10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC   20549

FORM 10-Q

x      Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended    March 31, 2011

¨      Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period from _______________ to ________________

Commission File Number:  0-24169

PEOPLES BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland	52-2027776
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

P.O. Box 210, 100 Spring Avenue, Chestertown, Maryland	21620
(Address of Principal Executive Offices)	(Zip Code)

(410) 778-3500

Registrant’s Telephone Number, Including Area Code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ¨ No ¨ (Not Applicable)

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company þ
(Do not check if a smaller reporting company)

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

Yes ¨ No þ

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 779,512 shares of common stock issued and outstanding as of May 1, 2011

PEOPLES BANCORP, INC.

FORM 10-Q

INDEX

		Page
Part I – Financial Information
Item 1.	Financial Statements	3
	Consolidated Balance Sheets at March 31, 2011 (unaudited)
	and December 31, 2010	3
	Consolidated Statements of Income (unaudited) for the three months
	ended March 31, 2011 and 2010	4
	Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
	for the three months ended March 31, 2011 and 2010	5
	Consolidated Statements of Cash Flows (unaudited) for the three months
	ended March 31, 2011 and 2010	6
	Notes to Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition
	and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	31
Item 4.	Controls and Procedures	31
Part II – Other Information
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	(Removed and Reserved)	32
Item 5.	Other Information	32
Item 6.	Exhibits	32
Signatures		32
Exhibit Index		33

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PART I - FINANCIAL INFORMATION

Item 1.      Financial Statements.

PEOPLES BANCORP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	March 31,			December, 31
	2011			2010
	(unaudited)
ASSETS
Cash and due from banks	$	16,571,994		$	10,378,485
Federal funds sold		1,016,000			1,016,000
Cash and cash equivalents		17,587,994			11,394,485
Securities available for sale		9,071,820			8,035,780
Securities held to maturity (approximate fair value of $1,527,317 and $3,554,315)		1,508,150			3,510,533
Federal Home Loan Bank & CBB Financial Corp. stock, at cost		2,151,600			2,151,600
Loans, less allowance for loan losses of $3,988,150 and $5,656,788		204,731,970			207,295,877
Premises and equipment		6,352,830			6,389,781
Goodwill and intangible assets		587,070			603,988
Accrued interest receivable		1,012,580			1,360,708
Deferred income taxes		2,369,494			2,367,847
Foreclosed real estate		1,370,000			1,201,600
Other assets		1,903,318			1,480,216
Total Assets	$	248,646,826		$	245,792,415
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Non-interest bearing	$	38,556,516		$	36,219,753
Interest-bearing		157,160,800			153,420,977
		195,717,316			189,640,730
Securities sold under repurchase agreements		2,179,654			2,754,321
Federal Home Loan Bank advances		22,000,000			24,000,000
Accrued interest payable		303,301			414,758
Other liabilities		1,526,031			1,590,442
		221,726,302			218,400,251
Stockholders’ equity
Common stock, par value $10 per share; authorized 1,000,000
shares; issued and outstanding 779,512 shares		7,795,120			7,795,120
Additional paid-in capital		2,920,866			2,920,866
Retained earnings		16,619,629			17,088,742
		27,335,615			27,804,728
Accumulated other comprehensive income (loss)
Unrealized gain (loss) on available for sale securities		8,947			11,474
Unfunded liability of defined benefit plan		(424,038	)		(424,038	)
		26,920,524			27,392,164
Total Liabilities and Stockholders’ Equity	$	248,646,826		$	245,792,415

The accompanying notes are an integral part of these consolidated financial statements.

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PEOPLES BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Income (unaudited)

	For the three months ended March 31,
	2011			2010
Interest and dividend revenue
Loans, including fees	$	2,888,493		$	3,219,351
U.S. government agency securities		41,713			108,470
Deposit in other banks		8			5
Federal funds sold		693			696
Equity securities		4,245			1,593
Total interest and dividend revenue		2,935,152			3,330,115
Interest expense
Deposits		672,450			739,813
Borrowed funds		181,131			245,149
Total interest expense		853,581			984,962
Net interest income		2,081,571			2,345,153
Provision for loan losses		1,500,000			475,000
Noninterest revenue
Service charges on deposit accounts		245,185			214,802
Insurance commissions		375,314			333,608
Gain (loss) on sale of foreclosed real estate		(17,352	)		-
Other noninterest revenue		61,185			64,190
Total noninterest revenue		664,332			612,600
Noninterest expense
Salaries and employee benefits		1,024,359			1,065,009
Occupancy		120,798			127,715
Furniture and equipment		84,702			89,155
Other operating		576,031			572,673
Total noninterest expense		1,805,890			1,854,552
Income (loss) before income taxes		(559,987	)		628,201
Income tax expense (benefit)		(262,367	)		226,945
Net income (loss)	$	(297,620	)	$	401,256
Earnings (loss) per common share - basic and diluted	$	(0.38	)	$	0.51

The accompanying notes are an integral part of these consolidated financial statements.

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PEOPLES BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

THREE MONTHS ENDED MARCH 31, 2011 and 2010

								Accumulated
			Additional					other
			paid-in		Retained			comprehensive			Comprehensive
	Par value		capital		earnings			income			income
Balance, December 31, 2009	$	7,795,120	$	2,920,866	$	18,865,399		$	(691,637	)
Net income		-		-		401,256			-		$	401,256
Unrealized loss on investment
securities available for sale net
of income taxes of $587		-		-		-			(902	)		(902	)
Comprehensive income											$	400,354
Cash dividend, $.45 per share		-		-		(350,780	)		-
Balance, March 31, 2010	$	7,795,120	$	2,920,866	$	18,671,133		$	(667,753	)
Balance, December 31, 2010	$	7,795,120	$	2,920,866	$	17,088,742		$	(412,564	)
Net income (loss)		-		-		(297,620	)		-		$	(297,620	)
Unrealized loss on investment
securities available for sale net
of income taxes of $1,646		-		-		-			(2,527	)		(2,527	)
Comprehensive income (loss)											$	(300,147	)
Cash dividend, $.22 per share		-		-		(171,493	)		-
Balance, March 31, 2011	$	7,795,120	$	2,920,866	$	16,619,629		$	(415,091	)

The accompanying notes are an integral part of these consolidated financial statements.

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PEOPLES BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)

	For the three months ended March 31,
	2011			2010
Interest received	$	3,305,576		$	3,548,116
Fees and commissions received		681,684			612,600
Cash paid to suppliers and employees		(2,191,494	)		(1,546,735	)
Interest paid		(965,038	)		(1,088,969	)
Taxes paid		262,367			(226,534	)
		1,093,095			1,298,478
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for premises, equipment, and software		(48,040	)		(69,544	)
Loans made, net of principal collected		703,240			(2,694,290	)
Proceeds from sale of foreclosed real estate		164,248			-
Proceeds from maturities and calls of securities
Available for sale		3,000,000			-
Held to maturity		2,000,194			1,500,188
Purchase of securities available for sale		(4,049,654	)		(4,003,873	)
Purchase of securities held to maturity		-			-
Redemption of FHLB stock, net of purchases		-			-
		1,769,988			(5,267,519	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in
Time deposits		736,878			1,041,256
Other deposits		5,339,708			(5,801,949	)
Securities sold under repurchase agreements		(574,667	)		(1,295,742	)
Advances under (repayments of) notes payable, net		(2,000,000	)		(2,000,000	)
Repayments of other borrowings		-			-
Dividends paid		(171,493	)		(350,780	)
		3,330,426			(8,407,215	)
NET INCREASE (DECREASE) IN CASH		6,193,509			(12,376,256	)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD		11,394,485			23,004,550
CASH AND EQUIVALENTS AT END OF PERIOD	$	17,587,994		$	10,628,294
NON CASH TRANSACTIONS
Transfer of foreclosed real estate	$	350,000		$	-

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PEOPLES BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued (unaudited)

	For the three months ended March 31,
	2011			2010
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
FROM OPERATING ACTIVITIES
Net income	$	(297,620	)	$	401,256
ADJUSTMENTS
Depreciation and amortization		80,281			83,791
Provision for loan losses		1,500,000			475,000
Deferred income taxes		-			411
Amortization of intangible assets		16,918			16,918
Security discount accretion, net of premium amortization		11,629			10,353
Gain of sale of foreclosed real estate		17,352			-
Decrease (increase) in
Accrued interest receivable		348,128			181,451
Income Tax refund receivable		-			-
Other assets		(418,392	)		175,037
Increase (decrease) in
Deferred origination fees and costs, net		10,667			26,197
Accrued interest payable		(111,457	)		(104,007	)
Other Liabilities		(64,411	)		32,071
	$	1,093,095		$	1,298,478

The accompanying notes are an integral part of these consolidated financial statements.

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Peoples Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Peoples Bancorp, Inc. and its subsidiaries, The Peoples Bank, a Maryland-chartered bank (the “Bank”), and Fleetwood, Athey, Macbeth & McCown, Inc., a Maryland insurance agency (the “Insurance Agency”), have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X of the U.S. Securities and Exchange Commission (the “SEC”).  Accordingly, they do not include all the information and notes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring entries) considered necessary for a fair presentation have been included.  Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2011 or any other future interim period.  The consolidated financial statements contained herein should be read in conjunction with the consolidated financial statements and related notes contained in the Annual Report of Peoples Bancorp, Inc. on Form 10-K for the year ended December 31, 2010.  When used in these notes, the term “Company” refers to Peoples Bancorp, Inc. and, unless the context requires otherwise, its consolidated subsidiaries.

The Account Standards Codification (the “ASC”) of the Financial Accounting Standards Board (the “FASB”) became effective on July 1, 2009.  At that date, the ASC became FASB’s officially recognized source of authoritative U. S. generally accepted accounting principles (“GAAP”) applicable to all public and non-public non-governmental entities, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”) and related literature.  Rules and interpretive releases of the SEC under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  All other accounting literature is considered non-authoritative.  The switch to the ASC affects the way companies refer to GAAP in financial statements and accounting policies.  Citing particular content in the ASC involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure.

The Company evaluated subsequent events after the balance sheet date through May 14, 2011.  No significant subsequent events were identified which would affect the presentation of the financial information.

2. Cash Flows

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and overnight investments in federal funds sold.

3. Comprehensive income (loss)

For the three months ended March 31, 2011, total comprehensive loss, net of taxes, was $300,147, compared to comprehensive income, net of taxes, of $400,354 for the same period of 2010.  Comprehensive income (loss) is the sum of net income (loss) and the change in the unrealized gain or loss on securities available for sale, net of income taxes.

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4. Loans and Allowance for Loan Losses

Major classifications of loans as of March 31, 2011 and December 31, 2010 are as follows:

	March 31, 2011			December 31,2010
Real estate
Residential	$	74,186,183		$	75,206,074
Commercial		89,132,895			89,617,135
Construction		13,450,751			13,403,765
Commercial		26,690,460			29,052,413
Consumer		5,186,050			5,588,830
		208,646,339			212,868,217
Deferred costs, net of deferred fees		73,781			84,448
Allowance for loan losses		(3,988,150	)		(5,656,788	)
	$	204,731,970		$	207,295,877

The rate repricing and maturity distribution of the loan portfolio is as follows:

Within ninety days	$	44,630,667	$	41,653,284
Over ninety days to one year		85,806,933		96,362,940
Over one year to five years		77,460,282		74,464,702
Over five years		748,457		387,291
	$	208,646,339	$	212,868,217
Variable rate loans included in above	$	48,939,041	$	51,208,677

A table of the recorded investment in loans that were impaired and risk rated at March 31, 2011 follows:

Impaired and Risk Rated Loans at March 31, 2011

	Recorded		Unpaid		Investment for		Investment for
	Investment in		Principal		which there		which there
Description of Loans	Impaired Loans		Balance		is related ALLL		is no Related ALLL
Residential real estate	$	2,571,014	$	2,571,014	$	1,605,699	$	965,315
Commercial real estate		5,011,092		5,011,092		4,360,951		650,141
Other real estate		-		-		-		-
Construction and land development		4,537,599		4,537,599		3,911,632		625,967
Commercial loans		101,523		101,523		26,523		75,000
Consumer loans		-		-		-		-
Total impaired loans	$	12,221,228	$	12,221,228	$	9,904,805	$	2,316,423

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The following tables illustrate total impaired loans segmented by those with and without a related allowance as of March 31, 2011 and December 31, 2010.  Comparable information is not available for March 31, 2010.

Total Impaired Loans Segmented by With and Without a Related Allowance Recorded

March 31, 2011

	Recorded		Current				Interest
	Investment in		Loan		Related		Income		Average
Description of Loans	Impaired Loans		Balance		Allowance		Recognized		Balance
With Related Allowance recorded
Residential real estate	$	1,605,699	$	1,605,699	$	794,111	$	367,514	$	1,609,815
Commercial real estate		4,360,951		4,360,951		594,952		2,893,290		4,369,670
Other real estate		-		-		-		-		-
Construction and land development		3,966,355		3,966,355		546,957		832,566		4,169,626
Commercial loans		26,523		26,523		26,523		995		26,821
Consumer loans		-		-		-		-		-
Total impaired loans	$	9,959,528	$	9,959,528	$	1,962,543	$	4,094,365	$	10,175,931
With No Related Allowance recorded
Residential real estate	$	965,315	$	965,315	$	-	$	316,575	$	1,020,772
Commercial real estate		650,141		650,141		-		250,454		650,141
Other real estate		-		-		-		-		-
Construction and land development		625,967		625,967		-		191,308		625,968
Commercial loans		75,000		75,000		-		8,441		75,000
Consumer loans		-		-		-		-		-
Total impaired loans	$	2,316,423	$	2,316,423	$	-	$	766,778	$	2,371,881
TOTAL
Residential real estate	$	2,571,014	$	2,571,014	$	794,111	$	684,089	$	2,630,587
Commercial real estate		5,011,092		5,011,092		594,952		3,143,744		5,019,811
Other real estate		-		-		-		-		-
Construction and land development		4,592,322		4,592,322		546,957		1,023,873		4,795,593
Commercial loans		101,523		101,523		26,523		9,436		101,821
Consumer loans		-		-		-		-		-
Total impaired loans	$	12,275,951	$	12,275,951	$	1,962,543	$	4,861,142	$	12,547,812

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Total Impaired Loans Segmented by With and Without a Related Allowance Recorded

December 31, 2010

	Recorded		Current				Interest
	Investment in		Loan		Related		Income		Average
Description of Loans	Impaired Loans		Balance		Allowance		Recognized		Balance
With Related Allowance recorded
Residential real estate	$	1,092,458	$	1,092,458	$	217,644	$	16,091	$	1,109,176
Commercial real estate		1,670,505		1,670,505		535,044		72,645		1,589,338
Other real estate		-		-		-		-		-
Construction and land development		5,169,481		5,169,481		2,494,682		239,506		4,726,734
Commercial loans		160,283		160,283		46,126		1,511		138,065
Consumer loans		-		-		-		-		-
Total impaired loans	$	8,092,727	$	8,092,727	$	3,293,496	$	329,753	$	7,563,313
With No Related Allowance recorded
Residential real estate	$	1,080,353	$	1,080,353	$	-	$	33,360	$	1,105,548
Commercial real estate		1,441,244		1,441,244		-		24,395		2,032,234
Other real estate		-		-		-		-		-
Construction and land development		625,967		625,967		-		3,552		617,399
Commercial loans		385,221		385,221		-		-		385,221
Consumer loans		-		-		-		-		-
Total impaired loans	$	3,532,785	$	3,532,785	$	-	$	61,307	$	4,140,402
TOTAL
Residential real estate	$	2,172,811	$	2,172,811	$	217,644	$	49,451	$	2,214,724
Commercial real estate		3,111,749		3,111,749		535,044		97,040		3,621,572
Other real estate		-		-		-		-		-
Construction and land development		5,795,448		5,795,448		2,494,682		243,058		5,344,133
Commercial loans		545,504		545,504		46,126		1,511		523,286
Consumer loans		-		-		-		-		-
Total impaired loans	$	11,625,512	$	11,625,512	$	3,293,496	$	391,060	$	11,703,715

Transactions in the allowance for loan losses were as follows:

	March 31, 2011		December 31, 2010		March 31, 2010
Beginning balance	$	5,656,788	$	2,845,364	$	2,845,364
Provision charged to operations		1,500,000		4,910,000		475,000
Recoveries		26,477		19,677		2,280
		7,183,265		7,775,041		3,322,644
Loans charged off		3,195,115		2,118,253		623,006
Ending balance	$	3,988,150	$	5,656,788	$	2,699,638

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The following table represents the allowance for loan losses and loan balances that are individually evaluated for impairment and loan balances collectively evaluated for possible impairment.

Allowance for Credit Losses and Loan Balances that are Individually and Collectively Evaluated for Possible Impairment

March 31, 2011

													Construction
							Residential			Commercial			and land			Other
	Unallocated			Commercial			Real Estate			Real Estate			Development			Real Estate		Consumer			Overdraft			Total
Allowance for Credit Losses
Beginning Balance	$	137,047		$	676,113		$	806,728		$	1,124,851		$	2,780,148		$	2,122	$	126,751		$	3,028		$	5,656,788
Charge-Offs		-			(491,329	)		(366,626	)		(185,626	)		(2,141,948	)		-		(8,904	)		(682	)		(3,195,115	)
Recoveries		-			210			1,575			-			-			-		24,084			608			26,477
Provision		(134,645	)		350,135			995,276			276,093			38,425			91		(36,053	)		10,678			1,500,000
Ending Balance	$	2,402		$	535,129		$	1,436,953		$	1,215,318		$	676,625		$	2,213	$	105,878		$	13,632		$	3,988,150
Ending Balance allocated to:
Loans individually
evaluated for impairment	$	-		$	26,523		$	794,111		$	594,952		$	546,957		$	-	$	-		$	-		$	1,962,543
Loans collectively
evaluated for impairment		2,402			508,606			642,842			620,366			129,668			2,213		105,878			13,632			2,025,607
	$	2,402		$	535,129		$	1,436,953		$	1,215,318		$	676,625		$	2,213	$	105,878		$	13,632		$	3,988,150

Allowance for Credit Losses and Loan Balances that are Individually and Collectively Evaluated for Possible Impairment

December 31, 2010

													Construction
							Residential			Commercial			and land			Other
	Unallocated			Commercial			Real Estate			Real Estate			Development			Real Estate			Consumer			Overdraft			Total
Allowance for Credit Losses
Beginning Balance	$	140,751		$	728,049		$	920,132		$	643,430		$	164,539		$	2,782		$	245,137		$	544		$	2,845,364
Charge-Offs		-			(166,779	)		(888,040	)		(951,603	)		(7,040	)		-			(101,162	)		(3,629	)		(2,118,253	)
Recoveries		-			2,660			374			-			-			-			15,113			1,530			19,677
Provision		(3,704	)		112,183			774,262			1,433,024			2,622,649			(660	)		(32,337	)		4,583			4,910,000
Ending Balance	$	137,047		$	676,113		$	806,728		$	1,124,851		$	2,780,148		$	2,122		$	126,751		$	3,028		$	5,656,788
Ending Balance allocated to:
Loans individually
evaluated for impairment	$	-		$	46,126		$	217,644		$	535,044		$	2,494,664		$	-		$	-		$	-		$	3,293,478
Loans collectively
evaluated for impairment		137,047			629,987			589,084			589,807			285,484			2,122			126,751			3,028			2,363,310
	$	137,047		$	676,113		$	806,728		$	1,124,851		$	2,780,148		$	2,122		$	126,751		$	3,028		$	5,656,788

Allowance for Credit Losses and Loan Balances that are Individually and Collectively Evaluated for Possible Impairment

March 31, 2010

													Construction
							Residential			Commercial			and land			Other
	Unallocated			Commercial			Real Estate			Real Estate			Development			Real Estate			Consumer			Overdraft			Total
Allowance for Credit Losses
Beginning Balance	$	140,751		$	728,049		$	920,132		$	643,430		$	164,539		$	2,782		$	245,137		$	544		$	2,845,364
Charge-Offs		-			(29,442	)		(489,267	)		(92,457	)		-			-			(10,531	)		(1,309	)		(623,006	)
Recoveries		-			820			-			-			-			-			355			1,105			2,280
Provision		(138,362	)		(12,150	)		420,648			185,113			(3,986	)		(1,125	)		22,412			2,449			474,999
Ending Balance	$	2,389		$	687,277		$	851,513		$	736,086		$	160,553		$	1,657		$	257,373		$	2,789		$	2,699,637
Ending Balance allocated to:
Loans individually
evaluated for impairment	$	-		$	164,257		$	383,442		$	672,576		$	40,756		$	-		$	1,578		$	-		$	1,262,609
Loans collectively
evaluated for impairment		2,389			523,020			468,071			63,510			119,797			1,657			255,795			2,789			1,437,028
	$	2,389		$	687,277		$	851,513		$	736,086		$	160,553		$	1,657		$	257,373		$	2,789		$	2,699,637

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Credit Quality Indicators.  As part of the on-going monitoring of the quality of the Bank’s loan portfolio, management tracks certain credit quality indicators

The Bank does credit-score all loans.  Loans are risk rated on the scale below:

Grades 1 through 4 – These grades include “pass grade” loans to borrowers of acceptable credit quality and risk.

Grade 5 – This grade includes loans that are on Management’s “watch list” and is intended to be utilized on a temporary basis for pass grade borrowers where a significant risk-modifying action is anticipated in the near future.

Grade 6 – This grade is for “Other Assets Especially Mentioned” or “Special Mention” in accordance with regulatory guidelines. This grade is intended to be temporary and includes loans to borrowers whose credit quality has clearly deteriorated and are at risk of further decline unless active measures are taken to correct the situation. This grade may include loans not fully secured where a specific valuation allowance may be necessary.

Grades 7 through 9 – These grades include “Substandard” loans, in accordance with regulatory guidelines, for which accrual of interest may have stopped. These grades include loans that are past due or not fully secured where a specific valuation allowance may be necessary.

The following table illustrates classified loans by class.  Classified loans include loans in Risk Grades 5, 6, and 7 through 9.

March 31, 2011	Pass Watch		Special Mention		Substandard		Total
Commercial	$	218,242	$	39,681	$	1,847,224	$	2,105,147
Residential real estate		2,225,967		-		4,509,823		6,735,790
Commercial real estate		592,398		1,828,743		7,225,936		9,647,077
Construction and land development		1,067,251		-		6,449,966		7,517,217
Other real estate		-		-		43,318		43,318
Consumer		11,569		-		37,390		48,959
	$	4,115,427	$	1,868,424	$	20,113,657	$	26,097,508

December 31, 2010	Pass Watch		Special Mention		Substandard		Total
Commercial	$	159,817	$	39,722	$	2,673,725	$	2,873,264
Residential real estate		1,975,178		-		4,448,109		6,423,287
Commercial real estate		3,255,868		1,833,303		4,834,487		9,923,658
Construction and land development		301,009		-		10,012,172		10,313,181
Other real estate		-		-		43,646		43,646
Consumer		11,695		-		10,417		22,112
	$	5,703,567	$	1,873,025	$	22,022,556	$	29,599,148

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The following table analyzes the age of past due and nonaccruing loans for the years ended March 31, 2011 and 2010.

					Greater than
	30-59 Days		60-89 Days		90 Days or		Total				Total		Loans 90 Days
March 31, 2011	Past Due		Past Due		Nonaccruing		Past Due		Current		Loans		and Accruing
Residential real estate	$	4,355,588	$	897,789	$	4,496,886	$	9,750,263	$	64,435,920	$	74,186,183	$	1,813,757
Commercial real estate		964,532		163,584		5,206,757		6,334,873		58,538,075		64,872,948		1,386,885
Other real estate		-		-		43,318		43,318		24,216,629		24,259,947		43,318
Construction and land development		465,120		240,609		4,100,296		4,806,025		8,644,726		13,450,751		1,022,686
Commercial loans		509,101		35,236		238,631		782,968		25,907,492		26,690,460		52,819
Consumer loans		133,511		38,325		43,233		215,069		4,970,981		5,186,050		5,843
Total	$	6,427,852	$	1,375,543	$	14,129,121	$	21,932,516	$	186,713,823	$	208,646,339	$	4,325,308

					Greater than
	30-59 Days		60-89 Days		90 Days or		Total				Total		Loans 90 Days
December 31, 2010	Past Due		Past Due		Nonaccruing		Past Due		Current		Loans		and Accruing
Residential real estate	$	1,452,435	$	1,258,246	$	4,506,064	$	7,216,745	$	67,989,329	$	75,206,074	$	2,008,168
Commercial real estate		980,023		467,285		3,216,515		4,663,823		60,693,365		65,357,188		2,120,564
Other real estate		-		-		1,130,824		1,130,824		23,129,123		24,259,947		1,130,824
Construction and land development		-		-		2,180,150		2,180,150		11,223,615		13,403,765		1,022,686
Commercial loans		54,262		28,545		594,022		676,829		28,375,584		29,052,413		19,838
Consumer loans		122,969		25,878		66,563		215,410		5,373,420		5,588,830		66,563
Total	$	2,609,689	$	1,779,954	$	11,694,138	$	16,083,781	$	196,784,436	$	212,868,217	$	6,368,643

Loans on which the accrual of interest has been discontinued or reduced, and the interest that would have been accrued at March 31, 2011 and 2010, are as follows:

	March 31,		December 31,
	2011		2010
Residential real estate	$	2,756,901	$	2,497,896
Commercial real estate		3,819,872		1,095,951
Other real estate		-		-
Construction and land development		3,077,610		1,157,464
Commercial loans		185,813		574,184
Consumer loans		37,390		-
Total	$	9,877,586	$	5,325,495
Interest not accrued on nonaccrual loans	$	591,191	$	644,566

As of March 31, 2011, the Bank had classified $5,486,715 of loans as troubled debt restructurings (“TDRs”).  Under a TDR, interest rates may be reduced to current market rates or principal reductions may be deferred for a set period of time.  For each of the current TDRs, the customer is expected to pay the full principal balance owed.

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5. Commitments

Loan commitments are made to accommodate the financial needs of the Company’s customers.  Letters of credit commit the Bank to make payments on behalf of customers when certain specified future events occur.  These obligations are not recorded in the Company’s financial statements.  The credit risks inherent in loan commitments and letters of credit are essentially the same as those involved in extending loans to customers, and these arrangements are subject to the Bank’s normal credit policies.  The Bank’s exposure to credit loss in the event the customer does not satisfy the terms of these arrangements equals the notional amount of the obligation less the value of any collateral.  The table below represents unfunded obligations at March 31, 2011 and December 31, 2010.

	March 31, 2011		December 31, 2010
Check loan lines of credit	$	487,622	$	468,621
Mortgage lines of credit		7,455,389		6,727,480
Other lines of credit		12,412,420		10,964,947
Undisbursed construction loan commitments		1,916,574		2,240,747
	$	22,272,005	$	20,401,795
Standby letters of credit	$	2,877,909	$	3,016,824

6. Earnings Per Share

Earnings (loss) per common share is derived by dividing net income (loss) available to holders of shares of common stock by the weighted average number of shares of common stock outstanding of 779,512 for the three-month periods ended March 31, 2011 and 2010.

7. Pension

The Bank maintains a defined benefit pension plan covering substantially all employees of the Bank.  Benefits are based on years of service and the employee’s highest average rate of earnings for five consecutive years during the final 10 full years before retirement.  The Bank’s general funding policy is to contribute annually the maximum amount that can be deducted for income tax purposes, determined using the projected unit credit cost method.  The assets of the plan are invested in various time deposits and held in trust as required by law.

During the three months ended March 31, 2011 and 2010, the Bank recognized net periodic costs for this plan of $75,844 and $76,342, respectively.  The Bank contributed $34,088 and $67,571 respectively, to the plan during the first quarters of 2011 and 2010.

8. Segment Reporting

The Company operates two primary businesses:  (i) Community Banking; and (ii) Insurance Products and Services. Through the Community Banking business, the Company provides services to consumers and small businesses on the upper Eastern Shore of Maryland through its seven branches. Community Banking activities include serving the deposit needs of small business and individual consumers by providing banking products and services to fit their needs. Loan products available to consumers include mortgage, home equity, automobile, marine, and installment loans and other secured and unsecured personal lines of credit. Small business lending includes commercial mortgages, real estate development loans, equipment and operating loans, as well as secured and unsecured lines of credit, accounts receivable financing arrangements, and merchant card services.

- 15 -

Through the Insurance Products and Services business, the Company provides a full range of insurance products and services to businesses and consumers in the Company’s market areas. Products include property and casualty, life, marine, individual health and long-term care insurance.

Selected financial information by line of business is included in the following table:

For the three months ended March 31, 2011	Community  banking			Insurance  products and services		Intersegment Transactions			Consolidated  Total
Net interest income	$	2,081,253		$	318	$	-		$	2,081,571
Provision for loan losses		1,500,000			-		-			1,500,000
Net interest income after provision		581,253			318		-			581,571
Noninterest revenue		288,417			375,915		-			664,332
Noninterest expense		1,585,507			220,383		-			1,805,890
Income before income taxes		(715,837	)		155,850		-			(559,987	)
Income tax expense (benefit)		(323,842	)		61,475		-			(262,367	)
Net income	$	(391,995	)	$	94,375	$	-		$	(297,620	)
Average assets	$	247,669,212		$	1,718,752	$	(756,434	)	$	248,631,530

For the three months ended March 31, 2010	Community  banking		Insurance  products and services		Intersegment Transactions			Consolidated  Total
Net interest income	$	2,344,762	$	391	$	-		$	2,345,153
Provision for loan losses		475,000		-		-			475,000
Net interest income after provision		1,869,762		391		-			1,870,153
Noninterest revenue		278,364		334,236		-			612,600
Noninterest expense		1,652,554		201,998		-			1,854,552
Income before income taxes		495,572		132,629		-			628,201
Income tax expense		174,496		52,499		-			226,995
Net income	$	321,076	$	80,130	$	-		$	401,206
Average assets	$	251,003,285	$	1,780,331	$	(3,093,976	)	$	249,689,640

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9. Fair Value

The fair value of an asset or a liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability.  In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach.  Such valuation techniques are consistently applied.  Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability.   FASB ASC valuation techniques include the assumptions that market participants would use in pricing an asset or a liability.  FASB ASC Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  The fair value hierarchy is as follows

• Level 1 inputs — Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2 inputs — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.  These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates. volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

• Level 3 inputs — Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

In general, fair value is based upon quoted market prices, where available.  If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.  These adjustments may include amounts to reflect counterparty credit quality and the issuer’s creditworthiness, among other things, as well as unobservable parameters.  Any such valuation adjustments are applied consistently over time.  The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  Although management believes the Company’s valuation methodologies are appropriate and consistent with those used by other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.  Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and, therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein.  Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstance that caused the transfer, which generally coincides with the Company’s monthly and quarterly valuation process.

- 17 -

The Company measures securities available for sale at fair value on a recurring basis.  The following table summarizes securities available for sale measured at fair value on a recurring basis as of March 31, 2011, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.

Available for Sale	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
U. S. Government Agency Securities	$	9,071,820	$	9,071,820	$	-	$	-

The Company’s foreclosed real estate is measured at fair value on a nonrecurring basis, which means that the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of reduced property value).  Foreclosed real estate measured at fair value on a non-recurring basis during the three months ended March 31, 2011 is reported at the fair value of the underlying collateral, assuming that the sale prices of the properties will be their current appraised values.  Appraised values are estimated using Level 2 inputs based on observable market data and current property tax assessments.  Foreclosed real estate measured at fair value on a nonrecurring basis during the three months ended March 31, 2011 is as follows.

	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Foreclosed real estate	$	1,370,000	$	-	$	1,370,000	$	-

FASB ASC Topic 825 requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis.

The Company does not measure the fair value of any of its other financial assets or liabilities on a recurring or nonrecurring basis.  The fair value of financial instruments equals the carrying value of the instruments except as noted.

	March 31, 2011				December 31, 2010
	Carrying		Fair		Carrying		Fair
	amount		value		amount		value
Financial assets
Cash and due from banks	$	16,571,994	$	16,571,994	$	10,378,485	$	10,378,485
Federal funds sold		1,016,000		1,016,000		1,016,000		1,016,000
Investment securities (total)		10,579,970		10,599,137		11,546,313		11,590,095
Federal Home Loan Bank  and CBB
Financial Corp. stock		2,151,600		2,151,600		2,151,600		2,151,600
Loans, net		204,731,970		205,542,013		207,295,877		208,116,545
Accrued interest receivable		1,012,580		1,012,580		1,306,708		1,360,708
Financial liabilities
Noninterest-bearing deposits	$	38,556,516	$	38,556,516	$	35,219,753	$	35,219,753
Interest-bearing deposits		157,160,800		160,656,581		154,420,977		157,626,964
Short-term borrowings		2,179,654		2,179,654		2,754,321		2,754,321
Federal Home Loan
Bank advances		22,000,000		23,329,464		24,000,000		25,230,768
Accrued interest payable		303,301		303,301		414,758		414,758

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The fair value of fixed-rate loans is estimated to be the present value of scheduled payments discounted using interest rates currently in effect.  The fair value of variable-rate loans, including loans with a demand feature, is estimated to equal the carrying amount.  The valuation of loans is adjusted for possible loan losses.

The fair value of interest-bearing checking, savings, and money market deposit accounts is equal to the carrying amount.  The fair value of fixed-maturity time deposits and borrowings is estimated based on interest rates currently offered for deposits and borrowings of similar remaining maturities.

It is not practicable to estimate the fair value of outstanding loan commitments, unused lines of credit, and letters of credit.

10.        Investment Securities

Investment securities are summarized as follows:

	Amortized		Unrealized		Unrealized		Fair
	cost		gains		losses		value
March 31, 2011
Available for sale
U. S. government agency	$	9,057,044	$	16,075	$	1,299	$	9,071,820
Held to maturity
U. S. government agency	$	1,503,092	$	19,083	$	-	$	1,522,175
Mortgage-backed securities		5,058		84		6		5,136
	$	1,508,150	$	19,167	$	6	$	1,527,311
December 31, 2010
Available for sale
U. S. government agency	$	8,016,831	$	18,949	$	-	$	8,035,780
Held to maturity
U. S. government agency	$	3,505,278	$	43,757	$	-	$	3,549,035
Mortgage-backed securities		5,255		25		-		5,280
	$	3,510,533	$	43,782	$	-	$	3,554,315

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Contractual maturities and the amount of pledged securities are shown below.  Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for sale				Held to maturity
	Amortized		Fair		Amortized		Fair
	cost		value		cost		value
March 31, 2011
Maturing
Within one year	$	5,012,643	$	5,025,240	$	1,503,092	$	1,522,175
Over one to five years		4,044,401		4,046,580		-		-
Mortgage-backed securities		-		-		5,058		5,136
	$	9,057,044	$	9,071,820	$	1,508,150	$	1,527,311
Pledged securities	$	2,362,611	$	2,367,625	$	319,910	$	321,994
December 31, 2010
Maturing
Within one year	$	6,002,966	$	6,018,760	$	3,505,278	$	3,549,035
Over one to five years		2,013,865		2,017,020		-		-
Mortgage-backed securities		-		-		5,255		5,280
	$	8,016,831	$	8,035,780	$	3,510,533	$	3,554,315
Pledged securities	$	633,593	$	637,127	$	2,530,378	$	2,562,778

Investments are pledged to secure the deposits of federal and local governments and as collateral for repurchase agreements.

11.         Recent Accounting Standards

Recent accounting pronouncements approved by FASB that apply to the Company are discussed below.  These pronouncements did not have, or, if not yet adopted, are not expected to have, a material impact on the financial statements of the Company.

ASU No. 2010-20, “Receivables (Topic 310) - Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” ASU 2010-20 requires entities to provide disclosures designed to facilitate financial statement users’ evaluation of (i) the nature of credit risk inherent in the entity’s portfolio of financing receivables, (ii) how that risk is analyzed and assessed in arriving at the allowance for credit losses and (iii) the changes and reasons for those changes in the allowance for credit losses. Disclosures must be disaggregated by portfolio segment, the level at which an entity develops and documents a systematic method for determining its allowance for credit losses, and class of financing receivable, which is generally a disaggregation of portfolio segment. The required disclosures include, among other things, a rollforward of the allowance for credit losses as well as information about modified, impaired, non-accrual and past due loans and credit quality indicators. ASU 2010-20 became effective for the Company’s financial statements as of December 31, 2010, as it relates to disclosures required as of the end of a reporting period. Disclosures that relate to activity during a reporting period became effective for the Company’s financial statements beginning on January 1, 2011.  ASU 2011-01, “Receivables (Topic 310) - Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20,” temporarily deferred the effective date for disclosures related to troubled debt restructurings to coincide with the effective date of the then proposed ASU 2011-02, “Receivables (Topic 310) - A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring,” which is further discussed below.

- 20 -

ASU No. 2010-28, “Intangibles - Goodwill and Other (Topic 350) - When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.” ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist such as if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ASU 2010-28 became effective for the Company on January 1, 2011.

ASU No. 2011-02, “Receivables (Topic 310) - A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.”  ASU 2011-02 clarifies which loan modifications constitute TDRs and is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a TDR, both for purposes of recording an impairment loss and for disclosure of TDRs.  In evaluating whether a restructuring constitutes a TDR, a creditor must separately conclude, under the guidance clarified by ASU 2011-02, that both of the following exist:  (i) the restructuring constitutes a concession; and (ii) the debtor is experiencing financial difficulties. ASU 2011-02 will be effective for the Company on July 1, 2011, and applies retrospectively to restructurings occurring on or after January 1, 2011.

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Item 2.           Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Peoples Bancorp, Inc. is a Maryland corporation and a financial holding company registered under the Bank Holding Company Act of 1956, as amended, located in Chestertown, Kent County, Maryland.  The Company was incorporated on December 10, 1996 to serve as the holding company of The Peoples Bank (the “Bank”), a Maryland commercial bank, which it acquired on March 24, 1997.  On January 2, 2007, the Company acquired Fleetwood, Athey, Macbeth & McCown, Inc. (the “Insurance Agency”).

The Bank was incorporated on April 13, 1910 and operates five branches located in Kent County, Maryland and two branches located in Queen Anne’s County, Maryland.  The Bank offers a variety of services to satisfy the needs of consumers and small- to medium-sized businesses and professional enterprises.  Most of the Bank’s deposit and loan customers are located in and derived from Kent County, northern Queen Anne’s County, and southern Cecil County, Maryland.  This primary service area is located between the Chesapeake Bay and the western border of Delaware.

The Insurance Agency has roots dating back to the 1920s, when The Fleetwood-Kirby Agency was formed.  In 1977, that agency was merged with several other well-respected insurances agencies to form Fleetwood, Athey, Macbeth & McCown, Inc.  The Insurance Agency operates from one location in Kent County and provides a full range of insurance products to businesses and consumers.  Product lines include property, casualty, life, marine, long-term care and health insurance.

Unless the context clearly requires otherwise, the terms “Company”, “we”, “us” and “our” in this report refer collectively to Peoples Bancorp, Inc. and its subsidiaries.

Application of Critical Accounting Policies

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q.  Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes.  These estimates, assumptions, and judgments are based on information available as of the date of the consolidated financial statements; accordingly, as this information changes, the unaudited consolidated financial statements could reflect different estimates, assumptions, and judgments.  Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and as such have a greater possibility of producing results that could be materially different than originally reported.  Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the consolidated financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event.  Carrying assets and liabilities at fair value inherently results in more financial statement volatility.  The fair values and information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available.

The policies, along with the disclosures presented in the other financial statement notes and in this financial review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined.  Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan losses as the accounting area that requires the most subjective or complex judgments, and as such should be most subject to revision as new information becomes available.

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The allowance for loan losses represents management’s estimate of probable loan losses inherent in the loan portfolio.  Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change.  In addition, various regulatory agencies, as an integral part of their examination processes, periodically review our allowance for loan losses.  Such agencies may require us to make additional provisions for estimated loan losses based upon judgments different from those of management.  The loan portfolio also represents the largest asset type on the balance sheet.  Further information about the methodology used to determine the allowance for loan losses is discussed below under the heading “Loan Quality”.

The following discussion is designed to provide a better understanding of the financial position of the Company and should be read in conjunction with the interim Consolidated Financial Statements and Notes thereto included elsewhere in this report, and in conjunction with the audited Consolidated Financial Statements and Notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in the Annual Report of Peoples Bancorp, Inc. on Form 10-K for the year ended December 31, 2010.

Forward-Looking Information

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995.  Readers of this quarterly report should be aware of the speculative nature of “forward-looking statements”.  Statements that are not historical in nature, including the words “anticipate”, “estimate”, “should”, “expect”, “believe”, “intend”, and similar expressions, are based on current expectations, estimates and projections about (among other things) the industry and the markets in which we operate; they are not guarantees of future performance.  Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties, including risks and uncertainties discussed in this report, general economic, market or business conditions; changes in interest rates, deposit flow, the cost of funds, and demand for loan products and financial services; changes in our competitive position or competitive actions by other companies; changes in the quality or composition of loan and investment portfolios; the ability to manage growth; changes in laws or regulations or policies of federal and state regulators and agencies; and other circumstances beyond our control.  These and other risks are discussed in detail in the periodic reports that Peoples Bancorp, Inc. files with the Securities and Exchange Commission (see Item 1A of Part II of this report for further information).  All of the forward-looking statements made in this report are qualified by these cautionary statements, and there can be no assurance that the actual results anticipated will be realized, or if substantially realized, will have the expected consequences on our business or operations.  Except as required by applicable laws, we do not intend to publish updates or revisions of any forward-looking statements we make to reflect new information, future events or otherwise.

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RESULTS OF OPERATIONS

General

For the three-month period ended March 31, 2011, the Company reported a net loss of $297,620 or $(0.38) per share, compared to net income of $401,256 or $0.51 per share for the same period of 2010, which represents a decrease of $698,876 or 174.17%.  The Company’s change in earnings when comparing the first quarter of 2011 to the first quarter of 2010 was the direct result of a $1,025,000 increase in our provision for loan losses to $1,500,000 for the first quarter of 2011 from $475,000 for the first quarter of 2010.  The increased provision was due primarily to the determination during the first quarter of 2011 that the Company would realize additional losses related to a significant borrower.  The Insurance Agency’s year to date income increased $14,250 to $94,375 for the three-month period ended March 31, 2011, compared to $80,130 for the same time period in 2010.

Net Interest Income

The primary source of income for the Company is net interest income, which is the difference between revenue on interest-earning assets, such as investment securities and loans, and interest incurred on interest-bearing sources of funds, such as deposits and borrowings.

The key performance measure for net interest income is the “net margin on interest-earning assets”, or net interest income divided by average interest-earning assets.  The Company’s net interest margin for the three-month period ended March 31, 2011 was 3.90%, compared to 4.29% for the same period of 2010.  The net margin may decline if competition increases, loan demand decreases, or the cost of funds rises faster than the return on loans and securities.  The net margin may also be adversely impacted by a number of factors which cannot be predicted and are beyond our control.

Net interest income for the three-month period ended March 31, 2011 was $2,081,571, which represents a decrease of $263,572 or 11.24% over net interest income for the same period of 2010.  The primary contributor to this decrease was the reduction in interest-earning assets.

Interest revenue for the three months ended March 31, 2011 totaled $2,935,152, compared to $3,330,115 for the same period last year, representing a decrease of $394,963 or 11.86%.  We experienced a $330,858 decrease in interest earned on loans as a direct result of nonaccrual loan balances increasing when compared to the first three months of 2010.  Additionally, we realized a $66,757 decrease in income on U.S. Government Agency securities for the first three months of 2011 when compared to the same time period in 2010.  The decrease in U. S. Government securities income was the direct result of the average balance decreasing $3,449,537 over the same period in 2010.

Interest expense for the three-month period ended March 31, 2011 totaled $853,581, compared to $984,962 for the same period last year, representing an decrease of $131,381 or 13.34%.  Deposits were $195,717,316 at March 31, 2011, compared to $189,640,730 at December 31, 2010 and $188,490,215 at March of 2010.  The Company decreased its Federal Home Loan Bank (“FHLB”) borrowings during the first quarter of 2011 from $24,000,000 at December 31, 2010 to $22,000,000 at March 31, 2011.  FHLB borrowings at March 31, 2010 were $26,000,000.  As a result, interest expense on borrowed funds for the first quarter of 2011 dropped $64,018 when compared to the three months ended March 31, 2010.

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A table of the Company’s average balances, interest and yields follows.

	For the Quarter Ended							For the Quarter Ended
	March 31, 2011							March 31, 2010
	Average							Average
	Balance		Interest		Yield			Balance		Interest		Yield
Assets
Federal funds sold	$	1,016,000	$	693		0.28	%	$	2,323,879	$	696		0.12	%
Interest-bearing deposits		5,103		9		0.67	%		49,293		5		0.04	%
Investment securities:
U.  S.  government agency		11,218,568		44,114		1.59	%		14,668,105		113,723		3.14	%
FHLB of Atlanta &
CBB Financial Corp..  Stock		2,151,600		4,489		0.85	%		2,401,200		1,670		0.28	%
		13,370,168		48,603		1.47	%		17,069,305		115,393		2.74	%
Loans:
Demand and time		27,124,118		390,616		5.84	%		26,380,179		385,582		5.93	%
Mortgage		177,737,461		2,443,258		5.57	%		175,474,292		2,751,427		6.36	%
Installment		5,405,876		86,175		6.46	%		6,524,397		110,197		6.85	%
Total loans		210,267,455		2,920,049		5.63	%		208,378,868		3,247,206		6.32	%
Allowance for loan losses		4,828,491							2,895,878
Total loans, net of allowance		205,438,964		2,920,049		5.76	%		205,482,990		3,247,206		6.41	%
Total interest-earning assets		219,830,235		2,969,354		5.48	%		224,925,467		3,363,300		6.06	%
Non-interest-bearing cash		15,400,343							11,750,199
Premises and equipment		6,365,631							6,523,920
Other assets		7,035,321							6,490,054
Total assets	$	248,631,530						$	249,689,640
Liabilities and Stockholders’ Equity
Interest-bearing Deposits
Savings and NOW deposits	$	46,626,954	$	17,037		0.15	%	$	48,055,941	$	22,668		0.19	%
Money market and supernow		10,849,151		7,306		0.27	%		11,106,248		13,354		0.49	%
Other time deposits		98,610,504		648,107		2.67	%		95,239,534		703,791		3.00	%
Total interest-bearing deposits		156,086,609		672,450		1.75	%		154,401,723		739,813		1.94	%
Borrowed funds		25,897,427		181,131		2.84	%		28,738,342		245,149		3.46	%
Total interest-bearing liabilities		181,984,036		853,581		1.90	%		183,140,065		984,962		2.18	%
Noninterest-bearing deposits		37,316,794							35,216,655
		219,300,830							218,356,720
Other liabilities		1,993,817							2,493,075
Stockholders’ equity		27,336,883							28,839,845
Total liabilities and stockholders equity	$	248,631,530						$	249,689,640
Net interest spread						3.58	%						3.88	%
Net interest income			$	2,324,672						$	2,378,338
Net margin on interest-earning assets						3.90	%						4.29	%

Interest on tax-exempt loans and investments are reported on fully taxable equivalent basis (a non GAAP financial measure).

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Provision for Loan Losses

The provision for loan losses was $1,500,000 for the first three months of 2011, compared to $475,000 for the same period of 2010.  The increase in the provision was in response to the increase in net charge-offs and specific allocations for impaired loans.  Additional information regarding risk elements in the loan portfolio, the provision for loan losses and management’s assessment of the adequacy of the allowance for loan losses is discussed below in the section entitled “Loan Quality”.

Noninterest Revenue

Noninterest revenue for the three-month period ended March 31, 2011 totaled $664,332, which represents an increase of $51,732 or 8.44% over noninterest revenue for the same period of 2010.  This increase resulted primarily from the $41,706 or 12.50% increase in Insurance Agency contingency income earned during the first quarter of 2011, from $333,608 for the first quarter of 2010 to $375,314 for the first quarter of 2011.  Insurance Agency contingency income is based on sales of new policies to customers and claims against existing policies for the prior year.  In addition, we experienced an increase in service charges on deposit accounts of $30,383 or 14.14% during the first quarter of 2011 when compared to the same period of 2010.  These increases were offset by a net loss on the sale of foreclosed real estate of $17,352.

Noninterest Expense

The Company recorded noninterest expense of $1,805,890 for the three-month period ended March 31, 2011, compared to $1,854,552 for the same period in 2010, a decrease of $48,662 or 2.62%.  This decrease was mainly attributable to decreased salaries and employee benefits of $40,650.

Income Tax Expense

The Company’s effective tax benefit rate for the three-month period ended March 31, 2011 was 46.9%, compared to an effective tax rate of 36.1% for the same period of 2010.  The Company’s income tax benefit for the first quarter of 2011 was $262,367, compared to an income tax expense of $226,945 for the same period of 2010.  Decreases in income before income tax during the three-month period ended March 31, 2011 contributed to the decrease in income tax expense when compared to the same period last year.

FINANCIAL CONDITION

Overview

Total assets of the Company at March 31, 2011 were $248,646,826, compared to $245,792,415 at December 31, 2010, representing an increase of $2,854,411 or 1.16% from December 31, 2010.

Total liabilities at March 31, 2011 were $221,726,302, compared to $218,400,251 at December 31, 2010, representing an increase of $3,326,051 or 1.52%.

Stockholders’ equity was $26,920,524 as of March 31, 2011, compared to $27,392,164 as of December 31, 2010, representing a decrease of $471,640.  The decrease was due to a net loss for the period totaling $297,620, a decrease in the unrealized gain on securities available for sale net of income taxes of $2,527 and dividends paid to stockholders of $171,493.

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Return on average equity for the quarter ended March 31, 2011 was (4.42)%, compared to 5.64% for the same period of 2010.  Return on average assets was (0.49)% for the quarter ended March 31, 2011, compared to 0.65% for the same period of 2010.

Composition of Loan Portfolio

At March 31, 2011, loans, net of unearned income, were $204,731,970, a decrease of $2,563,907 since December 31, 2010.  Because loans are expected to produce higher yields than investment securities and other interest-earning assets, the absolute volume of loans and the volume as a percentage of total earning assets is an important determinant of net interest margin.  Average loans, net of the allowance for loan losses, were $205,438,964 and $205,482,990 during the first quarters of 2011 and 2010, respectively, which constituted 93.45% and 91.36% of average interest-earning assets for the respective periods.  For the quarter ended March 31, 2011, our average loan to deposit ratio was 106.22%, compared to 108.37% for the same period in 2010.  The securities sold under repurchase agreements function like deposits, with the securities providing collateral in place of the FDIC insurance.  Our ratio of average loans to deposits plus borrowed funds was 93.68% for the quarter ended March 31, 2011, compared to 94.10% for the same period of 2010.  The Company extends credit primarily to customers located in and near the Maryland counties of Kent County, Queen Anne’s County, and Cecil County.  There are no industry concentrations in our loan portfolio.  A substantial portion of our loans are, however, secured by real estate, and the real estate market in the region, which is directly impacted by the local economy, will influence the performance of the Company’s portfolio and the value of the collateral securing the portfolio.

Loan Quality

The allowance for loan losses represents a reserve for potential losses in the loan portfolio.  The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing, past due, and other loans that management believes require attention.  The determination of the reserve level rests upon management’s judgment about factors affecting loan quality and assumptions about the economy.  Management believes that the allowance as of March 31, 2011 is adequate to cover possible losses in the loan portfolio identified as of that date; however, management’s judgment is based upon a number of assumptions about future events, which are believed to be reasonable, but which may not prove valid.  Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the loan loss allowance will not be required.

For significant problem loans, management’s review consists of evaluation of the financial strengths of the borrowers and guarantors, the related collateral, and the effects of economic conditions.  The overall evaluation of the adequacy of the total allowance for loan losses is based on an analysis of historical loan loss ratios, loan charge-offs, delinquency trends, and previous collection experience, along with an assessment of the effects of external economic conditions.  The allowance may be increased to accommodate reserves for specific loans identified as substandard during management’s loan review.  Net recoveries and/or decreases in loans may cause the allowance as a percentage of gross loans to exceed our target.  Historically, our regulators have discouraged negative provisions, however, management would consider a negative provision if warranted.

The provision for loan losses is a charge to earnings in the current period to replenish the allowance and maintain it at a level management has determined to be adequate.

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The allowance for loan losses decreased to $3,988,150 at March 31, 2011, from $5,656,788 at December 31, 2010.  The provision for loan losses was $1,500,000 for the first three months of 2011, compared to $475,000 for the same period of 2010.  The increase in the provision for loan losses in the first three months of 2011 when compared to the same period of 2010 was in response to the increase in net charge-offs, the results of our quarterly review of the adequacy of the factors discussed previously, and specific allocations for impaired loans.  As of March 31, 2011 and December 31, 2010, the allowance for loan losses compared to gross loans was 1.91% and 1.29%, respectively.  As part of our loan review process, management has noted an increase in foreclosures and bankruptcies in the geographic areas where we operate.  Additionally, the current nationwide recession has had a significant and adverse impact on real estate values and sales over the past 12 months.  Consequently, we have closely reviewed our loan portfolio and applied sensitivity analyses to collateral values to ensure that we are adequately measuring potential future losses.  Where necessary, we have obtained new appraisals on collateral.  Specific allocations of the allowance have been provided in these instances where losses may occur.

The following table sets forth activity in the Company’s allowance for loan losses for the periods indicated:

Allowance for Loan Losses

	Three months ended March 31, 2011			Three months ended March 31, 2010			Year ended December 31, 2010
Balance at beginning of year	$	5,656,788		$	2,845,364		$	2,845,364
Loan losses:
Commercial		491,329			29,442			166,779
Mortgages		2,694,200			581,725			1,846,683
Consumer		9,586			11,839			104,791
Total loan losses		3,195,115			623,006			2.118,253
Recoveries on loans previously charged off
Commercial		210			820			2,660
Mortgages		1,576			0			374
Consumer		24,691			1,460			16,643
Total loan recoveries		26,477			2,280			19,677
Net loan losses		3,168,638			620,726			2,098,576
Provision for loan losses charged to expense		1,500,000			475,000			4,910,000
Balance at end of year	$	3,988,150		$	2,699,638		$	5,656,788
Allowance for loan losses to loans outstanding
At end of period		1.91	%		1.29	%		2.66	%

Management believes it has identified and charged off all significant losses in the loan portfolio but there can be no assurance that additional losses will not occur in future periods.  The ratio of the allowance for loan losses to loans outstanding has increased due to the economic conditions being felt in our market area.

As a result of management’s ongoing review of the loan portfolio, loans are classified as nonaccrual when it is not reasonable to expect collection of interest under the original terms.  These loans are classified as nonaccrual even though the presence of collateral or the borrower’s financial strength may be sufficient to provide for ultimate repayment.  Interest on nonaccrual loans is recognized only when received. A loan is generally placed in nonaccrual status when it becomes 90 days or more past due. When a loan is placed in nonaccrual status, all interest that had been accrued on the loan but remains unpaid is reversed and deducted from earnings as a reduction of reported interest income.  No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain.

The Company had loans past due 90 days or more, including nonaccrual loans, of $14,129,121 and $11,694,139 at March 31, 2011 and December 31, 2010, respectively.  During the first three months of March the Company’s nonaccrual loans increased $4,552,091 or 85.48% from the level at December 31, 2010.  This increase was due to the lack of economic recovery in the real estate market in our lending area.  These loans are detailed below:

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Risk Elements of Loan Portfolio

	March 31,		December 31,
	2011		2010
Nonaccrual Loans
Commercial	$	185,813	$	574,184
Mortgage		9,654,383		4,751,311
Consumer		37,390		-
		9,877,586		5,325,495
Accruing Loans Past Due 90 Days or More
Commercial		52,819		19,838
Mortgage		4,192,874		6,282,242
Consumer		5,843		66,563
		4,251,535		6,368,643
	$	14,129,121	$	11,694,138

Gross interest income of $296,701 for the first three months of 2011, $347,046 for fiscal year 2010 and $28,298 for the first three months of 2010 would have been recorded if nonaccrual loans had been current and performing in accordance with their original terms.  Interest actually recorded on such loans was $8,145 for the first three months of 2011, $31,683 for fiscal year 2010 and $253 for the first three months of 2010.

Loans are classified as impaired when the collection of contractual obligations, including principal and interest, is doubtful.  Management believes it has identified all significant impaired loans as of March 31, 2011 and has made the appropriate change to the allowance for loan losses.

Deposits and Other Interest-Bearing Liabilities

Average interest-bearing deposits increased $1,684,886 or 1.09% to $156,086,609 for the three months ended March 31, 2010, from $154,401,723 for the same period of 2010.  Average noninterest-bearing deposits increased $2,100,139 or 5.96% to $37,316,794 for the three months ended March 31, 2011, from $35,216,655 for the same period of 2010.  Average total deposits have increased 2.00% or $3,785,025 to $193,403,403 for the three months ended March 31, 2011 from $189,618,378 for the same period of 2010.  Borrowings, primarily from the FHLB, decreased to $22,000,000 from $24,000,000 at December 31, 2010, representing a decrease of 8.33%.

Deposits, particularly core deposits, have been our primary source of funding and have enabled us to meet both our short-term and long-term liquidity needs.  Management anticipates that such deposits will grow and continue to be our primary source of funding for the foreseeable future.  It should be noted, however, that investor confidence in alternatives to deposit accounts, which may pay yields that are higher than those paid on deposits, typically increases when the economy and stock markets perform well.  Increased investor confidence in nondeposit investment products in future periods would likely have an adverse impact on our deposit growth.  In addition, changes in governmental monetary policy, especially interest rates, may impact our ability to attract and retain deposits.

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Short-Term Borrowings

The following table sets forth the Company’s position with respect to short-term borrowings at March 31, 2011 and December 31 2010. 

	March 31, 2011					December 31, 2010
	Amount		Rate			Amount		Rate
Retail Repurchase Agreements		2,179,654		.47	%		2,754,321		1.76	%

We may borrow up to approximately 30% of total assets from the FHLB of Atlanta through any combination of notes or line of credit advances.  Both the notes payable and the line of credit are secured by a floating lien on our real estate mortgage loans.  The Bank was required to purchase shares of capital stock in the FHLB of Atlanta as a condition to obtaining the line of credit.

We provide collateral of 105% of the repurchase agreement balances by pledging U.S. Government Agency securities.

The Bank has lines of credit of $13,650,000 in unsecured overnight federal funds and $5,000,000 in overnight federal funds with correspondent banks at March 31, 2011.

Liquidity and Capital Resources

Liquidity describes our ability to meet financial obligations that arise out of the ordinary course of business.  Liquidity is needed primarily to fund loans, meet depositor withdrawal requirements, and fund current and planned expenditures.  The Company derives liquidity through increased customer deposits, maturities in the investment portfolio, loan repayments and income from earning assets.  To the extent that deposits are not adequate to fund customer loan demand, liquidity needs can be met in the short-term funds markets through lines of credit totaling $18,650,000 from correspondent banks.  The Bank is also a member of the FHLB of Atlanta, which provides another source of liquidity through a secured line of credit in the amount of $36,892,755 of which $22,000,000 has been advanced as of March 31, 2011.  We also have the ability to borrow secured funds through the Federal Reserve’s Discount window as necessary.

Bank regulatory agencies have adopted various capital standards, including risk-based capital standards, that apply to financial institutions like the Company.  The primary objectives of the risk-based capital framework are to provide a more consistent system for comparing capital positions of financial institutions and to take into account the different risks among financial institutions’ assets and off-balance sheet items.

Risk-based capital standards have been supplemented with requirements for a minimum Tier 1 capital to assets ratio (leverage ratio).  In addition, regulatory agencies consider the published capital levels as minimum levels and may require a financial institution to maintain capital at higher levels.  A comparison of the Company’s capital ratios as of March 31, 2011 to the minimum ratios required by federal banking regulators is presented below.

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				Minimum			To be well
	Actual			Requirements			Capitalized
Total risk-based capital ratio		14.00	%		8.00	%		10.00	%
Tier 1 risk-based capital ratio		12.74	%		4.00	%		6.00	%
Tier 1 leverage ratio		10.31	%		4.00	%		5.00	%

Item 3.          Quantitative and Qualitative Disclosures About Market Risk.

The Company is a “smaller reporting company” and is not required to include the information required by this Item.

Item 4.          Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that Peoples Bancorp, Inc. files under the Securities and Exchange Act of 1934 with the Securities and Exchange Commission, such as this quarterly report, is recorded, processed, summarized and reported within the time periods specified in those rules and forms, and that such information is accumulated and communicated to management, including the President and Chief Executive Officer (the “CEO”), who also serves as the Chief Financial Officer (the “CFO”), to allow for timely decisions regarding required disclosure.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

An evaluation of the effectiveness of these disclosure controls was carried out as of March 31, 2011 under the supervision and with the participation of the Company’s management, including the CEO.  Based on that evaluation, the Company’s management, including the CEO, has concluded that our disclosure controls and procedures are, in fact, effective at the reasonable assurance level.

During the first quarter of 2011, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our control over financial reporting.

PART II - OTHER INFORMATION

Item 1.        Legal Proceedings.

None

Item 1A.     Risk Factors.

The risks and uncertainties to which our Company’s financial condition and operations are subject are discussed in detail in Item 1A of Part I of the Annual Report of Peoples Bancorp, Inc. on Form 10-K for the year ended December 31, 2010.  Management does not believe that any material changes in these risk factors have occurred since December 31, 2010.

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Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3.       Defaults Upon Senior Securities.

Not applicable.

Item 4.       (Removed and Reserved).

Item 5.       Other Information.

None.

Item 6.       Exhibits.

The exhibits filed or furnished with this report are listed in the Exhibit Index that immediately follows the signatures, which Index is incorporated herein by reference.

SIGNATURES

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

	PEOPLES BANCORP, INC.
Date:  May 13, 2011	By:	/s/ Thomas G. Stevenson
		Thomas G. Stevenson
		President/Chief Executive Officer
		& Chief Financial Officer

 

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EXHIBIT INDEX

Exhibit No.	Description
31.1	Certifications of the CEO/CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1	Certifications of the CEO/ CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

- 33 -

EX-31.1

Exhibit 31.1

Certifications of the Chief Executive Officer and the Chief Financial Officer

Pursuant to Securities Exchange Act Rules 13a-1 and 15d-14

As adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Thomas G. Stevenson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Peoples Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; and

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 13, 2011	/s/ Thomas G. Stevenson
		Thomas G. Stevenson
		President/Chief Executive Officer
		& Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Periodic Report

Pursuant to 18 U.S.C. Section 1350

As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to, and for purposes only of, 18 U.S.C. § 1350, the undersigned hereby certifies that (i) the Quarterly Report of Peoples Bancorp, Inc. on Form 10-Q for the quarter ended March 31, 2011, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Peoples Bancorp, Inc. and Subsidiaries.

Date:  May 13, 2011	/s/ Thomas G. Stevenson
	Thomas G. Stevenson
	President/Chief Executive Officer
	& Chief Financial Officer