking  regulators.  The following table sets forth the capital ratios
for the Company and the Banks as of March 31, 2010:


                                 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             $    52,505    13.37%           N/A      N/A     $   31,417         8.00%
Tier 1 Risk-based Capital                 47,554    12.11            N/A      N/A         15,707         4.00
Leverage Ratio                            47,554     8.66            N/A      N/A         21,965         4.00

The Peoples National Bank:
Total Risk-based Capital             $    30,831    12.32%    $   25,025    10.00%    $   20,020         8.00%
Tier 1 Risk-based Capital                 27,667    11.06         15,009     6.00         10,006         4.00
Leverage Ratio                            27,667     8.23         16,809     5.00         13,447         4.00

Bank of Anderson, N. A.(1):
Total Risk-based Capital             $    13,353    15.31%            (1)      (1)    $  10,466(1)      12.00%(1)
Tier 1 Risk-based Capital                 12,258    14.05             (1)      (1)        8,725(1)      10.00(1)
Leverage Ratio                            12,258     9.34             (1)      (1)       10,499(1)       8.00(1)

Seneca National Bank:
Total Risk-based Capital             $     6,805    12.37%    $    5,501    10.00%    $    4,401         8.00%
Tier 1 Risk-based Capital                  6,113    11.11          3,301     6.00          2,201         4.00
Leverage Ratio                             6,113     8.09          3,778     5.00          3,022         4.00
</TABLE>


(1) The OCC has  established  individual  minimum  capital  ratios  for  Bank of
Anderson pursuant to 12 C.F.R.  Section 3.10. These minimum  requirements exceed
the regulatory  requirements to be well capitalized,  and,  therefore,  the well
capitalized requirements are not shown.






                                       26
<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  Banks  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 Banks also use an earnings simulation model that estimates the
variations in interest  income under  different  interest-rate  environments  to
measure and manage the Bank's short-term  interest-rate  risk.  According to the
model,  as of March 31,  2010 the Company was  positioned  so that net  interest
income would  increase  $687,000 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  $254,000  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 Banks  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.

         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.



                                       27
<PAGE>


Item 4.           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.






                                       28
<PAGE>


PART II.  OTHER INFORMATION

Item 6.       Exhibits

              Exhibits.

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




                                       29
<PAGE>




SIGNATURES

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


                                           PEOPLES BANCORPORATION, INC.


Dated:  May 14, 2010                       By:    /s/ R. Riggie Ridgeway
                                                ------------------------
                                                  R. Riggie Ridgeway
                                                  Chief Executive Officer


Dated:  May 14, 2010                       By:   /s/ Robert E. Dye, Jr.
                                               ------------------------
                                                  Robert E. Dye, Jr.
                                                  Senior Vice President and CFO
                                                  (principal financial officer)




                                       30

<PAGE>


                                  Exhibit Index

Exhibit No.               Description of Exhibit

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









                                       31