TABLE OF CONTENTS


1        Corporate Profile
2        Financial Highlights
3        Letter to Shareholders and Friends
4        New Growth Spurs Excitement
5        Board of Directors
6        Executive Officers and Branch Managers
7        Independent Auditor's Report
8        Statement of Management's Responsibility
9        Selected Consolidated Financial Data
10-16    Management's Discussion and Analysis
17-20    Consolidated Financial Statements
21-32    Notes to Consolidated Statement





                                  Cover Photos
                   Depicts 75 years of growth starting in 1925
<PAGE>


Corporate Profile

Peoples  Bancorp (the  "Company') is a holding company formed in 1990. Its stock
is traded on the NASDAQ National Market System under the symbol PFDC.

The Company's  primary assets are Peoples  Federal Savings Bank of Dekalb County
("Peoples")  and First  Savings  Bank ("First  Savings").  Peoples was formed in
1925.  The  Company  has grown to assets  of more  than  $459  million  with the
addition of First Savings Bank to the holding company.

Peoples' main office is located in Auburn,  Indiana with full service offices in
Avilla,  two branches in Columbia City,  Garrett,  Kendallville,  LaGrange,  and
Waterloo.  On  February  29,  2000 a merger  was  completed  with  Three  Rivers
Financial Corp.,  which added First Savings Bank to the holding  company.  First
Savings  operates  six  offices  in Howe  and  Middlebury,  Indiana  and  Union,
Schoolcraft, and Three Rivers, Michigan.

The Banks' financial services include mortgages,  trusts,  consumer banking, and
individual retirement accounts.

Both Peoples and First Savings are members of the
Federal Home Loan Bank System, and their deposits are are insured by the Federal
Deposit Insurance Corp.

Executive Officers of Bancorp

Roger J. Wertenberger
Chairman of the Board

Maurice F. Winkler, III
Executive Officer and President

Deborah K. Stanger
Treasurer

Independent Auditors
Olive LLP
201 North Illinois Street
Indianapolis, IN  46204

Legal Counsel
Manatt, Phelps & Phillips
1501 M Street NW
Suite 700
Washington, D.C.  20005

Transfer Agent
Fifth Third Bank
Corporate  Trust  Services
38 Fountain  Square  Plaza
Cincinnati, OH 45263
Tel: 513-579-5320
     800-837-2755


Annual Meeting

     The  annual  meeting  of  stockholders  of  Peoples  Bancorp  will  be held
Wednesday,  January 10, 2001, at 2:00 p.m. at Ramada Limited, 306 Touring Drive,
Auburn, Indiana 46706.


Corporate Information

Form 10-K Report.
     A copy of the Company's 10-K,  including financial statements as filed with
the  Securities  and Exchange  Commission,  will be furnished  without charge to
stockholders of the company upon request to the Secretary,  Peoples Bancorp, 212
West 7th ST., P.O. Box 231,  Auburn,  Indiana 46706. As of the close of business
on September 30, 2000 the Company had approximately 1,500 stockholders.
<PAGE>

                        FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------
                                                 2000          1999
                                               -----------  ----------
    (dollars in thousands except per share data)
Operating Results:
Net Interest Income                            $ 14,098       $ 11,766
Provision for Loan Losses                           160             89
Dividends Per Share                                0.53           0.49
Average Equity to Average Assets                  13.53%         14.12%

At Year End:
Assets                                         $459,908       $327,563
Loans                                           392,085        270,523
Allowance for Loan Losses                         1,650          1,005
Deposits                                        352,856        270,994
Stockholders' Equity                             57,300         45,456
Book Value Per Share                              15.64          14.28



              Common Stock Information
---------------------------------------------------------------------
                                   Market Price
                              -----------------------    Dividends
                                Low           High        Per Share
                              ----------  -----------
Fiscal 2000
1st QTR                        $15.63        $17.13       $ 0.13
2nd QTR                         13.44         17.13         0.13
3rd QTR                         12.88         15.00         0.13
4th QTR                         13.75         17.38         0.14


Fiscal 1999
1st QTR                        $19.50        $20.88       $ 0.12
2nd QTR                         19.75         20.63         0.12
3rd QTR                         18.50         20.00         0.12
4th QTR                         15.50         19.13         0.13

The price of PFDC stock traded on NASDAQ on November 26, 2000 was $14.88


Graphs on this page show total assets, deposits, book value, and total loans for
the last five years in line graph format.




<PAGE>




To Our Stockholders and Friends:

     We are pleased to report that  Fiscal  2000 was another  excellent  earning
year for Peoples Bancorp. Earnings for the year totaled $4,547,954.

     This past year has been a period of significant achievements.

     Our  preparation  for the  transition  to the new  millennium  intended and
ensured no interruption of service to our valued customers.

     We completed  the merger of Three Rivers  Financial  Corporation  through a
stock  transfer  with Peoples  Bancorp.  This  transition  added six  additional
banking offices to our total.

     We completed  and opened the new Waterloo  Branch.  We are pleased with the
new facility and the corresponding asset growth.

     In Fiscal 2000, due to the reduced valuation placed on Financial Stocks, we
were able to repurchase 289,794 shares at an average price of $14.09.  This will
enhance the book value and earnings per share in the future.

     On October 25, 2000 Peoples celebrated its 75th Anniversary.  We take great
pride in our  long-standing  commitment to our customers and the  communities in
which they live and work. This philosophy and attitude started 75 years ago when
the bank opened and continues to this day.

     Effective January 2001, Dr. John Harvey, a valued and trusted friend of the
Company will retire from the Board of Directors  after 22 years of service.  Dr.
Harvey  has made  many  contributions  to the  Board  over the  years  and we're
fortunate he has agreed to serve as a Director Emeritus.

     This is a challenging time to be in the Financial Services Business. Rising
interest  rates have put pressure on net interest  margins and are  beginning to
slow the  economy.  This trend has clearly  offset  some of the  benefits of our
strong loan growth.

     For Peoples  Bancorp,  this fiscal year's results  reflected the effects of
these  and  other  factors  influencing   institutions  throughout  the  banking
industry.  For the year, we reported net income of $4,547,954,  or $1.32 diluted
earnings per common share. This compared to $4,586,766 or $1.42 diluted earnings
per common share, for the prior fiscal year.  Still,  while the 2000 fiscal year
figures fell slightly below our  record-breaking  performance of previous years,
they  represent  solid results in a time of rising  interest  rates and changing
demand for financial products.

     We  appreciate  the support and  confidence  of our  shareholders  and look
forward to continuing to serve our valued customers and  communities.  Since our
first cash dividend declared 12/15/87,  the Board of Directors has increased the
dividend  each year,  as our profits  grow we hope to  continue  this trend as a
reward to our loyal shareholders.

Sincerely


Roger J Wertenberger
Chairman of the Board


<PAGE>

                           NEW GROWTH SPURS EXCITEMENT

     Economic  Opportunities-The  combination  of Peoples  Federal  Savings Bank
(Peoples) and First Savings Bank (First  Savings) this year extends the reach of
both  institutions.  Peoples  gains nearby areas in southern  Michigan,  such as
Three  Rivers,  Schoolcraft,  and  Union,  along  with the  Howe and  Middlebury
communities in Indiana.  Together, our organization is poised to capture an even
greater presence,  such as in the strong home mortgage market.  Peoples is ready
to help each customer,  from  first-time  home buyers who may be moving into the
area or one of  several  new  golf  course/residential  developments  now  under
construction,  to  established  customers  with other  lifestyle  goals in mind.
Peoples is also taking  advantage of the growing  tourism market by contributing
to the  development  of the  Kendallville  Windmill  Museum;  the  $2.6  million
expansion of the Auburn Cord  Duesenburg  Museum;  and the 351-acre World War II
museum,  the only one of its kind in the  nation,  that  just  broke  ground  in
Auburn.

     Growing Community  Wal-Mart's  150-acre food storage facility,  expected to
employ 250, is another testament to the potency of our local economy.  But it is
only one example. Steel Dynamics is expected to begin construction in early 2001
of a new steel plant in Columbia City.  American  Axle, the biggest  employer in
Three Rivers,  and a Target Stores  distribution  facility both plan expansions.
The result of the growth is that our banks will continue to benefit as more jobs
are created in our service area.

     And we're  growing to keep pace.  This year Peoples  opened a new branch in
Waterloo,  Indiana,  which has  attracted  new ATM  customers  and bolstered our
agricultural  business  begun last year.  The LaGrange  office has also added an
ATM, and the Garrett office was recently remodeled.

     Celebrating  Tradition  Peoples  Federal  Savings Bank  celebrated its 75th
anniversary  this fall and First Savings will  celebrate 115 years in 2001.  And
while  we're  looking  ahead  toward  the next 75 years,  Peoples  is careful to
preserve the keystones that have made us successful thus far.

     Sometimes tried and true methods work best. For example, our trust division
is growing dramatically (+64% this year and +55% annual increase over the past 3
years)  because of the personal  attention our staff gives to each  customer,  a
relationship that is missing from the automation at many other institutions. The
same  management  and  personnel  are in place to  preserve  continuity  for the
customers of both banks.  At the same time, new board members have been added to
drive the combined business forward.

     Our  commitment  to  customer  service  is what  makes us a market  leader.
Peoples  is ready to meet the  financial  needs of  northeast  Indiana,  and now
southern  Michigan.  We are planning for the  continued  growth in store for the
communities we serve. In fact, Peoples is an integral part of it. Through all of
this  change,  one guiding  force  remains.  The  commitment  of the  directors,
officers, and staff to serving the customers and stockholders of Peoples Bancorp
remains our sole reason for doing business.


<PAGE>


                               Board of Directors





     Picture of Board of  Directors  Standing  left to right:  Russell A. Spice,
Erica D. Dekko, John C. Thrapp, Roger J. Wertenberger, Douglas D. Marsh, Maurice
F. Winkler,  III, G. Richard  Gatton,  John C. Harvey,  Steven R Olson,  Jack L.
Buttermore,  Jesse A. (Jack)  Sanders,  Lawrence R. Bowmar,  Bruce S.  Holwerda,
Robert D. Ball, (Not pictured Lloyd M. Cline).

                  Board of Directors

Roger J.  Wertenberger  -  Chairman  of the Board of the Bank,
Auburn, Indiana, Director since 1954.

Maurice F. Winkler, III - Chief Executive Officer and President of the Bank,
Auburn, Indiana,  Director since 1993.

Erica  D.  Dekko  -  Financial  Advisor  for  Dekko  Financial
Services  and director of Peoples  Federal  Savings Bank since
January,  2000.  Director  nominee  for Peoples  Bancorp  2001
election.

G. Richard Gatton - President and CEO of First Savings Bank of Three Rivers,
Michigan, Director since February 29, 2000.

John C. Harvey - Retired Physician, Auburn, Indiana. Director since 1979.

Bruce S. Holwerda - Vice President and Chief Operating Officer
Ambassador Steel Corporation,  Auburn,  Indiana Director since
1998.

Douglas D. Marsh - Chairman of the Board Applied Innovations, Inc., Chicago,
Illinois.  Associate, Fairway Realtors, Inc., Auburn, Indiana.
Director since 1982.

Stephen  R.  Olson -  Manager  of  Morton  Buildings  in Three
Rivers, Michigan and Director since February 29, 2000.

John C. Thrapp - Attorney, Thrapp & Thrapp, Kendallville, Indiana.
Director since 1990.

Robert D. Ball - Director Emeritus

Lawrence R. Bowmar - Director Emeritus

Jack L. Buttermore - Director Emeritus

Lloyd M. Cline - Director Emeritus

Jesse A.  (Jack)  Sanders - Director Emeritus

Russell A. Spice - Director Emeritus

<PAGE>
                               EXECUTIVE OFFICERS

               Executive Officers of People's Federal Savings Bank

Roger J. Wertenberger - Chairman of the Board

Maurice F. Winkler, III - Chief Executive Officer and President

Donald E. Budd - Vice President-Trust Officer

Jeffery L. Grate - Vice President-Lending

Herma F. Fields - Vice President-Savings

Deborah K. Stanger - Vice President-Chief Financial  Officer


                    Executive Officers of First Savings Bank

G. Richard Gatton - President and CEO

Jeffrey H. Gatton - Vice President Indiana Division

R. Orville Poling - Vice President-Lending

William F. Cody - Vice President-Lending



                                 BRANCH MANAGERS

         Branch Managers and Locations of People's Federal Savings Bank

Duwayne Anderson,  Columbia City Downtown
123-129 S. Main St., Columbia City, IN  46725

April Haynes, Columbia City North
507 North Main St., Columbia City, IN  46725
Cindy Jollief, Avilla
105 North Main St., Avilla, IN  46710

Larry Kummer, Waterloo
625 Wayne St., Waterloo, IN  46793

Richard Lewton, LaGrange
114-118 South Detroit St., LaGrange, IN  46761

Clark Ream, Kendallville
116 West Mitchell St., Kendallville, IN  46755

Brenda Strohm, Garrett
1212 South Randolph St., Garrett, IN  46738

Maurice F. Winkler, III, President, Auburn
212 West Seventh St., Auburn, IN  46706


               Branch Managers and Locations of First Savings Bank

G. Richard Gatton, President, Three Rivers
123 Portage Avenue, Three Rivers, MI  49093

Karen Bent, Schoolcraft
500 N. Grand, Schoolcraft, MI  49087

Mary Mihills, Three Rivers
1213 W. Michigan Ave., Three Rivers, MI  49093

Christy Linn, Union
15534 U.S. 12, Union, MI  49130

Jody Blake, Howe
303 Defiance St., Howe, IN  46746

Barbara Yoder, Middlebury
420 N. Main, Middlebury, IN  46540


<PAGE>


                          Independent Auditor's Report


 To the Stockholders and
 Board of Directors
 Peoples Bancorp
 Auburn, Indiana


     We have  audited the  accompanying  consolidated  balance  sheet of Peoples
Bancorp and  subsidiaries  as of  September  30, 2000 and 1999,  and the related
consolidated statements of income,  stockholders' equity and cash flows for each
of the three years in the period ended  September 30, 2000.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the  consolidated  financial  statements  described  above
present fairly, in all material respects, the consolidated financial position of
Peoples  Bancorp and  subsidiaries  as of September  30, 2000 and 1999,  and the
results of their  operations and their cash flows for each of the three years in
the period ended  September  30, 2000,  in conformity  with  generally  accepted
accounting principles.

Indianapolis, Indiana
October 27, 2000
<PAGE>


                    STATEMENT OF MANAGEMENT'S RESPONSIBILITY


         The management of Peoples  Bancorp is responsible  for the  preparation
and integrity of the consolidated financial statements and all other information
presented in this annual report. The consolidated financial statements have been
prepared in accordance with generally accepted accounting  principles applied on
a consistent  basis and  therefore,  include  estimates  based on  management's'
judgment and estimates.

         Management  maintains  a  system  of  internal  controls  to  meet  its
responsibility for reliable financial  information and the protection of assets.
This  system  includes  proper  segregation  of  duties,  the  establishment  of
appropriate  policies  and  procedures,  and  careful  selection,  training  and
supervision of qualified personnel.  In addition,  both independent auditors and
management  periodically review the system of internal controls and report their
findings to the Audit Committee of the Board of Directors.

         The  Committee  is  composed  of  non-management  directors  and  meets
periodically  with the  independent  auditors  and  management  to review  their
respective activities and responsibilities. Each has free and separate access to
the Committee to discuss accounting,  financial reporting,  internal control and
audit matters.

         Management  recognized  that the cost of a system of internal  controls
should not exceed the benefits  derived and that there are inherent  limitations
to be  considered  in  the  potential  effectiveness  of  any  system.  However,
management  believes that the  Company's  system of internal  controls  provides
reasonable assurance that financial  information is reliable and that assets and
customer deposits are protected.




Roger J. Wertenberger
Chief Executive Officer



Maurice F. Winkler III
President



Deborah K. Stanger
Chief Financial Officer

<PAGE>

<TABLE>

                                                SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY

                                                                                       September 30
                                          ------------------------------------------------------------------
                                             2000            1999        1998          1997         1996
                                          -------------- ------------ ------------ ------------ ------------
Financial Condition Data:
<S>                                         <C>          <C>          <C>          <C>          <C>
   Total assets                             $459,908,211 $327,562,551 $304,936,781 $290,601,595 $280,011,850
   Loans receivable, net                     390,435,094  296,869,920  266,658,583  235,255,669  223,011,251
   Investments and other
      interest-earning assets                 44,651,407   21,108,106   27,664,033   46,439,468   47,970,950
   Deposits                                  352,855,715  270,522,938  248,545,280  241,790,139  235,081,440
   Borrowed funds                             47,182,393   10,239,739    9,202,653    3,162,400            -
   Stockholders' equity                       57,299,548   45,456,219   44,670,627   44,298,170   42,676,765

                                            For Year Ended September 30
                                          ------------------------------------------------------------------
                                                2000         1999         1998         1997         1996
                                          -------------- ------------ ------------ ------------ ------------
Operating Data:
   Interest income                          $ 30,425,367 $ 23,827,383 $ 22,954,202 $ 21,897,799 $ 21,736,000
   Interest expense                           16,327,846   12,061,198   12,087,265   11,467,559   11,229,590
                                          -------------- ------------ ------------ ------------ ------------
   Net interest income                        14,097,521   11,766,185   10,866,937   10,430,240   10,506,410
   Provision
      for losses on loans                        159,869       88,969       74,621       50,000        8,824
                                          -------------- ------------ ------------ ------------ ------------
   Net interest income
      after provision
      for losses on loans                     13,937,652   11,677,216   10,792,316   10,380,240   10,497,586
   Other income                                1,280,830      853,719      757,682      644,164      640,928
   Other expenses                              7,770,839    5,459,293    4,746,908    4,228,452    5,930,049
                                          -------------- ------------ ------------ ------------ ------------
   Income before income taxes                  7,447,643    7,071,642    6,803,090    6,795,952    5,208,465
   Income tax expense                          2,899,689    2,484,876    2,596,395    2,593,760    1,996,007
                                          -------------- ------------ ------------ ------------ ------------
   Net income                                $ 4,547,954 $  4,586,766 $  4,206,695 $  4,202,192 $  3,212,458
                                          ============== ============ ============ ============ ============
   Net income per common share                     $1.33        $1.42        $1.25        $1.22        $0.91
                                          ============== ============ ============ ============ ============
   Dividends per common share                      $0.53        $0.49        $0.45        $0.41        $0.37
                                          ============== ============ ============ ============ ============

Other Data:
   Average yield
      on all interest-earning assets            8.20%          7.63%        7.75%        7.76%        7.85%
   Average cost
      of all interest-bearing liabilities       5.06           4.45         4.79         4.80         4.79
                                          ------------    -----------    ---------   ----------   ----------
   Interest rate spread                         3.14%          3.18%        2.96%        2.96%        3.06%
                                          ============    ===========    =========   ==========   ==========


   Number of full service banking offices         14              8            7            7            6
   Return on assets (net income divided by
      average total assets)                     1.20           1.44         1.40         1.47         1.15
   Return on equity (net income divided
      by average total equity)                  8.66          10.19         9.31         9.69         7.50
   Dividend payout ratio
      (dividends per common share divided by
      net income per common share)            39.85%         34.51%        36.00        33.61        40.66
   Equity to assets ratio (average total equity
      divided by average total assets)        13.53%         14.12%        15.08        15.22        15.37

</TABLE>
<PAGE>

General

         Peoples Bancorp (the "Company") is an Indiana corporation  organized in
October 1990 to become the thrift holding  company for Peoples  Federal  Savings
Bank  ("Peoples  Federal").  Effective  February 29, 2000 the Company  purchased
Three Rivers Financial Corp. and its wholly owned subsidiary, First Savings Bank
("First  Savings').  The Company is the sole  stockholder of Peoples Federal and
First  Savings(collectively  Banks).  Peoples Federal conducts business from its
main office in Auburn and in its seven full service  offices  located in Avilla,
Columbia City, Garrett,  Kendallville,  LaGrange, and Waterloo Indiana.  Peoples
Federal offers a full range of retail deposit  services and lending  services to
northeastern  Indiana.  First Savings conducts  business from its main office in
Three Rivers, Michigan and its 5 full service offices in Schoolcraft, and Union,
Michigan  and Howe and  Middlebury,  Indiana.  The  Company's  primary  business
activity is being the holding company for Peoples Federal and First Savings.

         Historically,  the  principal  business  of  savings  banks,  including
Peoples Federal and First Savings, has consisted of attracting deposits from the
general  public and making loans  secured by  residential  real estate.  Peoples
Federal's net earnings are  contingent on the  difference or spread  between the
interest  earned on its  loans  and  investments  and the  interest  paid on its
consumer deposits and borrowings.  Prevailing  economic  conditions,  government
policies, regulations,  interest rates, and local competition also significantly
affect the Bank. First Savings earnings are affected by the same factors.

         The Company's earnings are primarily dependent upon the earnings of the
Banks.  Interest  income is a function of the  balance of loans and  investments
outstanding  during a given  period  and the  yield  earned  on such  loans  and
investments.  Interest  expense is a function  of the  amounts of  deposits  and
borrowings  outstanding  during  the  same  period  and the  rates  paid on such
deposits and  borrowings.  The Banks'  earnings  are also  affected by gains and
losses on sales of loans and  investments,  provisions for loan losses,  service
charges, income from subsidiary activities, operating expenses and income taxes.

         On a yearly basis,  The Company  updates its long-term  strategic plan.
This plan includes,  among other things, The Company's commitment to maintaining
a strong  capital base and  continuing to improve the  organization's  return on
assets  through  asset  growth and  controlling  operating  expenses.  Continued
careful  monitoring of interest rate risk is also cited as an important goal. As
a result,  continued  origination of short-term  consumer and installment loans,
prime plus equity loans,  adjustable  rate mortgage  loans,  and fixed-rate real
estate loans with original terms of 15 years or less will be emphasized.

         The  following   table  sets  forth  the  weighted   average  yield  on
interest-earning  assets and the  weighted  average  rate on  interest-  bearing
liabilities for the years ending September 30, 2000, 1999, and 1998.

                                       September 30
                                   ----------------------
                                   2000     1999   1998
                                   ------  ------- ------
Weighted average interest rate on:
    Loans                          8.48%   7.72%   8.03%
    Securities                     7.28    6.95    6.02
    Other interest-earning assets  4.61    6.05    6.58
    Combined                       8.20    7.63    7.75
Weighted average cost of:
    NOW and savings deposits       3.32    2.81    2.85
    Certificates of deposit        5.57    5.20    5.62
    Borrowings                     7.87    5.28    5.21
    Combined                       5.06    4.45    4.79
Interest rate spread               3.14    3.18    2.96
Net yield on weighted average
     interest-earning assets       3.80    3.77    3.67

         The  following   table  sets  forth  the  weighted   average  yield  on
interest-earning  assets and the  weighted  average  rate of  interest-  bearing
liabilities at September 30, 2000, 1999 and 1998.

                                                   At September 30
                                      ------------------------------
                                        2000       1999      1998
                                      ---------  ---------  --------
Weighted average interest rate on:
    Loans                               8.15%      7.73%      7.98%
    Securities                          5.44       6.61      5.61
    Other interest-earning assets      10.69       7.62      5.01
    Combined                            8.06       7.66      7.76
Weighted average cost of:
    NOW and savings deposits            2.96       3.01      2.78
    Certificates of deposit             6.11       5.19      5.72
    Borrowings                          6.42       6.33      5.22
    Combined                            5.12       4.50      4.84
Interest rate spread                    2.94       3.16      2.92

Asset and Liability Management

         The Banks,  like other savings banks, are subject to interest rate risk
to the degree that their interest-bearing  liabilities,  primarily deposits with
short and  medium-term  maturities,  mature or  reprice  more  rapidly  than its
interest-earning assets. Although having liabilities that mature or reprice more
frequently  on average  than assets  will be  beneficial  in times of  declining
interest  rates,  such an  asset/liability  structure  will  result in lower net
income during periods of rising interest  rates,  unless offset by other factors
such as noninterest income.

         Historically,  all of the Banks' real  estate  loans were made at fixed
rates. More recently,  the Banks have adopted an asset and liability  management
plan that calls for the  origination  of  residential  mortgage  loans and other
loans  with  adjustable  interest  rates,  the  origination  of  15-year or less
residential  mortgage loans with fixed rates, and the maintenance of investments
with short to medium terms.
<PAGE>

         The  following  table  illustrates  the  projected  maturities  and the
repricing mechanisms of the major asset and liability categories of the Banks as
of September 30, 2000.  Maturity and repricing dates have been stated to reflect
the contractual  maturity and repricing dates. The information  presented in the
following  table is derived  from  information  that is  provided  to the OTS in
"Schedule  CMR:  Maturity  and Rate" filed as part of the Banks'  September  30,
2000,  quarterly  reports.  The data  contained in the  following  report is the
contractual repricing information and does not contain any assumptions regarding
repricing.

<TABLE>
                                                                          At September 30, 2000
                                                                          (Dollars in Thousands)
                                                ------------------------------------------------------------------------
                                                 3 Months  More than 3 Months                          Over
Period to maturity or repricing                   or Less     Thru 1 Year     1-3 Years   3-5 Years  5 Years     Total
                                                ---------- ------------------ ---------- ---------- ---------- ---------

<S>                                            <C>             <C>            <C>         <C>       <C>         <C>
Interest earning assets:
    Adjustable rate loans                      $   7,454       $ 17,992       $  19,628   $ 26,455  $       -   $ 71,529
    Fixed rate loans                               4,842          5,285           4,372     21,579    253,181    289,259
    Investment securities                         13,177          2,800           2,536      6,342      4,869     29,724
    Consumer and other loans                      19,229          4,506           6,285      8,660      3,310     41,990
                                               ----------   ----------------- ---------- ---------- ---------- ----------
    Total Assets Subject to Repricing             44,702         30,583          32,821     63,036    261,360    432,502
                                               ----------   ----------------- ---------- ---------- ---------- ----------
Liabilities Subject to Repricing:
    Certificates of deposit                       57,352         67,985          88,166      7,667          -    221,170
    N.O.W. and other transaction accounts         47,519              -               -          -          -     47,519
    Passbook accounts                             43,727              -               -          -          -     43,727
    Money market accounts                         40,440              -               -          -          -     40,440
    Borrowings                                       997         12,242           6,993      4,000     22,950     47,182
                                               ----------   ----------------- ---------- ---------- ---------- ----------
    Total Liabilities Subject to Repricing       190,035         80,227          95,159     11,667     22,950    400,038
                                               ----------   ----------------- ---------- ---------- ---------- ----------
Excess (deficiency) of rate sensitive
    assets over rate sensitive liabilities     $(145,333)     $ (49,644)      $ (62,338) $  51,369  $ 238,410    $32,464
                                               ==========   ================= ========== ========== ========== ==========

Cumulative excess (deficiency) of rate
    sensitive assets over rate sensitive       $(145,333)     $(194,977)      $(257,315) $(205,946)  $ 32,464    $32,464
                                               ==========   ================= ========== ========== ========== =========
    liabilities

As a % of Total Assets Subject to Repricing      (33.60)%       (45.08)%        (59.49)%   (47.62)%    7.51%      7.51%

</TABLE>

         A negative  interest rate gap leaves the Banks' earnings  vulnerable to
periods of rising  interest  rates  because  during such  periods,  the interest
expense  paid on  liabilities  will  generally  increase  more  rapidly than the
interest  income  earned  on  assets.  Conversely,  in a falling  interest  rate
environment,  the total expense paid on liabilities will generally decrease more
rapidly than the interest income earned on assets. A positive  interest rate gap
will have the opposite effect. The Company's management believes that the Banks'
interest rate gap in recent  periods has  generally  been  maintained  within an
acceptable range in view of the prevailing interest rate environment.

     The OTS issued a regulation,  which uses a net market value  methodology to
measure the interest rate risk exposure of thrift  institutions.  Under this OTS
regulation,  an institution's  "normal" level of interest rate risk in the event
of an assumed change in interest rates is a decrease in the institution's NPV in
an  amount  not  exceeding  2% of  the  present  value  of  its  assets.  Thrift
institutions  with over  $300  million  in assets or less than a 12%  risk-based
capital  ratio are required to file OTS Schedule  CMR. Data from Schedule CMR is
used by the OTS to calculate  changes in NPV (and the related  "normal" level of
interest rate risk) based upon certain interest rate changes  (discussed below).
Institutions that do not meet either of the filing requirements are not required
to file OTS  Schedule  CMR,  but may do so  voluntarily.  Under the  regulation,
institutions  that must file are required to take a deduction (the interest rate
risk capital  component)  from their total capital  available to calculate their
risk-based  capital  requirement if their interest rate exposure is greater than
"normal". The amount of that deduction is one-half of the difference between (a)
the institution's  actual calculated exposure to a 200 basis point interest rate
increase or  decrease  (whichever  results in the greater pro forma  decrease in
NPV) and (b) its "normal"  level of exposure which is 2% of the present value of
its assets.
<PAGE>

         Presented  below,  as of  September  30, 2000 and 1999,  is an analysis
performed  by the OTS of Peoples  Federal's  interest  rate risk as  measured by
changes in NPV for  instantaneous  and  sustained  parallel  shifts in the yield
curve, in 100 basis point increments, up and down 300 basis points. At September
30, 2000 and 1999,  2% of the  present  value of Peoples  Federal's  assets were
approximately $7.1 million and $6.5 million. Because the interest rate risk of a
200 basis point  decrease in market  rates  (which was greater than the interest
rate risk of a 200 basis point increase) was $10.4 million at September 30, 2000
and $12.0  million  at  September  30,  1999,  Peoples  Federal  would have been
required to make a deduction  from its total capital  available to calculate its
risk based capital  requirement if the OTS's  regulation  had been enacted.  The
decrease in interest rate risk from 1998 to 1999 is due to an improved  match of
expected cash flows from assets and liabilities.

        Interest RateRisk As of September 30, 2000

   Changes           Market Value
  in Rates $ Amount   $ Change    % Change  NPV Ratio  Change
---------- -------- ------------- -------- ---------- --------
+300 bp     27,791      (15,947)    -36%      8.45%     (394)
+200 bp     33,519      (10,399)    -24%      9.89%     (250)
+100 bp     38,971       (4,547)    -11%     11.23%     (116)
    0 bp    43,918            -        -     12.39%        -
-100 bp     47,197        3,279       7%     13.09%       70
-200 bp     48,238        4,230      10%     13.23%       84
-300 bp     49,283        5,365      12%     13.37%       98

        Interest RateRisk As of September 30, 1999

   Changes           Market Value
  in Rates $ Amount   $ Change    % Change  NPV Ratio  Change
---------- -------- ------------- -------- ---------- --------
+300 bp     23,070      (10,664)    -45%      7.58%     (536)
+200 bp     29,702      (12,032)    -29%      9.61%     (323)
+100 bp     36,101       (5,633)    -13%     11.27%     (147)
    0 bp    41,734            -       0%     12.74%        -
-100 bp     45,518        3,784       9%     13.67%       93
-200 bp     48,072        6,338      15%     14.26%      151
-300 bp     50,646        8,912      23%     14.83%      209


     Presented  below,  as of September  30, 2000 and 1999, is the same analysis
performed by the OTS of First Savings' interest rate risk. At September 30, 2000
and 1999, 2% of the present value of First  Savings'  assets were  approximately
$2.1 million.  Because the interest  rate risk of a 200 basis point  decrease in
market rates (which was greater than the interest rate risk of a 200 basis point
increase) was $2.9 million at September 30, 2000.  First Savings would have been
required to make a deduction  from its total capital  available to calculate its
risk  based  capital  requirement  if the  OTS's  regulation  had been  enacted.
Although  First  Savings was not part of the Company as of  September  30, 1999,
this information has been provided for comparative purposes only.

                          Interest RateRisk As of September 30, 2000

   Changes          Market Value
  in Rates $ Amount  $ Change    % Change NPV Ratio  Change
---------- -------- ------------ -------- --------- --------
+300 bp      8,380    (4,867)       -37%    8.25%     (427)
+200 bp     10,364    (2,883)       -22%   10.05%     (247)
+100 bp     12,013    (1,234)        -9%   11.49%     (103)
    0 bp    13,247         -           -   12.52%
-100 bp     14,027       780          6%   13.13%       61
-200 bp     14,617     1,370         10%   13.57%      105
-300 bp     15,231     1,984         15%   14.01%      149


                    Interest RateRisk As of September 30, 1999

   Changes          Market Value
  in Rates $ Amount  $ Change    % Change NPV Ratio  Change
---------- -------- ------------ -------- --------- --------
+300 bp      8,880    (3,471)       -28%    9.20%     (301)
+200 bp     10,232    (2,119)       -17%   10.42%        0
+100 bp     11,436      (914)        -7%   11.46%        1
    0 bp    12,351                         12.21%
-100 bp     12,923       572          5%   12.65%       44
-200 bp     13,346       996          8%   13.27%      106


         In  evaluating  the Banks'  exposure  to  interest  rate risk,  certain
shortcomings,  inherent in the method of  analysis  presented  in the  foregoing
table must be considered.  For example,  although certain assets and liabilities
may have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while  interest rates on other types may lag behind changes in
market rates.  Further, in the event of a change in interest rates,  prepayments
and early withdrawal  levels could deviate  significantly  from those assumed in
calculating the table.  Finally,  the ability of many borrowers to service their
debt may decrease in the event of an interest rate  increase.  As a result,  the
actual effect of changing  interest  rates may differ from that presented in the
foregoing table.

Interest Income

         Net  interest  income  decreases  during  periods  when the  spread  is
narrowed  between  the  Banks'  weighted  average  rate at which  new  loans are
originated and its weighted average cost of liabilities. In addition, the Banks'
ability to originate and sell mortgage  loans is affected by market factors such
as interest rates, competition,  consumer preferences,  the supply of and demand
for housing, and the availability of funds.

<PAGE>


         The following  table sets forth the weighted  average  yields earned on
the Banks' assets and the weighted average rate paid on deposits and borrowings.

<TABLE>

                                                                                    Years ended September 30
                                                                                     (Dollars in Thousands)
                                   ---------------------------------------------------------------------------------------
                                                 2000                       1999                          1998
                                   ---------------------------- ---------------------------- -----------------------------
                                     Average    Interest          Average   Interest           Average   Interest
                                   Outstanding   Earned/ Yield/ Outstanding Earned/   Yield/ Outstanding  Earned/   Yield/
                                     Balance      Paid    Rate    Balance     Paid     Rate    Balance     Paid      Rate
                                  ------------  -------- ------ ----------- --------- ------ ----------- ---------  ------
Interest-earning assets:
<S>   <C>                             <C>       <C>       <C>     <C>       <C>        <C>      <C>       <C>        <C>
 Loans(1)                             $329,742  $27,974   8.48%   $285,296  $22,028    7.72%    $252,520  $20,266    8.03%
 Investment securities(2)               20,576    1,498   7.28      17,447    1,213    6.95       33,665    2,025    6.02
 Other interest-earning assets          20,683      954   4.61       9,684      586    6.05       10,069      663    6.58
                                   -----------  --------        ----------- --------         ------------ --------
 Total interest-earning assets         371,001   30,426   8.20     312,427   23,827    7.63      296,254   22,954    7.75
                                                --------                    -------                       -------
Allowance for loan losses               (1,618)                       (977)                        (906)
Other assets                            18,780                       7,325                        4,291
                                   -----------                 -----------                  ------------
Total Assets                          $388,163                    $318,775                     $299,639
                                   ===========                 ===========                  ============
Interest-bearing liabilities:
  NOW and savings deposits            $ 99,730   $3,315   3.32    $ 85,866  $ 2,415    2.81      $74,516   $2,124    2.85
  Certificates of deposit              197,877   11,016   5.57     177,194    9,221    5.20      171,963    9,670    5.62
  Borrowings                            25,363    1,997   7.87       8,046      425    5.28        5,623      293    5.21
                                   -----------  --------        ----------- --------         ------------ --------
  Total interest-bearing liabilities   322,970   16,328   5.06     271,106   12,061    4.45      252,102   12,087    4.79
                                                --------                    --------                      ---------
Other liabilities                       12,691                       2,664                        2,332
Stockholders' equity                    52,502                      45,005                       45,205
                                   -----------                 -----------                  ------------
Total Liabilities and
     Stockholders' equity             $388,163                    $318,775                     $299,639
                                   ===========                 ===========                  ============

Net interest income/spread                      $14,098   3.14              $11,766   3.18                $10,867    2.96
                                                ========                    ========                      ========
Net yield on interest earning assets                      3.80                        3.77                           3.67


</TABLE>

     The Company has  supplemented  its  interest  income  through  purchases of
investment  securities when appropriate.  Such investments include US Government
securities,  including  those  issued and  guaranteed  by the Federal  Home Loan
Mortgage  Corporation  ("FHLMC"),  the  Federal  National  Mortgage  Association
("FNMA"),  and the Government National Mortgage Association ("GNMA"),  and state
and local  obligations.  This  activity (a)  generates  positive  interest  rate
spreads on large principal  balances with minimal  administrative  expense;  (b)
lowers  the  credit  risk  of the  Bank's  loan  portfolio  as a  result  of the
guarantees of full payment of principal and interest by FHLMC,  FNMA,  and GNMA;
(c) enables the Bank to use  securities  as  collateral  for  financings  in the
capital markets; and (d) increases the liquidity of the Bank.

     In  addition  to changes in  interest  rates,  changes in volume can have a
significant  effect on net interest  income.  The following  table describes the
extent to which  changes in  interest  rates and  changes in volume of  interest
related  assets and  liabilities  have affected the Banks'  interest  income and
expense  for the periods  indicated.  For the  purposes  of this table,  changes
attributable  to both rate and  volume,  which  cannot be  separated,  have been
allocated  proportionately  to the  change  due to volume  and the change due to
rate.


<PAGE>
<TABLE>

                                                                   Years ended September 30,
                                   -----------------------------------------------------------------------------------------------
                                             2000 vs 1999             1999 vs 1998               1998 vs 1997
                                   --------------------------- ------------------------- -----------------------------------------
                                       Increase                    Increase                  Increase
                                      (Decrease)      Total       (Decrease)     Total      (Decrease)      Total
                                        Due to       Increase       Due to      Increase      Due to       Increase
                                   ----------------            ---------------            ---------------
                                     Volume   Rate  (Decrease)  Volume   Rate  (Decrease)  Volume   Rate  (Decrease)
                                   --------- ------ ---------- -------- ------ ---------- -------- ------ ----------
Interest income from:
<S>                                  <C>     <C>      <C>      <C>      <C>     <C>        <C>     <C>     <C>
    Loans                            $2,302  $3,643   $5,945   $ 2,565  $(803)  $1,762     $1,779  $(271)  $1,508
    Investment securities                60     225      285    (1,089)   277     (812)       (83)    48      (35)
    Other interest-earning assets       (97)    465      368       (25)   (52)     (77)      (445)    28     (417)
                                   --------- ------ ---------- -------- ------ ---------- -------- -----  ----------
    Total interest income             2,265   4,333    6,598     1,451   (578)     873      1,251   (195)   1,056
                                   --------- ------ ---------- -------- ------ ---------- -------- -----  ----------
Interest expense from:
     NOW and savings deposits           476     424      900       322    (22)     300        126     49      175
     Certificates of deposit            680   1,115    1,795       288   (737)    (449)       301    (33)     268
     Borrowings                         291   1,281    1,572       125     (2)     123        167      9      176
                                   --------- ------ ---------- -------- ------ ---------- -------- -----  ----------
     Total interest expense           1,447   2,820    4,267       735   (761)     (26)       594     25      619
                                   --------- ------ ---------- -------- ------ ---------- -------- -----  ----------
Net interest income (expense)        $  818  $1,513   $2,331   $   716  $ 183   $  899     $  657  $(220)  $  437
                                   ========= ====== ========== ======== ====== ========== ======== =====  ==========


</TABLE>

Operating Expense

         While operating expenses have increased, the increases have been due in
large part to the  expansion of the  Company's  operations.  The  increases  are
service  related  and  consist  of the  following:  appraisal  and legal fees in
connection  with loan  originations,  data  processing due to automating  manual
systems;  and  start  up  costs  for  new  services.  Operating  expenses,  as a
percentage of the Company's total assets were 1.69%, 1.67%, and 1.56% for fiscal
years ended September 30, 2000, 1999, and 1998, respectively.

         The Company  continuously seeks to reduce operating  expenses.  In this
regard,  the budget  committee of the Board of Directors  monitors the Company's
current operating budget on at least a quarterly basis to ascertain that expense
levels remain within projected ranges and to establish  competitive,  as opposed
to aggressive,  rates for the Company's various deposit accounts.  The Company's
efforts to contain  operating  expense also include  underwriting  policies that
attempt to reduce potential losses and conservative expansion of personnel.

Liquidity and Capital Resources

          The standard  measure of liquidity  for savings  banks is the ratio of
cash and  eligible  investments  to a  certain  percentage  of net  withdrawable
savings  and  borrowings  due within one year.  The  minimum  required  ratio is
currently  set by OTS  regulation  at 4%,  of  which  1%  must be  comprised  of
short-term  investments  (i.e.,  generally  with a term of less than one  year).
Liquid assets consist of cash and eligible  investments,  which include  certain
United States  Treasury  obligations,  securities of various  federal  agencies,
certificates  of  deposit  at  insured  banks,   federal  funds,   and  bankers'
acceptances.  At  September  30,  2000,  Peoples  Federal  had liquid  assets of
$9,105,085.  This  represents a ratio of liquid assets to total assets of 4.30%.
First Savings had liquid assets of $17,395,840 or a ratio of 30.68%.

          The primary internal sources of funds for operations are principal and
interest payments on loans and new deposits.  In addition,  if greater liquidity
is required,  the Banks can borrow from the FHLB. In the opinion of  management,
the Banks' liquid assets are adequate to meet  outstanding  loan commitments and
other obligations.

      During the year ended  September  30,  2000 the merger  with Three  Rivers
Financial Corp was completed.  This merger increased all asset,  liability,  and
equity balances  substantially  over last year.  Combined  operations of the two
banks contributed $3.5 million.

      During  the year  ended  September  30,  1999  cash  and cash  equivalents
increased  over $2.1 million.  This increase  along with an increase in loans of
$29.9 million was funded by a decrease in investment securities of $9.1 million,
and  increases  in deposits of  $22.3million  and  borrowings  of $1.0  million.
Operations provided $4.3million.
<PAGE>

Results of Operations,  Fiscal Year Ended  September 30, 2000 Compared to Fiscal
Year Ended September 30, 1999

        The Company's net interest  income  increased  $2,331,336 to $14,097,521
for the fiscal year ended  September  30,  2000.  In addition to the merger with
Three Rivers, this increase was comprised of increased rates, and higher volumes
of loans  offset by higher  volumes of  deposits.  Interest  on  long-term  debt
increased to $1,698,043 due to higher borrowing  volumes by both Peoples Federal
and First Savings to fund loan demand.

         Provision  for loan losses  increased  $70,900 to  $159,869  reflecting
adjustments  due  to  management's  continuing  review  of its  loan  portfolio.
Management's  review of its loan  portfolio is based on historical  information,
review of specific loans, and general economic conditions.

        Other income  increased  $427,111 to $1,280,830 due to higher volumes of
deposits generating  additional fee income.  Also, First Savings sells loans and
generates  gains on these  sales,  which the  Company  did not have prior to the
merger.  Fiduciary fees increased  almost $80,000 to $204,940 due to higher fees
and the receipt of several estate settlement fees this year.

          Total non-interest expense was $7,770,839 for the year ended September
30, 2000.  Most of the  increases in this area are  attributable  to the merger.
Salaries and employee  benefits  increased also, as a result of additional staff
to support the growth of the Company.  Peoples  Federal opened its eighth branch
office in August of 1999 in a small  temporary  facility.  The permanent  branch
opened in June 2000 necessitating additional staff members.

          The effective  tax rate for the Company for the years ended  September
30, 2000 and 1999 was 38.9% and 35.1% respectively.

Results of Operations,  Fiscal Year Ended  September 30, 1999 Compared to Fiscal
Year Ended September 30, 1998

          The Company's net interest  income  increased  $899,248 to $11,766,185
for the fiscal  year ended  September  30,  1999.  The  increase  was  primarily
attributable  to the  increased  volume of loans in 1999 versus  1998.  Interest
expense  decreased  slightly due to lower rates paid on  certificates of deposit
accounts.  This decrease was almost  entirely  offset by increases due to higher
deposit  volume,  and  higher  borrowing  volumes  necessary  to fund the loans.
Interest expense decreased $26,067 to $12,061,198.

          Provision  for loan  losses  increased  $14,348 to $88,969  reflecting
adjustments  due  to  management's  continuing  review  of its  loan  portfolio.
Management's  review of its loan  portfolio is based on historical  information,
review of specific loans, and general economic conditions.

        Other  income  increased  $96,037  to  $853,719.  This  increase  was  a
combination of higher fiduciary fees collected this year and higher fees charged
on  deposit  accounts.  Other  income  decreased  due to last  year's  gains  on
securities sold which were not repeated this year.

       Total  non-interest  expense for the year was $5,459,293,  an increase of
$712,385.  This  increase  consisted  of  increased  salaries  and  benefits  of
$262,719,  equipment and occupancy  expense of $152,994,  and other  expenses of
$239,448.  These increases were caused by additional  personnel added to begin a
commercial  and  agricultural  lending  department,  new equipment  purchased in
anticipation of year 2000, and  amortization of a low income housing  investment
for tax losses.

          The effective  tax rate for the Company for the years ended  September
30, 1999and 1998 was 35.1% and 38.2% respectively.

Impact of Inflation and Changing Prices

          The  consolidated  financial  statements  and related  data  presented
herein have been  prepared in  accordance  with  generally  accepted  accounting
principles  which require the  measurement of financial  condition and operating
results in terms of historical dollars or fair value without considering changes
in the relative purchasing power of money over time due to inflation.

          Virtually all of the assets and liabilities of a financial institution
are  monetary in nature.  As a result,  interest  rates have a more  significant
impact on a  financial  institution's  performance  than the  effects of general
levels  of  inflation.  Interest  rates  do not  necessarily  move  in the  same
direction or with the same magnitude as the prices of goods and services,  since
such prices are affected by inflation.  In a volatile interest rate environment,
liquidity and the maturity  structure of the Bank's assets and  liabilities  are
critical to the maintenance of acceptable performance levels.

Current Accounting Issues

         Accounting for Derivative Instruments and Hedging Activities. Statement
of Financial  Accounting Standards ("SFAS") No. 133 requires companies to record
derivatives  on the  balance  sheet  at their  fair  value.  SFAS  No.  133 also
acknowledges  that the method of recording a gain or loss depends on the use off
the  derivative.  If certain  conditions are on the use of the derivative may be
specifically  designated  as (a) a hedge of the  exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment, (b)
a hedge of the exposure to variable cash flows of a forecasted  transaction,  or
(c) a hedge of the foreign  currency  exposure of a net  investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction.

o         For a derivative  designated as hedging the exposure to changes in the
          fair value of a recognized  asset or  liability  or a firm  commitment
          (referred to as a fair value hedge), the gain or loss is recognized in
          earnings in the period of change  together with the offsetting loss or
          gain on the hedged item attributable to the risk of being hedged.  The
          effect of that  accounting  is to  reflect in  earnings  the extent to
          which the hedge is not  effective in achieving  offsetting  changes in
          fair value.

o         For a derivative  designated  as hedging the exposure to variable cash
          flows of a forecasted  transaction (referred to as a cash flow hedge),
          the effective  portion of the  derivative's  gain or loss is initially
          reported as a component  of other  comprehensive  income  (outstanding
          earnings)  and  subsequently   reclassified  into  earnings  when  the
          forecasted transaction affects earnings. The ineffective proportion of
          the gain or loss is reported as earnings immediately.
<PAGE>

o         For a derivative  designated as hedging the foreign operation of a net
          investment  in a foreign  operation,  the gain or loss is  reported in
          other   comprehensive   income  (outside  earnings)  as  part  of  the
          cumulative  translation  adjustment.  The  accounting for a fair value
          hedged described above applies to derivative  designated as a hedge of
          the  foreign  exposure  of  an  unrecognized  firm  commitment  or  an
          available-for-sale security. Similarly, the accounting for a cash flow
          hedge described above applies to a derivative designated as a hedge of
          the  foreign  currency  exposure  of  a   foreign-currency-denominated
          forecasted transaction.

o        For a derivative  designated as a  hedging instrument, the gain or loss
         is recognized in earnings in the period of change

     The new statement  applies to all entities.  If hedge accounting is elected
by the  entity,  the  method  of  assessing  the  effectiveness  of the  hedging
derivative   and  the   measurement   approach   of   determining   the  hedge's
ineffectiveness must be established in the inception of the hedge.

     SFAS No. 133 amends SFAS No.52 and  supercedes  SFAS Nos. 80, 105, and 119.
SFAS  No.  107 is  amended  to  include  the  disclosure  provisions  about  the
concentrations  of credit risk from SFAS No. 105.  Several  Emerging  Issue Task
Force  consensuses's are also changed or nullified by the provisions of SFAS No.
133.
     SFAS No. 133 was to be effective for all fiscal years  beginning after June
15, 1999.  The  implementation  date was deferred,  and SFAS No. 133 will now be
effective for all fiscal  quarters of all fiscal years  beginning after June 15,
2000.
<PAGE>
<TABLE>

                                             PEOPLES BANCORP AND SUBSIDIARIES
                                                Consolidated Balance Sheet

                                                                                    September 30
                                                                         -------------------------------
                                                                                2000           1999
                                                                         ---------------  --------------
Assets
<S>                                                                        <C>             <C>
   Cash and due from banks                                                 $ 10,073,895    $  4,838,115
   Interest-bearing deposits                                                  8,772,912         834,134
                                                                          --------------  --------------
         Total cash and cash equivalents                                     18,846,807       5,672,249
   Interest-bearing time deposits                                             3,163,940
   Investment securities
     Available for sale                                                      18,203,268      16,932,913
     Held to maturity (fair value of $10,355,222 and $921,651)               10,276,887         867,559
                                                                          --------------  --------------
         Total investment securities                                         28,480,155      17,800,472
   Loans, net of allowance for loan losses of $1,649,948 and $1,005,119     390,435,094     296,869,920
   Premises and equipment                                                     6,149,802       2,285,889
   Federal Home Loan Bank of Indianapolis stock, at cost                      4,234,400       2,473,500
   Other assets                                                               8,598,013       2,460,521
                                                                          --------------  --------------

         Total assets                                                      $459,908,211    $327,562,551
                                                                          ==============  ==============

Liabilities
   NOW and savings deposits                                                $131,685,994    $ 94,186,160
   Certificates of deposit                                                  221,169,721     176,336,778
   Short-term borrowings                                                             --       3,039,739
   Federal Home Loan Bank advances                                           47,182,393       7,200,000
   Other liabilities                                                          2,570,555       1,343,655
                                                                          --------------  --------------
         Total liabilities                                                  402,608,663     282,106,332
                                                                          --------------  --------------

Commitments and Contingencies

Stockholders' Equity
   Preferred stock, $1 par value
     Authorized and unissued--5,000,000 shares
   Common stock, $1 par value
     Authorized--7,000,000 shares
     Issued and outstanding--3,662,641 and 3,183,717 shares                   3,662,641       3,183,717
   Additional paid-in capital                                                10,596,618       1,203,696
   Retained earnings                                                         43,815,516      41,282,725
   Unearned ESOP                                                               (351,494)             --
   Unearned RRP                                                                 (90,706)             --
   Accumulated other comprehensive income                                      (333,027)       (213,919)
                                                                          --------------  --------------
         Total stockholders' equity                                          57,299,548      45,456,219
                                                                          --------------  --------------

         Total liabilities and stockholders' equity                        $459,908,211    $327,562,551
                                                                          ==============  ==============
</TABLE>


See notes to consolidated financial statements.



<PAGE>



                                             PEOPLES BANCORP AND SUBSIDIARIES
                                             Consolidated Statement of Income


                                                    Year Ended September 30
                                            -----------------------------------
                                               2000         1999       1998
                                            ----------- ----------- -----------
Interest Income
   Loans                                    $27,974,178 $22,028,006 $20,271,263
   Investment securities                      1,497,452     843,675   1,793,778
   Other interest and dividend income           953,737     955,702     889,161
                                            ----------- ----------- -----------
                                             30,425,367  23,827,383  22,954,202
                                            ----------- ----------- -----------
Interest Expense
   Deposits
      NOW and savings deposits                3,314,937   2,423,709   2,124,060
      Certificates of deposit                11,016,168   9,221,122   9,669,669
   Short-term borrowings                        298,698     135,842     198,113
   Long-term debt                             1,698,043     280,525      95,423
                                            ----------- ----------- -----------
                                             16,327,846  12,061,198  12,087,265
                                            ----------- ----------- -----------
Net Interest Income                          14,097,521  11,766,185  10,866,937
   Provision for loan losses                    159,869      88,969      74,621
                                            ----------- ----------- -----------
Net Interest Income After
 Provision for Loan Losses                   13,937,652  11,677,216  10,792,316
                                            ----------- ----------- -----------
Other Income
   Fiduciary activities                         204,940     125,255      98,246
   Fees and service charges                     810,938     547,455     455,089
   Net realized gains (losses) on sales of      (57,961)         --      73,541
     available-for-sale securities
   Other income                                 322,913     181,009     130,806
                                            ----------- ----------- -----------
         Total other income                   1,280,830     853,719     757,682
                                            ----------- ----------- -----------
Other Expenses
   Salaries and employee benefits             3,968,745   2,771,597   2,508,878
   Net occupancy expense                        575,253     376,420     319,856
   Equipment expense                            594,777     473,952     377,522
   Data processing expense                      481,046     461,310     403,291
   Deposit insurance expense                     90,013     149,564     150,359
   Other expenses                             2,061,005   1,226,450     987,002
                                            ----------- ----------- -----------
         Total other expenses                 7,770,839   5,459,293   4,746,908
                                            ----------- ----------- -----------

Income Before Income Tax                      7,447,643   7,071,642   6,803,090
   Income tax expense                         2,899,689   2,484,876   2,596,395
                                            ----------- ----------- -----------

Net Income                                  $ 4,547,954 $ 4,586,766 $ 4,206,695
                                            =========== =========== ===========

Basic Earnings per Share                          $1.33       $1.42       $1.25

Diluted Earnings per Share                         1.32        1.42        1.25

Weighted Average Shares Outstanding           3,429,165   3,226,894   3,370,468


See notes to consolidated financial statements.


<PAGE>

<TABLE>


                                                                 PEOPLES BANCORP AND SUBSIDIARIES
                                                           Consolidated Statement of Stockholders' Equity


                                                                                                           Unearned   Accumulated
                                                          Additional                                     Recognition   Other
                                 Common Stock          Paid-in   Comprehensive Retained   Unearned     and     Comprehensive
                              ----------------------                                         ESOP    Retention
                              Outstanding  Amount       Capital     Income     Earnings    Shares     Plan       Income    Total
                                ---------- ---------- ------------ --------- ----------- --------- ----------- --------- ---------
<S>                           <C>       <C>         <C>          <C>        <C>        <C>         <C>       <C>        <C>
Balances October 1, 1997      3,391,986 $3,391,986  $ 5,263,589             $35,573,293                      $  69,302  $44,298,170
 Comprehensive income
   Net income                        --         --           --  $4,206,695   4,206,695                             --    4,206,695
   Other comprehensive income,
     net of tax
   Unrealized gains on securities,
     net of reclassification                                         27,421                                      27,421      27,421
     adjustment
                                                                 ----------
 Comprehensive income                                            $4,234,116
                                                                 ==========
 Cash dividends ($0.45 per share)    --         --           --              (1,507,566)                            --   (1,507,566)
 Repurchase of common stock    (111,302)  (111,302)  (2,242,791)                     --                             --   (2,354,093)
                               --------- ---------- ------------            ------------ -------- ----------- -------- ------------

Balances September 30, 1998   3,280,684  3,280,684    3,020,798              38,272,422                         96,723   44,670,627
 Comprehensive income
   Net income                        --         --           -- $4,586,766    4,586,766                             --    4,586,766
   Other comprehensive income,
     net of tax
   Unrealized losses on securities                                (310,642)                                   (310,642)    (310,642)
                                                                ----------
Comprehensive income                                            $4,276,124
                                                                ==========
Cash dividends ($0.49 per share)     --         --           --              (1,576,463)                            --   (1,576,463)
Repurchase of common stock       (96,967)   (96,967)  (1,817,102)                     --                            --   (1,914,069)
                               --------- ---------- ------------            ------------ -------- ----------- --------- -----------
Balances September 30, 1999    3,183,717  3,183,717    1,203,696              41,282,725                       (213,919) 45,456,219
 Comprehensive income
   Net income                        --         --           -- $4,547,954    4,547,954                             --    4,547,954
   Other comprehensive income,
     net of tax
   Unrealized losses on securities
     net of reclassification                                      (119,108)                                    119,108)    (119,108)
     adjustment
                                                                ----------
Comprehensive income                                            $4,428,846
                                                                ==========
Stock issued in purchase of     758,858    758,858   13,060,586                    --  $(392,353)  $(135,116)       --   13,291,975
  subsidiary
Cash dividends ($0.53 per share)     --         --           --             (1,886,276)       --          --        --   (1,886,276)
ESOP shares earned                   --         --       36,133                    --     40,859          --        --       76,992
RRP shares earned                    --         --           --                    --         --      44,410        --       44,410
Stock options exercised           9,860      9,860        90930                    --         --          --        --      100,790
Repurchase of common stock     (289,794)  (289,794)  (3,794,727)              (128,887)       --          --        --   (4,213,408)
                               -------- ----------- ------------           ------------ --------- ----------- --------- -----------
Balances September 30, 2000   3,662,641 $3,662,641  $10,596,618            $43,815,516  $(351,494) $ (90,706)$(333,027) $57,299,548
                              ========= =========== ============           ============ ========= =========== ========= ===========

</TABLE>


See notes to consolidated financial statements.


<PAGE>


<TABLE>



                                             PEOPLES BANCORP AND SUBSIDIARIES
                                           Consolidated Statement of Cash Flows


                                                                                 Year Ended September 30
                                                                               ----------------------------------------
                                                                                   2000         1999         1998
                                                                               ------------ ------------ --------------


Operating Activities
<S>                                                                            <C>          <C>            <C>
   Net income                                                                  $ 4,547,954  $ 4,586,766    $4,206,695
   Adjustments to reconcile net income to net cash provided by operating
     activities
     Provision for loan losses                                                     159,869       88,969        74,621
     Depreciation and amortization                                                 716,314      439,605       381,035
     Investment securities accretion, net                                          (32,263)     (79,166)      (40,769)
     Loans originated for sale                                                  (2,488,250)          --            --
     Proceeds from sale of loans held for sale                                   2,531,064           --            --
     (Gain) loss on sale of loans                                                  (42,814)          --            --
     Amortization of deferred loan fees                                           (337,117)    (426,077)     (379,997)
     Gain (loss) on sale of investment securities                                   57,961           --       (73,541)
     ESOP shares earned                                                             76,992           --            --
     RRP compensation expense                                                       44,410           --            --
     Change in
       Deferred income tax                                                        (251,814)    (459,581)     (138,060)
       Interest receivable                                                        (114,101)     (35,974)       44,804
       Interest payable                                                             81,568      179,596        32,522
     Other adjustments                                                          (1,464,185)     (17,390)       81,608
                                                                               ------------ ------------ -------------
         Net cash provided by operating activities                               3,485,588    4,276,748     4,188,918
                                                                               ------------ ------------ -------------

Investing Activities
   Net change in interest-bearing deposits                                         794,005      718,000       258,000
   Purchases of securities available for sale                                   (2,177,572)  (7,459,930)   (3,625,859)
   Proceeds from maturities and paydowns of securities held to maturity          1,850,548    4,216,989     4,203,955
   Proceeds from maturities and paydowns of securities available for sale        1,297,068   11,980,245    10,597,951
   Proceeds from sale of security available for sale                             1,684,772           --     2,661,344
   Net change in mutual funds                                                           --           --    (2,896,947)
   Net change in loans                                                         (19,907,906) (29,874,229)  (31,212,564)
   Purchases of premises and equipment                                          (1,457,753)    (328,616)   (1,079,132)
   Proceeds from sale of equipment                                                      --           --        13,993
   Proceeds from sales of real estate owned                                             --      143,566       115,026
   Purchases of Federal Home Loan Bank of Indianapolis stock                      (281,700)    (255,800)     (155,500)
   Cash received in acquisition                                                  4,935,071           --            --
   Other investing activities                                                           --       33,349      (337,500)
                                                                               ------------ ------------ -------------
         Net cash used by investing activities                                 (13,263,467) (20,826,426)  (21,457,233)
                                                                               ------------ ------------ -------------

Financing Activities
   Net change in
     NOW and savings deposits                                                    9,552,898   18,795,930     4,885,569
     Certificates of deposit                                                     7,564,210    3,464,428     1,837,050
     Short-term borrowings                                                      (3,039,739)  (1,162,914)    1,040,253
   Net change in advances by borrowers for taxes and insurance                     358,481           --          (593)
   Net change in bank overdraft                                                         --   (1,171,306)    1,171,306
   Proceeds from Federal Home Loan Bank advances                                36,700,000    2,200,000     5,000,000
   Repayment of Federal Home Loan Bank advances                                (22,282,205)          --            --
   Cash dividends                                                               (1,788,590)  (1,557,767)   (1,475,696)
   Repurchase of common stock                                                   (4,213,408)  (1,914,069)   (2,354,093)
   Proceeds from stock options exercised                                           100,790           --            --
                                                                               ------------ ------------ -------------
         Net cash provided by financing activities                              22,952,437   18,654,302    10,103,796
                                                                               ------------ ------------ -------------

Net Change in Cash and Cash Equivalents                                         13,174,558    2,104,624    (7,164,519)

Cash and Cash Equivalents, Beginning of Year                                     5,672,249    3,567,625    10,732,144
                                                                               ------------ ------------ -------------


Cash and Cash Equivalents, End of Year                                         $18,846,807  $ 5,672,249    $3,567,625
                                                                               ============ ============ =============

Additional Cash Flows and Supplementary Information:
   Interest paid                                                               $16,276,150  $11,860,610   $12,054,743
   Income tax paid                                                               3,293,330    2,861,591     2,612,502
   Fair value of net assets acquired in acquisition                             13,291,975            -             -
</TABLE>

See notes to consolidated financial statements.



<PAGE>


                        PEOPLES BANCORP AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements


Note 1 -- Nature of Operations and Summary of Significant Accounting Policies

     The accounting and reporting  policies of Peoples  Bancorp  (Company),  its
wholly  owned  subsidiaries,  Peoples  Federal  Savings  Bank of  DeKalb  County
(Peoples), First Savings Bank (First Savings) (collectively,  "Banks"), Peoples'
wholly owned subsidiary,  Peoples Financial  Services,  Inc. (Peoples Financial)
and First Savings wholly owned subsidiary, Alpha Financial, Inc. (Alpha) conform
to generally accepted accounting  principles and reporting practices followed by
the thrift industry. The more significant of the policies are described below.

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

     The Company is a thrift  holding  company whose  principal  activity is the
ownership and  management of the Banks.  The Banks operate under federal  thrift
charters  and provide  full  banking  services,  including  trust  services.  As
federally-chartered  thrifts,  the Banks are  subject to the  regulation  of the
Office  of  Thrift   Supervision   (OTS)  and  the  Federal  Deposit   Insurance
Corporation.

     The Company generates commercial,  mortgage and consumer loans and receives
deposits from  customers  located  primarily in north  central and  northeastern
Indiana and south central Michigan. The Companys' loans are generally secured by
specific items of collateral including real property and consumer assets.

     Consolidation--The  consolidated  financial statements include the accounts
of the Company,  the Banks, Alpha and Peoples Financial after elimination of all
material intercompany transactions.

     Investment  Securities--Debt  securities are classified as held to maturity
when the Company has the positive  intent and ability to hold the  securities to
maturity.  Securities  held to maturity  are  carried at  amortized  cost.  Debt
securities not classified as held to maturity and marketable  equity  securities
are classified as available for sale.  Securities available for sale are carried
at fair value with unrealized gains and losses reported separately,  net of tax,
in accumulated other  comprehensive  income. The Company holds no securities for
trading.

     Amortization  of  premiums  and  accretion  of  discounts  are  recorded as
interest income from  securities.  Realized gains and losses are recorded as net
security gains (losses).  Gains and losses on sales of securities are determined
on the specific-identification method.

     Loans are carried at the principal amount  outstanding.  Interest income is
accrued on the principal  balances of loans. The accrual of interest on impaired
loans is discontinued when, in management's  opinion, the borrower may be unable
to meet payments as they become due. When interest accrual is discontinued,  all
unpaid  accrued  interest is reversed when  considered  uncollectible.  Interest
income is subsequently recognized only to the extent cash payments are received.
Certain  loan fees and  direct  costs are being  deferred  and  amortized  as an
adjustment of yield on the loans.

<PAGE>


PEOPLES BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements


     Allowance  for loan losses is  maintained  to absorb  loan losses  based on
management's  continuing  review and  evaluation  of the loan  portfolio and its
judgment  as to  the  impact  of  economic  conditions  on  the  portfolio.  The
evaluation by management includes consideration of past loss experience, changes
in the composition of the portfolio,  the current  condition and amount of loans
outstanding,  and the probability of collecting all amounts due.  Impaired loans
are  measured by the present  value of expected  future cash flows,  or the fair
value of the collateral of the loan if collateral dependent.

     The determination of the adequacy of the allowance for loan losses is based
on estimates that are  particularly  susceptible  to significant  changes in the
economic  environment  and market  conditions.  Management  believes that, as of
September  30,  2000  the  allowance  for  loan  losses  is  adequate  based  on
information  currently available.  A worsening or protracted economic decline in
the area within which the Company  operates  would  increase the  likelihood  of
additional  losses due to credit and market  risks and could create the need for
additional loss reserves.

     Premises and equipment are carried at cost net of accumulated depreciation.
Depreciation  is computed  using  accelerated  and  straight-line  methods based
principally on the estimated useful lives of the assets. Maintenance and repairs
are expensed as incurred while major additions and improvements are capitalized.
Gains and losses on dispositions are included in current operations.

     Federal Home Loan Bank stock is a required investment for institutions that
are members of the Federal Home Loan Bank system. The required investment in the
common stock is based on a predetermined formula.

     Foreclosed  assets  are  carried  at the lower of cost or fair  value  less
estimated  selling  costs.  When  foreclosed  assets are acquired,  any required
adjustment is charged to the allowance for loan losses. All subsequent  activity
is included in current operations.

     Intangible  assets are being  amortized  utilizing both  straight-line  and
accelerated  methods  over periods  ranging from 7 to 20 years.  Such assets are
periodically evaluated as to the recoverability of their carrying value.

     Investment in limited partnerships is included in other assets. The Company
utilizes the equity method of accounting for these investments. At September 30,
2000 and 1999, these investments totaled $710,000 and $529,000.

     Pension  plan  costs are based on  actuarial  computations  and  charged to
current  operations.  The funding policy is to pay at least the minimum  amounts
required by ERISA.

     Stock options are granted for a fixed number of shares to employees with an
exercise price equal to or greater than the fair value of the shares at the date
of grant. The Company accounts for and will continue to account for stock option
grants in  accordance  with APB Opinion No. 25,  Accounting  for Stock Issued to
Employees,  and,  accordingly,  recognizes no compensation expense for the stock
option grants.

     Income tax in the consolidated statement of income includes deferred income
tax  provisions  or  benefits  for  all  significant  temporary  differences  in
recognizing income and expenses for financial reporting and income tax purposes.
The Company files consolidated income tax returns with its subsidiaries.

     Earnings  per share  have been  computed  based upon the  weighted  average
common  shares  outstanding  during  each year.  Unearned  ESOP shares have been
excluded from the computation of average common shares outstanding.

     Reclassifications  of  certain  amounts  in the prior  years'  consolidated
financial statements have been made to conform to the 2000 presentation.


Note 2 -- Restriction On Cash

     The Banks are required to maintain  reserve funds in cash and/or on deposit
with the Federal  Reserve  Bank.  The reserves  required at September  30, 2000,
totaled $1,184,000.

<PAGE>
PEOPLES BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 3 -- Investment Securities
                                            September 30, 2000
                                   ---------------------------------------------
                                                  Gross     Gross
                                    Amortized  Unrealized Unrealized   Fair
                                       Cost       Gains     Losses     Value
                                   ----------- ---------- ---------- -----------

Available for sale
   Federal agencies                $ 8,649,598     1,058   $177,054  $ 8,473,602
   State and municipal obligations   4,039,703    15,961     32,395    4,023,269
   Mortgage-backed securities        1,611,353     3,419     14,025    1,600,747
   Marketable equity securities      4,453,187        --    347,537    4,105,650
                                   ----------- ---------- ---------- -----------
       Total available for sale     18,753,841    20,438    571,011   18,203,268
                                   ----------- ---------- ---------- -----------

Held to maturity
   Federal agencies                    500,000        --         --      500,000
   State and municipal obligations     684,487     4,048         --      688,535
   Mortgage-backed securities        9,092,400   153,938     79,651    9,166,687
                                   ----------- ---------- ---------- -----------
       Total held to maturity       10,276,887   157,986     79,651   10,355,222
                                   ----------- ---------- ---------- -----------

       Total investment securities $29,030,728  $178,424   $650,662  $28,558,490
                                   =========== ========== ========== ===========




                                                September 30,  1999
                                   ---------------------------------------------
                                                 Gross     Gross
                                    Amortized  Unrealized Unrealized    Fair
                                      Cost       Gains     Losses      Value
                                   ----------- ---------- ---------- -----------

Available for sale
   Federal agencies                $ 7,268,786  $     --   $129,320  $ 7,139,466
   State and municipal obligations   4,522,436    14,007     36,772    4,499,671
   Marketable equity securities      5,495,920        --    202,144    5,293,776
                                   ----------- ---------- ---------- -----------
       Total available for sale     17,287,142    14,007    368,236   16,932,913
                                   ----------- ---------- ---------- -----------

Held to maturity
   State and municipal obligations     609,852     8,596         --      618,448
   Mortgage-backed securities          257,707    45,496         --      303,203
                                   ----------- ---------- ---------- -----------
       Total held to maturity          867,559    54,092         --      921,651
                                   ----------- ---------- ---------- -----------

       Total investment securities $18,154,701  $ 68,099   $368,236  $17,854,564
                                   =========== ========== ========== ===========
<PAGE>
PEOPLES BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements

     The  amortized  cost and fair  value of  securities  held to  maturity  and
available  for sale at September 30, 2000, by  contractual  maturity,  are shown
below.  Expected  maturities  will differ from  contractual  maturities  because
issuers may have the right to call or prepay obligations with or without call or
prepayment penalties.

                                                    2000
                             -----------------------------------------------
                                Held to Maturity       Available for Sale
                             ----------------------- -----------------------
Maturity Distributions        Amortized       Fair     Amortized    Fair
  at September 30                Cost        Value       Cost       Value
                             ----------- ----------- ----------- -----------
Within one year              $    65,000 $    65,000 $   651,586 $   651,648
One to five years                424,487     428,535   7,812,553   7,671,173
Five to ten years                695,000     695,000   4,111,969   4,058,926
After ten years                       --          --     113,193     115,124
                             ----------- ----------- ----------- -----------
                               1,184,487   1,188,535  12,689,301  12,496,871
Mortgage-backed securities     9,092,400   9,166,687   1,611,353   1,600,747
Marketable equity securities          --          --   4,453,187   4,105,650
                             ----------- ----------- ----------- -----------

                             $10,276,887 $10,355,222 $18,753,841 $18,203,268
                             =========== =========== =========== ===========

     Securities with a carrying value of $19,936,000 and $7,300,000 were pledged
at September  30, 2000 and 1999 to secure  Federal  Home Loan Bank  advances and
repurchase agreements.

     Proceeds from sales of  securities  available for sale during 2000 and 1998
were $1,684,772 and $2,661,344.  Gross gains of $74,900 in 1998 and gross losses
of $57,961  and $1,359  were  realized  on those  sales.  There were no sales of
securities  during the year ended  September  30,  1999.  The income tax expense
(benefit) on the security gains/losses for the year ended September 30, 2000 and
1998 was $(22,958) and $29,130.

     There were no sales of securities  held to maturity  during the three years
ended September 30, 2000.

Note 4 -- Loans and Allowance
<TABLE>

                                                                          September 30
                                                                  -------------------------
                                                                       2000        1999
                                                                  ------------ ------------

<S>                                                               <C>          <C>
Commercial, commercial mortgage and loans                         $ 21,112,108 $  8,093,935
Real estate loans                                                  331,424,271  269,021,724
Construction loans                                                   9,739,859    6,997,963
Individuals' loans for household and other personal expenditures    36,152,324   17,462,457
                                                                  ------------ ------------
                                                                   398,428,562  301,576,079
                                                                  ------------ ------------
Less:
   Undisbursed portion of loans                                      4,340,973    2,307,327
   Deferred loan fees and discounts                                  2,002,547    1,393,713
   Allowance for loan losses                                         1,649,948    1,005,119
                                                                  ------------ ------------
                                                                     7,993,468    4,706,159
                                                                  ------------ ------------

         Total loans                                              $390,435,094 $296,869,920
                                                                  ============ ============
</TABLE>

<TABLE>

Year Ended September 30                                  2000         1999          1998
                                                    ------------- ------------ ------------

Allowance for loan losses
<S>                  <C>                              <C>          <C>             <C>
   Balances, October 1                                $1,005,119   $   947,008     $886,567
   Allowance acquired in merger                          561,572            --           --
   Provision for losses                                  159,869        88,969       74,621
   Recoveries on loans                                    40,944        22,546       32,769
   Loans charged off                                    (117,556)      (53,404)     (46,949)
                                                    ------------- ------------ ------------
   Balances, September 30                             $1,649,948    $1,005,119     $947,008
                                                    ============= ============ ============

</TABLE>
<PAGE>
PEOPLES BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 5 -- Premises and Equipment

                                            September 30
                                         2000         1999
                                    ------------- -------------

Land                                  $1,180,460   $   438,238
Buildings                              7,589,077     3,134,565
Equipment                              4,188,408     2,351,581
                                    ------------- -------------
         Total cost                   12,957,945     5,924,384
Accumulated depreciation              (6,808,143)   (3,638,495)
                                    ------------- -------------

         Net                          $6,149,802    $2,285,889
                                    ============= =============



Note 6 -- Deposits

                                              September 30
                                         2000        1999
                                    ------------- -------------

Demand deposits                      $87,959,048  $ 55,875,165
Savings deposits                      43,726,946    38,310,995
Certificates and other time deposits
    of $100,000 or more               29,479,700    20,820,333
Other certificates and time deposits 191,690,021   155,516,445
                                    ------------- -------------
                                    $352,855,715  $270,522,938
                                    ============= =============

Certificates and other time deposits maturing in years ending September 30:

   2001                             $115,733,855
   2002                               73,843,697
   2003                               23,926,024
   2004                                3,791,721
   2005                                3,874,424
                                    -------------
                                    $221,169,721
                                    =============

Note 7 -- Short-term Borrowings

     Short-term  borrowings  at September  30, 1999 consist of  securities  sold
under agreement to repurchase  totaling $3,039,739 and consist of obligations of
the Company to other parties. There were no short-term borrowings outstanding at
September 30, 2000. The  obligations  were secured by investment  securities and
such  collateral  is  held  by  a  safekeeping  agent.  The  maximum  amount  of
outstanding  agreements at any month-end during 2000 totaled  $7,568,000 and the
average of such agreements totaled $5,859,000.


Note 8 -- Federal Home Loan Bank Advances

     Federal  Home Loan Bank  advances at September  30, 2000 and 1999  totaling
$47,182,393  and  $7,200,000 and were at various rates maturing at various dates
through September 2010. The Federal Home Loan Bank advances are secured by first
mortgage loans and investment  securities  totaling  $335,693,000.  Advances are
subject to restrictions or penalties in the event of prepayment.

                                                                  Weighted
Maturities in years ending September 30           Amount        Average Rate
                                                -------------   ------------

   2001                                          $13,242,927         6.78%
   2002                                            1,998,796         5.09
   2003                                            4,998,194         5.97
   2004                                            2,000,000         6.49
   2005                                            3,998,796         6.68
   Thereafter                                     20,943,680         6.38
                                               --------------

                                                 $47,182,393         6.42
                                               ==============


<PAGE>


PEOPLES BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements


Note 9 -- Loan Servicing

     Loans serviced for others are not included in the accompanying consolidated
balance  sheet.  The unpaid  principal  balances  of loans  serviced  for others
totaled  $20,257,000  at September  30, 2000.  The amount of mortgage  servicing
rights capitalized is immaterial to the financial statements.


Note 10 --         Income Tax

                                                  Year Ended September 30
                                           2000         1999        1998
                                        ------------ ----------- -----------

Income tax expense
   Currently payable
     Federal                             $2,507,946  $2,326,871  $2,054,730
     State                                  643,557     617,586     679,725
   Deferred
     Federal                               (240,696)   (278,965)   (110,448)
     State                                  (11,118)   (180,616)    (27,612)
                                         ----------- ----------- -----------

         Total income tax expense        $2,899,689  $2,484,876  $2,596,395
                                         =========== =========== ===========

Reconciliation of federal statutory to actual tax expense
   Federal statutory income tax at 34%   $2,532,199  $2,404,353  $2,313,044
   Tax exempt interest                      (63,492)   (102,618)   (104,677)
   Nondeductible expenses                     4,189       2,853       4,600
   Effect of state income taxes             417,410     288,400     430,395
   Effect of low income housing credits     (87,978)   (140,700)    (15,482)
   Other                                     97,361      32,588     (31,485)
                                         ----------- ----------- -----------

         Actual tax expense              $2,899,689  $2,484,876  $2,596,395
                                         =========== =========== ===========

     A  cumulative  net  deferred  tax asset is  included in other  assets.  The
components of the asset are as follows:

                                                           September 30
                                                          2000     1999
                                                     ----------- -----------
Assets
 Allowance for loan losses                           $  671,240  $  427,176
 Loan fees                                              556,504     528,296
 Net unrealized losses on securities available for sale 217,546     140,310
 Other                                                  262,678      23,141
                                                     ----------- -----------
         Total assets                                 1,707,968   1,118,923
                                                     ----------- -----------

Liabilities
   Depreciation                                         118,766      20,192
   State income tax                                      63,081      59,300
   Other                                                127,246          --
   Tax bad debt reserves in excess of base year         833,792     803,398
   FHLB of Indianapolis stock dividend                   84,278      84,278
                                                     ----------- -----------
         Total liabilities                            1,227,163     967,168
                                                     ----------- ------------
                                                     $  480,805  $  151,755
                                                     =========== ===========

     Retained earnings at September 30, 2000, include  approximately  $8,102,000
for which no deferred  income tax  liability  has been  recognized.  This amount
represents an  allocation  of income to bad debt  deductions as of June 30, 1988
for tax purposes only. Reduction of amounts so allocated for purposes other than
tax bad debt losses or  adjustments  arising  from  carryback  of net  operating
losses would create income for tax purposes only,  which income would be subject
to the then current  corporate  income tax rate. The unrecorded  deferred income
tax liability on the above amount was approximately  $2,755,000 at September 30,
2000.



<PAGE>


PEOPLES BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements


Note 11 --         Other Comprehensive Income

<TABLE>
                                                                         Year Ended September 30, 2000
                                                                        ---------------------------------
                                                                        Before-Tax    Tax      Net-of-Tax
                                                                         Amount     Benefit      Amount
                                                                        ---------- ---------- -----------
Unrealized losses on securities
<S>                                                                     <C>        <C>         <C>
   Unrealized holding losses arising during the year                    $(255,192) $(101,081)  $(154,111)
   Less: reclassification adjustment for losses realized in net income    (57,961)   (22,958)    (35,003)
                                                                        ---------- ---------- -----------

   Net unrealized gains                                                 $(197,231) $ (78,123)  $(119,108)
                                                                        ========== ========== ===========

                                                                         Year Ended September 30, 1999
                                                                        ---------------------------------
                                                                        Before-Tax    Tax      Net-of-Tax
                                                                          Amount    Benefit      Amount
                                                                        ---------- ---------- -----------
Unrealized losses on securities
   Unrealized holding losses arising during the year                    $(514,393) $(203,751)  $(310,642)
                                                                        ========== ========== ============

                                                                         Year Ended September 30, 1998
                                                                        ----------------------------------
                                                                        Before-Tax    Tax      Net-of-Tax
                                                                          Amount    Expense      Amount
                                                                        ---------- ---------- ------------
Unrealized gains on securities
   Unrealized holding gains arising during the year                      $118,947   $47,115    $ 71,832
   Less: reclassification adjustment for gains realized in net income      73,541    29,130      44,411
                                                                        ---------- ---------- -----------

   Net unrealized gains                                                 $  45,406   $17,985    $ 27,421
                                                                        ========== ========== ===========
</TABLE>


Note 12 --         Commitments and Contingent Liabilities

     In the normal  course of business  there are  outstanding  commitments  and
contingent  liabilities,  such as commitments  to extend  credit,  which are not
included in the accompanying  consolidated  financial statements.  The Company's
exposure to credit loss in the event of nonperformance by the other party to the
financial  instruments  for  commitments  to extend credit is represented by the
contractual or notional amount of those  instruments.  The Company uses the same
credit policies in making such  commitments as it does for instruments  that are
included in the consolidated balance sheet.

     Financial  instruments  whose  contract  amount  represents  credit risk at
September 30, 2000 and 1999 consisted of  commitments to extend credit  totaling
$36,748,000 and $18,416,000.

     Commitments  to extend credit are  agreements to lend to a customer as long
as  there  is no  violation  of  any  condition  established  in  the  contract.
Commitments  generally have fixed expiration dates or other termination  clauses
and may require  payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company  upon  extension  of credit,  is based on  management's
credit  evaluation.  Collateral held varies,  but may include  residential  real
estate, income-producing commercial properties, or other assets of the borrower.

     The Company has  employment  agreements  with two  officers,  which include
provisions  for  payment  to them of three  years'  salary in the event of their
termination  in  connection  with any  change in  ownership  or  control  of the
Company,  other than by  agreement.  The  agreements  have terms of three years,
which may be extended annually for successive periods of one year.

     The  Company  and  subsidiaries  are also  subject to  possible  claims and
lawsuits,  which arise,  primarily in the ordinary course of business. It is the
opinion of management  that the  disposition or ultimate  determination  of such
possible  claims or  lawsuits  will not have a  material  adverse  effect on the
consolidated financial position of the Company.

Note 13 --         Dividends and Capital Restrictions

     Without prior approval, current regulations allow Peoples and First Savings
to pay  dividends to the Company not  exceeding net profits (as defined) for the
current  calendar  year to date  plus  those  for the  previous  two  years.  At
September 30, 2000,  such  limitations  totaled  $3,459,000.  The Banks normally
restrict  dividends to a lesser amount because of the need to maintain  adequate
capital structures.
<PAGE>
PEOPLES BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 14 --         Regulatory Capital

     The  Banks  are  subject  to  various   regulatory   capital   requirements
administered  by the  federal  banking  agencies  and are  assigned to a capital
category. The assigned capital category is largely determined by ratios that are
calculated  according  to the  regulations.  The ratios are  intended to measure
capital  relative to assets and credit  risk  associated  with those  assets and
off-balance  sheet exposures of the entity.  The capital category assigned to an
entity can also be affected by qualitative judgments made by regulatory agencies
about the risk  inherent  in the  entity's  activities  that are not part of the
calculated ratios.

     There are five capital categories defined in the regulations,  ranging from
well capitalized to critically undercapitalized. Classification of a bank in any
of the  undercapitalized  categories  can result in actions by  regulators  that
could have a material effect on a bank's operations.  At September 30, 2000, the
Banks are categorized as well  capitalized and met all subject capital  adequacy
requirements.  There are no conditions  or events since  September 30, 2000 that
management believes have changed the Banks' classification.


<TABLE>

Peoples' actual and required capital amounts and ratios are as follows:
                                                                             September 30,.2000
                                                 ---------------------------------------------------------------------------
                                                                            Required for Adequate         To Be Well
                                                          Actual                  Capital 1              Capitalized(1)
                                                 ---------------------------------------------------------------------------
September 30                                         Amount       Ratio       Amount       Ratio      Amount       Ratio
----------------------------------------------------------------------------------------------------------------------------

<S>                                                 <C>              <C>     <C>              <C>     <C>             <C>
Total risk-based capital (1) (to risk-weighted      $39,099,000      19.9%   $15,740,000      8.0%    $19,675,000     10.0%
   assets)

Tier 1 risk-based capital(1) (to risk-weighted       38,041,000      19.3%     7,870,000      4.0%     11,805,000      6.0%
   assets)

Core capital (1) (to adjusted total assets)          38,041,000      10.9%    10,488,000      3.0%     17,479,000      5.0%

Core capital (1) (to adjusted tangible assets)       38,041,000      10.9%     6,992,000      2.0%            N/A      N/A

Tangible capital (1) (to adjusted total assets)      38,041,000      10.9%     5,244,000      1.5%            N/A      N/A
</TABLE>


<TABLE>
                                                                             September 30, 1999
                                                 ---------------------------------------------------------------------------
                                                                            Required for Adequate         To Be Well
                                                          Actual                  Capital 1              Capitalized(1)
                                                 ---------------------------------------------------------------------------
September 30                                         Amount       Ratio       Amount       Ratio      Amount       Ratio
----------------------------------------------------------------------------------------------------------------------------

<S>                                                 <C>              <C>     <C>               <C>     <C>            <C>
Total risk-based capital (1) (to risk-weighted      $36,705,000      20.5%   $14,335,000       8.0%    $17,918,000    10.0%
   assets)

Tier 1 risk-based capital (1) (to risk-weighted      35,726,000      19.9%     7,168,000       4.0%     10,751,000     6.0%
   assets)

Core capital (1) (to adjusted total assets)          35,726,000      11.1%     9,678,000       3.0%     16,130,000     5.0%

Core capital (1) (to adjusted tangible assets)       35,726,000      11.1%     6,452,000       2.0%            N/A     N/A

Tangible capital (1) (to adjusted total assets)      35,726,000      11.1%     4,839,000       1.5%            N/A     N/A
</TABLE>
<TABLE>

First Savings' actual and required capital amounts and ratios are as follows:
                                                                             September 30, 2000
                                                 ---------------------------------------------------------------------------
                                                                            Required for Adequate         To Be Well
                                                          Actual                  Capital 1              Capitalized(1)
                                                 ---------------------------------------------------------------------------
September 30                                         Amount       Ratio       Amount       Ratio      Amount       Ratio
----------------------------------------------------------------------------------------------------------------------------

<S>                                                 <C>              <C>      <C>              <C>      <C>           <C>
Total risk-based capital (1) (to risk-weighted      $10,439,000      17.7%    $4,707,000       8.0%     $5,884,000    10.0%
   assets)

Tier 1 risk-based capital (1) (to risk-weighted       9,877,000      16.8%     2,353,000       4.0%      3,530,000     6.0%
   assets)

Core capital (1) (to adjusted tangible assets)        9,877,000       9.6%     3,085,000       3.0%      5,142,000     5.0%

Core capital (1) (to adjusted total assets)           9,877,000       9.6%     2,057,000       2.0%            N/A     N/A

Tangible capital (1) (to adjusted total assets)       9,877,000       9.6%     1,543,000       1.5%            N/A     N/A
</TABLE>

(1) As defined by regulatory agencies
<PAGE>
PEOPLES BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements


Note 15 --         Employee Benefit Plans

     The  Banks  are  participants  in a  pension  fund  known as the  Financial
Institutions  Retirement  Fund  (FIRF).  This  plan  is a  multi-employer  plan;
separate  actuarial  valuations are not made with respect to each  participating
employer.  According  to FIRF  administrators,  the  market  value of the fund's
assets  exceeded  the value of vested  benefits in the  aggregate as of June 30,
1999, the date of the latest actuarial valuation. Pension expense was $7,036 and
$3,884 for 1999 and 1998. This plan provides pension benefits for  substantially
all of the Company's employees.

     A profit sharing plan is maintained for the benefit of substantially all of
Company  employees and allows for both employee and Company  contributions.  The
Company  contribution  consists  of a  matching  contribution  of 50  percent of
employee contributions,  up to 6 percent of eligible employee compensation.  The
Company contribution to the plan was $80,500 and $24,600 for 2000 and 1999.

     In connection  with the acquisition of Three Rivers  Financial  Corporation
(Three  Rivers) in 2000, the Company  assumed both the Employee Stock  Ownership
Plan (ESOP) and  Recognition  and Retention  Plan (RRP) of Three Rivers.  At the
date of the merger,  the ESOP had debt  payable to Three  Rivers of $422,000 and
unearned shares totaling 50,082.  With the merger,  the ESOP is now obligated to
repay the outstanding  debt to the Company.  Accordingly,  the balance of shares
that  are  collateral  for the  debt  have  been  reflected  as a  reduction  to
stockholders' equity.  Unearned ESOP shares totaled 39,681 at September 30, 2000
and  had  a  fair  value  of  $575,000.  Shares  are  released  to  participants
proportionately  as the  loan is  repaid.  Dividends  on  allocated  shares  are
recorded as dividends and charged to retained earnings. Dividends on unallocated
shares will be applied to the principal and interest due on the loan.

     Compensation  expense is  recorded  in an amount  equal to the fair  market
value of the stock at the time shares are committed to be released.  The expense
under the ESOP was $77,000 for 2000. At September 30, 2000,  the ESOP had 41,761
allocated and 39,938 suspense shares.

     Effective with the merger,  the Company continued the RRP under which Three
Rivers  had  previously  granted  awards  to  various  directors,  officers  and
employees of the Three Rivers and First Savings.  These awards generally vest at
a rate of 20  percent  per  year on the  anniversary  dates of each  grant.  The
expense under the RRP was $44,410 for 2000.


Note 16 --         Stock Option Plan

     Under the Company  incentive  stock option plan approved in 1998,  which is
accounted for in accordance with Accounting  Principles  Board Opinion (APB) No.
25, Accounting for Stock Issued to Employees, and related  interpretations,  the
Company grants  selected  executives and other key employees stock option awards
which vest and become  fully  exercisable  at the end of five years of continued
employment.  During 1999, the Company  authorized the grant of options for up to
200,000 shares of the Company's common stock. The exercise price of each option,
which has a ten-year  life, was equal to or greater than the market price of the
Company's stock on the date of grant;  therefore,  no  compensation  expense was
recognized.

     Although  the  Company  has  elected  to follow  APB No.  25,  SFAS No. 123
requires  pro forma  disclosures  of net income and earnings per share as if the
Company had accounted for its employee stock options under that  Statement.  The
fair value of each option grant was  estimated on the grant date using a present
value calculation with the following assumptions:

                                                        September 30
                                                    2000            1999
                                               --------------- -------------

Risk-free interest rates                        5.78% - 5.85%       5.02%
Dividend yields                                     2.48%           2.48%
Volatility factors of expected
  market price of common stock                      19.50           19.52

Weighted-average expected life of the options    4.5 years        10 years


     Under SFAS No. 123,  compensation  cost is  recognized in the amount of the
estimated  fair value of the options and  amortized to expense over the options'
vesting  period.  The pro forma  effect on net income and  earnings per share of
this statement are as follows:

                                                           September 30
                                                          2000        1999
                                                     -------------- ------------

Net income                             As reported      $4,547,954   $4,586,766
                                       Pro forma        $4,247,537   $4,563,646
Basic earnings per share               As reported          $ 1.33       $ 1.42
                                       Pro forma            $ 1.24       $ 1.41
Diluted earnings per share             As reported           $1.32        $1.42
                                       Pro forma            $ 1.23       $ 1.41
<PAGE>
PEOPLES BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements

     The following is a summary of the status of the Company's stock option plan
and  changes in that plan as of and for the years ended  September  30, 2000 and
1999.
<TABLE>

                                                 September 30
                                                      2000                 1999
                                          ------------------------ ----------------------
                                                    Weighted-               Weighted-
                                                     Average                Average
                                           Shares  Exercise Price  Shares  Exercise Price
                                          -------- -------------- -------- --------------

<S>                                        <C>        <C>           <C>      <C>
Outstanding, beginning of year             30,000     $21.50          --     $   --
Granted in connection with the merger      93,911      11.78        30,000    21.50
Exercised                                  (9,861)     11.16          --         --
Forfeited/expired                          (3,801)     11.97          --         --
                                          -------- -------------- -------- -------------

Outstanding, end of year                  110,249      14.43        30,000   $21.50
                                          ======== ============== ======== ============

Options exercisable at year end             59,056                  --
Weighted-average fair value of options
  granted during the year                              $5.29                  $5.78
</TABLE>

     As of September 30, 2000,  other  information by exercise price for options
outstanding is as follows:

                                        Weighted-
                         Number          Average
                           of           Remaining
 Exercise Price          Shares     Contractual Life   Exercisable
----------------    ------------- ------------------- -------------

$11.16                   53,757       5.5 years          45,381
$13.05                   21,740       7.0 years           5,774
$13.78                    4,752       8.0 years           1,901
$21.50                   30,000       8.5 years           6,000
                     ------------                      -----------
                        110,249                          59,056
                     ===========                       ===========

Note 17 --         Earnings Per Share

Earnings per share (EPS) were computed as follows:

                                                 Year Ended September 30, 2000
                                                --------------------------------
                                                           Weighted
                                                           Average   Per-Share
                                                 Income     Shares    Amount
                                                ---------- --------- ----------

Basic Earnings Per Share
   Net income available to common stockholders  $4,547,954 3,429,165    $1.33
Effect of Dilutive Securities
   Stock options and RRP awards                               10,617
                                                ---------- ---------
Diluted Earnings Per Share
   Income available to common stockholders
             and assumed conversions            $4,547,954 3,439,792    $1.32
                                                ========== =========

Options  to  purchase  30,000  shares of common  stock at $21.50  per share were
outstanding at September 30, 2000,  but were not included in the  computation of
diluted EPS because the  options'  exercise  price was greater  than the average
market price of the common shares.

                                            Year Ended September 30, 1999
                                       -------------------------------------
                                                  Weighted Average Per-Share
                                         Income         Shares       Amount
                                       ---------- ---------------- ---------
Basic and Diluted Earnings Per Share   $4,586,766     3,226,894       $1.42
                                       ========== ================ =========

Options  to  purchase  30,000  shares of common  stock at $21.50  per share were
outstanding at September 30, 1999,  but were not included in the  computation of
diluted EPS because the  options'  exercise  price was greater  than the average
market price of the common shares.

                                           Year Ended September 30, 1998
                                       -------------------------------------
                                                  Weighted Average Per-Share
                                         Income       Shares         Amount
                                       ---------- ---------------- ---------
Basic and Diluted Earnings Per Share   $4,206,695     3,370,468       $1.25
                                       ========== ================ =========

<PAGE>


PEOPLES BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements


Note 18 --         Acquisition

     On February  29,  2000,  the Company  acquired  Three  Rivers,  the holding
company of First Savings, through the exchange of 758,858 shares of newly issued
Company common stock.  First Savings is a federally  chartered savings bank with
branches  located in Southern  Michigan and Northern  Indiana.  Three Rivers was
merged into the Company and First  Savings will  maintain  its existing  federal
charter as a subsidiary of Peoples  Bancorp.  The  combination was accounted for
under the purchase  method of accounting.  First Savings'  results of operations
are included in the Company's  consolidated  income statement beginning March 1,
2000. The purchase had a recorded  acquisition  cost of $13,423,000 and goodwill
of  $2,518,000.   Goodwill  will  be  amortized  over  15  years  utilizing  the
straight-line   method.   Additionally,   a  core  deposit  intangible  totaling
$1,154,000  was  recognized  and will be amortized over eight years using a 125%
declining balance method.

          The  following  pro  forma   information   discloses  the  results  of
     operations  as though the merger had taken place at the  beginning  of each
     year.

                                           Year Ended September 30
                                      ---------------------------------
                                          2000                1999
                                      ------------        -------------

Net Interest Income                    $15,788,003         $15,135,955
                                      =============       =============
Net Income                              $4,582,382          $4,850,475
                                      =============       =============

Net Income per Share--Combined
   Basic                                     $1.25               $1.23
   Diluted                                   $1.23                1.23


Note 19 --         Fair Values of Financial Instruments

        The following  methods and  assumptions   were used to estimate the fair
value of each class of financial instrument:

        Cash and Cash Equivalents--The fair  value of cash and cash  equivalents
approximates carrying value.

        Interest-bearing  Deposits--The  fair  value of  interest-bearing   time
deposits approximates carrying value.

        Securities  and  Mortgage-backed  Securities--Fair values  are  based on
quoted market prices.

        Loans--For  both  short-term loans  and variable-rate loans that reprice
frequently and with no significant  change in credit risk, fair values are based
on carrying values. The fair value for other loans is estimated using discounted
cash flow analyses  using interest rates currently  being offered for loans with
similar terms to borrowers of similar credit quality.

        Interest  Receivable/Payable--The  fair  values of  interest receivable/
payable approximate carrying values.

        FHLB  Stock--Fair  value of FHLB stock is based on the price at which it
may be resold to the FHLB.

        Deposits--The fair values of noninterest-bearing,interest-bearing demand
and savings  accounts are  equal to the  amount payable on demand at the balance
sheet date. The  carrying amounts  for variable rate, fixed-term certificates of
deposit approximate their fair values at the balance  sheet  date.  Fair  values
for fixed-rate  certificates  of  deposit are estimated  using a discounted cash
flow  calculation   that applies  interest  rates  currently  being  offered  on
certificates to a  schedule of aggregated  expected  monthly  maturities on such
time deposits.

        Short-term   borrowings--The   fair   value  of  short-term   borrowings
approximates carrying value.

        Federal Home Loan Bank advances--The  fair value  of these borrowings is
estimated using a discounted cash flow calculation,  based on current  rates for
similar advances.

       Advances by Borrowers for Taxes and Insurance--The fair value of advances
by borrowers for taxes and insurance approximates carrying value.

The estimated fair values of the Company's financial instruments are as follows:
<TABLE>

                                                               September 30
                                          --------------------------------------------------
                                                    2000                      1999
                                          ------------------------- ------------------------
                                            Carrying      Fair        Carrying      Fair
                                             Amount      Value         Amount      Value
                                          ------------ ------------ ------------ ------------
Assets
<S>                                       <C>          <C>          <C>          <C>
 Cash and cash equivalents                $ 18,846,807 $ 18,846,807 $  5,672,249 $  5,672,249
 Interest-bearing time deposits              3,163,940    3,163,940           --           --
 Investment securities available for sale   18,203,268   18,203,268   16,932,913   16,932,913
 Investment securities held to maturity     10,276,887   10,355,222      867,559      921,651
 Loans                                     392,085,042  388,349,000  297,875,039  295,533,000
 Interest receivable                         2,268,143    2,268,143    1,822,340    1,822,340
 Stock in FHLB                               4,234,400    4,234,400    2,473,500    2,473,500

Liabilities
 Deposits                                  352,855,715  327,116,000  270,522,938  269,541,000
 Short-term borrowings                              --           --    3,039,739    3,039,739
 Federal Home Loan Bank advances            47,182,393   47,039,000    7,200,000    7,074,000
 Interest payable                              534,985      534,985      483,289      483,289

</TABLE>


<PAGE>


PEOPLES BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements


Note 20 --         Quarterly Results of Operations (Unaudited)
<TABLE>

                                             Provision               Average     Earnings
Quarter   Interest    Interest  Net Interest     For         Net      Shares       Per
Ending     Income      Expense     Income    Loan Losses   Income   Outstanding   Share
------- ----------- ----------- ------------ ----------- ---------- ----------- ---------
<S>     <C>         <C>         <C>           <C>        <C>         <C>          <C>
Dec 99  $ 6,206,469 $ 3,179,448 $ 3,027,021   $ 28,789   $1,159,686  3,141,106    $0.37
Mar 00    7,068,880   3,674,240   3,394,640     50,914    1,127,621  3,320,494     0.34
Jun 00    8,392,934   4,538,683   3,854,251     42,508    1,239,027  3,662,455     0.34
Sep 00    8,757,084   4,935,475   3,821,609     37,658    1,021,620  3,620,443     0.28
        ----------- ----------- ------------ ----------- ----------
        $30,425,367 $16,327,846 $14,097,521   $159,869   $4,547,954
        =========== =========== ============ =========== ==========

Dec 98  $ 5,845,682 $ 3,044,300 $ 2,801,382   $ 30,942   $1,084,291  3,270,559    $0.33
Mar 99    5,865,500   2,954,982   2,910,518     10,275    1,068,598  3,253,664     0.33
Jun 99    6,047,475   3,017,009   3,030,466     24,896    1,186,278  3,202,623     0.37
Sep 99    6,068,726   3,044,907   3,023,819     22,856    1,247,599  3,183,717     0.39
        ----------- ----------- ------------ ----------- ----------
        $23,827,383 $12,061,198 $11,766,185   $ 88,969   $4,586,766
        =========== =========== ============ =========== ==========

</TABLE>

Note 21 -- Condensed Financial Information (Parent Company Only)

        Presented  below  is  condensed  financial  information  as to financial
position, results of operations and cash flows of the Company.

                             Condensed Balance Sheet

                                                   September 30
                                            ----------------------------
                                                 2000           1999
                                            -------------  -------------
Assets
   Cash                                      $ 1,503,374    $ 2,791,444
   Securities purchased from
    subsidiary under agreement to resell              --      2,308,904
   Investment in subsidiaries                 51,320,095     35,651,696
   Securities available for sale               4,446,439      4,892,395
   Securities held to maturity                   115,000        150,000
   Other assets                                  463,564         90,411
                                            -------------  -------------
         Total assets                        $57,848,472    $45,884,850
                                            =============  =============

Liabilities
   Dividends payable on common stock         $   510,064    $   412,378
   Other                                          38,860         16,253
                                            -------------  -------------
         Total liabilities                       548,924        428,631
                                            -------------  -------------
Stockholders' equity
   Common stock                                3,662,641      3,183,717
   Additional paid-in capital                 10,596,618      1,203,696
   Retained earnings                          43,815,516     41,282,725
   Unearned ESOP                                (351,494)            --
   Unearned RRP                                  (90,706)            --
   Accumulated other comprehensive income       (333,027)      (213,919)
                                            -------------  -------------
                                              57,299,548     45,456,219
                                            -------------  -------------
Total liabilities and stockholders' equity   $57,848,472    $45,884,850
                                            =============  =============


<PAGE>


PEOPLES BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements


                          Condensed Statement of Income

                                                  Year Ended September 30
                                                     2000           1999
                                                 ------------   ------------
Income
   Dividends from subsidiaries                    $1,700,000     $3,500,000
   Interest on investments                           279,179        394,487
Expenses                                            (133,680)       (79,901)
                                                 -------------  -------------
Income before equity in undistributed income
 of subsidiaries and income tax expense            1,845,499      3,814,586
Equity in undistributed income of subsidiaries     2,700,355        802,880
                                                 -------------  -------------
Income before income tax                           4,545,854      4,617,466
Income tax expense (benefit)                          (2,100)        30,700
                                                 -------------  -------------
Net income                                        $4,547,954     $4,586,766
                                                 =============  =============

                        Condensed Statement of Cash Flows

                                                         Year Ended September 30
                                                            2000        1999
                                                         ----------- -----------
Net cash provided by operating activities                $1,903,899  $3,757,824
                                                         ----------- -----------
Cash flows from investing activities
 Purchases of securities available for sale                (719,665)   (905,698)
 Proceeds from maturities of securities held to maturity     35,000      25,000
 Proceeds from maturities and calls
    of securities available for sale                      1,085,000   1,480,245
 Net change in mutual fund                                       --     (20,742)
 Net change in securities purchased under
    agreement to resell                                   2,308,904   1,881,052
                                                         ----------- -----------
       Net cash provided by investing activities          2,709,239   2,459,857
                                                         ----------- -----------
Cash flows from financing activities
 Stock repurchased                                       (4,213,408) (1,914,069)
 Cash dividends                                          (1,788,590) (1,557,765)
 Proceeds from stock options exercised                      100,790         ---
                                                         ----------- -----------
       Net cash used by financing activities             (5,901,208) (3,471,834)
                                                         ----------- -----------
Net change in cash                                       (1,288,070)  2,745,847
Cash at beginning of year                                 2,791,444      45,597
                                                         ----------- -----------
Cash at end of year                                      $1,503,374  $2,791,444
                                                         =========== ===========