SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

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

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

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

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

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

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

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

                             Yes [X]   No [ ]

The number of outstanding shares of the issuer's $1.67 par value common stock as
of November 5, 1998 was 2,620,619.

Transitional Small Business Disclosure Format:

                             Yes [ ]   No [X]




                                       
<PAGE>




                   PEOPLES BANCORPORATION, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                       ($ in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                 September 30,          December 31,
                                                                                                      1998                  1997
                                                                                                   Unaudited               Audited
                                                                                                   ---------               -------
ASSETS
<S>                                                                                                 <C>                   <C>      
CASH AND DUE FROM BANKS ..............................................................              $  5,703              $   3,909
FEDERAL FUNDS SOLD ...................................................................                15,640                  4,570
SECURITIES
  Available for sale .................................................................                26,530                 20,321
  Held for investment (market value of $4,081
    and $3,954) ......................................................................                 3,951                  3,852
LOANS - less allowance for loan losses of $1,057
    and $987 .........................................................................                79,746                 75,862
PREMISES AND EQUIPMENT, net of accumulated
    depreciation and amortization ....................................................                 4,117                  2,674
ACCRUED INTEREST RECEIVABLE ..........................................................                 1,018                    878
OTHER ASSETS .........................................................................                 1,681                  1,350
                                                                                                    --------              ---------

TOTAL ASSETS .........................................................................              $138,386              $ 113,416
                                                                                                    ========              =========

LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
  Noninterest-bearing ................................................................              $ 14,758              $  11,008
  Interest-bearing ...................................................................                94,684                 85,182
                                                                                                    --------              ---------
     Total deposits ..................................................................               109,442                 96,190
SECURITIES SOLD UNDER REPURCHASE
  AGREEMENTS .........................................................................                 5,963                  4,433
NOTES PAYABLE TO FEDERAL HOME LOAN BANK ..............................................                 2,000                  2,031
ACCRUED INTEREST PAYABLE .............................................................                   775                    861
OTHER LIABILITIES ....................................................................                   324                    392
                                                                                                    --------              ---------
     Total liabilities ...............................................................               118,504                103,907
                                                                                                    --------              ---------
SHAREHOLDERS' EQUITY
Common Stock-10,000,000 shares authorized,  $1.67 par
  value per share, 2,432,047 shares and 1,687,250 shares
  outstanding at September 30, 1998 and December 31, 1997,
  respectively .......................................................................                 4,062                  2,817
Additional paid-in capital ...........................................................                13,447                  5,158
Retained earnings ....................................................................                 2,345                  1,553
Unrealized gain (loss) on securities available for sale ..............................                    28                    (19)
                                                                                                    --------              ---------
     Total shareholders' equity ......................................................                19,882                  9,509
                                                                                                    --------              ---------

TOTAL LIABILITIES & SHAREHOLDERS' EQUITY .............................................              $138,386              $ 113,416
                                                                                                    ========              =========
</TABLE>



                                       1
<PAGE>



                   PEOPLES BANCORPORATION, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                     ($ in thousands, except per share data)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                          Three Months Ended                    Nine Months Ended
                                                                             September 30,                        September 30,
                                                                          1998           1997                1998              1997
                                                                          ----           ----                ----              ----
INTEREST INCOME
<S>                                                                 <C>               <C>               <C>               <C>       
Interest and fees on loans .................................        $    1,888        $    1,849        $    5,506        $    5,182
Interest on securities
     Taxable ...............................................               375               273             1,067               848
     Tax-exempt ............................................                58                63               176               182
Interest on fed funds ......................................               170                55               368               140
                                                                    ----------        ----------        ----------        ----------
Total interest income ......................................             2,490             2,240             7,117             6,352

INTEREST EXPENSE
Interest on deposits .......................................             1,033               932             3,096             2,574
Interest on federal funds purchased and securities
     sold under repurchase agreements ......................                49                35               127               108
Interest on notes payable Federal Home
     Loan Bank .............................................                29                94                85               265
                                                                    ----------        ----------        ----------        ----------
Total interest expense .....................................             1,111             1,061             3,309             2,947
                                                                    ----------        ----------        ----------        ----------

Net interest income ........................................             1,379             1,179             3,809             3,405
PROVISION FOR LOAN LOSSES ..................................               152               116               154               217
                                                                    ----------        ----------        ----------        ----------
Net interest income after provision for
     loan losses ...........................................             1,227             1,063             3,655             3,188

NON-INTEREST INCOME
Service fees and other income ..............................               309               200               852               560
Gain on sales of securities available for sale .............                 0                 0                 0                 3
                                                                    ----------        ----------        ----------        ----------
                                                                           309               200               852               563
NON-INTEREST EXPENSE
Salaries and benefits ......................................               655               427             1,684             1,260
Occupancy ..................................................                54                49               162               129
Equipment ..................................................                92                65               238               191
Other operating expenses ...................................               380               211               941               612
                                                                    ----------        ----------        ----------        ----------
                                                                         1,181               752             3,025             2,193

Income before income taxes .................................               355               510             1,482             1,558

PROVISION FOR INCOME TAXES .................................               114               168               486               514
                                                                    ----------        ----------        ----------        ----------

Net income .................................................        $      240        $      342        $      995        $    1,044
                                                                    ==========        ==========        ==========        ==========

INCOME PER COMMON SHARE:
     BASIC .................................................        $     0.10        $     0.21        $     0.41        $     0.65
                                                                    ==========        ==========        ==========        ==========
     DILUTED ...............................................        $     0.09        $     0.20        $     0.39        $     0.62
                                                                    ==========        ==========        ==========        ==========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
     BASIC .................................................         2,432,047         1,628,662         2,432,047         1,607,342
                                                                    ==========        ==========        ==========        ==========
     DILUTED ...............................................         2,567,016         1,710,095         2,564,678         1,673,605
                                                                    ==========        ==========        ==========        ==========

DIVIDENDS PAID PER COMMON SHARE ............................        $    0.035        $     0.03        $    0.105        $     0.09
                                                                    ==========        ==========        ==========        ==========
</TABLE>


                                       2
<PAGE>


                   EOPLES BANCORPORATION, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                ($ in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                              Three Months Ended              Nine Months Ended 
                                                                                September 30,                    September 30,
                                                                             1998           1997             1998             1997
                                                                             ----           ----             ----             ----
                                                       
<S>                                                                         <C>             <C>             <C>               <C>   
Net income .....................................................            $240            $342            $  995            $1,044
Other comprehensive income, net of tax:
Unrealized income (loss) on securities
    arising during period ......................................              63              33                47                17
                                                                            ----            ----            ------            ------
Comprehensive income ...........................................            $303            $375            $1,042            $1,060
                                                                            ====            ====            ======            ======
</TABLE>



                                       3
<PAGE>



                   PEOPLES BANCORPORATION, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                ($ in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                                              Nine Months Ended 
                                                                                                                September 30,
                                                                                                          1998                 1997
                                                                                                          ----                 ----
                                                                                    
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                                   <C>                  <C>     
Net Income ...............................................................................            $    995             $  1,044
Adjustments to reconcile net cash provided
 by operating activities:
  Loss (gain) on sales of securities .....................................................                   0                   (3)
  Provision for loan losses ..............................................................                 154                  217
  Depreciation ...........................................................................                 163                  109
  Net amortization and (accretion) of premiums and
  discounts on securities ................................................................                  88                   42
  (Increase) in accrued interest receivable ..............................................                (139)                (135)
  (Increase) in other assets .............................................................                (404)                (151)
  Increase (decrease) in accrued interest payable ........................................                 (86)                  78
  Increase (decrease) in other liabilities ...............................................                 (68)                  79
                                                                                                      --------             --------
     Net cash provided by operating activities ...........................................                 704                1,281
                                                                                                      --------             --------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities held for investment ..............................................                (103)                (550)
Purchases of securities available for sale ...............................................             (21,562)             (12,150)
Proceeds from the maturity of securities available for sale ..............................              12,034                3,650
Proceeds from the sale of securities available for sale ..................................                   0                2,251
Proceeds from the call of securities available for sale ..................................               3,200                2,850
Purchase of Executive Officer's Life Insurance Investment ................................                   0               (1,090)
Net (increase) decrease in loans .........................................................              (3,884)             (11,641)
Proceeds from the sale of property .......................................................                   0                   39
Purchase of premises and equipment .......................................................              (1,606)                (481)
                                                                                                      --------             --------
     Net cash used by investing activities ...............................................             (11,920)             (17,123)
                                                                                                      --------             --------

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits .................................................................              13,252               11,172
Net (decrease) in securities sold under
  repurchase agreements ..................................................................               1,530                 (480)
Net (decrease) increase in notes payable to Federal home Loan Bank .......................                 (31)                (418)
Proceeds from sale of common stock .......................................................               9,497                    0
Proceeds from stock options exercised ....................................................                  36                   31
Cash dividend ............................................................................                (204)                (144)
                                                                                                      --------             --------
     Net cash provided by financing activities ...........................................              24,081               10,161
                                                                                                      --------             --------

     Net increase (decrease) in cash and cash equivalents ................................              12,864               (5,682)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ...........................................               8,479               12,327
                                                                                                      --------             --------
CASH AND CASH EQUIVALENTS, END OF PERIOD .................................................            $ 21,343             $  6,645
                                                                                                      ========             ========

CASH PAID FOR
Interest .................................................................................            $  3,395             $  2,615
                                                                                                      ========             ========
Income taxes .............................................................................            $    503             $    448
                                                                                                      ========             ========
</TABLE>




                                       4
<PAGE>



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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

STATEMENT OF CASH FLOWS

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

COMMON STOCK

    The Board of Directors  declared a cash  dividend of $0.035 per common share
to shareholders of record  September 14, 1998, June 18, 1998 and March 19, 1998,
payable October 6, 1998, June 30, 1998 and March 31, 1998, respectively

    The Company adopted SFAS No. 128,  Earnings per Share, on December 31, 1997.
This  statement  requires that the Company  present basic and diluted net income
per share.  The assumed  conversion  of stock  options  creates  the  difference
between  basic and diluted net income per share.  Income per share is calculated
by  dividing  net  income  by the  weighted  average  number  of  common  shares
outstanding  for each period  presented.  The weighted  average number of common
shares  outstanding  for basic net  income  per common  share was  2,432,047  at
September  30, 1998 and 1,607,342 at September  30, 1997.  The weighted  average
number of common shares  outstanding for diluted net income per common share was
2,564,678 at September 30, 1998 and 1,673,605 at September 30, 1997.

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

    In July 1998 the Company  completed the sale of 500,000 shares of its Common
Stock.  In connection with this offering,  the Company  received net proceeds of
$6,460,000  of which  $4,500,000  was used to capitalize  the  Company's  newest
subsidiary, Bank of Anderson,  National Association,  and the remainder is to be
used to support  expected  internal  growth.  This  offering was  oversubscribed
shortly after it commenced and was, therefore, terminated on July 22, 1998.

    On August 25, 1998, the Company commenced the sale of an additional  425,000
shares of its Common Stock in part to provide  subscribers  who were not able to
purchase shares in the prior offering with the  opportunity to purchase  shares.
In  connection  with  this  offering,  the  Company  received  net  proceeds  of
$5,490,000  of  which  $3,500,000  will be  used  to form a new de novo  bank in
Seneca,  South  Carolina  with the  remainder  to be used for general  corporate
purposes.  This offering was fully subscribed and was, therefore,  terminated on
October 16, 1998.

NON-PERFORMING LOANS

    As of  September  30,  1998,  there  were  ten  non-accrual  loans  totaling
$508,000,  two restructured  loans totalling  $211,000 and one loan 90 days past
due or more as to principal or interest payments in the amount of $324,000.

MANAGEMENT'S OPINION

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



                                       5
<PAGE>

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

    The following discussion and analysis should be read in conjunction with the
consolidated  financial  statements  and related notes and with the  statistical
information  and  financial  data  appearing  in this report as well as the 1997
Annual  Report of Peoples  Bancorporation,  Inc.  on Form  10-KSB/A.  Results of
operations  for  the  nine-month  period  ending  September  30,  1998  are  not
necessarily indicative of the results to be attained for any other period.

Forward Looking Statements

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

OVERVIEW

    Peoples Bancorporation, Inc. (the "Company"), headquartered in Easley, South
Carolina, was incorporated on March 6, 1992 for the primary purpose of effecting
the reorganization of The Peoples National Bank,  Easley,  South Carolina into a
bank holding company structure,  which reorganization  resulted in the ownership
by the Company of 100% of the issued and  outstanding  shares of common stock of
The Peoples National Bank. On September 3, 1998 the Company acquired 100% of the
issued  and  outstanding  shares of  common  stock of Bank of  Anderson,  N. A.,
Anderson,  South  Carolina,  a de novo bank  sponsored by the  Company.  Bank of
Anderson,  N.  A.  commenced  operations  on  September  3,  1998  in  temporary
facilities.

     Both The Peoples National Bank and Bank of Anderson,  N. A., are nationally
chartered  financial  institutions.  The Peoples  National Bank  operates  three
offices, one each in Easley, Pickens and Powdersville,  South Carolina.  Bank of
Anderson,  N.A.  operates  from  one  location  in the city of  Anderson,  South
Carolina.

    In September of 1997, The Peoples National Bank received regulatory approval
to open a branch  office in Seneca,  South  Carolina  which is located in Oconee
County,  South  Carolina.  Construction  was begun on this office with the land,
building   construction  and  equipment  costs  estimated  to  be  approximately
$965,000.  The Peoples  National Bank has withdrawn its application to form this
branch because of the Company's  decision to form a de novo bank in Seneca to be
named Seneca National Bank and to be housed in the facilities formerly scheduled
to be utilized as a branch of The Peoples National Bank.  Company  management is
in  the  process  of  seeking  all   necessary   regulatory   approval  for  the
establishment  of this de novo bank. If all necessary  regulatory  approvals are
received,  Seneca  National Bank will be chartered as a national  bank, and will
become a wholly owned subsidiary of the Company.

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

                                       6
<PAGE>

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

    The  Company  and  its  two  existing  bank  subsidiaries  presently  employ
seventy-four  (74)  full-time  and part-time  persons.  With the addition of the
Seneca bank, the Company expects to employ an additional six (6) persons.


EARNINGS REVIEW

    The  Company's  net income for the third  quarter of 1998 was  $240,000,  or
$0.14 per share ($0.09  diluted per share),  compared to net income of $342,000,
or $0.21 per share ($0.20  diluted per share) for the third quarter of 1997. Net
income for the nine months  ended  September  30, 1998 was $995,000 or $0.41 per
share  ($0.39  diluted per share),  compared to  $1,044,000,  or $0.65 per share
($0.62 diluted per share) for the nine months ended  September 30, 1997.  Return
on average equity for the nine months and three months ended  September 30, 1998
was 10.15% and 7.35%, respectively, compared to 15.60% and 15.33%, respectively,
for the same periods in 1997. Return on average assets for the nine months ended
September 30, 1998 was 1.06%  compared to 1.32% for the same period in 1997. For
the third quarter of 1998, return on average assets was 0.76%, compared to 1.30%
for the same period in 1997.

    The  decrease  in the  Company's  net income and  profitability  ratios from
1997's levels is directly attributable to pre-opening and early operating losses
associated  with the Company's new  subsidiary,  Bank of Anderson,  N.A.,  which
commenced  banking  operations on September 3, 1998, and the addition of several
key  management  positions  at  the  parent  company  level.  After  tax  losses
associated  with  Bank of  Anderson,  N.A.  for the  first  nine  months of 1998
amounted to $131,000,  and management  expects this  subsidiary's  operations to
continue to  negatively  impact the Company's  performance  for the remainder of
1998. In addition,  the Company expects to begin incurring  additional  expenses
associated with the formation of Seneca National Bank during the fourth quarter,
which will also negatively impact the Company's  performance during the upcoming
quarter. The operations of both Bank of Anderson,  N.A. and Seneca National Bank
will also negatively impact the economic results of the Company in 1999.

Net Interest Income

    The largest  component of the Company's  net income is net interest  income.
Net interest  income,  which is the  difference  between the interest  earned on
interest-earning  assets and the interest paid on interest-bearing  liabilities,
measures  the gross  profit from  lending and  investing  activities  and is the
primary  contributor to the Company's  earnings.  Net interest income before the
provision for loan losses for the third quarter of 1998 amounted to  $1,379,000,
an increase of $200,000,  or 16.9%, over the third quarter of 1997. Net interest
income before the provision for loan losses for the nine months ended  September
30, 1998 amounted to  $3,809,000,  an increase of $404,000,  or 11.9%,  over the
same period in 1997.  This  represents a 4.43% net interest margin (net interest
income  divided  by  average  earning  assets)  on  average  earning  assets  of
$114,527,000.  For this same period in 1997,  the net interest  margin was 4.40%
based on average earning assets of $103,592,000. This slight increase in the net
interest margin resulted primarily from lower deposit costs than the decrease in
earning asset yields.

Non-interest Income

    Non-interest income, excluding securities transactions,  increased $110,000,
or 55.5%, to $309,000 for the third quarter of 1998 compared to $199,000 for the
third quarter of 1997. For the first nine months of 1998,  non-interest  income,
excluding  securities  transactions,  increased $289,000,  or 51.2%, to $852,000
compared to $563,000 for the first nine months of 1997.  A $203,000  increase in


                                       7
<PAGE>

origination  fees on mortgage  loans;  earnings of $30,000 on the Bank's  salary
continuation   plan;  and  earnings  of  $71,000  from  the  Bank's  specialized
investment  program were the main  contributors  to the increase in non-interest
income in both 1998 periods when compared to the 1997  periods.  No gain or loss
was realized on the sale of available for sale securities  during the first nine
months of 1998. The Company  recorded a $2,740 gain on the sale of available for
sale securities during the first nine months of 1997.

Non-interest Expense

    Non-interest  expense  increased  $429,000,  or 57.1%, to $1,181,000 for the
third quarter of 1998  compared to $752,000 for the third  quarter of 1997.  For
the first nine  months of 1998,  non-interest  expense  increased  $832,000,  or
37.9%,  to  $3,025,000,  compared  to  $2,193,000  for the same  period in 1997.
Salaries and  benefits,  the largest  single  category of  non-interest  expense
items,  increased  $228,000,  or 53.5%,  to  $655,000  in the 1998  quarter  and
$424,000,  or 33.6%,  to  $1,684,000  for the nine  month  period in 1998 due to
normal salary  increases,  the addition of several key employees during the last
six months of 1997 and the second  quarter of 1998, and the full staffing of the
Bank of  Anderson,  N.A.,  during  the  third  quarter  of 1998.  Occupancy  and
equipment  expense,  collectively,  increased  $32,000,  or  27.5%,  in the 1998
quarter and $79,000,  or 24.8%,  for the first nine months of 1998 primarily due
to an increase in the purchase  and  maintenance  of  equipment  for The Peoples
National Bank and Bank of Anderson,  N.A.  Other  operating  expenses  increased
$170,000,  or 80.7%,  and $329,000,  or 53.7%, for the 1998 quarter and the 1998
nine month period ending September 30, 1998, respectively, primarily as a result
of an increase in marketing expenses due to advertising  commitments made by The
Peoples  National Bank and  advertising  associated  with the opening of Bank of
Anderson,  N.A.; increases in computer expenses associated with the installation
of a wide area network and Year 2000 compliance issues; increases in stationary,
printing and supplies  expense  associated with the opening of Bank of Anderson,
N.A. and increases in expenses associated with the Company's Salary Continuation
Plan.

Provision for Loan Losses

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

    The provision for loan losses  charged to operations  during the nine months
ended  September 30, 1998 was $154,000  compared to a charge of $217,000 for the
same nine month period in 1997.  The decrease is due  primarily to a decrease in
net charge-offs experienced in the 1998 period when compared to the 1997 period.

BALANCE SHEET REVIEW

Loans

    Outstanding loans represent the largest component of earning assets at 63.7%
of total earning  assets.  As of September 30, 1998, the Company had total gross
loans  outstanding  of  $80,803,000,  an increase of $3,954,000,  or 5.1%,  from
$76,849,000 in outstanding  gross loans at December 31, 1997. For the first nine
months of 1998, the Company's loans averaged $77,168,000 compared to $72,755,000
for the  same  period  of 1997.  The  increase  resulted  primarily  from  loans
generated by Bank of Anderson.

    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 nine months ended  September 30, 1998 was
9.34%  compared  to 9.41% for the first nine months of 1997 and to 9.35% for the
twelve months ended  December 31, 1997.  The decline in the Company's loan yield
was primarily  attributable  to a shift in the composition of the loan portfolio
to a higher concentration of mortgage loans which generally carry lower rates of
interest than other types of loans. At September 30, 1998 approximately 33.8% of
the Company's outstanding loans carried adjustable rates of interest.

                                       8
<PAGE>

    The Company's loan portfolio  consists  principally of loans secured by real
estate,  commercial loans and consumer loans.  Substantially  all of these loans
are to borrowers located in South Carolina and are concentrated in the Company's
market  areas.  The Company has no foreign  loans or loans for highly  leveraged
transactions.

Allowance for Loan Losses

    The  purpose of the  Company's  allowance  for loan losses is to absorb loan
losses  that  occur  in the  loan  portfolio.  The  allowance  for  loan  losses
represents  management's  estimate of an amount adequate in relation to the risk
of future losses inherent in the loan portfolio.

    While it is the Company's  policy to charge off in the current  period loans
in which a loss is considered  probable,  there are  additional  risks of future
losses which cannot be quantified precisely or attributed to particular loans or
classes of loans. Because these risks include the state of the economy, industry
trends and conditions affecting individual  borrowers,  management's judgment of
the allowance is  necessarily  approximate  and  imprecise.  The Company is also
subject to regulatory  examinations and  determinations as to adequacy which may
take  into  account  such  factors  as the  methodology  used to  calculate  the
allowance  for loan  losses  and the size of the  allowance  for loan  losses in
comparison to a group of peer companies identified by the regulatory agencies.

    Management  determines  the  adequacy  of  the  allowance  for  loan  losses
quarterly  and considers a variety of factors in  establishing  the level of the
allowance and the related provision,  which is charged to expense.  In assessing
the adequacy of the allowance,  management  relies  predominantly on its ongoing
review of the loan  portfolio,  which is  undertaken  both to ascertain  whether
there are  probable  losses  that  must be  charged  off and to assess  the risk
characteristics  of the  portfolio in the  aggregate.  The review  considers the
judgements of management,  an external loan review person and also those of bank
regulatory  agencies  that review the loan  portfolio  as part of their  regular
examination  process.  The  Comptroller of the Currency,  as part of its routine
examination  process of various  national banks,  including The Peoples National
Bank and Bank of Anderson,  N. A., may require  additions to the allowance based
upon information available to them at the time of their examination.

    Management  considers  the  allowance  for loan  losses  adequate  to absorb
possible losses on loans outstanding at September 30, 1998 and in the opinion of
management,  there are no material risks or significant loan  concentrations  in
the present portfolio.

     The  allowance  for loan losses at September  30, 1998 was  $1,057,000,  or
1.31%, of total loans outstanding  compared to $921,000,  or 1.18% and $987,000,
or 1.30%,  at  September  30, 1997 and  December  31,  1997,  respectively.  Net
charge-offs  during the first nine months of 1998 were $84,000,  compared to net
charge-offs of $57,000 for the first nine months 1997 and to net  charge-offs of
$98,000 for the year ended December 31, 1997.

    At September 30, 1998 the Company had $508,000 in  non-accruing  loans,  two
restructured  loans  totalling  $211,000 and one loan more than ninety days past
due in the amount of $323,639 on which  interest was still being  accrued.  This
compares to $563,000 in non-accruing  loans,  $11,000 in restructured  loans and
$104,000  in loans more than ninety  days past due on which  interest  was still
being accrued at September 30, 1997. At December 31, 1997, there was $757,000 in
non-accruing loans; one $10,000  restructured loan and a $142,000 loan more than
ninety days past due on which interest was still being  accrued.  Non-performing
assets as a percentage  of loans and other real estate  owned were 1.03%,  0.85%
and 1.17%,  at  September  30, 1998,  September  30, 1997 and December 31, 1997,
respectively.  The allowance  for loan losses as a percentage of  non-performing
loans was 127%,  108% and 91% at  September  30,  1998,  September  30, 1997 and
December 31, 1997 respectively.



                                       9
<PAGE>

        The  Company   accounts  for  impaired  loans  in  accordance  with  the
provisions  of  Statement  of  Financial   Accounting  Standards  ("SFAS")  114,
Accounting  by Creditors for  Impairment of a Loan.  SFAS No. 114, as amended by
SFAS No. 118,  requires  that  impaired  loans be measured  based on the present
value of  expected  future  cash flows or the  underlying  collateral  values as
defined in the  pronouncement.  The Company  includes the provisions of SFAS NO.
114, if any, in the allowance for loan losses. When the ultimate  collectibility
of an impaired  loan's  principal  is in doubt,  wholly or  partially,  all cash
receipts are applied to principal. When this doubt does not exist, cash receipts
are applied under the contractual terms of the loan agreement first to principal
then to interest income. Once the recorded principal balance has been reduced to
zero,  future cash receipts are applied to interest  income,  to the extent that
any interest has been foregone. Further cash receipts are recorded as recoveries
on any amounts previously charged off. On each of September 30, 1998,  September
30, 1997 and December 31, 1998, the Company had no impaired loans.


Securities and Federal Funds Sold

        Investment  securities  constituted 24.1% and 22.9% of earning assets as
of September  30, 1998 and December 31,  1997,  respectively.  At September  30,
1998,  securities  totaled  $30,481,000,  up $6,308,000 from December 31, 1997's
balance of $24,173,000.  The increase in investment securities resulted from the
investment of excess funds  attributable to an increase in deposits coupled with
soft loan demand.

        At September 30, 1998 the book value of the Company's Available-for-Sale
portfolio  was  $26,488,000  and  the  market  value  of its  Available-for-Sale
portfolio was $26,530,000 resulting in an unrealized gain before tax of $42,000.
The Company's total securities averaged $28,518,000 for the first nine months of
1998, 29.4% above the first nine months of 1997 average of $22,041,000.

        The Company  uses its  investment  portfolio  to provide  liquidity  for
unexpected  deposit  liquidation  or  loan  generation,  to meet  the  Company's
interest rate sensitivity goals and to generate income.  The Company  emphasizes
safety  in  its  selection  of  investment  securities  and,  accordingly,   the
investment portfolio is limited to securities of the United States government or
its  agencies,  mortgage  backed  securities  and  investment  grade  state  and
municipal securities. The Company does not invest in corporate bonds nor does it
hold any trading securities.

        At  September  30,  1998 Fed  Funds  sold  amounted  to  $15,640,000,  a
$11,070,000,  or 242.2%, increase over the $4,570,000 sold at December 31, 1997.
The increase is largely  attributable  to the  investment of funds received from
the Company's two latest common stock offerings and overnight funds sold by Bank
of Anderson, N. A.

Deposits

        The  Company's  primary  source of funds for  loans and  investments  is
deposits.  Deposits  increased  13.8% to $109,442,000 at September 30, 1998 from
$96,190,000 at December 31, 1997. The increase resulted principally from account
promotions  at The  Peoples  National  Bank and  deposits  generated  by Bank of
Anderson.  Competition  for deposit  accounts is primarily based on the interest
rates paid, location convenience and services offered.

        During the first nine months of 1998, interest-bearing deposits averaged
$91,019,000  compared  to  $74,362,000  for the  same  period  in  1997,  and to
$76,516,106 for the twelve months ended December 31, 1997. The average  interest
rate paid on  interest-bearing  deposits  was 4.50% for the first nine months of
1998 compared to 4.72% for the first nine months of 1997.  During the first nine
months  of  1998,  deposit  pricing  continued  to be  very  competitive  in the
Company's  market  areas,  resulting  in little  downward  pressure  on  deposit
interest rates.  The Company  expects this  competitive  deposit  environment to
continue.  In pricing  deposits,  the Company considers its liquidity needs, the
direction and levels of interest rates, anticipated loan demand and local market


                                       10
<PAGE>

conditions. As of September 30, 1998,  interest-bearing deposits comprised 86.5%
of total  deposits.  The  Company  does  not  believe  that it has any  brokered
deposits.

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

LIQUIDITY AND INTEREST RATE SENSITIVITY

        Liquidity  management  entails meeting the cash flow requirements of the
Company.  The primary cash flow  requirements  include  withdrawals of deposits,
extensions  of credit,  payment of  operating  expenses,  repayment of purchased
funds and  dividends.  The  Company's  principal  sources of funds for liquidity
purposes  are  customer  deposits,  principal  and  interest  payments on loans,
maturities and sale of debt securities,  temporary  investments and earnings. In
addition,  the Company  (through The Peoples National Bank and Bank of Anderson)
has the ability, on a short-term basis, to borrow funds from the Federal Reserve
System and to purchase  federal  funds from other  financial  institutions.  The
Peoples  National Bank is also a member of the Federal Home Loan Bank System and
has the  ability to borrow  both  short-term  and longer term funds on a secured
basis.  At September  30, 1998,  The Peoples  National  Bank had  $2,000,000  in
long-term  borrowings  from the Federal  Home Loan Bank of Atlanta and an unused
borrowing capacity of $14,000,000.

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

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

CAPITAL ADEQUACY

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

        Federal banking  regulations have  established  certain capital adequacy
standards  required to be  maintained  by banks and bank holding  companies.  At
September 30, 1998, the Company, The Peoples National Bank and Bank of Anderson,
N.A. were in compliance  with each of the applicable  capital  requirements  and


                                       11
<PAGE>

exceeded the "well capitalized" regulatory guidelines.  The following table sets
forth the capital ratios for the Company,  The Peoples National Bank and Bank of
Anderson, N.A. as of September 30, 1998:

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

                                                                                           Well                   Adequately
                                                                                        Capitalized               Capitalized
                                                             Actual                     Requirement               Requirement
                                                     Amount           Ratio        Amount         Ratio        Amount       Ratio
                                                     ------           -----        ------         -----        ------       -----
Company:
<S>                                                  <C>              <C>          <C>             <C>          <C>          <C>
Total Risk-based Capital ..................          20,911           22.95%       9,112           10%          7,289        8%
Tier 1 Risk-based Capital .................          19,854           21.79%       5,467            6%          3,645        4%
Leverage Ratio ............................          19,854           15.81%       6,278            5%          5,023        4%
The Peoples National Bank:
Total Risk-based Capital ..................          10,821           13.44%       8,051           10%          6,441        8%
Tier 1 Risk-based Capital .................           9,814           12.19%       4,830            6%          3,220        4%
Leverage Ratio ............................           9,814            7.64%       6,423            5%          5,138        4%

Bank of Anderson, N.A.:
Total Risk-based Capital ..................           4,402          105.6%          417           10%            333        8%
Tier 1 Risk-based Capital .................           4,369          104.8%          250            6%            167        4%
Leverage Ratio ............................           4,369           61.4%          356            5%            285        4%
</TABLE>

EFFECT OF INFLATION AND CHANGING PRICES

    The consolidated  financial statements have been prepared in accordance with
generally  accepted  accounting  principals  which  require the  measurement  of
financial  position and results of operations  in terms of  historical  dollars,
without  consideration of changes in the relative purchasing power over time due
to  inflation.  Unlike most other  industries,  virtually  all of the assets and
liabilities  of a financial  institution  are  monetary in nature.  As a result,
interest  rates  generally  have  a  more  significant  effect  on  a  financial
institution's  performance than does the effect of inflation.  Interest rates do
not  necessarily  change  in the same  magnitude  as the  prices  of  goods  and
services.

    While the effect of inflation on banks is normally not as  significant as is
its  influence on those  businesses  which have large  investments  in plant and
inventories, it does have an effect. During periods of high inflation, there are
normally  corresponding  increases in the money supply,  and banks will normally
experience  above average growth in assets,  loans and deposits.  Also,  general
increases in the prices of goods and services will result in increased operating
expenses.

EFFECTS OF REGULATORY ACTION

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



                                       12
<PAGE>

YEAR 2000 READINESS DISCLOSURE

        The Company  recognizes  that there is a business  risk in  computerized
systems as the new century approaches.  Many computer-based  information systems
in use today  exclude  the century as part of the date  definition,  which could
cause  inaccurate  interest  calculations  on loans  and  deposits.  A number of
computer  systems  used by the  Company  in its  day-to-day  operations  will be
affected by the "Year 2000  Problem."  Management  has  established  a Year 2000
Project Team (the "Y2K Team") which has identified  all affected  systems and is
currently working to ensure that this event will not disrupt operations. The Y2K
Team reports regularly to the Company's Board of Directors.  The Company is also
working  closely with all outside  computer  vendors to ensure that all software
corrections  and warranty  commitments  are  obtained and to implement  internal
"mock"  testing.  Testing  of all  systems  has begun and will be  completed  by
December  1998.  Alternative  vendors/programs  have  been  identified  for  all
critical  function  areas,  as classified by the Y2K Team, and will be purchased
and installed in the event the primary vendor can not provide  satisfactory  Y2K
compliance  by July 31,  1999.  Plans  are also in place in the  event  critical
systems  fail on January 1, 2000.  The  estimated  cost to the Company for these
corrective actions is $100,000, which is included in the Company's 1998 and 1999
budgets.  Incomplete  or  untimely  compliance,  however,  could have a material
adverse  effect on the Company,  the dollar amount of which cannot be accurately
quantified  at this time because of the  inherent  variables  and  uncertainties
involved.  Factors  which could  contribute  to the  Company's  experiencing  an
adverse  effect  include the  availability  of skilled  personnel  and compliant
software,  the  performance  of vendors,  the ability of entities with which the
Company does  business and the  Company's  customers to resolve  their Year 2000
problems and the ability to identify  noncompliant software and the applications
or functions affected.

ACCOUNTING AND REPORTING MATTERS

    In June 1997, Statement of Financial Accounting Standard No. 130, "Reporting
Comprehensive  Income" (FASB 130),  was issued,  and  established  standards for
reporting and displaying comprehensive income and its components,  as recognized
under accounting  standards,  to be displayed in a financial  statement with the
same prominence as other financial  statements.  Accordingly,  the  Consolidated
Statements  of  Comprehensive  Income (Loss) have been included in the financial
statements.

    In June 1997,  the FASB issued SFAS 131,  "Disclosure  about  Segments of an
Enterprise and Related  Information."  SFAS 131 requires that a public  business
enterprise  report  financial and descriptive  information  about its reportable
operating  segments.  Operating  segments are components of an enterprise  about
which separate financial information is available that is evaluated regularly by
the chief operating  decision maker in deciding how to allocate resources and in
assessing  performance.  SFAS 131  requires  that a public  enterprise  report a
measure of segment profit or loss,  certain  specific revenue and expense items,
segment  assets,  information  about the way that the  operating  segments  were
determined  and other items.  The  Statement  is effective  for the fiscal years
beginning after December 15, 1997. The Company does not anticipate that adoption
of SFAS 131 will have a material effect on its financial statements.

    In  June  1998,  the  FASB  issued  SFAS  133.  "Accounting  for  Derivative
Instrument and Hedging  Activities."  All derivatives are to be measured at fair
value  and  recognized  in the  statement  of  financial  position  as assets or
liabilities.  The statement is effective for fiscal years and quarters beginning
June 15, 1999. Because the Company does not use derivative  transactions at this
time,  management  does not expect that this  standard  would have a significant
effect on the Company.

    In April  1998,  the FASB  issued  SFAS  132,  Employers'  Disclosure  about
Pensions  and Other  Postretirement  Benefits."  The new  Statement  revises the
required  disclosure  for  employee  benefit  plans,  but it does not change the
measurement or recognition of such plans.  While the new standard  requires some
additional  information  about benefit  plans,  it helps  preparers of financial


                                       13
<PAGE>

statements  by  eliminating   certain   disclosures  and  by  standardizing  the
disclosures  for  pensions  and  other  postretirement  benefits  to the  extent
practicable.  SFAS  132  supercedes  the  disclosure  requirements  of SFAS  87,
"Employers'  Accounting  for  Pensions,"  SFAS 88,  "Employers'  Accounting  for
Settlements   and   Curtailments  of  Defined  Benefit  Pension  Plans  and  for
Termination  Benefits," and SFAS 106. "Employers'  Accounting for Postretirement
Benefits Other than  Pensions." The new disclosures are effective for the fiscal
years  beginning after December 15, 1997. The adoption of SFAS 132 will not have
an impact on the financial  statements of the Company due to the disclosure only
requirements.

    In March 1998, the  Accounting  Standards  Executive  Committee of the AICPA
issued  Statement  of  Position  98-1,  "Accounting  for the  Costs of  Computer
Software  Developed  or Obtained for Internal  use" (SOP 98-1),  which  provided
guidance  as to when  it is or is not  appropriate  to  capitalize  the  cost of
software  developed  or obtained for  internal  use.  SPO 98-1 is effective  for
financial  statements  for fiscal years  beginning  after December 15, 1998 with
early adoption encouraged.  The Company does not anticipate that adoption of SOP
98-1 will have a material effect on its financial statements.

    In October 1998, the FASB issued SFAS 143,  "Accounting for  Mortgage-Backed
Securities  Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage  Banking  Enterprise." The new statement  established  accounting and
reporting standards for certain activities of mortgage banking enterprises.  The
statement is effective for the first quarter  beginning after December 15, 1998.
The statement will have no effect on the financial statement of the Company.

PART II.  OTHER INFORMATION

Item 1.     Legal Proceedings

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

Item 2. Changes in Securities

               None.

Item 3. Defaults Upon Senior Securities

               None.

Item 4. Submission to a Vote of Security Holders

               None.

Item 5. Other Information

               None.

Item 6. Exhibits and Reports on Form 8-K

          (a)  Exhibits.

               Exhibit 27. Financial Data Schedule

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






                                       14
<PAGE>

SIGNATURES

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


                                      PEOPLES BANCORPORATION, INC.


Dated:  November 9, 1998              By:    /s/ Robert E. Dye
                                           -------------------
                                             Robert E. Dye
                                             President and Chairman of the Board


Dated:  November 9, 1998              By:   /s/ William B. West
                                          ---------------------
                                             William B. West
                                              Sr. Vice President & CFO
                                             (principal financial officer)





                                       15
<PAGE>



                                  EXHIBIT INDEX


       Exhibit No. from
          Item 601 of
        Regulation S-B                       Description
       ------------------                    ------------------------
              27                             Financial Data Schedule