----

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

|                                                                                                                                                                                                                                           |   |  June 30,2010 |    |  December 31,2009 |   |  June 30,2009 |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|------------------------|--------|--------------------|
|                                                                                                                                                                                                                                           |   |  Unaudited    |    |  Audited          |   |  Unaudited    |
|  ASSETS                                                                                                                                                                                                                                   |   |               |    |                   |   |               |   |   |   |   |   |   |
| CASH AND DUE FROM BANKS                                                                                                                                                                                                                        |   | $                  | 9,020   |                   |   | $                  | 11,862 |   |   | $ | 11,637 |   |
| INTEREST-BEARING DEPOSITS IN OTHER BANKS                                                                                                                                                                                                       |   |               | 93      |                   |   |               | 420 |   |   |   | 17 |   |
| FEDERAL FUNDS SOLD                                                                                                                                                                                                                             |   |               | 6,011   |                   |   |               | 14,592 |   |   |   | 3,797 |   |
|      Total cash and cash equivalents                                                                                                                                                                                  |   |               | 15,124  |                   |   |               | 26,874 |   |   |   | 15,451 |   |
| SECURITIES                                                                                                                                                                                                                                     |   |               |    |                   |   |               |   |   |   |   |   |   |
| Trading assets                                                                                                                                                                                                                                 |   |               | 40      |                   |   |               | 128 |   |   |   | 146 |   |
| Available for sale                                                                                                                                                                                                                             |   |               | 108,667 |                   |   |               | 103,227 |   |   |   | 93,535 |   |
| Held to maturity (market value of $8,017, $8,621                                                                                                                                                                                               |   |               |    |                   |   |               |   |   |   |   |   |   |
| and $9,791)                                                                                                                                                                                                                                    |   |               | 7,812   |                   |   |               | 8,402 |   |   |   | 9,697 |   |
|        Other investments, at cost                                                                                                                                                                           |   |               | 4,456   |                   |   |               | 4,456 |   |   |   | 4,075 |   |
| LOANS-less allowance for loan losses of $8,496, $7,431 and $7,809                                                                                                                                                                              |   |               | 352,388 |                   |   |               | 366,143 |   |   |   | 382,147 |   |
| PREMISES AND EQUIPMENT, net of accumulated                                                                                                                                                                                                     |   |               |    |                   |   |               |   |   |   |   |   |   |
| depreciation and amortization                                                                                                                                                                                                                  |   |               | 11,940  |                   |   |               | 12,270 |   |   |   | 12,743 |   |
| ACCRUED INTEREST RECEIVABLE                                                                                                                                                                                                                    |   |               | 2,210   |                   |   |               | 2,371 |   |   |   | 2,540 |   |
| ASSETS ACQUIRED IN SETTLEMENT OF LOANS                                                                                                                                                                                                         |   |               | 13,426  |                   |   |               | 11,490 |   |   |   | 3,919 |   |
| CASH SURRENDER VALUE OF LIFE INSURANCE                                                                                                                                                                                                         |   |               | 12,546  |                   |   |               | 12,304 |   |   |   | 12,057 |   |
| OTHER ASSETS                                                                                                                                                                                                                                   |   |               | 9,167   |                   |   |               | 8,936 |   |   |   | 4,955 |   |
| TOTAL ASSETS                                                                                                                                                                                                                                   |   | $                  | 537,776 |                   |   | $                  | 556,601 |   |   | $ | 541,265 |   |
|                                                                                                                                                                                                                                           |   |               |    |                   |   |               |   |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                                                                     |   |               |    |                   |   |               |   |   |   |   |   |   |
| LIABILITIES                                                                                                                                                                                                                                    |   |               |    |                   |   |               |   |   |   |   |   |   |
| DEPOSITS                                                                                                                                                                                                                                       |   |               |    |                   |   |               |   |   |   |   |   |   |
| Noninterest-bearing                                                                                                                                                                                                                            |   | $                  | 48,237  |                   |   | $                  | 55,367 |   |   | $ | 48,653 |   |
| Interest-bearing                                                                                                                                                                                                                               |   |               | 419,886 |                   |   |               | 429,629 |   |   |   | 403,071 |   |
| Total deposits                                                                                                                                                                                                                                 |   |               | 468,123 |                   |   |               | 484,996 |   |   |   | 451,724 |   |
| SECURITIES SOLD UNDER REPURCHASE                                                                                                                                                                                                               |   |               |    |                   |   |               |   |   |   |   |   |   |
| AGREEMENTS                                                                                                                                                                                                                                     |   |               | 11,287  |                   |   |               | 12,785 |   |   |   | 15,078 |   |
| FEDERAL FUNDS PURCHASED                                                                                                                                                                                                                        |   |               | -       |                   |   |               | 399 |   |   |   | - |   |
| FEDERAL HOME LOAN BANK ADVANCES                                                                                                                                                                                                                |   |               | -       |                   |   |               | - |   |   |   | 14,500 |   |
| ACCRUED INTEREST PAYABLE                                                                                                                                                                                                                       |   |               | 1,997   |                   |   |               | 2,049 |   |   |   | 3,152 |   |
| OTHER LIABILITIES                                                                                                                                                                                                                              |   |               | 2,508   |                   |   |               | 1,929 |   |   |   | 2,177 |   |
| Total Liabilities                                                                                                                                                                                                                              |   |               | 483,915 |                   |   |               | 502,158 |   |   |   | 486,631 |   |
| SHAREHOLDERS’ EQUITY                                                                                                                                                                                                                     |   |               |    |                   |   |               |   |   |   |   |   |   |
| Preferred stock – 15,000,000 shares authorized  Preferred stock Series T - $1,000 per  share liquidation preference;       issued and outstanding-12,660 shares at June 30, 2010, |   |               |    |                   |   |               |   |   |   |   |   |   |
|        December 31, 2009 and June 30, 2009.                                                                                                                                                                 |   |               | 12,065  |                   |   |               | 11,991 |   |   |   | 11,918 |   |
|   Preferred stock Series W - $1,000 per share liquidation preference;      issued and outstanding – 633 shares at June 30, 2010,                                                                 |   |               |    |                   |   |               |   |   |   |   |   |   |
|       December 31, 2009 and June 30, 2009                                                                                                                                                                        |   |               | 689     |                   |   |               | 697 |   |   |   | 704 |   |
| Common stock – 15,000,000 shares authorized, $1.11                                                                                                                                                                                       |   |               |    |                   |   |               |   |   |   |   |   |   |
|        par value per share, 7,003,063 shares, 7,003,063 shares                                                                                                                                              |   |               |    |                   |   |               |   |   |   |   |   |   |
|        and 7,002,503 shares outstanding, respectively                                                                                                                                                       |   |               | 7,774   |                   |   |               | 7,774 |   |   |   | 7,773 |   |
| Additional paid-in capital                                                                                                                                                                                                                     |   |               | 41,677  |                   |   |               | 41,658 |   |   |   | 41,617 |   |
| Retained earnings (deficit)                                                                                                                                                                                                                    |   |               | (10,329 | )                      |   |               | (9,702 | ) |   |   | (8,836 | ) |
| Accumulated other comprehensive income                                                                                                                                                                                                         |   |               | 1,985   |                   |   |               | 2,025 |   |   |   | 1,458 |   |
| Total Shareholders’ Equity                                                                                                                                                                                                               |   |               | 53,861  |                   |   |               | 54,443 |   |   |   | 54,634 |   |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                                                               |   | $                  | 537,776 |                   |   | $                  | 556,601 |   |   | $ | 541,265 |   |
|                                                                                                                                                                                                                                           |   |               |    |                   |   |               |   |   |   |   |   |   |

----

|  Peoples Bancorporation, Inc. and SubsidiariesConsolidated Statements of Income (Loss)(Dollars in thousands except per share and share data)Unaudited |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

|                                                                                                                |   |                 |      |   |                               |   |      |   |   |   |
|---------------------------------------------------------------------------------------------------------------------|--------|----------------------|-----------|--------|------------------------------------|--------|-----------|--------|--------|--------|
|                                                                                                                |   |                 |      |   |                               |   |      |   |   |
|                                                                                                                |   | Three Months Ende    |      |   |    Six Months Ended |
|                                                                                                                |   | June 30,   |      |   |  June 30,                     |
|                                                                                                                |   |   2010          |      |   |                               |   |      | 2010   |   | 2009   |
|  INTEREST INCOME                                                                                               |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| Interest and fees on loans                                                                                          |   | $                    | 5,411     |   |                               | $      | 5,754     |   |   | $      | 10,900 |   |   | $ | 11,930 |   |
| Interest on securities                                                                                              |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                                             |   |                 | 816       |   |                               |   | 856       |   |   |   | 1,680 |   |   |   | 1,732 |   |
| Tax-exempt                                                                                                          |   |                 | 359       |   |                               |   | 367       |   |   |   | 726 |   |   |   | 752 |   |
| Interest on federal funds                                                                                           |   |                 | 14        |   |                               |   | 1         |   |   |   | 22 |   |   |   | 1 |   |
| Total interest income                                                                                               |   |                 | 6,600     |   |                               |   | 6,978     |   |   |   | 13,328 |   |   |   | 14,415 |   |
|                                                                                                                |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| INTEREST EXPENSE                                                                                                    |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| Interest on deposits                                                                                                |   |                 | 1,861     |   |                               |   | 2,650     |   |   |   | 3,831 |   |   |   | 5,461 |   |
| Interest on federal funds purchased and securities                                                                  |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| sold under repurchase agreements                                                                                    |   |                 | 24        |   |                               |   | 21        |   |   |   | 44 |   |   |   | 49 |   |
|     Interest on notes payable Federal Home Loan Bank                                            |   |                 | -         |   |                               |   | 19        |   |   |   | - |   |   |   | 69 |   |
|     Interest on notes payable - other                                                           |   |                 | -         |   |                               |   | 39        |   |   |   | - |   |   |   | 182 |   |
| Total interest expense                                                                                              |   |                 | 1,885     |   |                               |   | 2,729     |   |   |   | 3,875 |   |   |   | 5,761 |   |
| Net interest income                                                                                                 |   |                 | 4,715     |   |                               |   | 4,249     |   |   |   | 9,453 |   |   |   | 8,654 |   |
| PROVISION FOR LOAN LOSSES                                                                                           |   |                 | 1,170     |   |                               |   | 873       |   |   |   | 4,595 |   |   |   | 1,578 |   |
| Net interest income after provision for loan losses                                                                 |   |                 | 3,545     |   |                               |   | 3,376     |   |   |   | 4,858 |   |   |   | 7,076 |   |
|                                                                                                                |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| NON-INTEREST INCOME                                                                                                 |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| Service charges on deposit accounts                                                                                 |   |                 | 391       |   |                               |   | 407       |   |   |   | 754 |   |   |   | 808 |   |
|     Customer service fees                                                                       |   |                 | 24        |   |                               |   | 28        |   |   |   | 64 |   |   |   | 70 |   |
|     Mortgage banking                                                                            |   |                 | 64        |   |                               |   | 159       |   |   |   | 149 |   |   |   | 353 |   |
|     Brokerage services                                                                          |   |                 | 36        |   |                               |   | 59        |   |   |   | 89 |   |   |   | 97 |   |
|     Bank owned life insurance                                                                   |   |                 | 139       |   |                               |   | 136       |   |   |   | 275 |   |   |   | 270 |   |
|     Gain on sale of  available-for-sale securities                                    |   |                 | 814       |   |                               |   | 5         |   |   |   | 814 |   |   |   | 5 |   |
|     Gain (loss) on sale of assets acquired in settlement of loans                               |   |                 | 76        |   |                               |   | (11       | )      |   |   | 71 |   |   |   | 38 |   |
|     Other noninterest income                                                                    |   |                 | 133       |   |                               |   | 113       |   |   |   | 408 |   |   |   | 291 |   |
|               Total noninterest income        |   |                 | 1,677     |   |                               |   | 896       |   |   |   | 2,624 |   |   |   | 1,932 |   |
|  NON-INTEREST EXPENSES                                                                                         |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| Salaries and benefits                                                                                               |   |                 | 2,042     |   |                               |   | 2,111     |   |   |   | 4,103 |   |   |   | 4,256 |   |
| Occupancy                                                                                                           |   |                 | 244       |   |                               |   | 243       |   |   |   | 494 |   |   |   | 489 |   |
| Equipment                                                                                                           |   |                 | 259       |   |                               |   | 295       |   |   |   | 520 |   |   |   | 596 |   |
|      Marketing and advertising                                                             |   |                 | 35        |   |                               |   | 41        |   |   |   | 80 |   |   |   | 72 |   |
|      Communications                                                                        |   |                 | 58        |   |                               |   | 59        |   |   |   | 121 |   |   |   | 124 |   |
|      Printing and supplies                                                                 |   |                 | 34        |   |                               |   | 39        |   |   |   | 71 |   |   |   | 78 |   |
|      Bank paid loan costs                                                                  |   |                 | 310       |   |                               |   | 287       |   |   |   | 655 |   |   |   | 507 |   |
|      Director fees                                                                         |   |                 | 74        |   |                               |   | 93        |   |   |   | 168 |   |   |   | 185 |   |
|      ATM/Debit card expenses                                                               |   |                 | 64        |   |                               |   | 104       |   |   |   | 124 |   |   |   | 201 |   |
|      Legal and professional fees                                                           |   |                 | 195       |   |                               |   | 200       |   |   |   | 341 |   |   |   | 351 |   |
|      Regulatory assessments                                                                |   |                 | 335       |   |                               |   | 261       |   |   |   | 657 |   |   |   | 511 |   |
|      Other post employment benefits                                                        |   |                 | 77        |   |                               |   | 91        |   |   |   | 165 |   |   |   | 182 |   |
| Other operating expenses                                                                                            |   |                 | 358       |   |                               |   | 326       |   |   |   | 731 |   |   |   | 682 |   |
|           Total noninterest expenses                              |   |                 | 4,085     |   |                               |   | 4,150     |   |   |   | 8,230 |   |   |   | 8,234 |   |
| Income (loss)  before income taxes                                                                        |   |                 | 1,137     |   |                               |   | 122       |   |   |   | (748 | ) |   |   | 774 |   |
| PROVISION FOR INCOME TAXES (BENEFIT)                                                                                |   |                 | 253       |   |                               |   | (96       | )      |   |   | (532 | ) |   |   | (2 | ) |
| Net income (loss)                                                                                                   |   | $                    | 884       |   |                               | $      | 218       |   |   | $      | (216 | ) |   | $ | 776 |   |
| Deductions for amounts not available to common shareholders:                                                        |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
|       Dividends declared or accumulated on preferred stock                            |   |                 | 173       |   |                               |   | 128       |   |   |   | 345 |   |   |   | 128 |   |
|       Net accretion of discount on preferred stock                                    |   |                 | 33        |   |                               |   | 8         |   |   |   | 66 |   |   |   | 8 |   |
|    Net income (loss) available to common shareholders                                                |   | $                    | 678       |   |                               | $      | 82        |   |   | $      | (627 | ) |   | $ | 640 |   |
|                                                                                                                |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
|                                                                                                                |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
|                                                                                                                |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
|                                                                                                                |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
|                                                                                                                |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
|                                                                                                                |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| INCOME (LOSS) PER COMMON SHARE                                                                                      |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| BASIC                                                                                                               |   | $                    | 0.10      |   |                               | $      | 0.01      |   |   | $      |  (0.09 | ) |   | $ | 0.09 |   |
| DILUTED                                                                                                             |   | $                    | 0.10      |   |                               | $      | 0.01      |   |   | $      |  (0.09 | ) |   | $ | 0.09 |   |
|                                                                                                                |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| WEIGHTED AVERAGE COMMON SHARES                                                                                      |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| BASIC                                                                                                               |   |                 | 7,003,063 |   |                               |   | 7,047,594 |   |   |   | 7,003,063 |   |   |   | 7,058,866 |   |
| DILUTED                                                                                                             |   |                 | 7,003,063 |   |                               |   | 7,098,596 |   |   |   | 7,003,063 |   |   |   | 7,114,645 |   |
|                                                                                                                |   |                 |      |   |                               |   |      |   |   |   |   |   |   |   |   |   |
| CASH DIVIDENDS PAID PER COMMON SHARE                                                                                |   | $                    | -         |   |                               | $      | -         |   |   | $      | - |   |   | $ | - |   |
|                                                                                                                |   |                 |      |
| See Notes to Unaudited Consolidated Financial Statements which are an integral part of these statement.   |   |                 |

----

|     Peoples Bancorporation, Inc. and Subsidiaries                                     Consolidated Statements of Shareholders’ Equity and Comprehensive IncomeFor the six months ended June 30, 2010 and 2009(Dollars in thousands)(Unaudited) |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

|                                                                         |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   | Accumulated |    |   |   |   |
|------------------------------------------------------------------------------|--------|-----------------|---------|--------|-----------------|--------|---------|--------------|--------|--------|-----------|--------|--------|------------|---------|--------|---------------|--------|-----------|--------------|--------|--------|-----------|--------|--------|-------------|---------|--------|--------|--------|
|                                                                         |   | Preferred Stock |    |   | Preferred Stock |   |    |         |   |   |      |   |   | Additional |    |   | Retained      |   |      | Other        |   |   | Total     |   |
|                                                                         |   | Series T        |    |   | Series W        |   |    | Common Stock |   |   | Paid-in   |   |   | Earnings   |    |   | Comprehensive |   |      | Shareholders |   |
|                                                                         |   | Shares          |    |   | Amount          |   |    | Shares       |   |   | Amount    |   |   | Shares     |    |   | Amount        |   |      | Capital      |   |   | (Deficit) |   |   | Income      |    |   | Equity |   |
| Balance, December 31, 2008                                              |   |            | -       |   |            | $      | -       |         |   |   | -         |   |   | $          | -       |   |          |   | 7,070,139 |         |   | $      | 7,848     |   |   | $           | 41,752  |   |   | $      | (9,564 | ) |   | $ | 1,476 |   |   | $ | 41,512 |   |
| Net income            |   |            | -  |   |            |   | -  |         |   |   | -    |   |   |       | -  |   |          |   | -    |         |   |   | -    |   |   |        | -  |   |   |   | 776  |   |   |   | -  |   |   |   | 776  |   |
| Other comprehensive Income,                                                  |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   net of tax:                                                      |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding losses on                                                 |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    securities available for sale,                             |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    net income tax of $(10)                                    |   |            | -       |   |            |   | -       |         |   |   | -         |   |   |       | -       |   |          |   | -         |         |   |   | -         |   |   |        | -       |   |   |   | - |   |   |   | (18 | ) |   |   | (18 | ) |
| Comprehensive income                                                         |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 758 |   |
| Issuance of preferred stock                                                  |   |            | 12 660  |   |            |   | 11,909  |         |   |   | 633       |   |   |       | 705     |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 12,614 |   |
| Cash dividends on                                                            |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    preferred stock                                            |   |            | -       |   |            |   | -       |         |   |   | -         |   |   |       | -       |   |          |   | -         |         |   |   | -         |   |   |        | -       |   |   |   | (40 | ) |   |   | - |   |   |   | (40 | ) |
| Common shares surrendered                                                    |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    by dissenting shareholders                                 |   |            | -       |   |            |   | -       |         |   |   | -         |   |   |       | -       |   |          |   | (67,636   | )            |   |   | (75       | )      |   |        | (168    | )      |   |   | - |   |   |   | - |   |   |   | (243 | ) |
| Accretion (amortization)                                                     |   |            | -       |   |            |   | 9       |         |   |   |      |   |   |       | (1      | )      |          |   | -         |         |   |   | -         |   |   |        | -       |   |   |   | (8 | ) |   |   | - |   |   |   | - |   |
| Stock-based compensation                                                     |   |            |  - |   |            |   |  - |         |   |   | -         |   |   |       | -       |   |          |   | -         |         |   |   | -         |   |   |        | 33      |   |   |   | - |   |   |   |  - |   |   |   | 33 |   |
| Balance, June 30, 2009                                                       |   |            | 12,660  |   |            | $      | 11,918  |         |   |   |  633 |   |   | $          | 704     |   |          |   | 7,002,503 |         |   | $      | 7,773     |   |   | $           | 41,617  |   |   | $      | (8,836 | ) |   | $ | 1,458 |   |   | $ | 54,634 |   |
|                                                                         |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Balance, December 31, 2009                                            |   |            | 12,660  |   |            | $      | 11,991  |         |   |   | 633       |   |   | $          | 697     |   |          |   | 7,003,063 |         |   | $      | 7,774     |   |   | $           | 41,658  |   |   | $      | (9,702 | ) |   | $ | 2,025 |   |   | $ | 54,443 |   |
| Net loss                                                                     |   |            | -       |   |            |   | -       |         |   |   | -         |   |   |       | -       |   |          |   | -         |         |   |   | -         |   |   |        | -       |   |   |   | (216 | ) |   |   | - |   |   |   | (216 | ) |
| Other comprehensive Income,                                                  |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   net of tax:                                                      |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding losses on                                                 |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    securities available for sale,                             |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    net income tax of $(20)                                    |   |            | -       |   |            |   | -       |         |   |   | -         |   |   |       | -       |   |          |   | -         |         |   |   | -         |   |   |        | -       |   |   |   | - |   |   |   | (40 | ) |   |   | (40 | ) |
| Comprehensive loss                                                           |   |            | -       |   |            |   | -       |         |   |   | -         |   |   |       | -       |   |          |   | -         |         |   |   | -         |   |   |        | -       |   |   |   | - |   |   |   | - |   |   |   | (256 | ) |
| Issuance of preferred stock                                                  |   |            | -       |   |            |   | -       |         |   |   | -         |   |   |       | -       |   |          |   | -         |         |   |   | -         |   |   |        | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Cash dividends on                                                            |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    preferred stock                                            |   |            | -       |   |            |   | -       |         |   |   | -         |   |   |       | -       |   |          |   | -         |         |   |   | -         |   |   |        | -       |   |   |   | (345 | ) |   |   | - |   |   |   | (345 | ) |
| Accretion (amortization)                                                     |   |            |    |   |            |   |    |         |   |   |      |   |   |       |    |   |          |   |      |         |   |   |      |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    of preferred stock                                         |   |            | -       |   |            |   | 74      |         |   |   | -         |   |   |       | (8      | )      |          |   | -         |         |   |   | -         |   |   |        | -       |   |   |   | (66 | ) |   |   | - |   |   |   | - |   |
| Stock-based compensation                                                     |   |            |  - |   |            |   |  - |         |   |   | -         |   |   |       | -       |   |          |   | -         |         |   |   | -         |   |   |        | 19      |   |   |   | - |   |   |   |  - |   |   |   | 19 |   |
| Balance, June 30, 2010                                                       |   |            | 12,660  |   |            | $      | 12,065  |         |   |   |  633 |   |   | $          | 689     |   |          |   | 7,003,063 |         |   | $      | 7,774     |   |   | $           | 41,677  |   |   | $      | (10,329 | ) |   | $ | 1,985 |   |   | $ | 53,861 |   |

----

|           Peoples Bancorporation, Inc. and Subsidiaries                                                                                                                     |   |             |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|---------|
|                Consolidated Statements of Cash Flows                                                                                               |   |             |    |
|                              (Dollars in thousands)                          |   | Six months Ended |    |
|                                    (Unaudited) |   | June 30,         |    |
|                                                                                                                                                                                                                          |   | 2010             |    |   | 2009 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                                                                                                          |   |             |    |   |   |   |
| Net income (loss)                                                                                                                                                                                                             |   | $                | (216    | ) |   | $ | 776 |   |
| Adjustments to reconcile net income (loss) to net cash  provided by                                                                                                                                                 |   |             |    |   |   |   |   |   |
|  operating activities:                                                                                                                                                                                                   |   |             |    |   |   |   |   |   |
| Gain on sale of premises and equipment                                                                                                                                                                                        |   |             | -       |   |   |   | (4 | ) |
| (Gain) loss from trading assets                                                                                                                                                                                               |   |             | 88      |   |   |   | (99 | ) |
| Gain on sale of securities available for sale                                                                                                                                                                                 |   |             | (814    | ) |   |   | (5 | ) |
| Gain on sale of assets acquired in settlement of loans                                                                                                                                                                        |   |             | (71     | ) |   |   | (38 | ) |
| Other than temporary write-down on Silverton Bank Stock                                                                                                                                                                       |   |             | -       |   |   |   | 160 |   |
| Provision for loan losses                                                                                                                                                                                                     |   |             | 4,595   |   |   |   | 1,578 |   |
| Depreciation and amortization                                                                                                                                                                                                 |   |             | 459     |   |   |   | 524 |   |
| Amortization and accretion (net) of premiums and                                                                                                                                                                              |   |             |    |   |   |   |   |   |
| discounts on securities                                                                                                                                                                                                       |   |             | 165     |   |   |   | (8 | ) |
|     Stock-based compensation                                                                                                                                                                              |   |             | 19      |   |   |   | 33 |   |
| Decrease in accrued interest receivable                                                                                                                                                                                       |   |             | 161     |   |   |   | 145 |   |
| (Increase) decrease in other assets                                                                                                                                                                                           |   |             | (140    | ) |   |   | 2,276 |   |
| Increase (decrease) in accrued interest payable                                                                                                                                                                               |   |             | (52     | ) |   |   | 516 |   |
| Increase in other liabilities                                                                                                                                                                                                 |   |             | 579     |   |   |   | 628 |   |
| Net cash provided by operating activities                                                                                                                                                                                     |   |             | 4,773   |   |   |   | 6,482 |   |
|                                                                                                                                                                                                                          |   |             |    |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                                                                                                                                                          |   |             |    |   |   |   |   |   |
| Purchases of securities available for sale                                                                                                                                                                                    |   |             | (30,447 | ) |   |   | (7,035 | ) |
| Purchases of other investments                                                                                                                                                                                                |   |             | -       |   |   |   | (529 | ) |
| Proceeds from principal pay-downs on securities available for sale                                                                                                                                                            |   |             | 9,767   |   |   |   | 7,336 |   |
| Proceeds from the maturities and calls of securities available for sale                                                                                                                                                       |   |             | 2,000   |   |   |   | 2,000 |   |
| Proceeds from the maturities and calls of securities held to maturity                                                                                                                                                         |   |             | 595     |   |   |   | 2,945 |   |
| Proceeds from the sale of securities available for sale                                                                                                                                                                       |   |             | 13,824  |   |   |   | - |   |
|     Increase in cash surrender value of life insurance                                                                                                                                                    |   |             | (242    | ) |   |   | (242 | ) |
| Proceeds from the sale of other real estate owned                                                                                                                                                                             |   |             | 2,755   |   |   |   | 5,343 |   |
| Net increase in loans                                                                                                                                                                                                         |   |             | 4,469   |   |   |   | 1,935 |   |
| Proceeds form the sale of premises and equipment                                                                                                                                                                              |   |             | -       |   |   |   | 4 |   |
| Purchase of premises and equipment                                                                                                                                                                                            |   |             | (129    | ) |   |   | (67 | ) |
| Net cash provided by investing activities                                                                                                                                                                                     |   |             | 2,592   |   |   |   | 11,690 |   |
|                                                                                                                                                                                                                          |   |             |    |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                                                                                                          |   |             |    |   |   |   |   |   |
| Net increase (decrease) in deposits                                                                                                                                                                                           |   |             | (16,873 | ) |   |   | 6,355 |   |
| Net decrease in securities sold under repurchase agreements                                                                                                                                                                   |   |             | (1,498  | ) |   |   | (7,103 | ) |
|     Net decrease in federal funds purchased                                                                                                                                                               |   |             | (399    | ) |   |   | (1,028 | ) |
| Net decrease in Federal Home Loan Bank advances                                                                                                                                                                               |   |             | -       |   |   |   | (20,100 | ) |
| Net decrease in notes payable to South Carolina Bank & Trust                                                                                                                                                              |   |             | -       |   |   |   | (11,000 | ) |
|     Common shares surrendered by dissenting shareholders                                                                                                                                                  |   |             | -       |   |   |   | (243 | ) |
|     Proceeds from the issuance of preferred stock and warrants                                                                                                                                            |   |             | -       |   |   |   | 12,614 |   |
|     Cash dividends paid on preferred stock                                                                                                                                                                |   |             | (345    | ) |   |   | (40 | ) |
| Net cash provided used in financing activities                                                                                                                                                                                |   |             | (19,115 | ) |   |   | (20,545 | ) |
| Net decrease in cash and cash equivalents                                                                                                                                                                                     |   |             | (11,750 | ) |   |   | (2,373 | ) |
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                                                                                                                                                |   |             | 26,874  |   |   |   | 17,824 |   |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                                                                                                                                                                                      |   | $                | 15,124  |   |   | $ | 15,451 |   |
|                                                                                                                                                                                                                          |   |             |    |   |   |   |   |   |
| CASH PAID FOR                                                                                                                                                                                                                 |   |             |    |   |   |   |   |   |
| Interest                                                                                                                                                                                                                      |   | $                | 3,927   |   |   | $ | 5,905 |   |
| Income taxes                                                                                                                                                                                                                  |   | $                | 40      |   |   | $ | 25 |   |
| NON-CASH TRANSACTIONS                                                                                                                                                                                                         |   |             |    |   |   |   |   |   |
| Change in unrealized loss  on available for sale securities                                                                                                                                                         |   | $                | (40     | ) |   | $ | (18 | ) |
| Loans transferred to other real estate                                                                                                                                                                                        |   | $                | 4,691   |   |   | $ | 3,834 |   |
|                                                                                                                                                                                                                          |   |             |    |   |   |   |   |   |

----

|                                        |   | Six Months EndedJune 30, |      |
|---------------------------------------------|--------|--------------------------|-----------|
|                                        |   | 2010                     |      |   | 2009 |   |
| Net (loss) income available to common       |   |                     |      |   |   |   |
|   shareholders (in thousands)     |   | $                        | (627      | ) |   | $ | 640 |   |
|                                        |   |                     |      |   |   |   |   |   |
| Weighted average shares outstanding:        |   |                     |      |   |   |   |   |   |
| Basic                                       |   |                     | 7,003,063 |   |   |   | 7,058,866 |   |
| Effect of dilutive securities:              |   |                     |      |   |   |   |   |   |
|      Stock options |   |                     | -         |   |   |   | 55,779 |   |
| Diluted                                     |   |                     | 7,003,063 |   |   |   | 7,114,645 |   |
|                                        |   |                     |      |   |   |   |   |   |
| Income (loss) per common share:             |   |                     |      |   |   |   |   |   |
| Basic                                       |   | $                        | (0.09     | ) |   | $ | 0.09 |   |
| Diluted                                     |   | $                        | (0.09     | ) |   | $ | 0.09 |   |

----

|                                                                 |   | Amortized               |      |   | Unrealized holding |   |    | Fair   |   |
|----------------------------------------------------------------------|--------|-------------------------|-----------|--------|-------------------------|--------|---------|--------|--------|
|                                                                 |   |     Cost |      |   | Gains                   |   |    | Losses |   |   | value |   |
|  TRADING ASSETS:                                                |   |                    |      |   |                    |   |    |   |   |   |   |   |
|                                                                 |   |                    |      |   |                    |   |    |   |   |   |   |   |
|  EQUITY SECURITIES                                              |   | $                       | 40        |   |                    | $      | -       |   |   | $ | - |   |   | $ | 40 |   |
|                                                                 |   |                    |      |   |                    |   |    |   |   |   |   |   |   |   |   |   |
|  SECURITIES AVAILABLE FOR SALE:                                 |   |                    |      |   |                    |   |    |   |   |   |   |   |   |   |   |   |
|                                                                 |   |                    |      |   |                    |   |    |   |   |   |   |   |   |   |   |   |
|   GOVERNMENT SPONSORED ENTERPRISESECURITIES                     |   |                    |      |   |                    |   |    |   |   |   |   |   |   |   |   |   |
|  Maturing after five years but within ten years                 |   | $                       | 8,686     |   |                    | $      | 392     |   |   | $ | - |   |   | $ | 9,078 |   |
|                                                                 |   |                    |      |   |                    |   |    |   |   |   |   |   |   |   |   |   |
|  MORTGAGE BACKED SECURITIES       |   |                    | 42,503    |   |                    |   | 1,651   |   |   |   | 30 |   |   |   | 44,124 |   |
|  Maturing after one year but within five years                  |   |                    | 16,078    |   |                    |   | 323     |   |   |   | - |   |   |   | 16,401 |   |
|   Maturing after five years but within ten years           |   |                    | 9,265     |   |                    |   | 139     |   |   |   | - |   |   |   | 9,404 |   |
|   Maturing after ten years                                 |   |                    | 67,846    |   |                    |   | 2,113   |   |   |   | 30 |   |   |   | 69,929 |   |
|                                                                 |   |                    |      |   |                    |   |    |   |   |   |   |   |   |   |   |   |
|   OBLIGATIONS OF STATES AND POLITICALSUBDIVISIONS               |   |                    |      |   |                    |   |    |   |   |   |   |   |   |   |   |   |
|  Maturing after one year but within five years                  |   |                    | 456       |   |                    |   | 38      |   |   |   | - |   |   |   | 494 |   |
|  Maturing after five years but within ten years                 |   |                    | 5,709     |   |                    |   | 157     |   |   |   | 9 |   |   |   | 5,857 |   |
|  Maturing after ten years                                       |   |                    | 22,360    |   |                    |   | 445     |   |   |   | 78 |   |   |   | 22,727 |   |
|                                                                 |   |                    | 28,525    |   |                    |   | 640     |   |   |   | 87 |   |   |   | 29,078 |   |
|  OTHER SECURITIES                                               |   |                    |      |   |                    |   |    |   |   |   |   |   |   |   |   |   |
|  Maturing after ten years                                       |   |                    | 603  |   |                    |   | -  |   |   |   | 21 |   |   |   | 582  |   |
|                                                                 |   |                    |      |   |                    |   |    |   |   |   |   |   |   |   |   |   |
|  Total securities available for sale                            |   | $                       | 105,660   |   |                    | $      | 3,145   |   |   | $ | 138 |   |   | $ | 108,667 |   |
|                                                                 |   |                    |      |   |                    |   |    |   |   |   |   |   |   |   |   |   |
|  SECURITIES HELD TO MATURITY:                                   |   |                    |      |   |                    |   |    |   |   |   |   |   |   |   |   |   |
|                                                                 |   |                    |      |   |                    |   |    |   |   |   |   |   |   |   |   |   |
|   OBLIGATIONS OF STATES AND POLITICALSUBDIVISIONS               |   |                    |      |   |                    |   |    |   |   |   |   |   |   |   |   |   |
|  Maturing within one year                                       |   | $                       | 897       |   |                    | $      | 15      |   |   | $ | - |   |   | $ | 912 |   |
|  Maturing after one but within five years                       |   |                    | 2,421     |   |                    |   | 93      |   |   |   | - |   |   |   | 2,514 |   |
|  Maturing after five years but within ten years            |   |                    | 3,357     |   |                    |   | 63      |   |   |   | - |   |   |   | 3,420 |   |
|  Maturing after ten years                                       |   |                    | 1,137     |   |                    |   | 34      |   |   |   | - |   |   |   | 1,171 |   |
|  Total securities held to maturity                         |   | $                       | 7,812     |   |                    | $      | 205     |   |   | $ | - |   |   | $ | 8.017 |   |

----

|                              |   | Less than 12 Months   |   |                   | 12 Months or More |            |   | Total                  |   |
|-----------------------------------|--------|-----------------------|--------|------------------------|-------------------|-----------------|--------|------------------------|--------|
|                              |   | Fair Value  |   | UnrealizedLosses  |              | FairValue  |   | UnrealizedLosses  |   | FairValue  |   | UnrealizedLosses  |
| Mortgage backed securities        |   | $                     | 3,341  |                   |              | $               | 30     |                   |   | $ | - |   |   | $ | - |   |   | $ | 3,341 |   |   | $ | 30 |   |
| Other securities                  |   |                  | -      |                   |              |            | -      |                   |   |   | 492 |   |   |   | 21 |   |   |   | 492 |   |   |   | 21 |   |
| States and political subdivisions |   |                  | 3,049  |                   |              |            | 87     |                   |   |   | - |   |   |   | - |   |   |   | 3,049 |   |   |   | 87 |   |
| Total                             |   | $                     | 6,390  |                   |              | $               | 117    |                   |   | $ | 492 |   |   | $ | 21 |   |   | $ | 6,882 |   |   | $ | 138 |   |

|                               |   |   Shares |    |   | WeightedAverageExercisePrice  |   | WeightedAverageContractualTerm (Years)  |   | AggregateIntrinsicValue |   |
|------------------------------------|--------|--------------------|---------|--------|------------------------------------|--------|----------------------------------------------|--------|-------------------------|--------|
| Outstanding, December 31, 2009     |   |               | 154,868 |   |                               | $      | 9.86                                         |   |                    |   |   |   |   |   |
| Granted                            |   |               | 6,500   |   |                               |   | 2.26                                         |   |                    |   |   |   |   |   |
| Exercised                          |   |               | -       |   |                               |   | -                                            |   |                    |   |   |   |   |   |
| Forfeited                          |   |               | (7,721  | )      |                               |   | 8.16                                         |   |                    |   |   |   |   |   |
| Outstanding, June 30, 2010         |   |               | 153,647 |   |                               | $      | 10.44                                        |   |                    |   | 6.45 |   |   | $ | - |   |
|                               |   |               |    |   |                               |   |                                         |   |                    |   |   |   |   |   |   |   |
| Options exercisable, June 30, 2010 |   |               | 133,786 |   |                               | $      | 9.90                                         |   |                    |   | 6.45 |   |   | $ | - |   |

----

| Level 1 | Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as U.S. Treasury Securities and other securities that are highly liquid and are actively traded in over-the-counter markets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Level 2 | Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes U. S. Government and agency mortgage-backed debt securities and impaired loans that are carried at the appraisal value of the underlying collateral.  |
| Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. For example, this category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, and highly-structured or long-term derivative contracts.                                                                                                                                                                |

|                                               |   | Quoted market price in active markets for identical assets/liabilities |   |   | Significant other observable inputs |   |    | Significant unobservable inputs |   |   |   |   |
|----------------------------------------------------|--------|------------------------------------------------------------------------|--------|--------|------------------------------------------|--------|---------|---------------------------------|--------|--------|--------|--------|
|                                               |   | (Level 1)                                                              |   |   | (Level 2)                                |   |    | (Level 3)                       |   |   | Total  |   |
| Recurring Basis:                                   |   |                                                                   |   |   |                                     |   |    |                            |   |   |   |   |
| Available for sale investment                      |   |                                                                   |   |   |                                     |   |    |                            |   |   |   |   |
| securities:                                        |   |                                                                   |   |   |                                     |   |    |                            |   |   |   |   |
|     Government Sponsored Securities |   | $                                                                      | -      |   |                                     | $      | 9,078   |                            |   | $      | -      |   |   | $ | 9,078 |   |
|     Mortgage Backed Securities      |   |                                                                   | -      |   |                                     |   | 69,929  |                            |   |   | -      |   |   |   | 69,929 |   |
|     Obligations of States and       |   |                                                                   |   |   |                                     |   |    |                            |   |   |   |   |   |   |   |   |
|     Political Subdivisions     |   |                                                                   | -      |   |                                     |   | 29,078  |                            |   |   | -      |   |   |   | 29,078 |   |
|     Other Securities                |   |                                                                   | -      |   |                                     |   | 582     |                            |   |   | -      |   |   |   | 582 |   |
| Trading Assets                                     |   |                                                                   | 40     |   |                                     |   | -       |                            |   |   | -      |   |   |   | 40 |   |
| Total                                              |   | $                                                                      | 40     |   |                                     | $      | 108,667 |                            |   | $      | -      |   |   | $ | 108,707 |   |
|                                               |   |                                                                   |   |   |                                     |   |    |                            |   |   |   |   |   |   |   |   |

----

|                       |   | Quoted market price in active marketsfor identical assets/liabilities |   |   | Significant otherobservable inputs |   |   | Significant unobservableinputs  |   |   |   |   |
|----------------------------|--------|----------------------------------------------------------------------------|--------|--------|------------------------------------|--------|--------|--------------------------------------|--------|--------|--------|--------|
|                       |   | (Level 1)                                                                  |   |   | (Level 2)                          |   |   | (Level 3)                            |   |   | Total  |   |
|   Nonrecurring Basis: |   |                                                                       |   |   |                               |   |   |                                 |   |   |   |   |
| Impaired loans             |   | $                                                                          | -      |   |                               | $      | 16,660 |                                 |   | $      | -      |   |   | $ | 16,660 |   |
| Other real estate owned    |   |                                                                       | -      |   |                               |   | 13,426 |                                 |   |   | -      |   |   |   | 13,426 |   |
| Total                      |   | $                                                                          | -      |   |                               | $      | 30,086 |                                 |   | $      | -      |   |   | $ | 30,086 |   |
|                       |   |                                                                       |   |   |                               |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |

|                                      |   | Quoted market price inactive markets for identical assets/liabilities |      |   |   Significant otherobservable inputs |    |          | Significantunobservable inputs |   |    |   |   |
|-------------------------------------------|--------|-----------------------------------------------------------------------|-----------|--------|------------------------------------------------|---------|---------------|--------------------------------|--------|---------|--------|--------|
|                                      |   | (Level 1)                                                             |      |   | (Level 2)                                      |    |          | (Level 3)                      |   |    | Total  |   |
| Recurring Basis:                          |   |                                                                  |      |   |                                           |    |          |                           |   |    |   |   |   |   |   |   |
| Available for sale investment securities: |   |                                                                  |      |   |                                           |    |          |                           |   |    |   |   |   |   |   |   |
|                                      |   |                                                                  |      |   |                                           |    |          |                           |   |    |   |   |   |   |   |   |
|   Government Sponsored Securities    |   |  $                                                               | -         |   |                                           |  $ | 7,132         |                           |   |  $ | -      |   |   |  $ | 7,132 |   |
|   Mortgage Backed Securities         |   |                                                                  | -         |   |                                           |    | 66,132        |                           |   |    | -      |   |   |   | 66,132 |   |
|   Obligations of States and          |   |                                                                  |      |   |                                           |    |          |                           |   |    |   |   |   |   |   |   |
|  Political Subdivisions              |   |                                                                  | -         |   |                                           |    | 29,398        |                           |   |    | -      |   |   |   | 29,398  |   |
|  Other Securities                    |   |                                                                  |      |   |                                           |    | 565           |                           |   |    | -      |   |   |   |  565 |   |
|  Trading Assets                      |   |                                                                  | 128  |   |                                           |    | -             |                           |   |    | -      |   |   |   | 128 |   |
|  Total                               |   |                                                                  | 128  |   |                                           |  $ | 103,227  |                           |   |  $ | -      |   |   |  $ | 103,355 |   |
|                                      |   |                                                                  |      |   |                                           |    |          |                           |   |    |   |   |   |   |   |   |
|  Nonrecurring Basis:                 |   |                                                                  |      |   |                                           |    |          |                           |   |    |   |   |   |   |   |   |
|  Impaired loans                      |   |  $                                                               | -         |   |                                           |  $ | 14,746        |                           |   |  $ | -      |   |   |  $ | 14,746 |   |
|  Other real estate owned             |   |                                                                  | -         |   |                                           |    | 11,490        |                           |   |    | -      |   |   |   |  11,490 |   |
|  Total                               |   |  $                                                               | -         |   |                                           |  $ | 26,236        |                           |   |  $ | -      |   |   |  $ | 26,236 |   |

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|                                                                    |   | June 30,2010   |    |   | December 31,2009 |   |
|-------------------------------------------------------------------------|--------|----------------|---------|--------|------------------|--------|
|                                                                    |   | Carryingamount |    |   | Fairvalue        |   |   | Carryingamount |   |   | Fairvalue |   |
| Financial assets:                                                       |   |           |    |   |             |   |   |   |   |   |   |   |
| Cash and due from banks                                                 |   | $              | 9,020   |   |             | $      | 9,020 |   |   | $ | 11,862 |   |   | $ | 11,862 |   |
| Interest-bearing deposits in other banks                                |   |           | 93      |   |             |   | 93 |   |   |   | 420 |   |   |   | 420 |   |
| Federal funds sold                                                      |   |           | 6,011   |   |             |   | 6,011 |   |   |   | 14,592 |   |   |   | 14,592 |   |
|       Trading assets                      |   |           | 40      |   |             |   | 40 |   |   |   | 128 |   |   |   | 128 |   |
| Securities available for sale                                           |   |           | 108,667 |   |             |   | 108,667 |   |   |   | 103,227 |   |   |   | 103,227 |   |
| Securities held to maturity                                             |   |           | 7,812   |   |             |   | 8,017 |   |   |   | 8,402 |   |   |   | 8,621 |   |
| Other investments                                                       |   |           | 4,456   |   |             |   | 4,456 |   |   |   | 4,456 |   |   |   | 4,456 |   |
| Loans (gross)                                                           |   |           | 360,884 |   |             |   | 355,995 |   |   |   | 373,574 |   |   |   | 370,420 |   |
|       Cash surrender value life insurance |   |           | 12,546  |   |             |   | 12,546 |   |   |   | 12,304 |   |   |   | 12,304 |   |
| Financial liabilities:                                                  |   |           |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                |   | $              | 468,123 |   |             | $      | 462,918 |   |   | $ | 484,996 |   |   | $ | 477,788 |   |
| Securities sold under repurchase agreements                             |   |           | 11,287  |   |             |   | 11,287 |   |   |   | 12,785 |   |   |   | 12,785 |   |
| Federal funds purchased                                                 |   |           | -       |   |             |   | - |   |   |   | 399 |   |   |   | 399 |   |

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| ·   | future economic and business conditions; |
|--------------------|------------------------------------------|

| ·   | lack of sustained growth in the economies of the Company's market areas; |
|--------------------|--------------------------------------------------------------------------|

| ·   | government monetary and fiscal policies; |
|--------------------|------------------------------------------|

| ·   | the effects of changes in interest rates on the levels, composition and costs of deposits, loan demand, and the values of loan collateral, securities, and interest sensitive assets and liabilities; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the effects of competition from a wide variety of local, regional, national and other providers of financial, investment, and insurance services, as well as competitors that offer banking products and services by mail, telephone, computer and/or the Internet; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the effect of agreements with regulatory authorities, which restrict various activities and impose additional administrative requirements without commensurate benefits; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | credit risks; |
|--------------------|---------------|

| ·   | higher than anticipated levels of defaults on loans; |
|--------------------|------------------------------------------------------|

| ·   | perceptions by depositors about the safety of their deposits; |
|--------------------|---------------------------------------------------------------|

| ·   | ability to continue weathering the current economic downturn; |
|--------------------|---------------------------------------------------------------|

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

| ·   | the risks of opening new offices, including, without limitation, the  related costs and time of building customer relationships and  integrating operations as part of these endeavors and the failure to  achieve expected gains, revenue growth and/or expense savings from  such endeavors; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changes in laws and regulations, including tax, banking and securities laws and regulations; |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | changes in the requirements of regulatory agencies; |
|--------------------|-----------------------------------------------------|

| ·   | changes in accounting policies, rules and practices; |
|--------------------|------------------------------------------------------|

| ·   | cost and difficulty of implementing changes in technology or products; |
|--------------------|------------------------------------------------------------------------|

| ·   | loss of consumer or investor confidence; |
|--------------------|------------------------------------------|

| ·   | the effects of war or other conflicts, acts of terrorism or other  catastrophic events that may affect general economic conditions and economic confidence; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | other factors and information described in this report and in any of the other reports that we file with the SEC under the Securities Exchange Act of 1934. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Loan Portfolio Composition                                   |   | June 30,    |    |   | December 31, |   |    | June 30,    |   |
|--------------------------------------------------------------|--------|-------------|---------|--------|--------------|--------|---------|-------------|--------|
| (Dollars in thousands)                                       |   | 2010        |    |   | 2009         |   |    | 2009        |   |
|                                                         |   | (Unaudited) |    |   | (Audited)    |   |    | (Unaudited) |   |
|                                                         |   |        |    |   |         |   |    |        |   |
| Commercial and industrial – not secured by real estate |   | $           | 38,888  |   |         | $      | 39,981  |        |   | $ | 41,198 |   |
| Commercial and industrial – secured by real estate     |   |        | 121,989 |   |         |   | 120,102 |        |   |   | 113,290 |   |
| Residential real estate – mortgage                     |   |        | 129,535 |   |         |   | 126,544 |        |   |   | 129,295 |   |
| Residential real estate – construction                 |   |        | 56,737  |   |         |   | 72,668  |        |   |   | 91,390 |   |
| Consumer loans                                               |   |        | 13,735  |   |         |   | 14,279  |        |   |   | 14,783 |   |
|      Gross loans                    |   | $           | 360,884 |   |         | $      | 373,574 |        |   | $ | 389,956 |   |

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

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|                           |   |   | Actual |   |   |   | WellCapitalizedRequirement |   |   |   |  AdequatelyCapitalizedRequirement |
|--------------------------------|--------|--------|--------|--------|--------|--------|----------------------------|--------|--------|--------|----------------------------------------|
|                           |   |   | Amount |   |   |   | Ratio                 |   |   |   | Amount                                 |   |   |   | Ratio |   |   |   | Amount |   |   |   |               Ratio    |
|  Company:                 |   |   |   |   |   |   |                       |   |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Risk-based Capital       |   | $      | 52,992 |   |   |   | 13.85                      | %      |   |   | N/A                                    |   |   |   | N/A |   |   | $ | 30,609 |   |   |   | 8.00 | % |
| Tier 1 Risk-based Capital      |   |   | 48,167 |   |   |   | 12.59                      |   |   |   | N/A                                    |   |   |   | N/A |   |   |   | 15,303 |   |   |   | 4.00 |   |
| Leverage Ratio                 |   |   | 48,167 |   |   |   | 8.87                       |   |   |   | N/A                                    |   |   |   | N/A |   |   |   | 21,721 |   |   |   | 4.00 |   |
|                           |   |   |   |   |   |   |                       |   |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The Peoples National Bank (1): |   |   |   |   |   |   |                       |   |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Risk-based Capital       |   | $      | 30,948 |   |   |   | 12.99                      | %      |   |   | (1                                     | ) |   |   | (1 | ) |   | $ | 28,589 | (1) |   |   | 12.00 | % (1) |
| Tier 1 Risk-based Capital      |   |   | 27,930 |   |   |   | 11.72                      |   |   |   | (1                                     | ) |   |   | (1 | ) |   |   | 23,831 | (1) |   |   | 10.00 | (1) |
| Leverage Ratio                 |   |   | 27,930 |   |   |   | 8.55                       |   |   |   | (1                                     | ) |   |   | (1 | ) |   |   | 26,133 | (1) |   |   | 8.00 | (1) |
|                           |   |   |   |   |   |   |                       |   |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank of Anderson, N. A. (1):   |   |   |   |   |   |   |                       |   |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Risk-based Capital       |   | $      | 13,570 |   |   |   | 15.27                      | %      |   |   | (1                                     | ) |   |   | (1 | ) |   | $ | 10,664 | (1) |   |   | 12.00 | % (1) |
| Tier 1 Risk-based Capital      |   |   | 12,453 |   |   |   | 14.01                      |   |   |   | (1                                     | ) |   |   | (1 | ) |   |   | 8,889 | (1) |   |   | 10.00 | (1) |
| Leverage Ratio                 |   |   | 12,453 |   |   |   | 9.27                       |   |   |   | (1                                     | ) |   |   | (1 | ) |   |   | 10,747 | (1) |   |   | 8.00 | (1) |
|                           |   |   |   |   |   |   |                       |   |   |   |                                   |   |   |   |
| Seneca National Bank (1):      |   |   |   |   |   |   |                       |   |   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Risk-based Capital       |   | $      | 7,131  |   |   |   | 12.93                      | %      |   |   | (1                                     | ) |   |   | (1 | ) |   | $ | 6,618 | (1) |   |   | 12.00 | % (1) |
| Tier 1 Risk-based Capital      |   |   | 6,441  |   |   |   | 11.67                      |   |   |   | (1                                     | ) |   |   | (1 | ) |   |   | 5,519 | (1) |   |   | 10.00 | (1) |
| Leverage Ratio                 |   |   | 6,441  |   |   |   | 8.24                       |   |   |   | (1                                     | ) |   |   | (1 | ) |   |   | 6,253 | (1) |   |   | 8.00 | (1) |

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

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