SELECTED FINANCIAL DATA

The following data should be read in conjunction with the Unaudited Consolidated
Financial Statements and Management's Discussion and Analysis that follows:

                                      At or For the Three Months      At or For the Six Months
                                            Ended June 30,                 Ended June 30,
                                         2009            2008            2009           2008
SIGNIFICANT RATIOS
Return on average stockholders'              4.93%           3.81%          5.59%          7.41%
equity
Return on average common                     4.85%           3.81%          6.53%          7.41%
stockholders' equity
Return on average assets                     0.56%           0.41%          0.61%          0.81%
Net interest margin                          3.45%           3.61%          3.49%          3.56%
Efficiency ratio (a)                        63.12%          54.55%         60.85%         56.31%
Average stockholders' equity to             11.34%          10.88%         10.99%         10.93%
average assets
Average loans to average deposits           78.36%          88.84%         79.09%         90.42%
Dividend payout ratio                      102.96%         122.38%         77.64%         61.51%

ASSET QUALITY RATIOS
Nonperforming loans as a percent of          3.72%           1.92%          3.72%          1.92%
total loans (b)(c)
Nonperforming assets as a percent of         2.00%           1.13%          2.00%          1.13%
total assets (b)(c)
Allowance for loan losses to loans           2.12%           1.38%          2.12%          1.38%
net of unearned interest (c)
Allowance for loan losses to                56.90%          71.80%         56.90%         71.80%
nonperforming loans (b)(c)
Provision for loan losses to average         0.43%           0.61%          0.79%          0.74%
loans
Net charge-offs as a percentage of           2.05%           2.70%          1.56%          1.57%
average loans (annualized)

CAPITAL INFORMATION (c)
Tier 1 capital ratio                        14.85%          12.10%         14.85%         12.10%
Total risk-based capital ratio              16.19%          13.33%         16.19%         13.33%
Leverage ratio                               9.95%           8.72%          9.95%          8.72%
Tangible equity to tangible assets           8.74%           7.30%          8.74%          7.30%
Tangible common equity to tangible           6.78%           7.30%          6.78%          7.30%
assets
Tangible assets (d)                   $  1,973,158    $  1,839,664    $ 1,973,158    $ 1,839,664
Tangible equity (e)                        172,356         134,229        172,356        134,229
Tangible common equity (f)             $   133,862    $    134,229     $  133,862     $  134,229

PER COMMON SHARE DATA
Earnings per share - Basic             $      0.23     $      0.19     $     0.60     $     0.74
Earnings per share - Diluted                  0.23            0.19           0.60           0.73
Cash dividends declared per common            0.23            0.23           0.46           0.45
share
Book value per share (c)                     19.30           19.55          19.30          19.55
Tangible book value per share (c)      $     12.92     $     13.03     $    12.92     $    13.03
(g)
Weighted-average common shares          10,360,590      10,304,666     10,352,769     10,303,690
outstanding - Basic
Weighted-average common shares          10,377,105      10,352,135     10,364,621     10,347,720
outstanding - Diluted
Common shares outstanding at end of     10,358,852      10,304,597     10,358,852     10,304,597
period

(a) Non-interest expense (less intangible asset amortization) as a percentage of fully tax-equivalent net interest income plus non-interest income (excluding gains or losses on investment securities and asset disposals).

(b) Nonperforming loans include loans 90 days past due and accruing, renegotiated loans and nonaccrual loans. Nonperforming assets include nonperforming loans and other real estate owned.

(c) Data presented as of the end of the period indicated.

(d) Total assets less goodwill and other intangible assets of $66,093 at June 30, 2009 and $67,217 at June 30, 2008.

(e) Total stockholders' equity less goodwill and other intangible assets of $66,093 at June 30, 2009 and $67,217 at June 30, 2008.

(f) Tangible equity less preferred stock of $38,494 at June 30, 2009 and $0 at June 30, 2008.

(g) Tangible equity divided by total common shares outstanding at end of period.

Forward-Looking Statements
Certain statements in this Form 10-Q which are not historical fact are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Words such as "anticipate", "estimates", "may", "feels", "expects", "believes", "plans", "will", "would", "should", "could" and similar expressions are intended to identify these forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to risks and uncertain­ties that may cause actual results to differ materially. Factors that might cause such a difference include, but are not limited to:
(1) continued deterioration in the credit quality of Peoples' loan portfolio could occur due to a number of factors, such as adverse changes in economic conditions that impair the ability of borrowers to repay their loans, the underlying value of the collateral could prove less valuable than otherwise assumed and assumed cash flows may be less favorable than expected, which may adversely impact the provision for loan losses;

(2) competitive pressures among financial institutions or from non-financial institutions, which may increase significantly;

(3) changes in the interest rate environment, which may adversely impact interest margins;

(4) changes in prepayment speeds, loan originations and charge-offs, which may be less favorable than expected and adversely impact the amount of interest income generated;

(5) general economic conditions and weakening in the economy, specifically the real estate market, either national or in the states in which Peoples does business, which may be less favorable than expected and impact the ability to generate quality loans;

(6) political developments, wars or other hostilities, which may disrupt or increase volatility in securities markets or other economic conditions;

(7) legislative or regulatory changes or actions, which may adversely affect the business of Peoples;

(8) adverse changes in the conditions and trends in the financial markets, which may adversely affect the fair value of securities within Peoples' investment portfolio;

(9) a delayed or incomplete resolution of regulatory issues that could arise;

(10) Peoples' ability to receive dividends from its subsidiaries;

(11) the impact of larger or similar financial institutions encountering problems, which may adversely affect the banking industry and/or Peoples;

(12) changes in accounting standards, policies, estimates or procedures, which may impact Peoples' reported financial condition or results of operations;

(13) Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity;

(14) the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity;

(15) the costs and effects of regulatory and legal developments, including the outcome of regulatory or other governmental inquiries and legal proceedings and results of regulatory examinations; and

(16) other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed with the Securities and Exchange Commission ("SEC"), including those risk factors included in the disclosure under the heading "ITEM 1A. RISK FACTORS" of this Form 10-Q and

All forward-looking statements speak only as of the execution date of this Form 10-Q and are expressly qualified in their entirety by the cautionary statements. Although management believes the expectations in these forward-looking statements are based on reasonable assumptions within the bounds of management's knowledge of Peoples' business and operations, it is possible that actual results may differ materially from these projections. Additionally, Peoples undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events except as may be required by applicable legal requirements. Copies of documents filed with the SEC are available free of charge at the SEC's website at www.sec.gov and/or from Peoples Bancorp Inc.'s website - www.peoplesbancorp.com under the "Investor Relations" section.

This discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements, and notes thereto, contained in Peoples' 2008 Form 10-K, as well as the Unaudited Consolidated Financial Statements, ratios, statistics and discussions contained elsewhere in this Form 10-Q.

Business Overview
The following discussion and analysis of Peoples' Unaudited Consolidated Financial Statements is presented to provide insight into management's assessment of the financial condition and results of operations.

Peoples offers diversified financial products and services through 47 financial service locations and 39 ATMs in southeastern Ohio, northwestern West Virginia and northeastern Kentucky through its financial service units - Peoples Bank, National Association ("Peoples Bank"), Peoples Financial Advisors (a division of Peoples Bank) and Peoples Insurance Agency, Inc, a subsidiary of Peoples Bank. Peoples Bank is a member of the Federal Reserve System and subject to regulation, supervision and examination by the Office of the Comptroller of the Currency.

Peoples' products and services include traditional banking products, such as deposit accounts, lending products and trust services. Peoples also offers a complete array of insurance products and makes available custom-tailored fiduciary and wealth management services. Peoples provides services through traditional offices, ATMs and telephone and internet-based banking. Brokerage services are offered exclusively through an unaffiliated registered broker-dealer located at Peoples' offices.

Critical Accounting Policies
The accounting and reporting policies of Peoples conform to US GAAP and to general practices within the financial services industry. The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Management has identified the accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of Peoples' Consolidated Financial Statements and Management's Discussion and Analysis at June 30, 2009, which were unchanged from the policies disclosed in Peoples' 2008 Form 10-K.

Fair Value Measurements
As a financial services company, the carrying value of certain financial assets and liabilities of Peoples is impacted by the application of fair value measurements, either directly or indirectly. Given the inherent volatility, the use of fair value measurements may have a significant impact on the carrying value of assets or liabilities, or result in material changes to the consolidated financial statements, from period to period. There were no material changes to the accounting practices and valuation methodologies employed by Peoples related to fair value measurements from those disclosed in Peoples' 2008 Form 10-K.

Summary of Recent Transactions and Events The following is a summary of recent transactions that have impacted or are expected to impact Peoples' results of operations or financial condition:

o On May 22, 2009, the Board of Directors of the Federal Deposit Insurance Corporation ("FDIC") adopted a final rule imposing a special assessment on all FDIC-insured depository institutions equal to five basis points on each institution's assets, minus its Tier 1 capital, as of June 30, 2009. This special assessment will be collected on September 30, 2009. On February 27, 2009, the FDIC adopted a final rule that changed the way its assessment system differentiates risk and increased base assessment rates beginning April 1, 2009. Both of these actions were part of the FDIC's efforts to rebuild the Deposit Insurance Fund, which has been reduced substantially by the higher rate of bank failures in 2008 and 2009 compared to recent years. As a result of the FDIC's actions, Peoples recorded FDIC insurance expense of $1.6 million for the second quarter of 2009, with $930,000 ($605,000 or $0.06 per diluted common share after-tax) related to the special assessment, versus $0.5 million for the first quarter of 2009.

o During the second quarter of 2009, Peoples Bank opened its first full-service office in Zanesville, Ohio and combined operations in Nelsonville, Ohio into a single facility. Peoples Bank also closed its Rutland, Ohio and Lower Salem, Ohio banking offices and consolidated those offices into existing nearby offices effective June 30, 2009. These actions were consistent with management's ongoing strategic focus of improving operating efficiencies by directing resources to areas with greater business development potential.

o As described in "ITEM 1. BUSINESS-Recent Corporate Developments" of Peoples' 2008 Form 10-K, on January 30, 2009, Peoples received $39 million of new equity capital from the U.S. Treasury's TARP Capital Purchase Program. The investment was in the form of newly-issued non-voting Fixed Rate Cumulative Perpetual Preferred Shares, Series A (the "Series A Preferred Shares") and a related 10-year warrant sold by Peoples to the U.S. Treasury (the "TARP Capital Investment").

o Between August 2007 and December 2008, the Federal Reserve's Open Market Committee reduced the target Federal Funds rate 500 basis points and the Discount Rate 575 basis points. These actions caused a corresponding downward shift in short-term interest rates, while longer-term rates have not decreased to the same extent. This steepening of the yield curve has provided Peoples with opportunities to improve net interest income and margin by taking advantage of lower-cost funding available in the market place and reducing certain deposit costs.

o Since early 2008, Peoples' loan quality has been impacted by contraction within the commercial real estate market and economy as a whole, which has caused declines in commercial real estate values and deterioration in financial condition of various commercial borrowers. These conditions led to Peoples downgrading the loan quality ratings on various commercial real estate loans through its normal loan review process. In addition, several impaired loans became under-collateralized due to reductions in the estimated net realizable fair value of the underlying collateral. As a result, Peoples' provision for loan losses, net charge-offs and nonperforming loans in recent quarters have been higher than historical levels.

o During 2008, Peoples systematically sold the preferred stocks issued by the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") held in its investment portfolio, due to the uncertainty surrounding these entities. These securities had a total recorded value of $12.1 million at December 31, 2007. In July 2008, Peoples sold its remaining Fannie Mae preferred stocks, which completely eliminated all equity holdings in Fannie Mae and Freddie Mac. As a result of the sales, Peoples recognized total pre-tax losses of $199,000 and $450,000 in the first and second quarters of 2008, respectively.

o Also during 2008 and continuing in the first half of 2009, Peoples sold selected lower yielding, longer-term investment securities, primarily obligations of U.S. government-sponsored enterprises, U.S. agency mortgage-backed securities and tax-exempt municipal bonds, as well as several small-lot mortgage-backed securities. The proceeds from these sales were reinvested into similar securities with less price risk volatility. These actions were intended to reposition the investment portfolio to reduce interest rate exposures and resulted in Peoples recognizing pre-tax gains of $262,000 and $588,000 for the three and six months ended June 30, 2009, respectively, versus $142,000 and $500,000 for the same periods in 2008, respectively.

o During the fourth quarter of 2008, Peoples Bank sold its merchant credit card payment processing services to First Data Merchant Services Corporation ("First Data"). Peoples Bank continues to serve the credit card processing needs of its commercial customers through a referral program with First Data.

The impact of these transactions, where material, is discussed in the applicable sections of this Management's Discussion and Analysis.

In the second quarter 2009, both net income available to common shareholders and diluted earnings per common share were lower than first quarter of 2009 (or "linked quarter"), due mostly to higher FDIC insurance expense. Other significant contributing factors included a modest increase in provision for loan losses and a full quarter's impact of preferred dividends related to the TARP Capital Investment. Compared to the prior year, second quarter 2009 net income available to shareholders was up 20%, while diluted earnings per common share increased 21%. Stronger net interest income and higher mortgage banking income were key drivers of these increases, while increased non-interest expense was mostly offset by a lower provision for loan losses. On a year-to-date basis, net income available to common shareholders was $6.2 million through June 30, 2009 versus $7.6 million a year ago, while diluted earnings per common share were $0.60 and $0.73, respectively. The combination of higher FDIC insurance expense and preferred dividends accounted for much of these decreases, as increased net interest income and non-interest income more than offset a modest increase in provision for loan losses and other non-interest expenses.

Peoples recorded a provision for loan losses of $4.7 million in the second quarter of 2009, compared to $4.1 million in the first quarter of 2009 and $6.8 million in the second quarter of 2008. These provisions reflect the amounts needed to maintain the adequacy of the allowance for loan losses based on management's formal quarterly analysis. The higher provision for loan losses in the second quarter of 2008 was largely attributable to a single $12.6 million commercial real estate loan becoming impaired during the quarter.

In the second quarter of 2009, net interest income totaled $15.4 million, consistent with the linked quarter and up 4% over the second quarter of 2008. Interest income was lower in the second quarter of 2009 compared to the linked quarter and second quarter of 2008, due mostly to a reduction in loan yields from refinancing activity and downward repricing of variable rate loans, coupled with a higher level of nonaccrual loans. Second quarter 2009 interest expense benefited from opportunities to reduce overall funding costs provided by maturing deposits and long-term borrowings and lower short-term interest market rates in response to the Federal Reserve's actions. In the second quarter of 2009, net interest margin compressed slightly from Peoples continuing to maintain a higher volume of short-term assets, consisting of excess cash reserves held at the Federal Reserve Bank.

Non-interest income, which excludes gains and losses on securities and asset disposals, remained strong in the first quarter of 2009, as a seasonal decline in insurance income was offset by increases in other non-interest revenues. Compared to the second quarter of 2008, non-interest income increased 5%, due largely to the higher mortgage banking income. On a year-to-date basis, higher mortgage banking revenue and increased deposit account service charges were mostly offset by reductions in trust and investment revenues and bank owned life insurance income, resulting in a modest 2% increase in total non-interest income.

Second quarter 2009 non-interest expense was impacted by higher FDIC insurance expense, while other operating costs were consistent with first quarter 2009 levels. Year-over-year growth in total non-interest expense occurred for both the three and six months ended June 30, 2009, due mostly to the additional FDIC insurance expense. Other significant contributing factors included increased employee benefit costs and higher loan-related expenses, primarily external legal and valuation services associated with problem loans.

During the second quarter of 2009, total assets decreased $16.7 million, to $2.04 billion at June 30, 2009, as excess cash reserves held at the Federal Reserve Bank were used to reduce non-core deposits and borrowed funds. Total assets were $36.9 million higher than year-end 2008, as substantial year-to-date deposit growth has produced a higher level of cash and cash equivalents. Gross portfolio loan balances decreased $6.7 million in the second quarter and $9.9 million through the first six months of 2009, to $1.09 billion at June 30, 2009. These declines were primarily a result of residential real estate loan production being sold to the secondary market. At June 30, 2009, total investment securities, although comparable to prior quarter-end, were up $9.4 million since December 31, 2008, due to an increase in fair value of the portfolio that more than offset the impact of maturities, calls and pay downs.

Total liabilities were $1.80 billion at June 30, 2009, down $24.8 million compared to March 31, 2009 and down $14.9 million compared to December 31, 2008. Total deposit balances decreased $14.0 million during the second quarter to $1.41 billion at quarter-end, due largely to a planned reduction in non-core deposits. As a result, retail balances were down $34.9 million in the second quarter of 2009. However, retail deposits remained $39.5 million higher than year-end 2008, due to strong growth in low-cost and non-interest-bearing retail deposits through six months of 2009. Total borrowed funds were $373.5 million at June 30, 2009, versus $385.5 million at March 31, 2009, with repayment of long-term borrowings accounting for nearly all of the decrease. In the first half of 2009, the combination of retail deposit growth and funds generated from the TARP Capital Investment enabled Peoples to reduce total borrowed funds $56.1 million, or 13%. The reduction in borrowings included the elimination of overnight wholesale borrowings, which totaled $44.4 million at December 31, 2008.

Total stockholders' equity increased $8.1 million and $51.8 million for the three and six months ended June 30, 2009, respectively. The key driver of the linked quarter increase was a $7.9 million increase in fair value of Peoples' available-for-sale investment portfolio, net of deferred tax. The TARP Capital Investment accounted for most of the year-to-date growth, while the fair value of the available-for-sale investment portfolio increased $10.9 million, net of deferred tax, further contributing to higher stockholders' equity at June 30, 2009.

Net Interest Income
Net interest income, the amount by which interest income exceeds interest expense, remains Peoples' largest source of revenue. The amount of net interest income earned by Peoples each quarter is affected by various factors, including changes in market interest rates due to the Federal Reserve Board's monetary policy, the level and degree of pricing competition for both loans and deposits in Peoples' markets, and the amount and composition of Peoples' earning assets and interest-bearing liabilities.

The following table details Peoples' average balance sheets for the periods presented:

                                                                 For the Three Months Ended
                                  June 30, 2009                        March 31, 2009                         June 30, 2008
                          Average       Income/    Yield/       Average       Income/    Yield/       Average       Income/    Yield/
(Dollars in               Balance       Expense     Rate        Balance       Expense     Rate        Balance       Expense     Rate
thousands)
Short-Term
Investments:
Deposits with other       $   38,546     $    24    0.25%       $   25,678     $    16    0.25%       $    2,461     $    13    2.21%
banks
Federal funds sold                 -           -    0.00%                -           -    0.00%              930           4    2.08%
 Total short-term             38,546          24    0.25%           25,678          16    0.25%            3,391          17    2.17%
investments
Investment Securities
(1):
Taxable                      647,568       8,741    5.40%          640,547       8,864    5.54%          529,924       6,884    5.21%
Nontaxable (2)                68,720       1,108    6.45%           70,928       1,147    6.47%           68,187       1,107    6.49%
 Total investment            716,288       9,849    5.50%          711,475      10,011    5.63%          598,111       7,991    5.35%
securities
Loans (3):
Commercial                   736,823      10,049    5.47%          734,493      10,275    5.67%          747,596      12,423    6.67%
Real estate (4)              275,487       4,417    6.41%          281,406       4,682    6.66%          282,804       4,848    6.88%
Consumer                      94,618       1,816    7.70%           91,396       1,774    7.87%           84,074       1,683    8.03%
 Total loans               1,106,928      16,282    5.91%        1,107,295      16,731    6.12%        1,114,474      18,954    6.81%
Less: Allowance for         (24,495)                              (23,980)                              (16,243)
loan losses
 Net loans                 1,082,433      16,282    6.03%        1,083,315      16,731    6.24%        1,098,231      18,954    6.92%
  Total earning            1,837,267      26,155    5.70%        1,820,468      26,758    5.92%        1,699,733      26,962    6.36%
assets
Intangible assets             66,144                                66,261                                67,395
Other assets                 137,839                               136,756                               127,190
  Total assets           $ 2,041,250                           $ 2,023,485                           $ 1,894,318
Deposits:
. . .