UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

        For Annual and Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

[X]  Annual Report  Pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 For the fiscal year ended September 30, 2000
                                       or
[    ]  Transition  Report  Pursuant  to Section  13 or 15(d) of the  Securities
     Exchange Act of 1934 For the transition period from ________ to ________

                         Commission File Number 0-18991
                                                -------

                                 PEOPLES BANCORP
             (Exact name of registrant as specified in its charter)

   INDIANA                                                     35-1811284
(State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                         Identification Number)

212 West 7th Street, Auburn, Indiana                                     46706
------------------------------------                                   --------
(Address of principal executive offices)                              (Zip Code)

       Registrant's telephone number, including area code: (219) 925-2500
        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act

                     Common Stock, par value $1.00 per share
                     ---------------------------------------
                                (Title of Class)

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

        Indicate by check mark if disclosure of  delinquent  filers  pursuant to
Item 405 of regulation S-K is not contained  herein,  and will not be contained,
to  the  best  of  registrant's   knowledge,  in  definitive  proxy  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this form 10-K. [X ]

Aggregate market value of voting stock held by non-affiliates of the registrant,
as of December 22, 2000:  $49,943,875.
                          ------------

        Indicate the number of shares  outstanding  of each of the  registrant's
classes of common stock, as of December 22, 2000:

           3,638,898 shares of Common Stock, par value $1.00 per share

                      Documents Incorporated by Reference:

        Portions of the definitive Proxy Statement/Prospectus (Part III) and the
Annual Report to  Stockholders  for the year ended  September 30, 2000 (Parts II
and IV).

<PAGE>



                                     PART I


         Peoples  Bancorp (the  "Company") may from time to time make written or
oral  "forward-looking  statements",   including  statements  contained  in  the
Company's  filings with the Securities and Exchange  Commission  (including this
annual  report  on Form  10-K  and the  exhibits  thereto),  in its  reports  to
stockholders and in other communications by the Company,  which are made in good
faith by the Company  pursuant to the "safe  harbor"  provisions  of the Private
Securities Litigation Reform Act of 1995.

         These forward-looking statements involve risks and uncertainties,  such
as statements of the Company's plans,  objectives,  expectations,  estimates and
intentions that are subject to change based on various  important  factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's  financial  performance to differ  materially from the
plans,  objectives,  expectations,  estimates and  intentions  expressed in such
forward-looking statements: the strength of the United States economy in general
and  the  strength  of  the  local  economies  in  which  the  Company  conducts
operations;  the effects of, and changes in, trade, monetary and fiscal policies
and laws,  including  interest  rate  policies of the board of  governors of the
federal  reserve  system,   inflation,   interest  rates,  market  and  monetary
fluctuations;  the timely  development  of and  acceptance  of new  products and
services of the Company and the perceived  overall  value of these  products and
services by users,  including  the  features,  pricing  and quality  compared to
competitors'  products and  services;  the  willingness  of users to  substitute
competitors' products and services for the Company's products and services;  the
success of the  Company in  gaining  regulatory  approval  of its  products  and
services,  when required;  the impact of changes in financial  services laws and
regulations   (including  laws  concerning   taxes,   banking,   securities  and
insurance);  technological changes;  acquisitions;  changes in consumer spending
and  saving  habits;  and the  success  of the  Company  in  managing  the risks
resulting from these factors.

         The Company  cautions that the listed  factors are not  exclusive.  The
Company does not  undertake  to update any  forward-looking  statement,  whether
written or oral, that may be made from time to time or on behalf of the Company.

Item 1.  Business

General

      The Company is an Indiana corporation  organized in October 1990 to become
the thrift  holding  company for Peoples  Federal  Savings Bank of DeKalb County
("Peoples  Federal").  The Company is the sole  shareholder of Peoples  Federal.
Peoples Federal  conducts  business from its main office in Auburn and 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.

      Peoples Federal was founded in 1925 and chartered by the Federal Home Loan
Bank Board ("FHLBB"),  now the Office of Thrift  Supervision  ("OTS"),  in 1937.
Since that time,  they have been a member of the  Federal  Home Loan Bank System
("FHLB  System")  and the  Federal  Home  Loan  Bank of  Indianapolis  ("FHLB of
Indianapolis"),  and its savings accounts are insured up to applicable limits by
the Savings Association  Insurance Fund ("SAIF"), as administered by the Federal
Deposit Insurance Corporation (the "FDIC").

      On February 29, 2000 a merger was  completed  with Three Rivers  Financial
Corp. and its subsidiary  First Savings Bank ("First  Savings") of Three Rivers,
Michigan.  The  Company  became the sole  shareholder  of First  Savings.  First
Savings conducts  business from its main office in Three Rivers,  Michigan,  and
its five full service offices in Union, and Schoolcraft,  Michigan, and Howe and
Middlebury, Indiana.

      The Company has no other  business  activity  other than being the holding
company for Peoples Federal and First Savings (collectively the "Banks") subject
to regulation  by the OTS. The  Company's  securities  are  registered  with the
Securities and Exchange  Commission ("SEC") pursuant to the Securities  Exchange
Act of 1934, as amended (the "Exchange Act"). As such, the Company is subject to
the information, proxy solicitation, insider trading, and other restrictions and
requirements of the Exchange Act.
<PAGE>

         In  June  1999,  the  Board  authorized  a  stock  repurchase  program.
Purchases of up to 300,000  shares of the Company's  common stock may be made in
open market or in privately negotiated  transactions.  As of September 30, 2000,
the Company had repurchased 290,694 shares.

         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 the  Banks'  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  Banks  offer  a wide  range  of  consumer  and  commercial  financial
services.  These  services  include:   consumer  demand  deposit  accounts;  NOW
accounts;   regular  and  term  savings   accounts  and  savings   certificates;
residential and commercial real estate loans; and secured and unsecured consumer
loans.  During 1999,  Peoples Federal added  agricultural and commercial lending
officers to its staff. Since these types of loans pose a higher credit risk than
traditional  mortgage  lending,  they typically  offer higher yields and are for
shorter terms.  It is expected that these loans will assist  Peoples  Federal in
managing its interest  rate risk,  and increase its overall  profitability.  The
Banks  provide these  services  through a branch  network  comprised of fourteen
full-service banking offices. They also provide credit card services, as well as
enhancements to its loan and deposit products designed to provide customers with
added  conveniences.  The Company has  historically  concentrated  its  business
activities in northeastern  Indiana.  The purchase of First Savings has extended
this area to southern  Michigan.  The Company's  current strategy is to maintain
its branch office network as well as remain alert to new opportunities.

      Over the years,  the Company has  broadened  its product line and enhanced
its  operations  in order to  accommodate  its growth  and to meet the  vigorous
competition  from various  financial  institutions  and other companies or firms
that engage in similar activities.

The Thrift Industry

      Thrift institutions are financial  intermediaries  which historically have
accepted  savings  deposits  from the general  public  and, to a lesser  extent,
borrowed  funds from  outside  sources and  invested  those  deposits  and funds
primarily in loans  secured by first  mortgage  liens on  residential  and other
types of real estate.  Such  institutions may also invest their funds in various
types of short- and long-term  securities.  The deposits of thrift  institutions
are insured by the SAIF as administered by the FDIC, and these  institutions are
subject to extensive regulations.  These regulations govern, among other things,
the lending and other investment  powers of thrift  institutions,  including the
terms of mortgage  instruments these institutions are permitted to utilize,  the
types of deposits they are permitted to accept, and reserve requirements.

      The operations of thrift  institutions,  including those of the Banks, are
significantly  affected by general  economic  conditions and by related monetary
and fiscal  policies of the federal  government and  regulations and policies of
financial institution regulatory  authorities,  including the Board of Governors
of the Federal Reserve System and the OTS. Lending  activities are influenced by
a number  of  factors  including  the  demand  for  housing,  conditions  in the
construction  industry,  and availability of funds. Sources of funds for lending
activities  include savings  deposits,  loan principal  payments,  proceeds from
sales of loans,  and  borrowings  from the  Federal  Home  Loan  Banks and other
sources.  Savings flows at thrift  institutions such as the Banks are influenced
by a number of factors  including  interest rates on competing  investments  and
levels of personal income.
<PAGE>

Earnings

      The Banks' earnings depend primarily on the difference between income from
interest-earning  assets such as loans and  investments,  and  interest  paid on
interest-bearing   liabilities  such  as  deposits  and  borrowings.  The  Banks
typically  engage in  long-term  mortgage  lending at fixed  rates of  interest,
generally  for  periods  of  up  to  30  years,  while  accepting  deposits  for
considerably shorter periods.

      Generally,   rapidly   rising   interest   rates   cause   the   cost   of
interest-bearing   liabilities   to  increase   more   rapidly  than  yields  on
interest-earning assets, thereby adversely affecting the earnings of many thrift
institutions.  While the industry has received  expanded  lending and  borrowing
powers in recent years  permitting  different  types of investments and mortgage
loans,  including those with floating or adjustable rates and those with shorter
terms, earnings and operations are still highly influenced by levels of interest
rates  and  financial  market  conditions  and  by  substantial  investments  in
long-term mortgage loans.

Competition

      The Banks experience  strong  competition both in making real estate loans
and in attracting savings deposits. The Banks compete for real estate loans with
commercial banks,  mortgage banking companies,  insurance  companies,  and other
institutional  lenders. The most direct competition for savings comes from other
thrift institutions,  mutual savings banks,  commercial banks and credit unions.
During  periods  of  generally  high  interest  rates,   additional  significant
competition for savings accounts comes from corporate and government  securities
as well as money market mutual funds.  The principal  methods  generally used by
the Banks to attract  deposit  accounts  include:  competitive  interest  rates,
advertising,  providing  a variety  of  financial  services,  convenient  office
locations,  flexible hours for the public,  and promotions for opening or adding
to deposit accounts.

Net Interest Income

      Net interest  income  increases  during periods when the spread is widened
between the Banks'  weighted  average rate at which new loans are originated and
the weighted average cost of interest-bearing liabilities. The Banks' ability to
originate   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.

      The Banks have  supplemented  their interest  income through  purchases of
investments when  appropriate.  This activity  generates  positive interest rate
spreads on large principal balances with minimal administrative expense.

Interest Rate and Volume of Interest-Related Assets and Liabilities

      Both  changes  in  rate  and  changes  in the  composition  of the  Banks'
interest-earning assets and interest-bearing  liabilities can have a significant
effect on net interest income.

      For information  regarding the total dollar amount of interest income from
interest-earning assets, the average yields, the amount of interest expense from
interest-bearing liabilities and the average rate, net interest income, interest
rate spread, and the net yield on interest-earning  assets,  refer to page 13 of
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations in the Company's  2000 Annual  Report to  Stockholders,  incorporated
herein by reference.
<PAGE>

      For information regarding the combined weighted average effective interest
rate earned by the Banks on their loan portfolios and investments,  the combined
weighted  average  effective  cost of the Banks'  deposits and  borrowings,  the
interest  rate  spread  of the  Banks,  and the net  yield on  combined  monthly
weighted average  interest-earning  assets of the Banks on their loan portfolios
and investments for the fiscal years ending  September 30, 2000,  1999, and 1998
refer to page 10 of Management's  Discussion and Analysis of Financial Condition
and Results of  Operations  in the  Company's  2000 Annual  Report  incorporated
herein by reference.

      For  information  concerning 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 during the fiscal years ending  September
30,  2000,  1999,  and 1998  refer  to page 14 of  Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations in the Company's 2000
Annual Report incorporated herein by reference.

Market Area

    Peoples Federal's market area in northeastern  Indiana spans the counties of
DeKalb,  Whitley,  Noble,  and  LaGrange.  This market area has a population  of
approximately  145,000 and has a  diversified  industrial  economic base with an
emphasis  on  the  production  sector  that  includes  major   manufacturers  of
international  scope.  Moreover,  the  distribution  sector,  primarily  in  the
wholesale and retail  trades,  constitutes  a substantial  portion of the area's
economy, both in terms of product mix, sales receipts, and employment.  The most
rapid  growth  has  occurred  in the  manufacturing  sector,  especially  in the
production of automotive  and  electronics  products,  and in the service sector
with respect to packaging, warehousing, and distribution services.

    With the addition of First Savings Bank to the Company,  the market area has
expanded into southern  Michigan and additional  towns of Howe and Middlebury in
northeastern Indiana. First Savings serves St. Joseph,  southern Kalamazoo,  and
Cass counties in Michigan and LaGrange and eastern Elkhart  counties in Indiana.
This expanded  market area is contiguous to the Peoples  Federal market area and
is a natural expansion.  This aggregate market area has a population estimate of
489,108 and consists of a diversified economic base that includes manufacturing,
wholesale and retail trades, small farming, and service industries.  The general
area serviced by First Savings would be classified as rural.

Lending Activities

    General

    The  Banks  have  attempted  to  emphasize  investments  in  adjustable-rate
residential  mortgages  and consumer  loans in their market  areas.  In order to
lessen their risk from  interest  rate  fluctuations,  the Banks  emphasize  the
origination  of  interest  rate  sensitive  loan  products,   such  as  one-year
adjustable-rate mortgage loans, and prime plus equity loans. However, during the
recent low interest rate market,  customers  preferred fixed rate products.  The
Banks  reacted to this trend by offering a new mortgage  product of a seven-year
fixed rate loan, which converts to a one-year  adjustable  product at the end of
the seventh year. In this way, the Banks offered a fixed rate product to satisfy
the  customer  demand,  but are not locked  into low  interest  rates for a long
period of time.  For  regulatory  reporting  purposes,  these loans are shown as
fixed rate product  until the period  remaining  to the next  repricing is under
five  years.   Seven   year/one  year  loans   originated   during  the  initial
implementation  of this  product  are now shown in this Form 10-K as  adjustable
rate  product.  More  recent  originations  of these types of loans are shown as
fixed rate  mortgages.  First Savings sells any loans they  originate for longer
than seven year fixed rate terms on the secondary market.

Residential Mortgage Loans

    A  substantial   portion  of  the  Banks'  lending  activity   involves  the
origination  of  loans  secured  by  residential  real  estate,   consisting  of
single-family  dwelling  units.  The Banks also lend on the security of mid-size
multifamily  dwelling  units.  The  residential  mortgage  loans included in the
Banks' portfolio are primarily conventional  fixed-rate loans with a maturity of
up to 30 years.

    The Banks also offer adjustable-rate mortgage loans. Currently,  these loans
generally  have interest  rates that adjust (up or down) every year.  Generally,
these loans  provide for a maximum  adjustment  of 6% over the life of the loans
with a maximum  adjustment  of 2% during any given year.  Adjustments  are based
upon an index  established at the time the  commitments are issued by the Banks.
The index used for most loans is tied to the applicable  United States  Treasury
security  index.  While  adjustable-rate  mortgage  loans  assist  the  Banks in
maintaining a positive  spread during periods of high interest  rates, it is not
expected that  adjustments in interest rates on  adjustable-rate  mortgages will
match  precisely  changes  in the  Banks'  cost of funds.  The  majority  of the
adjustable rate mortgages originated by the Banks have limitations on the amount
(generally 6%) and frequency of interest rate changes.
<PAGE>

    During the fiscal  year  ended  September  30,  2000,  the Banks  originated
$127,435,000  of  residential  loans of which  $79,917,000  was five- to 30-year
fixed-rate  mortgages  and  $47,518,000  was  adjustable-rate  loans.  The rates
offered on the Banks'  adjustable-rate  residential mortgage loans are generally
competitive  with the rates offered by other thrift  institutions  in the Banks'
market  areas and are based upon the Banks' cost of funds and the rate of return
the Banks can receive on comparable investments. Fixed-rate loans are originated
only under terms and conditions and using documentation which would permit their
sale in the secondary  market and at rates which are generally  competitive with
rates offered by other financial institutions in the Banks' market areas.

    Set  forth  below  is  the  amounts  and   percentages   of  fixed-rate  and
adjustable-rate loans (which include consumer loans) in the Banks' portfolios at
September 30, 2000, 1999, and 1998 (Dollars in thousands).

                        September 30,
--------------------------------------------------------------
       2000                 1999                 1998
--------------------  -------------------- -------------------
  Fixed   Adjustable    Fixed   Adjustable   Fixed  Adjustable
--------- ----------  --------  ---------- -------- ----------
$291,488   $106,941   $259,133    $42,443  $225,270   $46,740
  73.2%     26.8%       85.9%      14.1%     82.8%     17.2%


    The terms of the residential loans originated by the Banks range from one to
30 years. Experience during recent years reveals that as a result of prepayments
in  connection  with  refinancings  and  sales  of  the  underlying  properties,
residential loans generally remain outstanding for periods substantially shorter
than  maturity  of the loan  contracts.  At  September  30,  2000,  the  average
contractual  maturity of the Banks'  portfolios of fixed-rate  loans was 9 years
and 9  months,  and 19 years  and 0 months  with  respect  to its  portfolio  of
adjustable-rate loans.

    Substantially all of the Banks' residential mortgages include so-called "due
on sale" clauses,  which are provisions  giving the Banks the right to declare a
loan  immediately  due and payable in the event that,  among other  things,  the
borrower  sells or  otherwise  disposes  of the  real  property  subject  to the
mortgage, and the loan is not repaid.

    Generally, the Banks will not lend more than 80% of the appraised value of a
residential property which is owner occupied unless the borrower obtains private
mortgage  insurance  reducing  the  uninsured  portion of the loan to 72% of the
appraised value. If private mortgage insurance is obtained, the Banks' policy is
to lend up to 90% of the appraised value of the property  securing the loan. The
Banks apply the same standards to residential  loans  purchased in the secondary
market.

Commercial Real Estate Loans

    The Banks also originate  commercial  real estate loans.  From September 30,
1999, to September 30, 2000, commercial real estate loans generated by the Banks
increased  from  $10,411,049 to  $13,167,996,  with the percentage of commercial
real estate  loans to total loans  increasing  from 3.80% to 4.30%.  These loans
consisted of  construction  and permanent loans secured by mortgages on mid-size
commercial real estate and farms. Of these loans, approximately $5.1 million are
secured by agricultural  real estate.  The terms of commercial real estate loans
vary from loan to loan but are  usually  five-year  adjustable-rate  loans  with
terms of 20 to 25 years. The loan-to-value ratio of commercial real estate loans
is generally 75% or less.

    Generally,  commercial  real estate loans involve  greater risk to the Banks
than do residential  loans but usually provide for a higher rate of interest and
increased fee income than do  residential  loans.  Commercial  real estate loans
typically  involve large loan balances to single  borrowers or groups of related
borrowers.  In  addition,  the  payment  experience  on loans  secured by income
producing  properties is typically dependent on the successful  operation of the
related project and thus may be subject to a great extent to adverse  conditions
in the real estate market or in the economy generally.
<PAGE>

Construction Loans

    The Banks offer residential  construction loans both to owner-occupants  and
to persons building residential property. Construction loans are usually offered
with fixed rates of interest during construction.  Generally, construction loans
have terms  ranging  from six to 12 months at fixed rates over the  construction
period.  Practically  all  residential  construction  loans are written so as to
become permanent loans at the end of the construction period.

    Construction  loans involve  greater  underwriting  and default risks to the
Banks than do loans secured by mortgages on existing properties.  Loan funds are
advanced  upon the  security of the project  under  construction,  which is more
difficult to value prior to the completion of construction. Moreover, because of
the uncertainties  inherent in estimating  construction  costs, it is relatively
difficult  to evaluate  accurately  the total loan funds  required to complete a
project  and the  related  loan-to-value  ratios.  Should a default  occur which
results in  foreclosure,  the Banks  could be  negatively  impacted in that they
would have to take  control of the  project  and  attempt  either to arrange for
completion of construction or dispose of the unfinished project.

    The Banks'  underwriting  criteria are designed to evaluate and minimize the
risks of each construction  loan. The Banks carefully consider a wide variety of
factors before  originating a construction  loan,  including the availability of
permanent  financing  or a takeout  commitment  to the  borrower  (which  may be
provided by the Banks at market  rates);  the reputation of the borrower and the
contractor;    independent   valuations   and   reviews   of   cost   estimates;
pre-construction  sale  information;  and cash flow projections of the borrower.
Inspections  of  construction  sites are made by the Banks on a timely  basis to
verify  progress  made to date as a further  reinforcement  of its  conservative
lending policy. To reduce the risks inherent in construction  lending, the Banks
limit the number of properties  that can be  constructed on a  "speculative"  or
unsold basis by a developer at any one time and  generally  require the borrower
or its principals to personally guarantee repayment of the loan.

Consumer and Other Loans

    Federal  laws  and   regulations   permit  a   federally-chartered   savings
institution to make secured and unsecured  consumer loans  including home equity
loans  (loans  secured  by the  equity  in the  borrower's  residence,  but  not
necessarily  for the purpose of  improvement),  home  improvement  loans  (loans
secured by a residential  second  mortgage),  loans secured by deposit accounts,
and credit card loans  (unsecured).  The Banks offer all of these types of loans
and are  currently  emphasizing  home  equity  loans  to take  advantage  of the
adjustable  interest  rate  feature  of this type of loan  versus  the  mortgage
product.  These  loans also carry a higher rate of  interest  than  conventional
mortgages,  thereby  increasing the profit potential while reducing the interest
rate risk.

Loan Portfolio Cash Flows

     The following  table sets forth the  estimated  maturity of the Banks' loan
portfolios  by type of  loan at  September  30,  2000.  The  estimated  maturity
reflects  contractual  terms  at  September  30,  2000.   Contractual  principal
repayments  of loans do not  necessarily  reflect  the actual term of the Banks'
loan portfolios.  The average life of mortgage loans is substantially  less than
their  contractual  terms because of loan prepayments and because of enforcement
of "due on sale" clauses.  The average life of mortgage loans tends to increase,
however, when current mortgage loan rates substantially exceed rates on existing
mortgage loans.
<PAGE>
                            Due in    One Year   Due After
                            One Year   Through     Five
                            or Less   Five Years   Years      Total
                            --------- ---------- ---------- ----------
                                        (In thousands)
Type of Loan:
Construction loans --
 Residential real estate     $ 9,630   $     -    $      -   $  9,630
 Commercial                      110         -           -        110
Real estate loans:
 Mortgage-residential         29,761    69,803     231,861    331,425
 Commercial                    2,006     9,274       5,275     16,555
Installment loans --
 consumer                     17,010    13,382       5,760     36,152
 commercial                    3,503       969          85      4,557
                            --------- ---------- ---------- ----------
         Total               $62,020   $93,428    $242,981   $398,429
                            ========= ========== ========== ==========

    The following  table sets forth the total amount of loans due after one year
from September 30, 2000, which have a fixed rate or an adjustable rate. (Dollars
in thousands)

           Loans Due
    October 1, 2001 and thereafter
----------------------------------
        Fixed        Adjustable         Total at September 30, 2000
----------------- ----------------      ---------------------------
      $176,238        $160,171                   $336,409


Loan Portfolio Composition

    The following table sets forth the composition of the Banks' loan portfolios
by type of loan at the dates indicated.  The table includes a reconciliation  of
total net loans receivable, after consideration of undisbursed portion of loans,
deferred loan fees and discounts, and allowance for losses on loans.
<PAGE>
<TABLE>
                                                                     At September 30
                                 2000                  1999                 1998                 1997                1996
                         --------------------------------------------------------------------------------------------------------
TYPE OF LOAN               AMOUNT        %       AMOUNT       %       AMOUNT      %       AMOUNT       %       AMOUNT       %
                         -----------  -------- -----------  -------  ---------- -------  ----------  -------  ----------  -------
Residential:             (Dollars in thousands)                             (Dollars in thousands)
<S>                       <C>           <C>     <C>          <C>     <C>         <C>     <C>          <C>      <C>         <C>
     Single family units  $ 332,847     83.5%   $ 265,992    88.2%   $ 243,858   89.7%   $ 217,528    90.8%    $207,028    91.0%
     2-4 family units         3,263      0.8%       1,603     0.5%       1,610    0.6%       1,541     0.6%       1,234     0.5%
     Over 4 family units      3,018      0.8%       2,525     0.8%       2,687    1.0%       2,813     1.2%       2,769     1.2%
Commercial real estate       16,665      4.2%       9,392     3.1%       6,425    2.4%       4,269     1.8%       4,006     1.8%
Land acquisition and
     development              1,926      0.5%       1,251     0.4%       1,299    0.5%         769     0.3%         702     0.3%
Consumer and other loans     39,657     10.0%      19,861     6.6%      15,157    5.6%      11,915     5.0%      10,959     4.8%
Loans on deposits             1,052      0.3%         952     0.3%         973    0.4%         821     0.3%         877     0.4%
                         -----------  -------- -----------  -------  ---------- -------  ----------  -------  ----------  -------
                            398,428    100.0%     301,576   100.0%     272,009  100.0%     239,656   100.0%     227,575   100.0%
                         -----------  -------- -----------  -------  ---------- -------  ----------  -------  ----------  -------
Less:
Undisbursed portion
     of loans                 4,341                 2,307                3,081               2,444                2,717
Deferred loan fees and
     discounts                2,002                 1,394                1,323               1,070                  959
                         -----------           -----------           ----------          ----------           ----------
                              6,343                 3,701                4,404               3,514                3,676
                         -----------           -----------           ----------          ----------           ----------
Total loans receivable      392,085               297,875              267,605             236,142              223,899
Allowance for losses
     on loans                 1,650                 1,005                  947                 887                  888
                         -----------           -----------           ----------          ----------           ----------
Net loans                 $ 390,435             $ 296,870            $ 266,658           $ 235,255             $223,011
                         ===========           ===========           ==========          ==========           ==========
</TABLE>

Origination, Purchase and Sale of Loans and Loan Concentrations

    The  Banks   originate   residential   loans  in  conformity  with  standard
underwriting  criteria to assure maximum  eligibility for possible resale in the
secondary  market.  Although the Banks have  authority  to lend  anywhere in the
United States, they have confined their loan origination activities primarily in
the Banks' service areas.

    Loan  originations  are developed  from a number of sources,  primarily from
referrals  from  real  estate  brokers,   builders,  and  existing  and  walk-in
customers.  Peoples  Federal also utilizes the services of a loan broker located
in Fort Wayne,  Indiana,  who is paid on a commission basis (generally 1% of the
loan amount) to originate loans for Peoples Federal.

    The  Banks'  mortgage  loan  approval  process  is  intended  to assess  the
borrower's  ability  to repay  the loan,  the  viability  of the  loan,  and the
adequacy  of the value of the  property  that  will  secure  the loan.  The loan
committees of the Banks can approve  residential and commercial loans ranging up
to  $200,000.  The Banks'  Boards of  Directors  must  approve  loans  exceeding
$200,000.  The Banks utilize  independent  qualified  appraisers approved by the
Board of  Directors to appraise  the  properties  securing its loans and require
title  insurance  or title  opinions so as to insure that the Banks have a valid
lien on the mortgaged real estate.  The Banks require borrowers to maintain fire
and casualty insurance on its secured properties.

    The  procedure  for  approval  of  construction  loans  is the  same  as for
residential  mortgage  loans,  except that the appraiser  evaluates the building
plans,  construction  specifications,  and estimates of construction  costs. The
Banks also evaluate the feasibility of the proposed construction project and the
experience  and track record of the  developer.  In addition,  all  construction
loans generally require a commitment from a third-party lender or from the Banks
for a permanent  long-term loan to replace the construction loan upon completion
of construction.
<PAGE>

    Consumer  loans  are  underwritten  on the  basis of the  borrower's  credit
history and an analysis of the borrower's income and expenses,  ability to repay
the loan, and the value of the collateral,  if any. A consumer loan officer must
approve consumer loans. Consumer loan originations currently are being generated
primarily through advertising.

    Currently,  it is  the  Banks'  policy  to  originate  both  fixed-rate  and
adjustable-rate  loans,  providing  all such loans are  eligible for sale in the
secondary market.  It is Peoples Federal's  intention to hold all originated and
purchased  loans in its portfolio  and not for sale.  First Savings is currently
active in the  secondary  market and sells the  majority  of its fixed rate loan
products.

The following  table shows mortgage and other loan  origination,  purchase,  and
repayment activity for the Banks during the periods indicated:

                                                    Years Ended September 30
                                                  -----------------------------
                                                     2000     1999      1998
                                                  -------- ---------- ---------
                                                     (Dollars in thousands)
Mortgage loans originated
   for the purpose of:
     Construction-commercial                            90  $      -  $  1,425
     Construction-residential                       13,096    10,080     8,386
     Purchase/refinance-commercial                   4,278     2,325     2,324
     Purchase/refinance-residential                 72,772    92,772    82,553
Consumer and other loans originated                 28,989    22,258    14,463
                                                  --------- --------- ---------
   Total loans originated                          119,225   127,435   109,151
                                                  --------- --------- ---------
Loans  acquired in merger with First Savings        73,381         -         -
                                                  --------- --------- ---------
                                                   192,606   127,435   109,151
                                                  --------- --------- ---------
Loan credits:
   Principal repayments                             98,962    97,440    77,980
                                                  --------- --------- ---------
Other:
   Provision for losses on loans                       160        89        75
   Amortization of loan fees                          (337)     (426)     (380)
   Loan foreclosures, net                              256       121        73
                                                  --------- --------- ---------
                                                        79      (216)     (232)
                                                  --------- --------- ---------

     Total credits, net                             99,041    97,224    77,748
                                                  --------- --------- ---------
Net increases in mortgage and other
   loans receivable, net                          $ 93,565  $ 30,211  $ 31,403
                                                  ========= ========= =========

Interest Rates, Points and Fees

    The  Banks  realize  interest,  point,  and  fee  income  from  its  lending
activities.  The Banks  also  realize  income  from  commitment  fees for making
commitments to originate  loans,  from  prepayment and late charges,  loan fees,
application fees, and fees for other miscellaneous services.

    The Banks account for loan origination fees in accordance with the Statement
of Financial Accounting Standards on Accounting for Nonrefundable Fees and Costs
Associated  with  Originating  or Acquiring  Loans ("SFAS No. 91") issued by the
Financial  Accounting  Standards  Board (the "FASB").  SFAS No. 91 prohibits the
immediate  recognition  of loan  origination  fees as revenues and requires that
such income  (net of certain  direct  loan  origination  costs) for each loan be
amortized, generally by the interest method, over the estimated life of the loan
as an adjustment of yield.
<PAGE>

    First  Savings  also  realizes  income  from  gains on sales of  loans,  and
servicing fees for loans sold with servicing retained.

Nonperforming Assets

    Loans are reviewed on a regular basis and are generally placed on nonaccrual
status when the loans become 90 days or more past due, or when,  in the judgment
of management,  the  probability of collection is deemed to be  insufficient  to
warrant  further  accrual.  When  a  loan  is  placed  on a  nonaccrual  status,
previously  accrued but unpaid interest is deducted from interest  income.  When
the Banks are  unable to  resolve a  delinquency  satisfactorily  within 45 days
after  the  loan  is  past  due,  they  will  undertake   foreclosure  or  other
proceedings, as necessary, to minimize any potential loss.

    Real estate  acquired by the Banks as a result of  foreclosure or by deed in
lieu of foreclosure is classified as "real estate owned" until it is sold.  When
property is so  acquired,  it is  recorded at the lower of loan  balance or fair
market  value at the date of  acquisition.  Periodically,  real estate  owned is
reviewed to ensure that net  realizable  value is not less than carrying  value,
and any allowance  resulting  there from is charged to operations as a provision
for loss on real estate owned.  All costs incurred in  maintaining  the property
from the date of acquisition are expensed.

    The following table reflects the amount of loans in delinquent  status as of
the dates indicated:
<TABLE>

                                              Loans Delinquent For
                 ----------------------------------------------------------------------------
                         30-59 Days               60-89 Days           90 Days and Over
                 ------------------------- ----------------------- --------------------------
                                   Percent                Percent                Percent
                                   of Loan                of Loan                 of Loan
                 Number   Amount  Category Number  Amount Category Number  Amount Category
                 ------- -------- -------- ------ ------- -------- ------ ------- ---------
<S>                  <C>   <C>      <C>      <C>   <C>       <C>     <C>    <C>       <C>
Real estate:                           (Dollars in thousands)
  One to four        16    $ 626    0.19%    1     $ 24      0.01%   11     $ 521     0.16%
   family

Consumer             29      207    0.57%    5       14      0.04%   10       302     0.84%
                 -------  --------         ------- --------        ------- ------

   Total             45    $ 833    0.21%    6     $ 38      0.01%   21     $ 823     0.21%
                 =======  ========         ======= ========        ======= =======

</TABLE>

             The following table sets forth the Banks'  nonperforming  assets at
the dates indicated:
<PAGE>

                                        At September 30,
                            -----------------------------------
                             2000   1999   1998   1997   1996
                            ------ ------ ------ ------ -------
                                 (Dollars in thousands)
Nonaccrual loans             $587   $474   $729   $658   $  814
Loans past due 90 days and
    still accruing              7     64     23     64       88
                            ------ ------ ------ ------ --------
                              594    538    752    722      902
Real estate owned, net
   of allowance               165      -      -      -      110
                            ------ ------ ------ ------ --------
Total nonperforming
   assets                    $759   $538   $752   $722   $1,012
                            ====== ====== ====== ====== ========

    Consumer  loans are placed on nonaccrual  generally when the loan exceeds 90
days  delinquent  or if,  in the  opinion  of  management,  the  possibility  of
collecting  the  loan  becomes  questionable.   Mortgage  loans  are  placed  on
nonaccrual  generally when the loan exceeds 90 days delinquent;  however, if the
loan is below a 25%  loan-to-value,  management  may at their  option  decide to
accrue interest on the loan, since collection of the loan appears highly likely.

    Interest income that would have been recognized for the year ended September
30, 2000, if nonaccrual loans had been current in accordance with their original
terms,  approximated  $13,000.  Interest income recognized on such loans for the
year ended September 30, 2000,  approximated $37,000. At September 30, 2000, the
Banks had no loans that were deemed  impaired in  accordance  with  Statement of
Financial Accounting Standards No. 114.

     Federal regulations require savings  associations to review their assets on
a regular basis and to classify them as: special mention; substandard;  doubtful
and loss. Loans classified as special mention,  are loans which currently do not
expose the Banks to an unusual risk of loss but based on  information  available
require the attention of management.  This classification usually includes loans
secured  by unusual  collateral,  loans  with  documentary  items that are being
addressed by counsel,  and  relatively  large loans where the borrower has had a
history of  delinquent  payments and the  collateral  has a cashflow  shortfall,
however, the borrower has continued to service the debt.

    Loans  classified as substandard or doubtful  generally  represent  balances
where the borrower  has made  several  late  payments and is unable to bring the
loan  current.  Substandard  loans  generally  represent  situations  where  the
borrower  is  attempting  to resolve  the  delinquency  in the normal  course of
business (i.e., sale of the property or infusion of additional  capital).  Loans
classified  as  doubtful  represent  situations  where  the  borrower  has  been
unsuccessful  in  attempts to resolve the  delinquency  in the normal  course of
business.  Doubtful  loans  involve a greater  degree of  uncertainty  regarding
estimate of loss.

    Loans  classified as loss  represent  situations  where the loan is severely
delinquent.  These loans typically involve extensive  bankruptcy  proceedings or
other unusual circumstances where the debtor contests foreclosure.

    Loans  classified  as  special  mention;  substandard  or  doubtful  do  not
necessarily   require  specific  reserves.   Individual  loan  balances  may  be
classified in one or more categories based on management's analysis and estimate
of the risk underlying each individual situation.

    In  accordance  with  the  federal   regulations,   the  Banks'   management
continually  reviews the mix and  delinquency  status of its loan  portfolio and
classifies those loans, which it deems appropriate.

    As of September  30, 2000,  loan  balances  were  classified by the Banks as
follows:
<PAGE>

             Loss                         $   29,602
             Doubtful                             -0-
             Substandard                   1,933,264
             Special Mention                 451,374

Allowance for Losses on Loans and Real Estate Owned

    The  allowances  for loan and real estate  owned  losses  represent  amounts
available  to  absorb  inherent  losses  in  the  loan  and  real  estate  owned
portfolios.  Such allowances are based on management's  continuing review of the
portfolios,  historical charge-offs, current economic conditions, and such other
factors,  which in  management's  judgment  deserve  recognition  in  estimating
possible losses. In addition,  various regulatory agencies,  as an integral part
of their examination process, periodically review the allowance for loan losses.
Such agencies may require  additions to the  allowances  based on their judgment
about  the  information  available  to them at the  time of  their  examination.
Provisions  for losses are charged to earnings to bring the allowances to levels
considered  necessary by management.  Losses are charged to the allowances  when
considered probable. As of September 30, 2000 allowances for losses on loans and
real  estate  owned  were  $1,638,948  and  $11,000,  respectively.  The  Banks'
management  believes  that the  allowances  are  adequate  to  absorb  known and
inherent  losses in the  portfolios.  No assurance can be given,  however,  that
economic  conditions  which may  adversely  affect the  Banks'  markets or other
circumstances  will not result in additions to the  allowance  for loan and real
estate owned losses.

The following  table  presents an  allocation  of the Banks'  allowance for loan
losses at the dates  indicated  and the  percentage of loans in each category to
total loans.
<TABLE>
                                                             September 30,
                                  2000          1999            1998          1997         1996
                            -------------- -------------- --------------- ------------- -------------
                             Amount    %    Amount    %    Amount    %     Amount   %   Amount    %
                            ------- ------ -------- ----- ------- ------- ------- ----- ------ ------
<S>                          <C>     <C>     <C>    <C>     <C>     <C>    <C>    <C>    <C>    <C>
Balance at end of                (Dollars in thousands)
period applicable to:
Residential Mortgage Loans   $1,122  88.7%   $ 869  88.7%   $742    91.5%  $726   91.7%  $594   91.8%
Commercial Real Estate Loans    101   4.4%      76   4.4%    121     2.6%    16    3.0%    15    3.0%
Consumer Loans                  196   6.9%      60   6.9%     84     5.9%    37    5.3%    47    5.2%
Unallocated                     220              -             -            107           231
                            ------- ------ ------- ------  ------  ------ ------ ------ ------ ------
Total                        $1,639 100.0%  $1,005 100.0%   $947   100.0%  $886  100.0%  $887  100.0%
                            ======= ====== ======= ======  ======  ====== ====== ====== ====== ======
</TABLE>


The  following  table is a summary of activity in the Banks'  allowance for loan
and real estate owned losses for the periods indicated.
<PAGE>

Summary of Loan Loss Experience               Years ended September 30,
                                      ---------------------------------------
(Dollars in Thousands)                 2000      1999    1998   1997    1996
                                      ------- --------- ------ ------- ------
Balance of loan loss allowance at
     beginning of year                $ 1,005   $  947   $886   $887   $912
      Allowance acquired in merger        562        -      -      -      -
       Charge-offs
          Residential                       -        -      -      -      -
          Commercial real estate            -        -      -      -      -
          Commercial                        -        -      -      -      -
          Consumer                        118       53     47     84     55
                                      -------- -------- ------ ------ ------
               Total Charge-offs          118       53     47     84     55
                                      -------- -------- ------ ------ ------
        Recoveries
          Residential                       -        -      -      -      -
          Consumer                         41       22     33     33     21
                                      -------- -------- ------ ------ ------
               Total Recoveries            41       22     33     33     21
                                      -------- -------- ------ ------ ------
          Net Charge-offs (Recoveries)     77       31     14     51     34
Provision for loan losses                 160       89     75     50      9
                                      --------  ------- ------ ------ ------
Balance of loan loss allowance at
     end of year                      $ 1,650   $1,005   $947   $886   $887
                                      ========  ======= ====== ====== ======
Ratio of net charge-offs to average
     loans outstanding                  0.02%    0.01%   0.01%  0.02%  0.02%

Investment Activities

    Federal thrift institutions,  such as the Banks, have authority to invest in
various types of liquid assets, including United States Treasury obligations and
securities  of  various  federal  agencies,  certificates  of deposit at insured
banks,  bankers'  acceptances and federal funds. As a member of the FHLB System,
the Banks must maintain  minimum  levels of liquid assets  specified by the OTS,
which  vary from  time to time.  Subject  to  various  regulatory  restrictions,
federal thrift institutions may also invest a portion of their assets in certain
commercial  paper,  corporate  debt  securities  and mutual  funds whose  assets
conform to the  investments  that a federal thrift  institution is authorized to
make directly.

    The  carrying  values of the Banks'  investment  securities,  including  its
liquid assets, as of the dates indicated are presented in the following table.

<PAGE>
                                              At September 30,
                                    ------------------------------------
                                       2000       1999         1998
                                    ---------  -----------  ------------
Interest-bearing deposits and             (Dollars in thousands)
     certificates of deposit (1)     $11,937     $   834      $   718
U.S. government and federal
     agency securities
     Held to maturity                    500           -         4,000
     Available for sale                8,474       7,139        11,287
Mortgage backed securities
     Held to Maturity                  9,092         258           372
     Available for sale                1,601
Stock in FHLB of Indianapolis          4,234       2,474         2,218
Other
     Held to maturity                    684         610           696
     Available for sale(2)             8,129       9,793        10,591
                                   ----------  ----------    ----------
          Total investments          $44,651     $21,108       $29,882
                                   ==========  ==========    ==========
------------------------------------------------
(1)  In  interest-bearing  accounts in FHLB of Indianapolis  $8,773;  In insured
     certificates   of  deposit  $3,164  at  September  30,  2000;  In  FHLB  of
     Indianapolis  at September 30, 1999; In insured  certificates of deposit at
     September 30, 1998;
(2)  Van Kampen Prime Income Fund $2,407, Van Kampen Senior Income Trust $1,540,
     Nuveen Senior Income Fund $158, State and Municipal  obligations  $4,707 at
     September 30, 20000; Van Kampen Prime Income Fund $3,677, Van Kampen Senior
     Income Trust $1,617,  State and Municipal  obligations  $4,500 at September
     30, 1999;  Van Kampen Prime Income Fund $3,784,  Van Kampen  Senior  Income
     Trust $1,677, State and Municipal obligations $5,130 at September 30, 1998;

    The  following   table  sets  forth   information   regarding  the  maturity
distribution  of investment  securities at September 30, 2000,  and the weighted
average yield on those securities.
<TABLE>

                                                                At September 30, 2000
                                          -------------------------------------------------------------
                                               Available for Sale             Held to Maturity
                                          -----------------------------  ------------------------------
(Dollars in thousands)                             Weighted Approximate            Weighted Approximate
                                          Amortized Average    Fair     Amortized  Average     Fair
Maturity Distribution at September 30:      Cost     Yield     Value      Cost      Yield      Value
                                          --------- ------- ----------- ---------- -------- -----------
<S>                                        <C>       <C>     <C>         <C>         <C>     <C>
Due in one year or less                    $   651   5.06%   $   651     $    65     5.67%   $    65
Due after one through five years             7,813   5.60%     7,671         425     5.81%       428
Due after five through ten years             4,112   6.84%     4,059         695     7.07%       695
Due after ten years                            113   4.60%       115           -                   -
                                          ---------         ----------- ---------           ---------
                                            12,689            12,496       1,185               1,188
Mortgage-backed securities                   1,611   6.74%     1,601       9,092     6.15%     9,167
Marketable equity securities                 4,453             4,106           -                   -
                                          ---------         ----------- ---------           ---------
                  Total                    $18,753           $18,203     $10,277             $10,355
                                          =========         =========== =========           =========
</TABLE>
<PAGE>

Sources of Funds

General

    Deposits have  traditionally  been the primary  source of funds of the Banks
for use in lending and investment activities. In addition to deposits, the Banks
derive funds from loan prepayments and income on earning assets. While income on
earning  assets is a  relatively  stable  source of funds,  deposit  inflows and
outflows can vary widely and are influenced by prevailing  interest rates, money
market conditions, and levels of competition.

Deposits

    Deposits are attracted  principally  from within the Banks'  primary  market
areas  through  the  offering  of a variety  of deposit  instruments,  including
passbook and statement  accounts and  certificates  of deposit  ranging in terms
from three months to five years. Deposit account terms vary,  principally on the
basis of the minimum balance required, the time periods the funds must remain on
deposit  and the  interest  rate.  The Banks  also offer  individual  retirement
accounts ("IRA's").

    The Banks'  policies are designed  primarily to attract  deposits from local
residents  rather than to solicit  deposits  from areas  outside  their  primary
markets. The Banks do not accept deposits from brokers due to the volatility and
rate sensitivity of such deposits.  Interest rates paid, maturity terms, service
fees and withdrawal  penalties are established by the Banks on a periodic basis.
Determination  of rates and terms are  predicated  upon  funds  acquisition  and
liquidity  requirements,  rates paid by  competitors,  growth  goals and federal
regulations.

    A major  determinant of the Banks' average cost of funds is the distribution
of the Banks'  accounts by interest  rate paid.  An  important  indicator of the
Banks' stability of lendable funds is the distribution of the Banks' accounts by
maturity.

    For  information  on the amounts of  certificate  accounts at September  30,
2000,  maturing  during the next five years and  thereafter  see page  eleven in
Management's  Discussion  and Analysis of the  Company's  2000 Annual  Report to
Stockholders.

    The following  table lists  maturities of certificates of deposits where the
balance of the certificate  exceeds $100,000 for the periods indicated.  None of
these certificates were brokered deposits. (dollars in thousands)

                        At September 30,
                        ----------------
                              2000
                        ----------------
3 months or less             $ 4,294
3-6 months                     5,411
6-12 months                    6,326
over 12 months                13,449
                        ----------------
Total                        $29,480
                        ================



Borrowings

    As members of the FHLB  System and the FHLB of  Indianapolis,  the Banks are
eligible to arrange  borrowings or advances for various  purposes and on various
terms.  As of  September  30,  2000,  1999 and 1998 the  Banks  had  outstanding
advances  to  the  FHLB  of  Indianapolis  of  $47,182,393,   $7,2000,000,   and
$5,000,000,  respectively.  Of the $7,200,000 outstanding at September 30, 1999,
$5,000,000  was long-term  debt. See page 24 of the Company's 2000 Annual Report
to Stockholders for the maturity breakdown of these long-term instruments.
<PAGE>

    Reverse  repurchase  agreements,  another  source of  borrowing  for Peoples
Federal, are retail obligations of Peoples Federal with a maturity of 90 days or
less, and are generally  secured with specific  investment  securities  owned by
Peoples Federal.

    The  following  tables  set  forth  certain  information  as to  the  Banks'
short-term  borrowings  consisting of FHLB of Indianapolis  advances and reverse
repurchase  agreements  for the  periods  and at the  dates  indicated.  Average
balances and average interest rates are based on month-end balances.

                                                  Years Ended September 30
                                                 --------------------------
                                                   2000    1999      1998
                                                 ------- --------  --------
                                                   (Dollars in thousands)
Average balance of short-term borrowings          $5,859   $3,533  $4,166
Highest month-end balance of total borrowings      7,568    4,417   5,088
Weighted average interest rate of total borrowing  5.28%    5.28%   5.21%

                                                       At September 30
                                                 -------------------------
                                                  2000      1999     1998
                                                 -------- -------- -------
Reverse Repurchase agreements                        -       3,040  4,203
                                                 -------- -------- -------
Total short-term borrowings                        $ -      $3,040  $4,203
                                                 ========  ======= =======

Weighted average interest rate                     0.00%     6.33%   5.22%



Trust Department

    In October  1984,  the FHLB of  Indianapolis  granted  full trust  powers to
Peoples Federal,  one of the first savings institutions in Indiana to be granted
such powers. As of September 30, 2000, Peoples Federal's trust department assets
totaled approximately  $57,858,000 including self-directed Individual Retirement
Accounts  ("IRA's"),  and it was offering a variety of trust services  including
estate  planning.  As of that  date,  the  trust  department  was  administering
approximately 650 trust accounts,  including estates,  guardianships,  revocable
and irrevocable trusts, testamentary trusts, and self-directed IRA accounts. The
trust department also offers and administers  self-directed IRA's and Simplified
Employee Pension IRA's for small  businesses.  The trust  department  provides a
needed  service  to the  communities  served  by  Peoples  Federal,  as  well as
generating fee income which is largely unaffected by interest rate fluctuations.

Non-Bank Subsidiary

    Peoples  Financial  Services,  Inc. ("PFSI") was organized in 1977 under the
laws of the State of Indiana. It is wholly owned by Peoples Federal and conducts
a general  insurance  business  within  the State of  Indiana  under the name of
Peoples Insurance Agency. During fiscal years ended September 30, 2000 and 1999,
PFSI recorded total income of $84,351 and $90,515, respectively, with net income
for such periods amounting to $20,322 and $24,327, respectively.

    Alpha  Financial  was  organized  under the laws of the state of Michigan in
1975 as a wholly owned subsidiary of First Savings. First Savings' investment in
Alpha  Financial  was  $100,000  at  September  30,  2000.  The  assets of Alpha
Financial  consist of cash and stock in MIMLIC  Life  Insurance  Company,  which
reinsures  credit life insurance  policies  written on the lives of borrowers of
various financial institutions.

<PAGE>

Discount Brokerage Services

    Since 1985,  Peoples Federal has offered discount  brokerage services to its
customers.  In 1996,  this service was moved to the service  corporation and was
offered through U.S. Clearing Corp. Prior to 1996, another vendor was used. This
service  also reduces the expenses of  securities  transactions  for the various
trust accounts  administered by the trust department and provides customers with
a convenient and inexpensive means of conducting brokerage transactions.

Employees

    As of  September  30,  2000,  the Banks  employed 135 persons on a full-time
basis  and 16  persons  on a  part-time  basis.  The  Banks'  employees  are not
represented by any collective  bargaining  group,  and management  considers its
relations  with its  employees  to be  excellent.  The  holding  company  has no
employees.


                                                     REGULATION

General

         The Company,  as a savings and loan holding company,  and the Banks, as
federally chartered savings associations, are subject to extensive regulation by
the OTS and the FDIC. The lending  activities and other investments of the Banks
must  comply  with  various  federal  regulatory   requirements,   and  the  OTS
periodically   examines  the  Banks  for  compliance  with  various   regulatory
requirements and for safe and sound operations.  The FDIC also has the authority
to conduct  examinations.  The Banks must file reports  with the OTS  describing
their activities and financial condition and are also subject to certain reserve
requirements  promulgated  by the  Board of  Governors  of the  Federal  Reserve
System. This supervision and regulation is intended primarily for the protection
of  depositors  and the deposit  insurance  funds and not for the  protection of
stockholders  of the  Company.  Certain  of these  regulatory  requirements  are
referred to below or appear elsewhere herein.

Recent Legislation

         Financial Services  Modernization  Legislation.  The Gramm-Leach-Bliley
Act (the  "Financial  Services  Modernization  Act") became  effective March 11,
2000.  The  Financial  Services  Modernization  Act repeals the two  affiliation
provisions  of  the  Glass-Steagall   Act:  Section  20,  which  restricted  the
affiliation of Federal Reserve Member Banks with firms "engaged  principally" in
specified  securities  activities;  and Section  32,  which  restricts  officer,
director, or employee interlocks between a member bank and any company or person
"primarily  engaged"  in  specified  securities  activities.  In  addition,  the
Financial  Services  Modernization  Act also contains  provisions that expressly
preempt any state law restricting the  establishment of financial  affiliations,
primarily related to insurance.  The general effect of the law is to establish a
comprehensive framework to permit affiliations among commercial banks, insurance
companies,  securities  firms, and other financial service providers by revising
and expanding the Bank Holding Company Act framework to permit a holding company
system to engage in a full range of  financial  activities  through a new entity
known as a  "Financial  Holding  Company."  "Financial  activities"  is  broadly
defined to include not only banking,  insurance, and securities activities,  but
also merchant banking and additional  activities that the Federal Reserve Board,
in consultation  with the Secretary of the Treasury,  determines to be financial
in nature,  incidental to such financial activities, or complementary activities
that do not pose a  substantial  risk to the safety and  soundness of depository
institutions or the financial system generally.

         The Financial  Services  Modernization Act provides that no company may
acquire control of an insured savings association,  unless that company engages,
and continues to engage,  only in the  financial  activities  permissible  for a
Financial  Holding Company,  unless  grandfathered as a unitary savings and loan
holding company.  The Financial  Institution  Modernization Act grandfathers any
company that was a unitary  savings and loan holding  company on May 4, 1999 (or
becomes a unitary  savings and loan holding  company  pursuant to an application
pending on that date).  Such a company may continue to operate  under laws prior
to the Financial Services  Modernization Act as long as the company continues to
meet the two tests:  it can  control  only one  savings  institution,  excluding
supervisory  acquisitions,  and each such institution must meet the QTL test. It
further  requires that a grandfathered  unitary savings and loan holding company
must  continue  to  control at least one  savings  association,  or a  successor
institution, that is controlled on May 4, 1999.
<PAGE>

         The Financial Services Modernization Act also permits national banks to
engage in expanded activities through the formation of financial subsidiaries. A
national  bank may have a  subsidiary  engaged in any  activity  authorized  for
national  banks  directly  or  any  financial  activity,  except  for  insurance
underwriting,  insurance investments,  real estate investment or development, or
merchant  banking,  which  may  only be  conducted  through  a  subsidiary  of a
Financial Holding Company. Financial activities include all activities permitted
under new sections of the Bank Holding Company Act of 1956 ("BHCA") or permitted
by regulation.

         The Company and the Banks do not believe  that the  Financial  Services
Modernization  Act will have a material  adverse effect on the operations of the
Company  and the Banks in the  near-term.  However,  to the extent  that the act
permits  banks,  securities  firms,  and insurance  companies to affiliate,  the
financial services industry may experience further consolidation.  The Financial
Services  Modernization  Act is intended  to grant to  community  banks  certain
powers as a matter of right that larger  institutions  have accumulated on an ad
hoc basis and which unitary savings and loan holding  companies already possess.
Nevertheless,  this  act may  have  the  result  of  increasing  the  amount  of
competition  that the  Company and the Bank face from  larger  institutions  and
other types of companies  offering  financial  products,  many of which may have
substantially  more  financial  resources  that the  Company  and the  Bank.  In
addition,  because the Company may only be acquired by other unitary savings and
loan holding companies or Financial Holding Companies,  the legislation may have
an  anti-takeover  effect by limiting  the number of  potential  acquirers or by
increasing  the costs of an acquisition  transaction  by a bank holding  company
that has not made the election to be a Financial  Holding  Company under the new
legislation.

Regulation of the Company

         General.  The Company is a savings and loan holding  company as defined
by the HOLA. As such,  the Company is registered  with the OTS and is subject to
OTS  regulation,  examination,  supervision  and  reporting  requirements.  As a
subsidiary  of a savings  and loan  holding  company,  the Banks are  subject to
certain  restrictions in their dealings with the Company and affiliates thereof.
The Company also is required to file certain reports with, and otherwise  comply
with, the rules and regulations of the SEC under the federal securities laws.

         Activities  Restrictions.  There are generally no  restrictions  on the
activities of a savings and loan holding  company.  The broad latitude to engage
in activities  under current law can be  restricted if the OTS  determines  that
there is reasonable cause to believe that the continuation by a savings and loan
holding  company of an  activity  constitutes  a serious  risk to the  financial
safety,  soundness or stability of its subsidiary savings  institution,  the OTS
may impose such  restrictions as deemed necessary to address such risk including
limiting: (i) payment of dividends by the savings institution; (ii) transactions
between the savings institution and its affiliates;  and (iii) any activities of
the savings institution that might create a serious risk that the liabilities of
the  holding   company  and  its  affiliates  may  be  imposed  on  the  savings
institution.   Notwithstanding  the  above  rules  as  to  permissible  business
activities  of  unitary  savings  and loan  holding  companies,  if the  savings
institution  subsidiary  of such a holding  company  fails to meet the QTL test,
then such unitary  holding  company shall also become  subject to the activities
restrictions  applicable to multiple  holding  companies and, unless the savings
institution  requalifies as a QTL within one year  thereafter,  register as, and
become subject to, the restrictions  applicable to a bank holding  company.  See
"Regulation of the Bank--Qualified Thrift Lender."

         Restrictions on  Acquisitions.  Savings and loan holding  companies are
prohibited from acquiring, without prior approval of the OTS, (i) control of any
other savings  institution or savings and loan holding company or  substantially
all the assets  thereof  or (ii) more than 5% of the voting  shares of a savings
institution or holding company thereof which is not a subsidiary.  Under certain
circumstances,  a registered  savings and loan  holding  company is permitted to
acquire,  with the  approval  of the OTS,  up to 15% of the voting  shares of an
undercapitalized  savings  institution  pursuant to a "qualified stock issuance"
without that savings institution being deemed controlled by the holding company.
In order for the shares acquired to constitute a "qualified stock issuance," the
shares must consist of previously  unissued stock or treasury shares, the shares
must be  acquired  for  cash,  the  saving  and  loan  holding  company's  other
subsidiaries  must have  tangible  capital of at least  6-1/2% of total  assets,
there must not be more than one common  director or officer  between the savings
and loan holding company and the issuing savings  institution,  and transactions
between the savings institution and the savings and loan holding company and any
of its  affiliates  must conform to Sections 23A and 23B of the Federal  Reserve
Act.  Except  with the prior  approval  of the OTS,  no director or officer of a
savings and loan holding  company or person  owning by proxy or  otherwise  more
than 25% of such  company's  stock,  may also  acquire  control  of any  savings
institution,  other  than a  subsidiary  savings  institution,  or of any  other
savings and loan holding company.
<PAGE>

Regulation of the Banks

         Federal  Home Loan Bank  System.  The  Banks  are  members  of the FHLB
System,  which  consists  of 12  district  Federal  Home Loan  Banks  subject to
supervision and regulation by the Federal  Housing  Finance Board ("FHFB").  The
Federal Home Loan Banks provide a central credit  facility  primarily for member
institutions. As members of the FHLB of Indianapolis,  the Banks are required to
acquire  and hold  shares of  capital  stock in the FHLB of  Indianapolis  in an
amount  at  least  equal to 1% of the  aggregate  unpaid  principal  of its home
mortgage  loans,  home  purchase  contracts,  and  similar  obligations  at  the
beginning of each year, or 1/20 of its advances (i.e., borrowings) from the FHLB
of  Indianapolis,  whichever is greater.  The Banks were in compliance with this
requirement  with an investment in FHLB of  Indianapolis  stock at September 30,
2000, of $4,234,400.

         The FHLB of  Indianapolis  serves as a reserve or central  bank for its
member  institutions  within its assigned district.  It is funded primarily from
proceeds  derived from the sale of consolidated  obligations of the FHLB System.
It makes  advances  to  members  secured  by certain  prescribed  collateral  in
accordance with policies and procedures established by the FHFB and the Board of
Directors of the FHLB of Indianapolis.  Long-term  advances may only be made for
the purpose of providing funds for  residential  housing  finance.  Members must
meet  standards of community  investment or service  established  by the FHLB of
Indianapolis in order to maintain continued access to long-term advances.  As of
September 30, 2000, the Banks had advances totaling $47,182,393 outstanding.
See "Business of the Company--Deposit  Activity and Other Sources of Funds"  and
"--Borrowings."

         Liquidity Requirements. Under OTS regulations, a savings association is
required to maintain an average daily balance of liquid assets  (including cash,
certain  time  deposits  and savings  accounts,  bankers'  acceptances,  certain
government obligations,  and certain other investments) in each calendar quarter
of not less than 4% of either (1) its liquidity base  (consisting of certain net
withdrawable accounts plus short-term borrowings) as of the end of the preceding
calendar quarter,  or (2) the average daily balance of its liquidity base during
the preceding quarter.  The OTS may change this liquidity  requirement from time
to time to any  amount  from  4.0% to 10.0%,  depending  upon  certain  factors,
including economic conditions and savings flows of all savings associations. The
Banks  maintains  liquid assets in compliance with these  regulations.  Monetary
penalties  may be  imposed  upon an  institution  for  violations  of  liquidity
requirements.

         Qualified  Thrift  Lender  Test.  Savings   institutions  must  meet  a
qualified  thrift  lender  ("QTL")  test,  which  test  may  be  met  either  by
maintaining  a specified  level of assets in  qualified  thrift  investments  as
specified in HOLA or by meeting the definition of a "domestic  building and loan
association"  in section 7701 of the Internal  Revenue Code of 1986,  as amended
(the "Code").  If the Banks maintain an appropriate  level of certain  specified
investments (primarily residential mortgages and related investments,  including
certain  mortgage-related  securities)  and  otherwise  qualifies  as a QTL or a
domestic building and loan association, it will continue to enjoy full borrowing
privileges from the FHLB. The required  percentage of investments  under HOLA is
65% of  assets  while  the  Code  requires  investments  of 60%  of  assets.  An
association  must be in  compliance  with the QTL test or definition of domestic
building and loan association on a monthly basis in nine out of every 12 months.
Associations  that fail to meet the QTL test will  generally be prohibited  from
engaging in any activity not  permitted  for both a national  bank and a savings
association.  As of September 30, 2000, the Banks were in compliance  with their
QTL  requirements  and  met the  definition  of a  domestic  building  and  loan
association.
<PAGE>

         Regulatory Capital Requirements. Under OTS capital regulations, savings
institutions  must maintain  "tangible"  capital equal to 1.5% of adjusted total
assets,  "core" capital equal to 3% of adjusted total assets and "total" capital
(a combination of core and "supplementary" capital) equal to 8% of risk-weighted
assets.  In addition,  OTS  regulations  which impose  certain  restrictions  on
savings  associations  that have a total  risk-based  capital ratio that is less
than 8.0%, a ratio of Tier 1 capital to  risk-weighted  assets of less than 4.0%
or a ratio of Tier 1 capital to adjusted total assets of less than 4.0% (or 3.0%
if the  institution  is  rated  Composite  1 under  the OTS  examination  rating
system).

          The  OTS  has  adopted  an   amendment  to  its   risk-based   capital
requirements that requires savings  institutions with more than a "normal" level
of interest rate risk to maintain  additional total capital (the OTS is delaying
implementation of this requirement).  A savings institution's interest rate risk
will be measured in terms of the  sensitivity  of its "net  portfolio  value" to
changes in interest  rates.  Net portfolio value is defined,  generally,  as the
present  value of expected  cash inflows from  existing  assets and  off-balance
sheet  contracts  less the present value of expected cash outflows from existing
liabilities.  A savings  institution will be considered to have a "normal" level
of interest rate risk  exposure if the decline in its net portfolio  value after
an  immediate  200 basis point  increase or  decrease in market  interest  rates
(whichever  results  in the  greater  decline)  is less  than 2% of the  current
estimated  economic value of its assets.  A savings  institution  with a greater
than normal  interest  rate risk will be required to deduct from total  capital,
for purposes of calculating its risk-based capital  requirement,  an amount (the
"interest rate risk  component")  equal to one-half the  difference  between the
institution's  measured interest rate risk and the normal level of interest rate
risk, multiplied by the economic value of its total assets.

         The OTS will calculate the sensitivity of a savings  institution's  net
portfolio  value based on data submitted by the institution in a schedule to its
quarterly  Thrift  Financial Report and using the interest rate risk measurement
model  adopted by the OTS. The amount of the interest  rate risk  component,  if
any, to be deducted from a savings  institution's total capital will be based on
the  institution's  Thrift  Financial  Report  filed two  quarters  earlier.  In
general,  savings  institutions  with  less than $300  million  in assets  and a
risk-based  capital  ratio  above 12% are exempt  from this  interest  rate risk
component unless the OTS terminates such exemption.  Although the Bank qualifies
for the exemption, management believes that based on current financial data, the
Bank would not be deemed to have more than a normal level of interest rate risk.

         In addition  to  generally  applicable  capital  standards  for savings
institutions,  the Director of the OTS is  authorized  to establish  the minimum
level of capital  for a savings  institution  at such amount or at such ratio of
capital-to-assets  as the Director determines to be necessary or appropriate for
such  institution in light of the particular  circumstances  of the institution.
The  Director  of the OTS may treat the failure of any  savings  institution  to
maintain capital at or above such level as an unsafe or unsound practice and may
issue a  directive  requiring  any savings  institution  which fails to maintain
capital at or above the minimum  level  required  by the  Director to submit and
adhere to a plan for increasing capital. Such a directive may be enforced in the
same manner as an order issued by the OTS.

         At  September  30, 2000,  the Banks  exceeded  all  regulatory  minimum
capital  requirements  as indicated in Note 14, page 27 of the Company's  Annual
Report to Stockholders.

         Insurance of Deposit Accounts.  The Banks' deposit accounts are insured
by the SAIF to the maximum amount permitted by law. Insurance of deposits may be
terminated by the FDIC upon a finding that the institution has engaged in unsafe
or  unsound  practices,  is  in an  unsafe  or  unsound  condition  to  continue
operations or has violated any  applicable  law,  regulation,  rule,  order,  or
condition imposed by the FDIC or the institution's primary regulator.
<PAGE>

         The FDIC  charges an annual  assessment  for the  insurance of deposits
based on the risk a particular  institution poses to its deposit insurance fund.
Under this system as of September 30, 2000,  SAIF members paid within a range of
0  cents  to 23  cents  per  $100  of  domestic  deposits,  depending  upon  the
institution's  risk  classification.  This  risk  classification  is based on an
institution's capital group and supervisory subgroup assignment. Pursuant to the
Economic Growth and Paperwork  Reduction Act of 1996 (the "Act"), the Bank pays,
in addition to its normal deposit  insurance  premium as a member of the SAIF an
amount equal to  approximately  6.4 basis points  toward the  retirement  of the
Financing  Corporation bonds ("Fico Bonds") issued in the 1980s to assist in the
recovery of the savings and loan  industry.  Members of the Bank  Insurance Fund
("BIF"),  by  contrast,  pay,  in  addition to their  normal  deposit  insurance
premium,  approximately  1.3 basis  points.  Under the Act, the FDIC also is not
permitted to establish SAIF assessment  rates that are lower than comparable BIF
assessment  rates.  Effective  January 1, 2000, the rate paid to retire the Fico
Bonds will be equal for members of the BIF and the SAIF.  The Act also  provided
for the merging of the BIF and the SAIF by January 1, 1999,  provided there were
no financial  institutions still chartered as savings associations at that time.
Although  legislation  to  eliminate  the savings  association  charter had been
proposed at January 1, 1999, financial institutions such as the Banks were still
chartered as savings associations.

         Federal Reserve System.  Pursuant to regulations of the Federal Reserve
Board, a savings institution must maintain average daily reserves equal to 3% on
the first $54.0 million of transaction accounts, plus 10% on the remainder. This
percentage  is subject to  adjustment  by the  Federal  Reserve  Board.  Because
required  reserves  must  be  maintained  in the  form  of  vault  cash  or in a
non-interest  bearing  account  at a Federal  Reserve  Bank,  the  effect of the
reserve   requirement   is  to   reduce   the   amount   of  the   institution's
interest-earning  assets.  As of September 30, 2000, the Banks met their reserve
requirements.

         Dividend and Other Capital  Distribution  Limitations.  The OTS imposes
various  restrictions or requirements on the ability of savings  institutions to
make capital distributions, including cash dividends. A savings institution that
is a subsidiary of a savings and loan holding  company,  such as the Bank,  must
file an  application  or a notice with the OTS at least 30 days before  making a
capital  distribution.   Savings  institutions  are  not  required  to  file  an
application for permission to make a capital  distribution  and need only file a
notice if the following  conditions are met: (1) they are eligible for expedited
treatment under OTS regulations,  (2) they would remain  adequately  capitalized
after the distribution,  (3) the annual amount of capital  distribution does not
exceed net income for that year to date added to retained net income for the two
preceding  years,  and  (4) the  capital  distribution  would  not  violate  any
agreements  between the OTS and the savings  institution or any OTS regulations.
Any other situation would require an application to the OTS.

         In addition,  the OTS could prohibit a proposed capital distribution by
any  institution,  which would otherwise be permitted by the regulation,  if the
OTS  determines  that the  distribution  would  constitute  an unsafe or unsound
practice.  A federal  savings  institution  is prohibited  from making a capital
distribution if, after making the distribution, the savings institution would be
unable to meet any one of its minimum regulatory capital  requirements.  Savings
institutions  cannot  distribute  regulatory  capital  that  is  needed  for its
liquidation account.

         Affiliate Restrictions.  Transactions between a savings association and
its "affiliates" are subject to quantitative and qualitative  restrictions under
Sections  23A  and 23B of the  Federal  Reserve  Act.  Affiliates  of a  savings
association include,  among other entities,  the savings  association's  holding
company  and  companies   that  are  under  common   control  with  the  savings
association.

         In  general,  Sections  23A  and  23B and  OTS  regulations  issued  in
connection  therewith  limit the  extent to which a savings  association  or its
subsidiaries may engage in certain "covered  transactions" with affiliates to an
amount equal to 10% of the  association's  capital and  surplus,  in the case of
covered  transactions  with any one affiliate,  and to an amount equal to 20% of
such  capital  and  surplus,  in the  case  of  covered  transactions  with  all
affiliates.  In addition,  a savings association and its subsidiaries may engage
in covered  transactions and certain other  transactions only on terms and under
circumstances  that are  substantially the same, or at least as favorable to the
savings  association  or its  subsidiary,  as those  prevailing  at the time for
comparable transactions with nonaffiliated companies. A "covered transaction" is
defined to include a loan or extension of credit to an affiliate;  a purchase of
investment  securities  issued by an  affiliate;  a purchase  of assets  from an
affiliate,  with certain  exceptions;  the acceptance of securities issued by an
affiliate as collateral  for a loan or extension of credit to any party;  or the
issuance  of a  guarantee,  acceptance,  or  letter  of  credit  on behalf of an
affiliate.
<PAGE>

           In addition, under the OTS regulations, a savings association may not
make a loan or  extension  of credit to an  affiliate  unless the  affiliate  is
engaged only in activities  permissible  for bank holding  companies;  a savings
association  may not purchase or invest in securities of an affiliate other than
shares of a  subsidiary;  a savings  association  and its  subsidiaries  may not
purchase a low-quality  asset from an affiliate;  and covered  transactions  and
certain other transactions between a savings association or its subsidiaries and
an affiliate must be on terms and conditions  that are consistent  with safe and
sound  banking  practices.  With certain  exceptions,  each loan or extension of
credit by a savings  association  to an affiliate  must be secured by collateral
with a  market  value  ranging  from  100% to  130%  (depending  on the  type of
collateral) of the amount of the loan or extension of credit.

         The OTS  regulation  generally  excludes all  non-bank and  non-savings
association  subsidiaries of savings  associations from treatment as affiliates,
except to the  extent  that the OTS or the  Board of  Governors  of the  Federal
Reserve System (the "Federal Reserve Board") decides to treat such  subsidiaries
as affiliates.  The regulation  also requires  savings  associations to make and
retain records that reflect  affiliate  transactions in reasonable  detail,  and
provides that certain  classes of savings  associations  may be required to give
the OTS prior notice of affiliate transactions.

         Prompt  Corrective  Action.  The prompt corrective action regulation of
the  OTS  requires  certain  mandatory  actions  and  authorizes  certain  other
discretionary  actions to be taken by the OTS against a savings  bank that falls
within certain undercapitalized capital categories specified in the regulation.

         The regulation  establishes five categories of capital  classification:
"well capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically  undercapitalized." Under the regulation, the
risk-based  capital,  leverage capital,  and tangible capital ratios are used to
determine an institution's  capital  classification.  At September 30, 2000, the
Banks met the capital  requirements  of "well  capitalized"  institutions  under
applicable OTS regulations.

         In  general,  the prompt  corrective  action  regulation  prohibits  an
insured  depository  institution from declaring any dividends,  making any other
capital  distribution,  or paying a management  fee to a controlling  person if,
following the  distribution or payment,  the institution  would be within any of
the three  undercapitalized  categories.  In  addition,  adequately  capitalized
institutions  may accept Brokered  Deposits only with a waiver from the FDIC and
are  subject  to  restrictions  on the  interest  rates that can be paid on such
deposits.  Undercapitalized  institutions  may not accept,  renew,  or roll-over
Brokered Deposits.

         If the OTS  determines  that an  institution is in an unsafe or unsound
condition,  or if the  institution  is deemed to be  engaging  in an unsafe  and
unsound  practice,  the  OTS  may,  if  the  institution  is  well  capitalized,
reclassify  it as  adequately  capitalized;  if the  institution  is  adequately
capitalized  but not well  capitalized,  require it to comply with  restrictions
applicable  to  undercapitalized  institutions;   and,  if  the  institution  is
undercapitalized,  require it to comply with certain restrictions  applicable to
significantly undercapitalized institutions.

         Community Reinvestment Act and Fair Lending Developments. The Banks are
subject to certain fair lending requirements and reporting obligations involving
home  mortgage  lending  operations  and  Community   Reinvestment  Act  ("CRA")
activities.  The CRA generally requires the federal banking agencies to evaluate
the record of a financial  institution  in meeting the credit needs of its local
communities,   including  low-  and  moderate-income  neighborhoods.  A  savings
association may be subject to substantial  penalties and corrective measures for
a violation of certain fair lending laws. The federal banking  agencies may take
compliance with such laws and CRA  obligations  into account when regulating and
supervising other activities.
<PAGE>

         A savings association's compliance with its CRA obligations is based on
a performance-based evaluation system that bases CRA ratings on an institution's
lending service and investment  performance.  When a holding company applies for
approval to acquire  another  financial  institution  or  financial  institution
holding company,  the OTS will review the assessment of each subsidiary  savings
association of the applicant;  and such records may be the basis for denying the
application. As of the latest CRA Examinations, the Banks each received a rating
of "satisfactory" in complying with its CRA obligations.

Item 2.  Properties


Peoples  Federal  owns eight  full-service  banking  offices  located in Avilla,
Auburn, Columbia City, Garrett, Kendallville, LaGrange and Waterloo, Indiana.

    The following  table provides  certain  information  with respect to Peoples
Federal's full-service offices at September 30, 2000.

         Full Service                Date         Net Book
            Offices                 Opened        Value (1)
--------------------------------  ------------   -----------
Main Office, Auburn                   1973        $  149
Avilla                                1980           107
Garrett                               1972            97
Columbia City-Downtown                1971           128
Columbia City-North                   1998           524
Kendallville                          1941           430
LaGrange                              1972           154
Waterloo                              2000         1,028


(1)      Of real estate at September 30, 2000.

The  total  net book  value of  Peoples  Federal's  premises  and  equipment  at
September 30, 2000, was $3.2 million.

First  Savings  Bank owns six  full-service  banking  offices  located  in Three
Rivers, Union, and Schoolcraft, Michigan and Howe and Middlebury, Indiana.

    The  following  table  provides  certain  information  with respect to First
Saving's full service offices at September 30, 2000.

         Full Service                Date         Net Book
            Offices                 Opened       Value (1)
--------------------------------  ------------   -----------
Main Office, Three Rivers             1981        $1,261
Schoolcraft                           1971            93
Union                                 1988           269
Three Rivers, branch                  1988           128
Howe                                  1998           399


(1)      Of real estate at September 30, 2000.



    The  total  net book  value of First  Savings'  premises  and  equipment  at
September 30, 2000 was $2.9 million.
<PAGE>


Item 3.  Legal Proceedings

    There are no material  pending legal  proceedings to which the Company,  the
Banks or any subsidiary is a party or to which any of their property is subject.


Item 4.  Submission of Matters to a Vote of Security Holders

    Not Applicable.

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

    Reference is made to page 2 of the Company's  Annual Report to Stockholders,
for the year ended September 30, 2000 for the information required by this Item,
which is hereby incorporated by reference.

Item 6.  Selected Financial Data

    Reference is made to page 9 of the Company's  Annual Report to  Stockholders
for the year ended  September  30, 2000,  for the  information  required by this
Item, which is hereby incorporated by reference.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
 of Operations
--------------

    Reference  is made to  pages 10 to 116 of the  Company's  Annual  Report  to
Stockholders for the year ended September 30, 2000, for the information required
by this Item, which is hereby incorporated by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

    Reference  is made to  pages 11 and 12 of the  Company's  Annual  Report  to
Stockholders for the year ended September 30, 2000, for the information required
by this item, which is hereby incorporated by reference.

Item 8.  Financial Statements and Supplementary Data


    Reference  is made to  pages  17 to 32 of the  Company's  Annual  Report  to
Stockholders for the year ended September 30, 2000 for the information  required
by this Item, which is hereby incorporated by reference.

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
--------------------------------------------------------------------------------
Financial Disclosures
---------------------

    None.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

    Reference  is made to the section  captioned  "The  Peoples  Bancorp  Annual
Meeting-Election  of Directors" in the Company's  Proxy Statement dated December
12, 2000 for the information required by this Item, which is hereby incorporated
by reference.

Item 11.  Executive Compensation

    Reference  is made to the section  captioned  "The  Peoples  Bancorp  Annual
Meeting-Executive  Officer  Compensation" in the Company's Proxy Statement dated
December  12, 2000 for the  information  required by this Item,  which is hereby
incorporated by reference.

<PAGE>

Item 12.  Security Ownership of Certain Beneficial Owners and Management

    Reference  is made to the section  captioned  "The  Peoples  Bancorp  Annual
Meeting-Securities Ownership of Certain Beneficial Owners in the Company's Proxy
Statement  dated  December  12, 2000 for the  information  required by this Item
which is hereby incorporated by reference.

Item 13.  Certain Relationships and Related Transactions

    Reference  is made to the section  captioned  "The  Peoples  Bancorp  Annual
Meeting-Transactions  with  Certain  Related  Persons"  in the  Company's  Proxy
Statement  dated  December 12, 2000 for the  information  required by this Item,
which is hereby incorporated by reference.

                                     PART IV

Item 14.  Exhibits, Financial Statements, Schedules, and Reports on Form 8-K

    (a) The following  consolidated  financial statements of Peoples Bancorp and
Its Wholly-owned Subsidiaries,  included in the Annual Report to Stockholders of
the registrant  for the year ended  September 30, 2000 are filed as part of this
report:

                  1.  Financial Statements

             o  REPORT OF OLIVE LLP, INDEPENDENT AUDITORS PAGE 7.
             o  CONSOLIDATED  BALANCE SHEET - AS OF SEPTEMBER 30, 2000, AND 1999
PAGE 17.
             o  CONSOLIDATED  STATEMENT OF INCOME FOR THE YEARS ENDED  SEPTEMBER
             30,  2000,  1999,  AND 1998 PAGE 18. o  CONSOLIDATED  STATEMENT  OF
             STOCKHOLDERS'  EQUITY FOR THE YEARS ENDED SEPTEMBER 30, 2000, 1999,
             AND 1998 PAGE 19. o  CONSOLIDATED  STATEMENT  OF CASH FLOWS FOR THE
             YEARS ENDED SEPTEMBER 30, 2000, 1999, AND 1998 PAGE 20. .o NOTES TO
             CONSOLIDATED FINANCIAL STATEMENTS PAGES 21-32.

             2.         Financial Statement Schedules

             All schedules are omitted because they are not  applicable,  or the
required  information  is shown in the  consolidated  financial  statements  and
notes.

             3.       Exhibits

Exhibit No.   Description of Exhibit
-----------  -----------------------


3.1          Articles of Incorporation of Peoples Bancorp (1)

3.2          Bylaws of Peoples Bancorp (1)

10.4         Amended and Restated Stock Option and Stock Grant Plan (2)

10.5         Employee Stock Ownership Plan (1)

10.5(a)      First Amendment to Employee Stock Ownership Plan (3)

10.5(b)      Second Amendment to Employee Stock Ownership Plan (3)

10.5(c)      Third Amendment to Employee Stock Ownership Plan (3)
<PAGE>

10.6         Expense and Tax Sharing Agreement  between Peoples Bancorp, Peoples
             Federal  Savings  Bank of  DeKalb   County  and  Peoples  Financial
             Services, Inc., dated May 28, 1992 (3)

10.7         New option plan

13           Annual Report to Stockholders

22           Subsidiaries of the Registrant

23           Consent of Auditors
---------------------------------
    (1)  Incorporated  by  reference  to Exhibit  bearing the same number in the
Company's   Registration  Statement  of  Form  S-4  (33-37343)  filed  with  the
Securities and Exchange Commission on October 17, 1990.

    (2)  Incorporated  by  reference  to Exhibit  bearing the same number in the
Company's Annual Report on form 10-K for the year ended September 30, 1991.

    (3)  Incorporated  by  reference  to Exhibit  bearing the same number in the
Company's Annual Report on form 10-K for the year ended September 30, 1992.

(b)      There  were no  reports on  Form 8-K filed  for the period June 1, 2000
through September 30, 2000.

The  Securities  and  Exchange  Commission  maintains  a Web sit  that  contains
reports,  proxy  and  information  statements  and other  information  regarding
registrants that file electronically with the Commission  including the Company.
That address is http://www.sec.gov.

<PAGE>
                                   SIGNATURES


    Pursuant  to the  requirements  of  Section  13 or 15(d)  of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                         PEOPLES BANCORP

December 22, 2000                       Roger J. Wertenberger
                                        Chairman of the Board,
                                        and Director

    Pursuant to the  requirements  of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

December 22, 2000                       Roger J. Wertenberger,
                                        Chairman of the Board,
                                        and Director

December 22, 2000                       Maurice F. Winkler III,
                                        President, Chief Executive Officer
                                        and Director

December 22, 2000                       Deborah K. Stanger
                                        Vice President-Chief Financial Officer

December 22, 2000                       Robert D. Ball, Director

December 22, 2000                       Bruce S. Holwerda,  Director

December 22, 2000                       John C. Harvey, Director

December 22, 2000                       Douglas D. Marsh, Director

December 22, 2000                       Lawrence R. Bowmar, Director

December 22, 2000                       John C. Thrapp, Director
<PAGE>

                                   EXHIBIT 22



                         SUBSIDIARIES OF THE REGISTRANT


Name of Subsidiary                          State of Incorporation
--------------------------------            ----------------------
Peoples Federal Savings
Bank of DeKalb County                       United States of America

and its subsidiary

Peoples Financial Services Inc.                  Indiana


First Savings Bank
Federal Savings Bank                        United States of America

And its subsidiary

Alpha Financial                                   Michigan