SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

  For the Quarterly Period Ended                          Commission file
           June 30, 2005                                     000-20616

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

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

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

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


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

                             Yes [X] No [ ]

               Indicate by check mark whether the registrant is an
                 accelerated filer (as defined in Rule 12 b-2 of
                               the Exchange Act).

                              Yes [ ] No [X]

                     The number of outstanding shares of the
                      issuer's $1.11 par value common stock
                       as of August 4, 2005 was 5,942,368.




<PAGE>



PART I - FINANCIAL INFORMATION
Item 1. Financial Statements


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

<TABLE>
<CAPTION>
                                                                                    June 30,           June 30,         December 31,
                                                                                      2005               2004                2004
                                                                                   Unaudited          Unaudited            Audited
                                                                                   ---------          ---------            -------
ASSETS
<S>                                                                                 <C>                <C>                <C>
CASH AND DUE FROM BANKS ...................................................         $  12,035          $  11,653          $   8,630
INTEREST-BEARING DEPOSITS IN OTHER BANKS ..................................             1,143                961              1,028
FEDERAL FUNDS SOLD ........................................................             2,855              9,976              2,631
                                                                                    ---------          ---------          ---------
     Total cash and cash equivalents ......................................            16,033             22,590             12,289
SECURITIES
     Available for sale ...................................................            64,650             64,053             62,052
     Held for investment (market value of $8,000, $7,334 and
          $7,451) .........................................................             8,027              7,434              7,386
       Other investments, at cost .........................................             1,770              1,814              1,809
LOANS-less allowance for loan losses of $3,933, $3,607 and
          $3,691 ..........................................................           352,693            307,329            322,212
MORTGAGE LOANS HELD FOR SALE ..............................................                 -              4,049                  -
PREMISES AND EQUIPMENT, net of accumulated
     depreciation and amortization ........................................            10,995             11,203             11,075
ACCRUED INTEREST RECEIVABLE ...............................................             2,008              1,679              1,830
CASH SURRENDER VALUE OF LIFE INSURANCE ....................................             9,237              9,522              9,049
OTHER ASSETS ..............................................................             2,667              2,202              2,094
                                                                                    ---------          ---------          ---------
         TOTAL ASSETS .....................................................         $ 468,080          $ 431,875          $ 429,796
                                                                                    =========          =========          =========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
DEPOSITS
     Noninterest-bearing ..................................................         $  52,770          $  47,551          $  51,507
     Interest-bearing .....................................................           337,289            307,467            294,638
                                                                                    ---------          ---------          ---------
         Total deposits ...................................................           390,059            355,018            346,145
SECURITIES SOLD UNDER REPURCHASE
     AGREEMENTS ...........................................................            27,941             32,589             33,953
FEDERAL FUNDS PURCHASED ...................................................               479                267                572
NOTES PAYABLE TO FEDERAL HOME LOAN BANK ...................................             7,000              5,000              8,500
ACCRUED INTEREST PAYABLE ..................................................             1,637              1,245              1,154
OTHER LIABILITIES .........................................................             1,261              1,594              1,232
                                                                                    ---------          ---------          ---------
         Total Liabilities ................................................           428,377            395,713            391,556
                                                                                    ---------          ---------          ---------
SHAREHOLDERS' EQUITY
Common Stock - 15,000,000 shares authorized, $1.11
     Par value per share, 5,942,368 shares, 5,523,842 shares ..............             6,596              6,132              6,463
       and 5,822,608 shares outstanding, respectively .....................
Additional paid-in capital ................................................            32,443             29,523             32,237
Retained Earnings .........................................................             1,320              1,467                  -
Accumulated other comprehensive income (loss) .............................              (656)              (960)              (460)
                                                                                    ---------          ---------          ---------
         Total Shareholders' Equity .......................................            39,703             36,162             38,240
                                                                                    ---------          ---------          ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................................         $ 468,080          $ 431,875          $ 429,796
                                                                                    =========          =========          =========
</TABLE>


                                       1
<PAGE>


                 Peoples Bancorporation, Inc. and Subsidiaries
                        Consolidated Statements of Income
                    (Dollars in thousands except share data)
                                    Unaudited

<TABLE>
<CAPTION>
                                                                            Three Months Ended                   Six Months Ended
                                                                                   June 30,                          June 30,
                                                                                   --------                          --------
                                                                           2005              2004             2005              2004
                                                                           ----              ----             ----              ----
INTEREST INCOME
<S>                                                                    <C>              <C>              <C>              <C>
   Interest and fees on loans ..................................       $    5,787       $    4,573       $   11,035       $    9,053
   Interest on securities
       Taxable .................................................              474              461              920              978
       Tax-exempt ..............................................               60               58              119              110
   Interest on federal funds ...................................               77               21              131               55
                                                                       ----------       ----------       ----------       ----------
Total interest income ..........................................            6,398            5,113           12,205           10,196
                                                                       ----------       ----------       ----------       ----------
INTEREST EXPENSE
   Interest on deposits ........................................            1,942            1,448            3,545            2,977
   Interest on federal funds purchased and securities
       sold under repurchase agreements ........................              156               70              302              130
    Interest on notes payable Federal Home Loan Bank ...........               68               65              164              126
                                                                       ----------       ----------       ----------       ----------
Total interest expense .........................................            2,166            1,583            4,011            3,233
                                                                       ----------       ----------       ----------       ----------
Net interest income ............................................            4,232            3,530            8,194            6,963

PROVISION FOR LOAN LOSSES ......................................              183              153              356              283
                                                                       ----------       ----------       ----------       ----------
Net interest income after provision for loan losses ............            4,049            3,377            7,838            6,680
                                                                       ----------       ----------       ----------       ----------
NON-INTEREST INCOME
   Service fees and other income ...............................              887              881            1,772            1,619
   Gain on sale of mortgage loans held for sale ................                -              615                -            1,087
   Gain on sale of available for sale securities ...............                3               34                7              127
                                                                       ----------       ----------       ----------       ----------
                                                                              890            1,530            1,779            2,833
                                                                       ----------       ----------       ----------       ----------
NON-INTEREST EXPENSES
   Salaries and benefits .......................................            2,006            2,099            4,004            4,254
   Occupancy ...................................................              181              167              354              326
   Equipment ...................................................              319              322              686              617
   Marketing and advertising ...................................              121               70              206              149
   Communications ..............................................               54               56              111              117
   Printing and supplies .......................................               36               53               72               96
   Bank paid loan costs ........................................               56               83              109              144
   Director fees ...............................................               94               69              173              141
   Executive retirement benefit expense ........................               29               29               58              448
   Legal and professional fees .................................               71               67              164              106
   Other operating expenses ....................................              484              441              847              850
                                                                       ----------       ----------       ----------       ----------
             Total noninterest expenses ........................            3,451            3,456            6,784            7,248
                                                                       ----------       ----------       ----------       ----------
   Income before income taxes ..................................            1,488            1,451            2,833            2,265

PROVISION FOR INCOME TAXES .....................................              487              454              921              727
                                                                       ----------       ----------       ----------       ----------
   Net income ..................................................       $    1,001       $      997       $    1,912       $    1,538
                                                                       ==========       ==========       ==========       ==========
INCOME PER COMMON SHARE
   BASIC .......................................................       $     0.17       $     0.17       $     0.32       $     0.26
                                                                       ==========       ==========       ==========       ==========
   DILUTED .....................................................       $     0.17       $     0.17       $     0.32       $     0.26
                                                                       ==========       ==========       ==========       ==========
WEIGHTED AVERAGE COMMON SHARES
   BASIC .......................................................        5,930,160        5,800,338        5,906,741        5,800,338
                                                                       ==========       ==========       ==========       ==========
   DILUTED .....................................................        6,079,207        6,030,254        6,060,398        6,020,174
                                                                       ==========       ==========       ==========       ==========
CASH DIVIDENDS PAID PER COMMON SHARE ...........................       $     0.05       $     0.07       $     0.10       $     0.14
                                                                       ==========       ==========       ==========       ==========
</TABLE>




                                       2
<PAGE>

                  Peoples Bancorporation, Inc. and Subsidiaries
           Consolidated Statements of Changes in Shareholders' Equity
                 for the six months ended June 30, 2005 and 2004

                    (Dollars in thousands except share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                          Accumulated
                                                           Common stock           Additional                 other         Total
                                                           ------------             paid-in   Retained   comprehensive shareholders'
                                                        Shares         Amount       capital   earnings   Income (loss)     equity
                                                        ------         ------       -------   --------   -------------     ------
<S>                                                   <C>          <C>           <C>          <C>          <C>           <C>
Balance, December 31, 2003 .......................    5,523,842    $    6,131    $   29,524   $      444   $       62    $   36,161
Net Income .......................................                                                 1,538                      1,538
Other comprehensive income, net of tax:
   Unrealized holding gains on
     securities available for sale,
     net of income taxes of $495 .................                                                               (938)         (938)
   Less reclassification
     adjustments for gains
     included in net income, net of
     income taxes of $43 .........................                                                                (84)          (84)
                                                                                                                         ----------
Comprehensive income .............................                                                                              516
Cash Dividends ...................................                                                  (515)                      (515)

                                                      ---------    ----------    ----------   ----------   ----------    ----------
Balance, June 30, 2004 ...........................    5,523,842    $    6,131    $   29,524   $    1,467   $     (960)   $   36,162
                                                      =========    ==========    ==========   ==========   ==========    ==========

Balance, December 31, 2004 .......................    5,822,608    $    6,463    $   32,237   $        -   $     (460)   $   38,240
Net Income .......................................                                                 1,912                      1,912
Other comprehensive income, net of tax:
   Unrealized holding losses on
     securities available for sale,
     net of income taxes of $338 .................                                                               (191)         (191)
   Less reclassification
     adjustments for gains
     included in net income, net of
     income taxes of $2 ..........................                                                                 (5)           (5)
                                                                                                                         ----------

Comprehensive income .............................                                                                            1,716
Cash Dividends ...................................                                                  (592)                      (592)
Proceeds from stock options ......................      119,760           133           206                                     339
                                                      ---------    ----------    ----------   ----------   ----------    ----------

Balance, June 30, 2005 ...........................    5,942,368    $    6,596    $   32,443   $    1,320   $     (656)   $   39,703
                                                      =========    ==========    ==========   ==========   ==========    ==========
</TABLE>








                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                               (Unaudited)
                                                                                                             Six months Ended
                                                                                                                  June 30,
                                                                                                                  --------
                                                                                                          2005                 2004
                                                                                                          ----                 ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                                     <C>                <C>
   Net Income ................................................................................          $  1,912           $  1,538
   Adjustments to reconcile net income to net cash provided
     by operating activities
   Gain on sale of premises and equipment ....................................................                10                (13)
   Gain on sale of securities available for sale .............................................                (7)              (127)
   Gain on sale mortgage loans held for sale .................................................                 -             (1,087)
   Provision for loan losses .................................................................               356                283
   Depreciation and amortization .............................................................               588                501
   Amortization and accretion (net) of premiums and
     discounts on securities .................................................................                59                148
   Origination of mortgage loans held for sale ...............................................                 -            (97,539)
   Sale of mortgage loans held for sale ......................................................                 -             99,678
   Decrease in accrued interest receivable ...................................................              (178)               142
   Decrease (increase) in other assets .......................................................              (221)              (447)
   Decrease in accrued interest payable ......................................................               483               (359)
   Increase in other liabilities .............................................................                29                975
                                                                                                        --------           --------
     Net cash provided by operating activities ...............................................             3,031              3,693
                                                                                                        --------           --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of securities held for investment ...............................................            (1,678)            (2,139)
   Purchases of securities available for sale ................................................            (4,817)           (21,236)
   Purchase of other investments .............................................................                39               (139)
   Proceeds from the principal pay downs on securities available for sale ....................             1,527              3,292
   Proceeds from the maturity of securities held to maturity .................................             1,018                320
   Proceeds from the maturity of securities available for sale ...............................                 -                472
   Proceeds from the sale of securities available for sale ...................................               358              8,101
   Proceeds from the call of securities available for sale ...................................                 -             22,825
   Purchase of cash surrender value life insurance ...........................................              (188)            (7,224)
   Net increase in loans .....................................................................           (31,084)           (14,798)
   Proceeds from the sale of premises and equipment ..........................................                22                 18
   Purchase of premises and equipment ........................................................              (540)            (1,478)
                                                                                                        --------           --------
     Net cash used in investing activities ...................................................           (35,343)           (11,986)
                                                                                                        --------           --------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in deposits ..................................................................            43,914              1,689
   Net increase (decrease) in securities sold under repurchase
     agreements ..............................................................................            (6,012)             8,199
   Net increase in federal funds purchased ...................................................               (93)               267
   Net decrease in notes payable to Federal Home Loan Bank ...................................            (1,500)                 -
    Proceeds from the Sale/Exercise of Stock .................................................               339                  -
   Cash dividend .............................................................................              (592)              (515)
                                                                                                        --------           --------
     Net cash provided by financing activities ...............................................            36,056              9,640
                                                                                                        --------           --------
     Net increase in cash and cash equivalents ...............................................             3,744              1,347
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR .................................................            12,289             21,243
                                                                                                        --------           --------
CASH AND CASH EQUIVALENTS, END OF PERIOD .....................................................          $ 16,033           $ 22,590
                                                                                                        ========           ========

CASH PAID FOR
     Interest ................................................................................          $  3,528           $  3,375
                                                                                                        ========           ========
     Income Taxes ............................................................................          $    859           $    545
                                                                                                        ========           ========
</TABLE>



                                       4
<PAGE>


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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      A summary of these  policies is included in the 2004 Annual Report on Form
10-K and incorporated herein by reference.

STATEMENT OF CASH FLOWS

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

COMMON STOCK

     The Board of Directors declared cash dividends of $0.05 per common share to
shareholders  of record March 18, 2005 and June 17, 2005,  payable April 4, 2005
and July 5, 2005, respectively.

     Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share,"  requires  that the  Company  present  basic and  diluted net income per
common share.  The assumed  conversion of stock options  creates the  difference
between  basic and diluted net income per share.  Income per share is calculated
by  dividing  net  income  by the  weighted  average  number  of  common  shares
outstanding  for each period  presented.  The weighted  average number of common
shares  outstanding  for basic net income  per  common  share for the six months
ended June 30, 2005 and 2004 was  5,906,741  and  5,800,338,  respectively.  The
weighted average number of common shares  outstanding for diluted net income per
common share was  6,060,398 and 6,020,174 for the six months ended June 30, 2005
and 2004, respectively.

      The following table  illustrates the effect on net income and earnings per
share if the  Company  had  applied  the fair value  recognition  provisions  of
Financial  Accounting  Standards  Board ("FASB") SFAS No. 123,  "Accounting  for
Stock-Based Compensation," to stock-based employee compensation.

<TABLE>
<CAPTION>
                                                                                 Three Months Ended            Six Months Ended
                                                                                      June 30,                     June 30,
                                                                                      --------                     --------
                                                                                 2005          2004           2005          2004
                                                                                 ----          ----           ----          ----

<S>                                                                         <C>           <C>             <C>             <C>
Net income, as reported .......................................             $     1,001   $      997      $    1,912      $   1,538
Deduct:  total stock-based employee compensation
  expense determined under fair value based method
  for all awards, Net of related tax effects ..................                     (34)         (27)            (58)           (55)
                                                                            -----------      -------       ---------      ---------
Pro forma net income ..........................................             $       967      $   970      $    1,854      $   1,483
                                                                            ===========      =======       =========      =========
Net income per common share
  Basic - as reported .........................................             $      0.17      $  0.17       $    0.32      $    0.26
                                                                            ===========      =======       =========      =========
  Basic - pro forma ...........................................             $      0.16      $  0.17       $    0.31      $    0.26
                                                                            ===========      =======       =========      =========
  Diluted - as reported .......................................             $      0.17      $  0.17       $    0.32      $    0.26
                                                                            ===========      =======       =========      =========
  Diluted - pro forma .........................................             $      0.16      $  0.16       $    0.31      $    0.25
                                                                            ===========      =======       =========      =========
</TABLE>

     Per share data in 2004 has been restated to reflect the 3-for-2 stock split
effected in October 2004 and the 5% stock dividend declared in December 2004.


                                       5
<PAGE>

MANAGEMENT'S OPINION

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

Forward-Looking Statements

         From time to time,  including in this  report,  the Company may publish
forward-looking  statements  relating to such matters as  anticipated  financial
performance,  business prospects,  technological developments,  new products and
similar   matters.   All   statements   that  are  not   historical   facts  are
"forward-looking  statements."  Words such as "estimate,"  "project,"  "intend,"
"expect,"  "believe,"  "anticipate,"  "plan," and similar  expressions  identify
forward-looking statements. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking  statements.  In order to comply with
terms of the safe  harbor,  the  Company  notes that a variety of factors  could
cause the Company's actual results and experience to differ  materially from the
anticipated   results  or  other   expectations   expressed  in  the   Company's
forward-looking  statements.  The risks and  uncertainties  that may  affect the
operations,  performances,  development  and results of the  Company's  business
include,  but are not limited to, the following:  risks from changes in economic
and industry  conditions;  changes in interest  rates;  risks inherent in making
loans  including  repayment  risks  and  value of  collateral;  adequacy  of the
allowance for loan losses; dependence on senior management; and recently-enacted
or proposed  legislation.  Statements  contained  in this report  regarding  the
demand for Peoples  Bancorporation's  products and services,  changing  economic
conditions,  interest rates, consumer spending and numerous other factors may be
forward-looking statements and are subject to uncertainties and risks.





                                       6
<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 2004
Annual  Report  of  Peoples  Bancorporation,  Inc.  on  Form  10-K.  Results  of
operations for the  three-month  and six-month  periods ending June 30, 2005 are
not necessarily indicative of the results to be attained for any other period.

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 in the preparation of the Company's  financial  statements.
The significant accounting policies of the Company are described in Item 8, Note
1 to the  Consolidated  Financial  Statements  in the 2004 Annual Report on Form
10-K of Peoples Bancorporation, Inc.

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

     Of  these  significant  accounting  policies,  the  Company  considers  its
policies  regarding the allowance  for loan losses (the  "Allowance")  to be its
most  critical  accounting  policy due to the  significant  degree of management
judgment  involved in determining  the amount of the Allowance.  The Company has
developed  policies and  procedures for assessing the adequacy of the Allowance,
recognizing  that this process  requires a number of  assumptions  and estimates
with respect to its loan portfolio. The Company's assessments may be impacted in
future  periods by  changes in  economic  conditions,  the impact of  regulatory
examinations,  and the discovery of information with respect to borrowers, which
is not  known to  management  at the time of the  issuance  of the  consolidated
financial statements.  Refer to the discussion under Provision and Allowance for
Loan Losses, Loan Loss Experience section of the Company's 2004 Annual Report on
Form 10-K and the  Allowance  for Loan  Losses  and  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.



                                       7
<PAGE>



Overview

       The  Company  is  a  bank  holding   company   with  three   wholly-owned
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 seven banking  offices located in the Upstate Area of
South Carolina.





                                       8
<PAGE>


                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EARNINGS PERFORMANCE

Overview

     The Company's  consolidated  net income for the second  quarter of 2005 was
$1,001,000 or $0.17 per diluted share  compared to $997,000 or $0.17 per diluted
share for the second  quarter of 2004, an increase of $4,000 or 0.4%. Net income
for the six months ended June 30, 2005 was $1,912,000 or $0.32 per diluted share
compared to  $1,538,000 or $0.26 per diluted share for the six months ended June
30, 2004, an increase of $374,000 or 24.3%. Return on average equity for the six
months and three months  ended June 30, 2005 was 9.74% and 10.04%  respectively,
compared to 8.42% and 10.86%  respectively  for the six months and three  months
ended  June 30,  2004.  Return on  average  assets  for the six months and three
months ended June 30, 2005 was 0.85% and 0.87%  respectively,  compared to 0.72%
and 0.92%  respectively for the six months and three months ended June 30, 2004.
The increases in the Company's net income, diluted earnings per share, return on
average  equity,  and  return on  average  assets in the first  half of 2005 are
largely attributable to growth in average balances and yields of earning assets,
and the negative impact of a one-time expense incurred in the first half of 2004
that  was  related  to  salary  continuation  and  death  benefit  plans  for an
executive.

Interest Income, Interest Expense and Net Interest Income

     The largest  component of the Company's income is net 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  $702,000 or 19.9% to $4,232,000 in the quarter ended June
30, 2005 compared to $3,530,000 in the quarter ended June 30, 2004.  For the six
months ended June 30, 2005 net interest income before  provision for loan losses
increased  $1,231,000 or 17.7% to $8,194,000  compared to $6,963,000 for the six
months  ended June 30, 2004.  The  Company's  net interest  margin for the three
months and six months  ending  June 30,  2005 was 3.95% and 3.93%  respectively,
compared  to 3.54% and 3.50%  respectively  for the three  months and six months
ended June 30, 2004.

     The  Company's  total  interest  income for the second  quarter of 2005 was
$6,398,000 compared to $5,113,000 for the second quarter of 2004, an increase of
$1,285,000  or 25.1%.  Total  interest  income for the six months ended June 30,
2005 was  $12,205,000  compared to $10,196,000 for the six months ended June 30,
2004,  an increase  of  $2,009,000  or 19.7%.  Interest  and fees on loans,  the
largest component of total interest income,  increased  $1,214,000 in the second
quarter of 2005 to $5,787,000  compared to $4,573,000  for the second quarter of
2004, an increase of 26.5%.  Interest and fees on loans increased $1,982,000 for
the six months ended June 30, 2005 to $11,035,000 compared to $9,053,000 for the
six months ended June 30,  2004,  an increase of 21.9%.  The  increases in total
interest  income  and  interest  and fees on loans are  primarily  due to higher


                                       9
<PAGE>

average balances in these types of earning assets, and also due to higher yields
earned on these assets.

     Interest  on taxable  securities,  the second  largest  component  of total
interest  income  increased  $13,000 in the second  quarter of 2005 to  $474,000
compared  to  $461,000  for the second  quarter of 2004,  an  increase  of 2.8%.
Interest on taxable  securities  decreased $58,000 for the six months ended June
30, 2005 to $920,000  compared  to  $978,000  for the six months  ended June 30,
2004, a decrease of 5.9%.

     The Company's  total  interest  expense for the second  quarter of 2005 was
$2,166,000 compared to $1,583,000 for the second quarter of 2004, an increase of
$583,000 or 36.8%. Total interest expense for the six months ended June 30, 2005
was $4,011,000 compared to $3,233,000 for the six months ended June 30, 2004, an
increase  of  $778,000  or 24.1%.  Interest  expense on  deposits,  the  largest
component of total interest expense, increased $494,000 in the second quarter of
2005 to  $1,942,000  compared to $1,448,000  for the second  quarter of 2004, an
increase of 34.1%.  Interest expense on deposits  increased $568,000 for the six
months  ended June 30, 2005 to  $3,545,000  compared to  $2,977,000  for the six
months  ended June 30,  2004,  an increase of 19.1%.  Interest on federal  funds
purchased and securities sold under  repurchase  agreements,  the second largest
component of total interest expense,  increased $86,000 or 122.9% to $156,000 in
the second  quarter of 2005 compared to $70,000 for the second  quarter of 2004.
Interest  on federal  funds  purchased  and  securities  sold  under  repurchase
agreements  increased  $172,000  or 132.3% to $302,000 in the first half of 2005
compared to $130,000  for the first half of 2004.  Interest on notes  payable to
the  Federal  Home Loan Bank,  the third  largest  component  of total  interest
expense,  increased  $3,000 or 4.6% to  $68,000  in the  second  quarter of 2005
compared to $65,000 for the second quarter of 2004. Interest on notes payable to
the Federal Home Loan Bank  increased  $38,000 or 30.2% to $164,000 in the first
half of 2005  compared to $126,000  for the first half of 2004.  The increase in
interest  expense among the various  types of  interest-bearing  liabilities  is
largely  attributable to significantly  higher market interest rates experienced
at the Company's bank  subsidiaries  during the first half of 2005 when compared
to the first half of 2004, as well as higher  average  balances in some of these
accounts.

Provision for Loan Losses

     The provision for loan losses charged to operations during the three months
and six months  ended June 30, 2005 was  $183,000  and  $356,000,  respectively,
compared to $153,000 and  $283,000,  respectively,  for the three months and six
months  ended June 30, 2004.  The changes in the  Company's  provision  for loan
losses for the second  quarter and first half of 2005 are based on  management's
evaluation  of the  Company's  overall  credit  quality and its estimate of loan
losses inherent in the loan portfolio.


                                       10
<PAGE>


Non-interest Income

     Non-interest  income decreased $640,000 or 41.8% to $890,000 for the second
quarter  of  2005  compared  to  $1,530,000  for the  second  quarter  of  2004.
Non-interest  income  decreased  $1,054,000 or 37.2% to $1,779,000 for the first
half of  2005  compared  to  $2,833,000  for the  first  half of  2004.  This is
primarily  due to the  Company's  exit  from the  wholesale  mortgage  business.
Service fees and other income,  the largest  component of  non-interest  income,
increased  $6,000 or 0.7% to $887,000 for the second quarter of 2005 compared to
$881,000 for the second quarter of 2004. Service fees and other income increased
$153,000  or 9.5% to  $1,772,000  for the  second  quarter of 2005  compared  to
$1,619,000 for the second quarter of 2004.

     Mortgage banking income,  the second largest  component of service fees and
other income,  increased  from zero in the second  quarter of 2004 to $98,000 in
the second quarter of 2005, and increased from zero in the first half of 2004 to
$221,000  in the first half of 2005.  This is due to the fact that all  mortgage
banking  income was formerly  reported as gains on mortgage  loans held for sale
because these pre-sold loans were closed and funded by The Peoples National Bank
prior to their actual sale.  Gains on mortgage  loans held for sale,  the second
largest component of non-interest  income in 2004,  decreased 100% from $615,000
during the second quarter of 2004 to zero during the second quarter of 2005, and
decreased 100% from $1,087,000  during the first half of 2004 to zero during the
first half of 2005.  During 2004 management made the decision to completely exit
the wholesale  mortgage  business due to the significant  decrease in demand for
residential  mortgage loans and refinancing,  and therefore at December 31, 2004
the Company no longer owned any  mortgage  loans held for sale.  Currently,  the
Company's  mortgage  banking income consists  entirely of fees collected for the
origination of residential mortgages at the Company's banks.

     Gains of $3,000 and  $34,000,  respectively,  were  realized on the sale of
available-for-sale securities during the second quarters of 2005 and 2004. Gains
on  available-for-sale  securities  were $7,000 for the first six months of 2005
compared to $127,000 for the first six months of 2004, a decrease of $120,000.

Non-interest Expense

     Total  non-interest  expense decreased $5,000 or 0.1% to $3,451,000 for the
second quarter of 2005 from  $3,456,000  for the second  quarter of 2004.  Total
non-interest expense decreased $464,000 or 6.4% to $6,784,000 for the first half
of 2005 from $7,248,000 for the first half of 2004.  Salaries and benefits,  the
largest  component  of  non-interest  expense,  decreased  $93,000  or 4.4%,  to
$2,006,000 for the second quarter of 2005 from $2,099,000 for the second quarter
of 2004. Salaries and benefits decreased $250,000 or 5.9%, to $4,004,000 for the
first half of 2005 from  $4,254,000 for the first half of 2004. The decreases in
salaries and benefits are primarily due to a reduction in  commissions  paid and
changes in personnel due to the exit from the wholesale  mortgage loan business.
The decreases are partially  offset by the addition of four persons hired in the
residential  construction  lending area, as well as normal salary  increases and
other changes in personnel throughout the Company.

                                       11
<PAGE>

     Occupancy and furniture and equipment expenses increased $11,000 or 2.2% to
$500,000  in the  second  quarter of 2005  compared  to  $489,000  in the second
quarter of 2004.  Occupancy  and  furniture  and  equipment  expenses  increased
$97,000 or 10.3% to $1,040,000  for the first half of 2005 from $943,000 for the
first half of 2004. The increase is primarily  attributable to the completion of
an expansion and renovation to the main office of Bank of Anderson,  N.A. in the
third quarter of 2004.


     Executive retirement benefit expense was unchanged at $29,000 in the second
quarter of 2005  compared  to $29,000 in the second  quarter of 2004.  Executive
retirement  benefit expense decreased $390,000 or 87.1% to $58,000 for the first
half of 2005  from  $448,000  for the  first  half of  2004.  This  decrease  is
attributable to a one-time,  non-recurring  charge incurred in the first quarter
of 2004 in the amount of $376,000 to increase the liability  for death  benefits
payable to the beneficiary of the Company's former Chairman,  President and CEO,
who died shortly  after the end of the period.  This charge was required by SFAS
No. 112 in accordance with generally accepted accounting principles.

     Miscellaneous  other  non-interest  expenses  increased  $43,000 or 9.8% to
$484,000 for the second  quarter of 2005 from $441,000 for the second quarter of
2004. Other  non-interest  expenses decreased $3,000 or 0.4% to $847,000 for the
first half of 2005 from  $850,000 for the first half of 2004.  This  increase is
attributable to normal recurring operating expenses.





                                       12
<PAGE>


BALANCE SHEET REVIEW

Loans

     Outstanding  loans (which excludes  mortgage loans held for sale) represent
the largest  component of earning assets at 82.0% of total earning assets. As of
June 30, 2005, the Company held total gross loans  outstanding of  $356,626,000.
Gross  loans  increased  $30,723,000  or 9.4% from  $325,903,000  in total gross
outstanding  loans at December 31, 2004 and increased  $45,690,000 or 14.7% from
$310,936,000  in total gross loans  outstanding  at June 30, 2004.  The increase
resulted from new loans generated by the Company's  three banking  subsidiaries.
The following table summarizes outstanding loans by collateral type:

<TABLE>
<CAPTION>
Loan Portfolio Composition                                                                      June 30,                December 31,
                                                                                                --------                ------------
(Dollars in Thousands)                                                                  2005                2004             2004
                                                                                        ----                ----             ----
                                                                                              (Unaudited)                  (Audited)

<S>                                                                                   <C>                <C>                <C>
Commercial and Industrial - not secured by real estate ....................           $ 39,661           $ 39,312           $ 39,723
Commercial and Industrial - secured by real estate ........................             94,288             91,860             95,965
Residential real estate - mortgage ........................................            108,750             97,992            105,580
Residential real estate - construction ....................................             94,357             59,894             63,380
Consumer loans ............................................................             19,570             21,878             21,255
                                                                                      --------           --------           --------
     Gross Loans ..........................................................           $356,626           $310,936           $325,903
                                                                                      ========           ========           ========
</TABLE>


     The interest rates charged on loans vary with the degree of risk,  maturity
and amount of the loan. Competitive pressures,  money market rates, availability
of funds, and government  regulation also influence  interest rates. The average
yield on the Company's  loans for the six months and three months ended June 30,
2005 was 6.53% and 6.73% respectively,  compared to 5.74% and 5.82% respectively
for the six months and three months  ended June 30,  2004.  From the end of June
2004  through the end of June 2005,  the Federal  Reserve has raised the federal
funds target rate by 25 basis points in each of nine consecutive meetings of the
Federal  Open  Market  Committee,  for a total  increase of 2.25% in the federal
funds target rate. A large portion of the Company's adjustable-rate loans, which
constitutes 44.0% of the loan portfolio, reprice almost immediately following an
interest rate change by the Federal Reserve.

     The Company's loan portfolio consists  principally of residential  mortgage
loans,  commercial  loans, and consumer loans.  Substantially all of these loans
are to borrowers located in South Carolina and are concentrated in the Company's
market areas.

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


                                       13
<PAGE>

parties.  The Company also formerly purchased mortgage loans through a wholesale
mortgage loan division of The Peoples National Bank and then resold the loans to
third parties.  These loans were classified as loans held for sale for reporting
purposes. In the first half of 2004, the Company originated $97,539,000 and sold
$99,678,000  in mortgage  loans held for sale.  Due to the fact that  management
made the decision to completely exit the wholesale  mortgage business by the end
of 2004,  there  were no  mortgage  loans  held for sale at June 30,  2005 or at
December 31, 2004, a decrease of 100% from the $4,049,000 in mortgage loans held
for sale at June 30, 2004.

     The Company's  commercial lending activity is directed  principally towards
businesses  whose demands for funds fall within each Banks' legal lending limits
and which are potential  deposit  customers of the Banks. This category of loans
includes loans made to individuals,  partnerships,  and corporations,  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 generally
short-term with emphasis on repayment strengths and low debt-to-worth ratios. At
June  30,  2005  approximately  $13,555,000  or 5.3% of  commercial  loans  were
unsecured.

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

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

Allowance for Loan Losses

     The  allowance  for loan losses at June 30, 2004 was  $3,933,000 or 1.1% of
loans  outstanding  (which  excludes  mortgage  loans held for sale) compared to
$3,691,000  or 1.1% of loans  outstanding  at December  31, 2004 and compared to
$3,607,000 or 1.2% of loans outstanding at June 30, 2004. The allowance for loan
losses is based upon management's continuing evaluation of the collectibility of
loans based on the  historical  loan loss  experience  of the  Company,  current
economic  conditions  affecting the ability of borrowers to repay, the volume of
loans, the quality of the collateral securing  non-performing and problem loans,
and other factors deserving recognition.

     At June  30,  2005  the  Company  had  $2,331,000  in  non-accruing  loans,
$1,423,000 in  restructured  loans,  no loans more than ninety days past due and
still  accruing  interest,  and  $1,306,000  in other real  estate  owned.  This
compares to $670,000 in  non-accruing  loans,  $512,000 in  restructured  loans,
$838,000  in loans more than ninety  days past due on which  interest  was still
being accrued,  and $756,000 in other real estate owned at December 31, 2004. At


                                       14
<PAGE>

June 30, 2004, the Company had $705,000 in  non-accruing  loans, no restructured
loans,  $66,000  in loans  more than  ninety  days  past due and still  accruing
interest, and $704,000 in other real estate owned.  Non-performing loans at June
30, 2005  consisted  of  $2,239,000  in  mortgage  loans and $92,000 in consumer
loans.  Non-performing  assets as a  percentage  of loans and other real  estate
owned was 1.41%,  0.85%, and 0.47% at June 30, 2005, December 31, 2004, and June
30,  2004,  respectively.  The increase in the amount of  non-accruing  loans is
largely attributable to one loan secured by real estate at Bank of Anderson. The
increase in the amount of restructured loans is largely attributable to one loan
secured by church  assets at The  Peoples  National  Bank.  The  increase in the
amount of other real estate owned is  attributable  to an increase in foreclosed
residential  properties at The Peoples  National  Bank.  Management  anticipates
possible  future  charge-offs  in the  range  of  $150,000  to  $200,000  on its
non-accruing  loans and anticipates  possible future charge-offs in the range of
$50,000  to  $75,000  on its  other  real  estate  owned.  Management  does  not
anticipate any losses on its restructured loans.

     Net charge-offs  during the first six months of 2005 were $114,000 compared
to net  charge-offs  of  $114,000  for the  first  six  months  of 2004  and net
charge-offs  of $336,000 for the year ended December 31, 2004. The allowance for
loan losses as a percentage of non-performing  loans was 105%, 183%, and 468% as
of June 30, 2005, December 31, 2004, and June 30, 2004, respectively.

     The Company  accounts for impaired loans in accordance  with the provisions
of SFAS No.114,  Accounting by Creditors for Impairment of a Loan. SFAS No. 114,
as amended by SFAS No. 118,  requires that impaired  loans be measured  based on
the present  value of expected  future cash flows or the  underlying  collateral
values as defined in the pronouncement.  When the ultimate  collectibility of an
impaired loan's  principal is in doubt,  wholly or partially,  all cash receipts
are then applied to  principal.  The Company had  $150,000 in impaired  loans at
June 30, 2005, and no impaired loans at December 31, 2004 and June 30, 2004.

Securities

     The  Company  invests  primarily  in  obligations  of the United  States or
obligations  guaranteed as to principal and interest by the United States, other
taxable securities, and in certain obligations of states and municipalities. The
Company  does not  invest  in  corporate  bonds  nor  does it hold  any  trading
securities.  The Company uses its investment  portfolio to provide liquidity for
unexpected  deposit  liquidation  or  loan  generation,  to meet  the  Company's
interest rate  sensitivity  goals,  to secure public  deposits,  and to generate
income. At June 30, 2005 securities totaled $74,447,000,  which represents 17.1%
of total earning assets.  Securities held at June 30, 2005 increased  $3,200,000
or 4.5%  from  $71,247,000  invested  as of  December  31,  2004  and  increased
$1,146,000 or 1.6% from $73,301,000 invested as of June 30, 2004.

     At June 30, 2005 the Company's  total  investments  classified as available
for sale had an amortized cost of $65,643,000  and a market value of $64,650,000
for an  unrealized  loss of  $993,000.  This  compares to an  amortized  cost of
$65,508,000  and a  market  value  of  $64,053,000  for an  unrealized  loss  of


                                       15
<PAGE>

$1,455,000 on the Company's investments classified as available for sale at June
30, 2004. At December 31, 2004 the  Company's  total  investments  classified as
available for sale had an amortized  cost of  $62,749,000  and a market value of
$62,052,000 for an unrealized loss of $697,000.  Such unrealized  losses are not
considered  to be other than  temporary  because  the Company has the ability to
hold, and generally does not sell,  such  investments  prior to their  maturity.
These  unrealized  losses have resulted from changes in market interest rates as
opposed to any deterioration in credit quality of the investments.


Cash Surrender Value of Life Insurance

     The Company's cash surrender value of life insurance was $9,237,000 at June
30, 2005, an increase of $188,000 or 2.1% from the  $9,049,000  held at December
31, 2004 and a decrease of $285,000 or 3.0% from the $9,522,000 held at June 30,
2004.  The decrease since June 30, 2004 is due to the conversion of certain life
insurance  policies  into  cash  subsequent  to the death of an  officer  of the
Company.

Cash and Cash Equivalents

     The Company's cash and cash  equivalents  increased  $3,744,000 or 30.5% to
$16,033,000 at June 30, 2005 from $12,289,000 at December 31, 2004 and decreased
$6,557,000 or 29.0% from  $22,590,000 at June 30, 2004. The changes in the level
of cash and cash  equivalents  are due to  fluctuations  in the Banks'  need for
immediate liquidity.

Deposits

     The  Banks'  primary  source of funds for loans and  investments  are their
deposits.  Total deposits increased $43,914,000 or 12.7% to $390,059,000 at June
30, 2005 from  $346,145,000  at December 31, 2004 and increased  $35,041,000  or
9.9% from  $355,018,000  at June 30, 2004.  The increase  resulted from deposits
generated by each of the Banks.  Competition  for deposit  accounts is primarily
based on the interest rates paid, location convenience and services offered.

     During the first six  months of 2005,  interest-bearing  deposits  averaged
$321,292,000  compared to  $308,080,000  for the first six months of 2004.  From
time to time Peoples National Bank solicits certificates of deposit from various
sources  through  brokers and through a program  designed to gather deposits via
the Internet.  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. These non-traditional deposits were primarily
being  used  to  fund  Peoples  National  Bank's  short-term   mortgage  lending
activities.  On June 30, 2005 and  December  31, 2004 there were no  outstanding
certificates  garnered through the Internet,  and no brokered deposits.  On June
30, 2004 there were no outstanding  certificates  garnered through the Internet,
and brokered  deposits  totaled  $6,558,000.  These  deposits are an  attractive
alternative funding source available to use while continuing efforts to maintain
and grow the banks' local deposit base.

                                       16
<PAGE>

     The average interest rate paid on  interest-bearing  deposits was 2.21% for
the first six months of 2005 compared to 1.94% for the first six months of 2004.
In pricing  deposits,  the Company  considers its liquidity needs, the direction
and levels of interest  rates,  and local  market  conditions.  At June 30, 2005
interest-bearing deposits comprised 86.5% of total deposits compared to 86.6% at
June 30, 2004.

     The Company's core deposit base consists largely of consumer time deposits,
savings,  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 continue to provide the
Company with a large  source of  relatively  stable  funds.  Core  deposits as a
percentage of total deposits averaged  approximately 77.4% and 77.1% for the six
months ended June 30, 2005 and June 30, 2004, respectively.  The Company closely
monitors its reliance on certificates greater than $100,000, which are generally
considered less stable and less reliable than core deposits.

Borrowings

     The  Company's   borrowings  are  comprised  of  federal  funds  purchased,
securities sold under repurchase  agreements,  and both short-term and long-term
advances from the Federal Home Loan Bank of Atlanta. At June 30, 2005 short-term
borrowings  totaled  $30,420,000 and were comprised of $27,941,000 in securities
sold under  repurchase  agreements,  $479,000 in federal  funds  purchased,  and
$2,000,000 in short-term advances from the Federal Home Loan Bank of Atlanta. At
December 31, 2004 short-term  borrowings totaled  $38,025,000 and were comprised
of  $33,953,000  in securities  sold under  repurchase  agreements,  $572,000 in
federal funds purchased,  and $3,500,000 in short-term advances from the Federal
Home  Loan Bank of  Atlanta.  At June 30,  2004  short-term  borrowings  totaled
$32,856,000   and  were  comprised  of  $32,589,000  in  securities  sold  under
repurchase  agreements  and  $267,000  in Federal  Funds  Purchased.  Short-term
borrowings are used  primarily for the immediate cash needs of the Company.  The
Company also had  $5,000,000  of long-term  advances  from the Federal Home Loan
Bank of Atlanta at each of June 30, 2005, December 31, 2004, and June 30, 2004.


LIQUIDITY

     Liquidity  management  involves  meeting the cash flow  requirements of the
Company.  The Company's  liquidity position is primarily dependent upon its need
to respond to  short-term  demand for funds caused by increased  loan demand and
withdrawals  from deposit  accounts.  The Company's  primary  liquidity  sources
include cash and due from banks,  federal funds sold,  and unpledged  securities
available for sale. In addition, the Company (through the Banks) has the ability
to borrow funds on a  short-term  basis from the Federal  Reserve  System and to
purchase  federal funds from other  financial  institutions.  The Banks are also
members of the Federal Home Loan Bank System and have the ability to borrow both
short-term and long-term  funds on a secured basis. At June 30, 2005 The Peoples
National  Bank had total  borrowing  capacity from the Federal Home Loan Bank of
Atlanta equal to $36,529,000,  and the unused portion of this line of credit was
$31,529,000. Bank of Anderson had total borrowing capacity from the Federal Home


                                       17
<PAGE>

Loan Bank of Atlanta equal to  $33,699,000,  all of which was unused at June 30,
2005.  Seneca National Bank, had total borrowing  capacity with the Federal Home
Loan Bank of Atlanta at June 30, 2005 of  $5,889,000,  and the unused portion of
this line of credit  was  $3,889,000.  At June 30,  2005,  the Banks had  unused
federal funds credit line with various correspond banks totaling $30,271,000.

     Peoples  Bancorporation,  Inc.,  the parent  holding  company,  has limited
liquidity needs, and requires  liquidity to pay limited  operating  expenses and
dividends only.

     During the latter part of 2004 and the first half of 2005, the Company made
capital expenditures of approximately $282,000 associated with the renovation of
portions of the corporate  headquarters  building in Easley, SC. The Company may
additionally make other lesser capital expenditures through 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.


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 specified periods of time. At June
30,  2005,  the  Banks  had  issued  commitments  to  extend  credit  (excluding
commitments for residential  mortgage loans designated for sale) of $118,615,000
through various types of arrangements. These commitments generally expire in one
year. Past experience  indicates that many of these commitments to extend credit
will expire not fully used. As described under "Liquidity," the Company believes
that it has adequate  sources of liquidity  to fund  commitments  that are drawn
upon by the borrowers.

     In addition to commitments  to extend credit,  the Banks also issue standby
letters of credit, which are assurances to a third party that it will not suffer
a loss if the Bank's  customer fails to meet its  contractual  obligation to the
third party. Standby letters of credit totaled $6,131,000 at June 30, 2005. Past
experience  indicates  that many of these standby  letters of credit will expire
unused. However,  through its various sources of liquidity, the Company believes
that it will have the necessary  resources to meet these obligations  should the
need arise.  Various types of collateral  secure most of the standby  letters of
credit.  The Company  believes  that the risk of loss  associated  with  standby
letters of credit is  comparable  to the risk of loss  associated  with its loan
portfolio.  Moreover,  the fair value  associated  with any  standby  letters of
credit issued by the Company is immaterial to the Company.

     According  to SFAS No. 133,  "Accounting  for  Derivative  Instruments  and
Hedging Activities," loan commitments that relate to the origination or purchase


                                       18
<PAGE>

of mortgage loans that will be held for sale must be accounted for as derivative
instruments.   Therefore,  such  commitments  are  recorded  at  fair  value  in
derivative assets or liabilities, with changes in fair value recorded in the net
gain or loss on sale of  mortgage  loans.  In 2004 the  Company  engaged  in the
origination and sale of residential  mortgage loans and entered into commitments
on an  individual  loan basis to both  originate and sell  residential  mortgage
loans  whereby  the  interest  rate  on  the  loan  to the  borrower  and to the
end-purchaser   of  the  loan  is   determined   prior  to  funding  (rate  lock
commitments).  At June 30,  2004 the  Company  had  commitments  outstanding  to
originate  residential mortgage loans under rate lock commitments from borrowers
totaling $22,093,000.  Simultaneously, the Company had commitments to sell these
loans to third parties under rate lock commitments.  The Company did not collect
any  upfront  fees when  issuing  a  mortgage  loan  commitment  to a  potential
borrower,  and mortgages are sold to third parties at par value.  The cumulative
effect under SFAS No. 133 for rate lock  commitments as of June 30, 2004 for the
Company was immaterial.

     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. The Company did not
have any obligations under non-cancelable operating lease agreements at June 30,
2005.




                                       19
<PAGE>


CAPITAL ADEQUACY AND RESOURCES

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

     The Company and the Banks are required to maintain  certain  capital ratios
by federal banking regulators. The following table sets forth the capital ratios
for the Company and the Banks as of June 30, 2005:


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

                                                                        Well                 Adequately
                                                                     Capitalized             Capitalized
                                                 Actual              Requirement             Requirement
                                                 ------              -----------             -----------
                                          Amount       Ratio      Amount       Ratio      Amount       Ratio
                                          ------       -----      ------       -----      ------       -----
Company:
<S>                                      <C>           <C>       <C>           <C>       <C>            <C>
Total Risk-based Capital .............   $ 44,278      12.39%    $ 35,737      10.00%    $ 28,590       8.00%
Tier 1 Risk-based Capital ............     40,359      11.29       21,449       6.00       14,299       4.00
Leverage Ratio .......................     40,359       8.72       23,142       5.00       18,513       4.00

Peoples National Bank:
Total Risk-based Capital .............   $ 25,346      12.31%    $ 20,590      10.00%    $ 16,472       8.00%
Tier 1 Risk-based Capital ............     23,269      11.31       12,344       6.00        8,230       4.00
Leverage Ratio .......................     23,269       9.08       12,813       5.00       10,251       4.00

Bank of Anderson, N. A:
Total Risk-based Capital .............   $ 11,949      10.68%    $ 11,188      10.00%    $  8,951       8.00%
Tier 1 Risk-based Capital ............     10,614       9.49        6,711       6.00        4,474       4.00
Leverage Ratio .......................     10,614       7.09        7,485       5.00        5,988       4.00

Seneca National Bank:
Total Risk-based Capital .............   $  4,972      12.25%    $  4,059      10.00%    $  3,247       8.00%
Tier 1 Risk-based Capital ............      4,465      11.01        2,433       6.00        1,622       4.00
Leverage Ratio .......................      4,465       8.12        2,749       5.00        2,200       4.00
</TABLE>



                                       20
<PAGE>


RECENTLY ISSUED ACCOUNTING STANDARDS

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

     In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment" ("SFAS No. 123(R)").  SFAS No.123(R) covers a wide range of share-based
compensation  arrangements  including  share  options,  restricted  share plans,
performance-based awards, share appreciation rights, and employee share purchase
plans.   SFAS  No.  123(R)  will  require  companies  to  measure  all  employee
stock-based  compensation  awards  using a fair value  method  and  record  such
expense in its  financial  statements.  In  addition,  the  adoption of SFAS No.
123(R) requires  additional  accounting and disclosure related to the income tax
and cash flow effects resulting from share-based payment arrangements.  SFAS No.
123 (R) is effective beginning with the first interim or annual reporting period
of a company's first fiscal year beginning on or after June 15, 2005.

     In April 2005, the Securities and Exchange Commission's Office of the Chief
Accountant and its Division of  Corporation  Finance  released Staff  Accounting
Bulletin ("SAB") No. 107. SAB No. 107 provides  interpretive guidance related to
the interaction  between SFAS No. 123(R) and certain SEC rules and  regulations,
as well as the staff's  views  regarding the  valuation of  share-based  payment
arrangements for public companies.  SAB No. 107 also reminds public companies of
the  importance  of  including  disclosures  within  filings  made  with the SEC
relating to the accounting for share-based  payment  transactions,  particularly
during the transition to SFAS No.123(R). The Company is currently evaluating the
impact that the adoption of SFAS No. 123(R) will have on its financial position,
results of operations and cash flows. The cumulative effect of adoption, if any,
will be  measured  and  recognized  in the  statement  of  income on the date of
adoption.

     Other accounting standards that have been issued or proposed by the FASB or
other standards-setting  bodies that do not require adoption until a future date
are not  expected  to  have a  material  impact  on the  consolidated  financial
statements upon adoption.


Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risk is the risk of loss from adverse  changes in market  prices and
interest rates. The Company's market risk arises  principally from interest rate
risk  inherent in its lending,  deposit,  and borrowing  activities.  Management
actively  monitors and manages its  interest  rate risk  exposure.  Although the
Company manages certain other risks,  such as credit quality and liquidity risk,
in the normal course of business,  management considers interest rate risk to be
its most significant market risk and the market risk that could potentially have
the largest material effect on the Company's  financial condition and results of
operations.  Other  types of market  risks,  such as foreign  currency  risk and
commodity  price  risk,  do not  arise in the  normal  course  of the  Company's
business activities, although they may affect a few of the Company's customers.

                                       21
<PAGE>

     The primary  objective of Asset and Liability  Management at the Company is
to manage  interest rate risk and achieve  reasonable  stability in net interest
income  throughout  interest rate cycles.  This is achieved by  maintaining  the
proper   balance   of   rate-sensitive   earning   assets   and   rate-sensitive
interest-bearing  liabilities. The relationship of rate-sensitive earning assets
to  rate-sensitive  interest-bearing  liabilities  is the  principal  factor  in
projecting  the effect that  fluctuating  interest rates will have on future net
interest  income.  Rate-sensitive  assets and  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 next twelve months. In general an asset sensitive position would
indicate  that net  interest  income  would  benefit  from  increases  in market
interest  rates.  Conversely,  a liability  sensitive  position  generally would
indicate  that net  interest  income  would  benefit  from  decreases  in market
interest rates. The static gap position is limited because it does not take into
account  changes in interest rates or changes in  management's  expectations  or
intentions.  At  June  30,  2005,  on a  cumulative  basis  through  12  months,
rate-sensitive  liabilities exceeded rate-sensitive assets by $16,594,000.  This
liability-sensitive position is largely attributable to the Company's short-term
Certificates of Deposit,  Money Market accounts and NOW accounts,  which totaled
$121,834,000, $51,471,000 and $50,912,000, respectively, at June 30, 2005.



                                       22
<PAGE>


Item 4.           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.

     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.




                                       23
<PAGE>



PART II.  OTHER INFORMATION

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

Annual Meeting of Shareholders
On May 19, 2005, The Company held its Annual Meeting of Shareholders. The voting
results of the 2005 Annual Meeting of Shareholders follows.

Proposal #1 - Election of Directors
The following  persons were elected as Directors to serve for a three-year  term
with 3,295,772 shares voted,  representing 55.8% of the total shares entitled to
vote:

                                                                       Broker
                                   For        Withheld      Abstain   Non-Votes
                                   ---        --------      -------   ---------
     Charles E. Dalton        3,292,584        3,188            0         0
     Larry D. Reeves          3,285,626       10,146            0         0
     R. Riggie Ridgeway       3,281,972       13,800            0         0

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

                                                            Year Term Ends
              William A. Carr                                 2006
              Robert E. Dye, Jr.                              2006
              W. Rutledge Galloway                            2006
              E. Smyth McKissick, III                         2006
              James A. Black, Jr.                             2006
              William B. West                                 2006
              Andrew M. McFall                                2007
              Eugene W. Merritt, Jr.                          2007
              George B. Nalley, Jr.                           2007
              Nell W. Smith                                   2007
              A. J. Thompson, Jr.                             2007

Proposal #2 - Amendment of Bylaws
The following amendments were approved with 3,295,772 shares voted, representing
55.8% of the total voting shares:

                                                                        Broker
                                           For      Against   Abstain  Non-Votes
                                           ---      -------   -------  ---------

Section 3.02(a) To require the size     3,235,209   38,311     22,252     0
of the Board of Directors be set by
the Board of Directors with a
minimum of six directors.


                                       24
<PAGE>

<TABLE>
<CAPTION>
                                                                                          Broker
                                                 For           Against       Abstain     Non-Votes
                                                 ---           -------       -------     ---------
<S>                                           <C>               <C>          <C>             <C>
Section 3.02(b) To require 90                 3,203,591         61,774       30,407          0
Days notice of nominations for
director by shareholders and
limit election as directors to
persons under 72 years old.

Section 3.03 To require removal               3,136,364         12,636      146,772          0
of directors be by vote of shareholders
in a manner complying with South
Carolina law.

Section 3.04 To conform                       3,242,730         21,910       31,132          0
procedures for filling vacancies and
changing number of directors to Articles of
Incorporation and South Carolina law.

Section 3.09 To make Chairman                 3,262,355         14,104       19,313          0
of the Board of Directors the
person responsible for conducting
meetings of Board of Directors

Section 3.11(old) To delete this              3,195,770         66,406       33,596         0
section which requires Article
Three of the Bylaws be changed
only by vote of shareholders.

Section 3.11 (new) To create                  3,189,752         61,966       44,054          0
nonvoting position of director
emeritus to be filled in discretion
of Board of Directors.
</TABLE>

Item 6.       Exhibits

              Exhibits.

3.2      Registrant's  Bylaws, as amended through June 16, 2005 (incorporated by
         reference to  Registrant's  Current  Report on Form 8-K, filed June 20,
         2005).
31.1     Rule 13a-14(a) / 15d-14(a) Certifications
31.2     Rule 13a-14(a) / 15d-14(a) Certifications
32       Section 1350 Certifications


                                       25
<PAGE>


SIGNATURES

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


                                           PEOPLES BANCORPORATION, INC.


Dated:  August 11, 2005                    By:    /s/ R. Riggie Ridgeway
                                                ------------------------
                                                  R. Riggie Ridgeway
                                                  President and CEO


Dated:  August 11, 2005                    By:   /s/ Robert E. Dye, Jr.
                                               ------------------------
                                                  Robert E. Dye, Jr.
                                                  Sr. Vice President & CFO
                                                  (principal financial officer)



                                       26
<PAGE>



                                  Exhibit Index

Exhibit No.                Description of Exhibit

3.2      Registrant's  Bylaws, as amended through June 16, 2005 (incorporated by
         reference to  Registrant's  Current  Report on Form 8-K, filed June 20,
         2005).
31.1     Rule 13a-14(a) / 15d-14(a) Certifications
31.2     Rule 13a-14(a) / 15d-14(a) Certifications
32       Section 1350 Certifications



                                       27