28

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended September 30, 2005
                                       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: (260) 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 if the registrant is a well-known  seasoned  issuer,
as defined in rule 405 of the Securities Act. Yes ___ No X .

     Indicate by check mark if the  registrant  is not  required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes No X . ----- ----

     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. ___

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2). Yes ___ No X - ----

     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Exchange Act). Yes ___ No X - ----

Aggregate market value of voting stock held by non-affiliates of the registrant,
as of March 31, 2005: $69,046,073. ------------

     Indicate  the  number of  shares  outstanding  of each of the  registrant's
classes of common stock, as of December 20, 2005:

           3,341,264 shares of Common Stock, par value $1.00 per share

                      Documents Incorporated by Reference:

     Portions of the definitive Proxy Statement (Parts I and III) and the Annual
Report to Stockholders for the year ended September 30, 2005 (Parts III 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  and other actual  results 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;  changes in real estate  values and the real
estate market; loss of deposits and loan demand to other financial institutions;
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;  increases  in
compensation  and  employee  expenses;  unanticipated  results in pending  legal
proceedings;  other factors described in "Investment  Considerations" in Item 1;
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 eight
full-service  offices located in Avilla,  Columbia City, Garrett,  Kendallville,
LaGrange,  Topeka 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,  it has been a member of the  Federal  Home Loan Bank  System
("FHLB  System")  and the  Federal  Home  Loan  Bank of  Indianapolis  ("FHLB of
Indianapolis").  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.


                                       2
<PAGE>

     The Company  has no other  business  activity  other than being the holding
company for Peoples Federal and First Savings  (collectively the "Banks") and is
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.

     In February,  2003,  the Board  authorized a  three-year  stock  repurchase
program permitting the Company to purchase up to 300,000 shares of the Company's
common  stock  may be  made  in  the  open  market  or in  privately  negotiated
transactions.  As of September  30, 2005,  the Company had  repurchased  131,703
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  Company'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,  the  Company  expects  to  emphasize  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.

     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 fifteen  full-service  banking
offices.  They also provide credit card  services,  as well as  enhancements  to
their  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.

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


                                       3
<PAGE>

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 usually 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 interest rates 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 eight
of  Management's  Discussion and Analysis of Financial  Condition and Results of
Operations in the Company's 2005 Annual Report to Stockholders.

     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, 2005,  2004, and 2003
refer  to  page  four of  Management's  Discussion  and  Analysis  of  Financial
Condition  and Results of  Operations  in the  Company's  2005 Annual  Report to
Stockholders.

     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,  2005,  2004,  and 2003 refer to page nine of  Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations in the Company's 2005
Annual Report to Stockholders.


                                       4
<PAGE>

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  157,300 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 to the  Company,  the market area has
expanded  into  southern  Michigan  and the  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
580,000 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 it originates 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.

     During  the fiscal  year  ended  September  30,  2005 the Banks  originated
$78,636,904  of  residential  loans of which  $20,787,247  were five- to 30-year
fixed-rate  mortgages and  $57,849,657  were  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.

                                       5
<PAGE>

     Set  forth  below  are  the  amounts  and  percentages  of  fixed-rate  and
adjustable-rate loans (which include consumer loans) in the Banks' portfolios at
September 30, 2005, 2004, and 2003.

                                  September 30,
-----------------------------------------------------------------------
            2005               2004                         2003
--------------------  ------------------------    ---------------------
                             (Dollars in Thousands)
-----------------------------------------------------------------------
Adjustable   Fixed    Adjustable       Fixed      Adjustable    Fixed
----------  -------- -----------  ------------  ------------  ---------
 $248,534   $113,159   $238,586      $127,408      $231,122   $133,032
   68.7%     31.3%       65.2%         34.8%         63.5%      36.5%

     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.  However,  with the
recent increases in refinancings,  many consumers now have low rate loans.  With
interest rates rising, these consumers may not be as willing to prepay these low
rate loans,  and the loans may remain  outstanding for a much longer period.  At
September 30, 2005, the average contractual maturity of the Banks' portfolios of
fixed-rate  loans  was 8 years  and 5  months,  and 20 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,
2004,  to  September  30, 2005,  commercial  real estate  loans  decreased  from
$22,447,000 to $19,752,000,  with the percentage of commercial real estate loans
to total  loans  decreasing  from  6.10% to  5.50%.  These  loans  consisted  of
construction  and permanent  loans  secured by mortgages on mid-size  commercial
real estate and farms. Of these loans,  approximately  $10.4 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.

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


                                       6
<PAGE>

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,  2005.  The  estimated  maturity
reflects  contractual  terms  at  September  30,  2005.   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.

                                         Due After
                             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    $ 7,316     $ -           $      -    $ 7,316
   Commercial                     110                          -        110
Real estate loans:
   Mortgage-residential        56,065      132,637       122,995    311,697
   Commercial                   5,251       10,924         3,577     19,752
Installment loans --
   Consumer                     5,280        6,322           166     11,768
   Commercial                   7,281        3,486           283     11,050
                             ---------  -----------   -----------  ----------
         Total                $81,303     $153,369     $127,021    $361,693
                             =========  ===========   ===========  ==========

     The following table sets forth the total amount of loans due after one year
from September 30, 2005, which have a fixed rate or an adjustable rate.

                    Loans Due
         October 1, 2006 and thereafter
-----------------------------------------
                             (Dollars in Thousands)
-----------------------------------------------------------------------------
        Fixed               Adjustable          Total at September 30, 2005
-----------------     -------------------    --------------------------------
       $92,374               $188,016                     $280,390

                                       7
<PAGE>


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.

<TABLE>
                                                              At September 30
                              2005                2004              2003               2002              2001
                       ----------------------------------------------------------------------------------------------
TYPE OF LOAN            AMOUNT       %      AMOUNT      %      AMOUNT      %     AMOUNT      %      AMOUNT      %
                       ---------- -------- ---------- ------- ---------  ------ ---------- ------- ---------- -------
<S>                     <C>        <C>     <C>        <C>     <C>       <C>      <C>       <C>      <C>       <C>
Residential:                                              (dollars in thousands)
     Single family unit$ 289,321    80.0%  $ 288,452   78.8%  $301,265   82.7%   $312,509   79.5%   $336,586   83.4%
     2-4 family units      1,512     0.4%      1,550    0.4%     1,797    0.5%      2,954    0.8%      3,243    0.8%
     Over 4 family units   2,105     0.6%      2,401    0.7%     2,593    0.7%      3,485    0.9%      1,452    0.8%
Commercial real estate    19,752     5.5%     22,447    6.1%    14,750    4.1%     20,870    5.3%     21,906    4.2%
Land acquisition and
     development           2,442     0.7%      1,683    0.5%     1,480    0.4%      1,516    0.4%      1,938    0.5%
Consumer and other loans  45,822    12.7%     48,785   13.3%    41,748   11.5%     50,233   12.8%     46,177   10.0%
Loans on deposits            739     0.2%        675    0.2%       521    0.1%      1,044    0.3%        979    0.3%
                       ---------- -------- ---------- ------- ---------  ------ ---------- ------- ---------- -------
                         361,693   100.0%    365,993  100.0%   364,154   100.0%   392,611  100.0%    412,281  100.0%
                       ---------- -------- ---------- ------- ---------  ------ ---------- ------- ---------- -------
Less:
Undisbursed portion
     of loans              3,361               2,440             3,467              3,821              5,262
Deferred loan fees and
     discounts             1,216               1,434             1,623              1,653              1,829
                       ----------          ----------         ---------         ----------         ----------
                           4,577               3,874             5,090              5,474              7,091
                       ----------          ----------         ---------         ----------         ----------
Total loans receivable   357,116             362,119           359,064            387,137            405,190
Allowance for losses
     on loans              1,967               1,958             2,111              2,117              1,895
                       ----------          ----------         ---------         ----------         ----------
Net loans              $ 355,149           $ 360,161          $ 356,953         $ 385,020           $403,295
                       ==========          ==========         =========         ==========         ==========
</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  $500,000.  The Banks'  Boards of  Directors  must  approve  loans  exceeding
$500,000.  The Banks utilize  independent  qualified  appraisers approved by the
Board of Directors to appraise the  properties  securing their 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.

                                       8
<PAGE>

     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.

     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,  provided  all such loans are  eligible  for sale in the
secondary  market.  Peoples Federal currently holds all originated and purchased
loans in its  portfolio.  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
                                                --------------------------------
                                                   2005       2004        2003
                                                ---------  ------------ --------
                                                        (Dollars in thousands)
Mortgage loans originated
   for the purpose of:
     Construction-commercial                     $    69    $      -   $      -
     Construction-residential                      7,905      10,693     10,321
     Purchase/refinance-commercial                 5,051       3,526      3,349
     Purchase/refinance-residential               59,403      75,179    123,978
Consumer and other loans originated               16,920      24,678     29,805
                                                ---------  ----------  ---------
   Total loans originated                         89,348     114,076    167,453
                                                ---------  ----------  ---------
Loan credits:
    Loans sold                                     5,604       9,498     37,157
   Principal repayments and other adjustments     88,320     100,869    158,249
                                                ---------  ----------  ---------
Other:
   Provision for losses on loans                      67          40        537
   Amortization of loan fees                        (487)       (506)      (759)
   Loan foreclosures, net                            856         967        336
                                                ---------  ----------  ---------
                                                     436         501        114
                                                ---------  ----------  ---------

     Total credits, net                           88,756     101,370    158,363
                                                ---------  ----------  ---------
Net increases (decreases) in mortgage and other
   loans receivable, net                         $(5,012)   $  3,208   $(28,067)
                                                =========  ==========  =========

Interest Rates, Points and Fees

     The Banks  realize  interest,  point,  and fee income  from  their  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.

                                       9
<PAGE>

     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.

     The Banks also realize  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  therefrom 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 at
September 30, 2005.

<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
   family                17       1,112       0.38%        2       182      0.06%        7         722       0.25%
  Non-residential         2         189       0.96%        -         -      0.00%        1         245       1.24%

Consumer                  8          80       0.38%        1         3      0.01%        9          26       0.12%
                    --------  ----------             --------  --------            --------  ----------

   Total                 27     $ 1,381       0.38%        3      $185      0.05%       17       $ 993       0.27%
                    ========  ==========             ========  ========            ========  ==========

</TABLE>

                                       10
<PAGE>



     The following table sets forth the Banks' nonperforming assets at the dates
indicated.

                                           At September 30,
                             -------------------------------------------
                               2005     2004    2003      2002      2001
                             -------  -------- -------  --------  ------
                                      (Dollars in thousands)
Nonaccrual loans              $1,042  $  493   $1,127   $  801    $676
Loans past due 90 days and
    still accruing               126      26       90      106      52
                             -------  -------  -------  -------   ------
                               1,168     519    1,217      907     728
Real estate owned, net
   of allowance                1,061     940      854      489     117
                             -------  -------  -------  -------   ------

   assets                     $2,229  $1,459   $2,071   $1,396    $845
                             =======  =======  =======  =======   ======

     Consumer loans are placed on nonaccrual  generally when the loan exceeds 90
days delinquent or if, in the opinion of management, OMITTED] 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  ratio,  management may at their option decide
to accrue  interest on the loan,  since  collection  of the loan appears  highly
likely.

     The increase in  non-accrual  loans since  September  30, 2004 is primarily
from the 1 to 4 family portion of the loan  portfolio,  and management  believes
the increase has been  appropriately  considered in determining  the adequacy of
the  allowance  for loan and real estate owned  ("REO")  losses at September 30,
2005.  There have been no significant  changes in potential  problem loans since
September 30, 2004. Net  charge-offs  for the years ended September 30, 2005 and
2004 were $59,090 and  $192,751,  respectively.  Net  charge-offs  were slightly
above average during fiscal 2003 due to the aforementioned  economic conditions.
This was combined with a large loss on one commercial  loan resulting in the net
charge-off increase for this year.

     Interest  income  that  would  have  been  recognized  for the  year  ended
September  30, 2005, if  nonaccrual  loans had been current in  accordance  with
their original terms,  approximated $12,000.  Interest income recognized on such
loans for the year ended September 30, 2004,  approximated $11,000. At September
30, 2005 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 cash flow  shortfall,
however,  the borrower has  continued to service the debt.  It is the  Company's
policy to  reserve  5% of the loan  balance  for  loans  classified  as  special
mention.

     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).
Substandard  loans are reserved at 20% of the loan balance.  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, and
the company reserves 50% of the loan balance.

     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.

                                       11
<PAGE>

     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 it deems appropriate.

     As of September 30, 2005,  loan  balances  were  classified by the Banks as
follows:

             Loss                          $       -0-
             Doubtful                              -0-
             Substandard                      863,000
             Special Mention                2,190,000

Allowance for Losses on Loans

     The  allowances  for loan  losses  represent  amounts  available  to absorb
inherent losses in the loan  portfolios.  The allowance is 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
allowance 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 allowance to levels  considered  necessary by  management.  Losses are
charged to the  allowance  when  considered  probable.  As of September 30, 2005
allowance for losses on loans was $1,966,623.  Overall,  the general composition
of the loan portfolio has remained similar to the prior year with no significant
shift of risk between  components  of the loan  portfolio  that would impact the
calculation  of the allowance for loan losses.  The Banks'  management  believes
that the  allowance  is  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.  The  unallocated  portion  relates to  qualitative  factors in the
portfolio such as economic  conditions in the Banks' market areas,  which cannot
be separated by loan type.
<TABLE>

                                                             September 30,
                              2005                 2004           2003           2002             2001
                             --------------- --------------- -------------- -------------- --------------
                             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    $1,080  87.8%  $1,334  87.8%  $1,420   82.1% $1,361   81.2% $  910   82.4%
Commercial/ Commercial Real
     Estate Loans                276   6.1%     231   8.8%     166    5.8%    404    5.7%    527    6.2%
Consumer Loans                   311   6.1%     140   3.4%     311   12.1%    294   13.1%    342   11.4%
Unallocated                      300            254            214             58            116
                             ------- ------ ------- ------- ------- ------ ------- ------ ------- ------
Total                         $1,967 100.0%  $1,959 100.0%  $2,111  100.0% $2,117  100.0% $1,895  100.0%
                             ======= ====== ======= ======= ======= ====== ======= ====== ======= ======
</TABLE>


     The  following  table is a summary of activity in the Banks'  allowance for
loan losses for the periods indicated.


                                       12
<PAGE>
<TABLE>

Summary of Loan Loss Experience                        Years ended September 30,
                                       -----------------------------------------------------------
                                        2005        2004        2003         2002        2001
                                       ---------   ----------  ----------   ----------  -------
<S>                                     <C>          <C>         <C>         <C>        <C>
Balance of loan loss allowance at                      (Dollars in Thousands)
     beginning of year                   $1,959      $2,111      $2,117      $1,895     $1,650
       Charge-offs
          Residential                         7           4          25          36          4
          Commercial real estate              -         144           -           -          -
          Commercial                                      -         395           -          -
          Consumer                           87          93         138         118        139
                                       ---------   ---------  ----------   ---------  ---------
               Total Charge-offs             94         241         558         154        143
                                       ---------   ---------  ----------   ---------  ---------
          Recoveries
          Residential                         -           -           -           -          -
          Consumer                           35          49          15          28         34
                                       ---------   ---------  ----------   ---------  ---------
               Total Recoveries              35          49          15          28         34
                                       ---------   ---------  ----------   ---------  ---------
          Net Charge-offs (Recoveries)       59         192         543         126        109
Provision for loan losses                    67          40         537         348        354
                                       ---------   ---------  ----------   ---------  ---------
Balance of loan loss allowance at
     end of year                         $1,967      $1,959      $2,111      $2,117     $1,895
                                       =========   =========  ==========   =========  =========
</TABLE>

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.


                                       13
<PAGE>

                                            At September 30,
                                    -------------------------------
                                      2005       2004        2003
                                    ---------  ---------  ----------
Interest-bearing deposits and                (Dollars in thousands)
     certificates of deposit (1)    $  3,467    $  7,725   $ 29,965
U.S. government and federal
     agency securities
     Held to maturity                      -           -          -
     Available for sale               76,041      71,985     61,352
Mortgage-backed securities
     Held to Maturity                    751       1,112      2,117
     Available for sale                7,604      10,742     13,953
Stock in FHLB of Indianapolis          4,888       4,737      4,519
Other
     Held to maturity                      -           -          -
     Available for sale (2)           14,035      12,954     10,199
                                    ---------   ---------  ---------

          Total investments         $106,786    $109,255   $122,105
                                    =========   =========  =========

--------------------------------------------
(1) In insured  certificates  of deposit at September 30,  2005;Interest-bearing
accounts at FHLB of Indianapolis of $4,654,  insured  certificates of deposit of
$3,071 at September 30, 2004;  Interest-bearing accounts at FHLB of Indianapolis
of  $26,695,insured  certificates  of  deposit  $3,270 at  September  30,  2003;
Interest-bearing   accounts  at  FHLB  of  Indianapolis   of  $27,175,   insured
certificates of deposit of $3,270 at September 30, 2003;
(2) Van Kampen  Prime  Income Fund  ($2,464),  Van Kampen  Senior  Income  Trust
($1,397),  State and Municipal  obligations ($10,174) at September 30, 2005; Van
Kampen Prime Income Fund  ($2,442),  Van Kampen  Senior  Income Trust  ($1,538),
State and Municipal obligations ($8,974) at September 30, 2004; Van Kampen Prime
Income  Fund  ($2,298),  Van Kampen  Senior  Income  Trust  ($1,397),  State and
Municipal obligations ($6,504) at September 30, 2003;

     The  following  table  sets  forth   information   regarding  the  maturity
distribution  of investment  securities at September 30, 2005,  and the weighted
average yield on those securities.
<TABLE>

                                                             At September 30, 2005
                                        --------------------------------------------------------------
                                              Available for Sale             Held to Maturity
                                        ------------------------------ -------------------------------
                                                  Weighted Approximate            Weighted Approximate
                                        Amortized Average    Fair      Amortized  Average    Fair
Maturity Distribution at September 30:    Cost     Yield     Value       Cost      Yield     Value
                                        --------- -------- ----------- --------- --------- ------------
                                                       (Dollars in thousands)
<S>                                     <C>        <C>       <C>           <C>                  <C>
Due in one year or less                 $ 1,753    2.90%     $ 1,738       $  -                 $ -
Due after one through five years         61,129    3.65%      60,047          -                   -
Due after five through ten years         22,874    4.35%      22,601          -                   -
Due after ten years                       1,853    3.97%       1,830          -                   -
                                        ---------          ----------- ---------           ------------
                                         87,609              86,216           -                   -
Mortgage-backed securities                7,710    4.15%      7,603         751    5.11%        767
Marketable equity securities              3,980               3,861           -                   -
                                        ---------          ----------- ---------           ------------
                  Total                 $99,299             $97,680        $751               $ 767
                                        =========          =========== =========           ============

</TABLE>

Sources of Funds

General

                                       14
<PAGE>

     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 interest-earning  assets. While
income  on  interest-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,
2005, maturing during the next five years and thereafter, see Note 6 of Notes to
Consolidated Financial Statements on page 25 of the Company's 2005 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.

                           At September 30,
                        ------------------------
                           2005
                        ------------
                        (Dollars In thousands)
3 months or less            $ 6,426
3-6 months                    3,683
6-12 months                   9,242
over 12 months               17,510
                        ------------
Total                      $ 36,861
                        ============

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,  2005,  2004 and 2003 the  Banks  had  outstanding
advances  from  the  FHLB  of  Indianapolis  of  $59,250,000,  $50,100,000,  and
$54,100,000,  respectively.  See Note 8 of the Notes to  Consolidated  Financial
Statements  on  pages  26  and  27  of  the  Company's  2005  Annual  Report  to
Stockholders for the maturity breakdown of these long-term instruments.

     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  reverse  repurchase  agreements  for the
periods and at the dates indicated.  Average balances and average interest rates
are based on month-end balances.


                                       15
<PAGE>
<TABLE>
                                                                       Years Ended September 30
                                                               ---------------------------------------------
                                                                   2005             2004             2003
                                                               -----------   --------------  ---------------
                                                                        (Dollars in thousands)
<S>                                                               <C>              <C>              <C>
Average balance of short-term borrowings                          $ 2,138          $ 3,328          $ 4,294
Highest month-end balance of total short-term borrowings            3,771            5,166            7,136
Weighted average interest rate of total short-term borrowings       1.55%            1.26%            1.53%

                                                                            At September 30
                                                               ---------------------------------------------
                                                                   2005             2004             2003
Reverse Repurchase agreements                                         642            3,321            2,650
Bank overdraft                                                        239                -                -
                                                               -----------   --------------  ---------------
Total short-term borrowings                                         $ 881          $ 3,321          $ 2,650
                                                               ===========   ==============  ===============

Weighted average interest rate                                      2.00%            1.38%            1.49%

</TABLE>

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, 2005, Peoples Federal's trust department assets
totaled approximately  $70,908,000 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 700 trust accounts,  including estates,  guardianships,  revocable
and irrevocable trusts,  testamentary trusts, and self-directed IRA's. 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.

     During 2003,  Peoples Federal purchased the trust business of First Federal
Savings  Bank of  Huntington,  IN. The  purchase  was  effected  using a revenue
sharing agreement, rather than an up-front cash payment. Regulatory approval has
been  received,  and these  assets are  included in the number of  accounts  and
amount of assets referenced above.

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, 2005 and 2004,
PFSI recorded total income of $60,765 and $51,078, respectively, with net income
for such periods amounting to $4,228 and $4,244, 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,  Inc. was $251,825 at September 30, 2005.  The assets of Alpha
Financial  consist of cash and seven percent of the stock of MBT Title Services,
which reinsures credit life insurance policies written on the lives of borrowers
of various financial institutions.

Employees

     As of  September  30, 2005,  the Banks  employed 146 persons on a full-time
basis  and 19  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

                                       16
<PAGE>

     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

     On   November   12,   1999,   President   Clinton   signed   into  law  the
Gramm-Leach-Bliley  Financial  Services  Modernization  Act of  1999  -  federal
legislation which modernizes the laws governing the financial services industry.
This law  establishes a  comprehensive  framework to permit  affiliations  among
commercial  banks,  insurance  companies,  securities  firms and other financial
service providers. As a result of this legislation,  bank holding companies will
be permitted to engage in a wider variety of financial activities than permitted
under  prior  law,   particularly  with  respect  to  insurance  and  securities
activities.  To the extent the law permits banks, securities firms and insurance
companies to affiliate,  the financial  services industry may experience further
consolidation.  This  could  result  in a growing  number  of  larger  financial
institutions that offer wider varieties of financial services than are currently
offered by the  Company  and that  could  aggressively  compete  in the  markets
currently served by the Company. The law also increases commercial banks' access
to loan  funding  by the  Federal  Home  Loan  Bank  System,  and  includes  new
provisions   in  the  privacy  area,   restricting   the  ability  of  financial
institutions  to  share  nonpublic  personal  customer  information  with  third
parties.

     On October 26, 2001, President Bush signed the USA Patriot Act of 2001 (the
"Patriot  Act").  The Patriot Act is intended to strengthen  the ability of U.S.
Law Enforcement to combat terrorism on a variety of fronts. The potential impact
of the Patriot Act on financial  institutions is significant  and  wide-ranging.
The  Patriot  Act  contains   sweeping   anti-money   laundering  and  financial
transparency laws and requires  financial  institutions to implement  additional
policies and  procedures  with respect to, or  additional  measures  designed to
address,  any or all the  following  matters,  among others:  money  laundering,
suspicious activities and currency transaction reporting, and currency crimes.

     On July 30, 2002,  President Bush signed into law the Sarbanes-Oxley Act of
2002  (the   "Sarbanes-Oxley   Act").  The   Sarbanes-Oxley   Act  represents  a
comprehensive  revision  of  laws  affecting  corporate  governance,  accounting
obligations and corporate  reportings.  The  Sarbanes-Oxley Act is applicable to
all companies with equity or debt securities  registered under the Exchange Act.
In particular,  the  Sarbanes-Oxley  Act  establishes:  (i) new requirements for
audit committees, including independence, expertise, and responsibilities;  (ii)
additional   responsibilities  regarding  financial  statements  for  the  Chief
Executive  Officer and Chief Financial Officer of the reporting  company;  (iii)
new standards for auditors and regulation of audits;  (iv) increased  disclosure
and  reporting  obligations  for the reporting  company and their  directors and
executive  officers;  and (v) new and increased civil and criminal penalties for
violation of the securities laws.

     The Securities and Exchange Commission had adopted final rules implementing
Section 404 of the Sarbanes-Oxley Act of 2002 but has delayed the implementation
of 404 regulations for non-accelerated  filers. The Company may at some point in
the  future be  required  to  include a report of  management  on the  Company's
internal  control over  financial  reporting.  The internal  control report must
include  a  statement  of  management's   responsibility  for  establishing  and
maintaining  adequate control over financial reporting of the Company,  identify
the framework used by management to evaluate the  effectiveness of the Company's
internal control over financial reporting,  provide  management's  assessment of
the effectiveness of the Company's internal control over financial reporting and
state that the Company's  independent  accounting firm has issued an attestation
report  on  management's  assessment  of the  Company's  internal  control  over
financial  reporting.  Management  expects  that if and when  applicable  to the
Company,  significant  efforts  will be required to comply with  Section 404 and
that the cost of such compliance may be material upon implementation.


                                       17
<PAGE>

Regulation of the Company

     General.  The Company is a savings and loan  holding  company as defined by
the Home  Owners'  Loan Act, as amended (the  "HOLA").  As such,  the Company is
registered  with  the  OTS  and  is  subject  to  OTS  regulation,  examination,
supervision  and reporting  requirements.  As subsidiaries 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. The Company is a multiple savings and loan holding
company.  HOLA provides that,  among other things,  no multiple savings and loan
holding company or subsidiary  thereof which is not a savings  association shall
commence  or  continue  for a limited  period of time after  becoming a multiple
savings and loan holding company or subsidiary  thereof,  any business  activity
other than (i)  furnishing  or performing  management  services for a subsidiary
savings bank,  (ii)  conducting an insurance  agency or escrow  business,  (iii)
holding,  managing, or liquidating assets owned by or acquired from a subsidiary
savings  institution,  (iv) holding or managing properties used or occupied by a
subsidiary savings institution, (v) acting as trustee under deeds of trust, (vi)
those activities previously directly authorized by the FSLIC by regulation as of
March 5, 1987,  to be engaged in by multiple  holding  companies  or (vii) those
activities  authorized  by the FRB as  permissible  for bank holding  companies,
unless the Director of the OTS by regulation prohibits or limits such activities
for savings and loan  holding  companies.  Those  activities  described in (vii)
above must also be approved by the Director of the OTS prior to being engaged in
by a multiple  holding  company.  The OTS has taken the position  that  multiple
holding  companies may also engage in activities that are financial in nature as
prescribed in Section 4(k) of the Bank Holding  Company Act of 1956, as amended.
Notwithstanding  the  above  rules  as to  permissible  business  activities  of
multiple savings and loanholding companies,  if a savings institution subsidiary
of such a  holding  company  fails  to meet the QTL  test,  unless  the  savings
institution requalifies as a QTL within one year thereafter, the holding company
must register as, and become subject to, the activities  restrictions applicable
to a bank  holding  company.  See  "Regulation  of the  Banks--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 25% 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  savings  and loan  holding  company's  other
subsidiaries must have tangible capital of at least 6.5% 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 11 of the Home Owners' Loan Act and
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.

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, 2005, of $4,888,200.

                                       18
<PAGE>

     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, 2005,
the Banks had advances totaling  $59,250,000  outstanding.  See "Business of the
Company--Deposit Activity and Other Sources of Funds" and "--Borrowings."

     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  qualify  as QTL's  or a  domestic
building  and loan  association  ("DBLA"),  they  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, 2005, the Banks were in compliance  with their
QTL  requirements  and  met the  definition  of a  domestic  building  and  loan
association.

     Branching. Subject to certain limitations, the HOLA and the OTS regulations
currently permit federally  chartered savings  institutions such as the Banks to
establish  branches  in  any  state  of  the  United  States.   Federal  savings
associations with branches in more than one state must satisfy either the QTL or
the DBLA test on a  state-by-state  basis.  The authority for a federal  savings
institution  to  establish  an  interstate  branch  network  would  facilitate a
geographic diversification of the institution's activities. This authority under
the HOLA and the OTS  regulations  preempts any state law purporting to regulate
branching by federal savings institutions.

     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  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).

     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, 2005, the Banks exceeded all  regulatory  minimum  capital
requirements.

     Insurance  Deposit  Accounts.  The FDIC administers two separate  insurance
funds,  which are not  commingled:  one primarily  for  federally  insured banks
("BIF") and one primarily for federally insured savings  associations  ("SAIF").
As the federal insurer of deposits of savings institutions,  the FDIC determines
whether  to  grant  insurance  to  newly  chartered  savings  institutions,  has
authority to prohibit unsafe or unsound  activities and has  enforcement  powers
over savings institutions  (usually in conjunction with the OTS or on its own if
the OTS does not undertake enforcement action).

                                       19
<PAGE>

     Deposit  accounts in the Banks are  insured by the SAIF  within  prescribed
statutory limits which generally provide a maximum of $100,000 coverage for each
insured  account.  As a condition to such  insurance,  the FDIC is authorized to
issue  regulations and, in conjunction  with the OTS,  conduct  examinations and
generally supervise the operations of its insured members.

     The FDIC's  deposit  insurance  premiums are assessed  through a risk based
system under which all insured  depository  institutions  are placed into one of
nine  categories  and  assessed  insurance  premiums  based upon their  level of
capital and supervisory evaluation. Under the system, institutions classified as
well capitalized (i.e. a core capital ratio of at least 5%, a ratio of Tier 1 or
core capital to risk weighted  assets ("Tier 1 risk based  capital") of at least
6% and a total risk-based  capital ratio of at least 10%) pay the lowest premium
while institutions that are less than adequately  capitalized (i.e. core or Tier
1 risk based capital ratio of less than 4% or a total  risk-based  capital ratio
of less than 8%) and  considered  of  substantial  supervisory  concern  pay the
highest premium.  Risk classification of all insured institutions is made by the
FDIC semi-annually.

     In addition to the assessment for deposit insurance,  savings  institutions
are  required  to  pay on  bonds  issued  in the  late  1980s  by the  Financing
Corporation to  recapitalize  the  predecessor to the SAIF. By law,  payments on
Financing  Corporation  obligations have been shared equally between the members
of both  insurance  funds  since  January 1, 2000.  The  Banks'  annual  deposit
insurance premium for the year ended September 30, 2005, including the Financing
Corporation  payments,  was  approximately  $52,000  based upon its current risk
classification  and the new assessment  schedule for SAIF insured  institutions.
These premiums are subject to change in future periods.

     The FDIC is authorized to increase assessment rates, on a semiannual basis,
if it  determines  that the  reserve  ratio of the  SAIF  will be less  than the
designated  reserve  ratio of 1.25% of SAIF insured  deposits.  In setting these
increased  assessments,  the FDIC must seek to restore the reserve ratio to that
designated  reserve  level,  or such higher  reserve ratio as established by the
FDIC.  The FDIC may also impose  special  assessments  on SAIF  members to repay
amounts  borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.

     Federal  Reserve  System.  Pursuant to regulations  of the Federal  Reserve
Board, a savings  institution  must maintain  average daily reserves against its
transaction  accounts  (primarily  checking and NOW accounts)  and  non-personal
money market  accounts.  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, 2005, 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 Banks,  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.

                                       20
<PAGE>

     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.

     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.

     Standards   for  Safety  and   Soundness.   Under   applicable   regulatory
requirements,  the Banks are required to prescribe  standards,  by regulation or
guideline, relating to internal controls, information systems and internal audit
systems, loan documentation,  credit underwriting,  interest rate risk exposure,
asset  growth,  asset  quality,  operational  and  managerial  standards  as the
agencies deem appropriate. The OTS and the federal bank regulatory agencies have
adopted a set of guidelines  prescribing safety and soundness standards pursuant
to the statute.  The safety and soundness guidelines establish general standards
relating to internal controls and information  systems,  internal audit systems,
loan  documentation,  credit  underwriting,  interest rate risk exposure,  asset
growth,  and compensation,  asset quality and earnings  standards,  and fees and
benefits.  In general, the guidelines require,  among other things,  appropriate
systems and  practices  to identify  and manage the risks  associated  with each
aspect of an institution's  operations.  The guidelines also prohibit  excessive
compensation  as an unsafe and unsound  practice  and describe  compensation  as
excessive  when the amounts paid are  unreasonable  or  disproportionate  to the
services  performed by an  executive  officer,  employee,  director or principal
stockholder.

     With respect to asset quality and earnings standards, a savings institution
would be required to maintain systems, commensurate with its size and the nature
and  scope  of  its   operations,   to  identify   problem  assets  and  prevent
deterioration  in those assets as well as to evaluate  and monitor  earnings and
ensure that earnings are sufficient to maintain adequate capital and reserves.

     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, 2005, the
Banks met the capital  requirements  of "well  capitalized"  institutions  under
applicable OTS regulations.

                                       21
<PAGE>

     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.

     Real  Estate  Lending  Standards.  Under joint  regulations  of the federal
banking  agencies,  including  the OTS,  savings  institutions  must  adopt  and
maintain  written policies that establish  appropriate  limits and standards for
extensions  of credit that are secured by liens or  interests  in real estate or
extensions  of credit that are secured by liens or  interests  in real estate or
are made for the purpose of  financing  permanent  improvements  to real estate.
These policies must establish loan portfolio diversification standards,  prudent
underwriting  standards,  including  loan-to-value  limits  that are  clear  and
measurable,  loan  administration  procedures  and  documentation,  approval and
reporting requirements. An institution's real estate lending policy must reflect
consideration  of the  Interagency  Guidelines for Real Estate Lending  Policies
(the  "Interagency  Guidelines")  that have been adopted by the federal  banking
agencies. The Interagency  Guidelines,  among other things, call upon depository
institutions  to  establish  internal  loan-to-value  limits  specified  in  the
Interagency  Guidelines  for  the  various  types  of  real  estate  loans.  The
Interagency  Guidelines  state that it may be appropriate in individual cases to
originate  or  purchase  loans  with  loan-to-value  ratios  in  excess  of  the
supervisory loan-to-value limits not exceeding those specified, but require that
the  aggregate  amount of loans with  loan-to-value  ratios in excess of certain
specified  levels may not exceed the amount of the savings  association's  total
capital.   (Amounts   in  excess  of  core   capital   must  be  deducted  on  a
dollar-for-dollar basis from this capital.)

     Federal  Consumer  Credit and  Non-Discrimination  Legislation.  The Banks'
mortgage lending activities arc subject to the provisions of various federal and
state  statutes,  including,  among others,  the Truth in Lending Act, the Equal
Credit  Opportunity  Act, the Real Estate  Settlement  Procedures  Act, the Fair
Housing Act and the  regulations  promulgated  thereunder.  These  statutes  and
regulations,  among other things,  prohibit discrimination on the basis of race,
gender or other designated characteristics,  prohibit unfair and deceptive trade
practices,  require the  disclosure  of certain  basic  information  to mortgage
borrowers  concerning credit terms and settlement costs, and otherwise  regulate
terms and conditions of credit and the procedures by which credit is offered and
administered.   Each   of  the   foregoing   statutes   provides   for   various
administrative,  civil  and,  in  limited  circumstances,  criminal  enforcement
procedures, and violations thereof may also lead to class actions seeking actual
and/or punitive damages.

     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
into account  compliance with such laws and CRA obligations  when regulating and
supervising other activities.

     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 of CRA  Examinations  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 1A.  Risk Factors

                                       22
<PAGE>

     In analyzing  whether to make or to continue an  investment in the Company,
investors should consider, among other factors, the following:

     Economic  Conditions  and  Related  Uncertainties.  Commercial  banking  is
affected,  directly  and  indirectly,  by  local,  domestic,  and  international
economic  and  political  conditions,  and by  governmental  monetary and fiscal
policies.  Conditions  such  as  inflation,  recession,  unemployment,  volatile
interest rates, tight money supply, real estate values,  international conflicts
and other  factors  beyond  the  Company's  control  may  adversely  affect  the
potential  profitability  of the Company.  Any future  rises in interest  rates,
while  increasing  the  income  yield  on the  Company's  earnings  assets,  may
adversely  affect  loan  demand  and the cost of funds  and,  consequently,  the
profitability  of the  Company.  Any  future  decreases  in  interest  rates may
adversely affect the Company's  profitability  because such decreases may reduce
the amounts that the Company may earn on its assets.  Economic  downturns  could
result in the delinquency of outstanding  loans.  Management does not expect any
one particular  factor to materially affect the Company's results of operations.
However,  downtrends in several areas,  including real estate,  construction and
consumer spending, could have a material adverse impact on the Company's ability
to remain profitable.

     Effect of Interest  Rates on the Banks and the Company.  The  operations of
financial  institutions  such as the Company are  dependent to a large degree on
net interest income,  which is the difference between interest income from loans
and   investments  and  interest   expense  on  deposits  and   borrowings.   An
institution's  net interest income is significantly  affected by market rates of
interest that in turn are affected by  prevailing  economic  conditions,  by the
fiscal and monetary  policies of the federal  government  and by the policies of
various  regulatory  agencies.  Like all financial  institutions,  the Company's
balance  sheet is affected by  fluctuations  in interest  rates.  Volatility  in
interest rates can also result in disintermediation,  which is the flow of funds
away  from  financial  institutions  into  direct  investments,   such  as  U.S.
Government and corporate  securities and other  investment  vehicles,  including
mutual funds,  which,  because of the absence of federal insurance  premiums and
reserve  requirements,  generally  pay  higher  rates of return  than  financial
institutions.  See "Item 7: Management's  Discussion of Financial  Condition and
Results of Operations" and "Item 7A:  Quantitative  and  Qualitative  Disclosure
about Market Risk."

     Federal and State Government Regulations. The operations of the Company and
the Banks are  heavily  regulated  and will be  affected  by present  and future
legislation and by the policies established from time to time by various federal
and state regulatory  authorities.  In particular,  the monetary policies of the
Federal Reserve Board have had a significant  effect on the operating results of
banks in the past,  and are  expected to continue to do so in the future.  Among
the  instruments  of  monetary  policy  used by the  Federal  Reserve  Board  to
implement  its  objectives  are  changes in the  discount  rate  charged on bank
borrowings and changes in the reserve  requirements on bank deposits.  It is not
possible to predict what changes,  if any, will be made to the monetary  polices
of the Federal Reserve Board or to existing federal and state legislation or the
effect that such changes may have on the future business and earnings  prospects
of the Company.

     During the past several years,  significant  legislative attention has been
focused on the regulation and deregulation of the financial  services  industry.
Non-bank financial  institutions,  such as securities brokerage firms, insurance
companies  and money market funds,  have been  permitted to engage in activities
that compete directly with traditional bank business.

     Competition. The Company faces strong competition from other banks, savings
institutions  and other  financial  institutions  that have  branch  offices  or
otherwise  operate in the Company's market area, as well as many other companies
now  offering a range of  financial  services.  Many of these  competitors  have
substantially  greater  financial  resources and larger branch  systems than the
Company.  In addition,  many of the Banks' competitors have higher legal lending
limits than do the Banks. Particularly intense competition exists for sources of
funds  including  savings and retail time  deposits and for loans,  deposits and
other services that the Banks offer. See "Item 1: Business - Competition."

     As a result of the repeal of the Glass  Steagall Act,  which  separated the
commercial and investment banking industries,  all banking organizations face an
increase in  competition.  See "Item 1: Business - Supervision  and Regulation -
Financial Services Modernization Act."

                                       23
<PAGE>

     Allowance  for Loan Losses.  The Company has  established  an allowance for
loan losses which  management  believes to be adequate to offset probable losses
on the  Company's  existing  loans.  However,  there  is no  precise  method  of
estimating  loan losses.  There can be no assurance that any future  declines in
real  estate  market  conditions,  general  economic  conditions  or  changes in
regulatory  policies  will not require the Company to increase its allowance for
loan losses.

     An Economic  Slowdown in  Northeastern  Indiana and  Southwestern  Michigan
Could Hurt Our  Business.  We focus our  business  in  northeastern  Indiana and
southwestern  Michigan  in DeKalb,  Whitley,  Noble,  LaGrange,  and the eastern
portion of Elkhart  counties,  Indiana and St.  Joseph,  Cass, and the southwest
portion of Kalamazoo  counties,  Michigan.  An economic  slowdown in these areas
could have the following consequences, any of which could hurt our business:

          Loan delinquencies may increase;

          Problem assets and foreclosures may increase;

          Demand for the  products  and  services  of  Peoples  Federal or First
          Savings may decline; and

          Collateral for loans made by the Banks,  especially  real estate,  may
          decline in value, in turn reducing  customers'  borrowing  power,  and
          reducing the value of assets and collateral  associated  with existing
          loans of the Banks.

     Dividends.  While the Board of Directors  expects to continue its policy of
regular  quarterly  dividend  payments,  this  dividend  policy will be reviewed
periodically  in light of future  earnings,  regulatory  restrictions  and other
considerations.  No assurance can be given,  therefore,  that cash  dividends on
common  stock will be paid in the  future.  See page 2 of the  Company's  Annual
Report to Stockholders  for the year ended September 30, 2005 and Note 14 of the
Notes to  Consolidated  Financial  Statements  for the year ended  September 30,
2005.

     Market for Common Stock.  Although the Company's  common stock is listed on
the Nasdaq  National  Market System,  there has been only limited trading in the
Common Stock. There can be no assurance that a regular and active market for the
Common Stock will develop in the foreseeable future. See "Item 5: Market for the
Registrant's  Common Stock and Related  Stockholder  Matters."  Investors in the
shares of common stock must, therefore,  be prepared to assume the risk of their
investment for an indefinite period of time.

     "Anti-Takeover"    and    "Anti-Greenmail"    Provisions   and   Management
Implications.  The Articles of  Incorporation of the Company  presently  contain
certain   provisions   which   may  be   deemed   to  be   "anti-takeover"   and
"anti-greenmail" in nature in that such provisions may deter, discourage or make
more difficult the  assumption of control of the Company by another  corporation
or person through a tender offer,  merger,  proxy contest or similar transaction
or series of  transactions.  The  overall  effects  of the  "anti-takeover"  and
"anti-greenmail"  provisions  may be to  discourage,  make  more  costly or more
difficult,  or  prevent  a future  takeover  offer,  prevent  shareholders  from
receiving a premium for their  securities in a takeover  offer,  and enhance the
possibility  that a future bidder for control of the Company will be required to
act through  arms-length  negotiation  with the  Company's  Board of  Directors.
Copies of the  Articles  of  Incorporation  of the  Company are on file with the
Securities and Exchange Commission and the Indiana Secretary of State.

     Stock Not an Insured  Deposit.  Investments  in the shares of the Company's
common  stock are not  deposits  insured  against  loss by the FDIC or any other
entity.

Item 1B.  Unresolved Staff Comments

         Not applicable.

Item 2.  Properties

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

     The following table provides  certain  information  with respect to Peoples
Federal's full-service offices at September 30, 2005:

                                       24
<PAGE>

         Full Service                Date         Net Book
            Offices                 Opened       Value (1)
------------------------------------------------------------
                                   (Dollars in thousands)
Main Office, Auburn                      1973         $ 330
Avilla                                   1980            90
Garrett                                  1972           121
Columbia City-Downtown                   1971            84
Columbia City-North                      1998           485
Kendallville                             1941           379
LaGrange                                 1972           223
Waterloo                                 2000           861
Topeka                                   2002           470

(1) Of real estate at September 30, 2005.

     The total net book value of Peoples  Federal's  premises  and  equipment at
September 30, 2005, was $4.0 million.

     First  Savings  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
Savings' full service offices at September 30, 2005.

        Full Service                Date         Net Book
            Offices                 Opened       Value (1)
------------------------------------------------------------
                                   (Dollars in thousands)
Main Office, Three Rivers                1981         $ 488
Schoolcraft                              1971            50
Union                                    1988           151
Three Rivers, branch                     1988           548
Howe                                     1998           333
Middlebury                               1998           589

(1) Of real estate at September 30, 2005.

     The  total net book  value of First  Savings'  premises  and  equipment  at
September 30, 2005 was $2.4 million.

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.

Item 4.5.  Executive Officers of Registrant

     Information  regarding executive officers of the Company is incorporated by
reference to pages 3 to 4 of the Company's  Proxy  Statement  dated  December 9,
2005.

                                       25
<PAGE>


                                     PART II

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

     Reference  is made to Item 12  under  Part  III of this  form  10-K for the
Equity Compensation Plan Table required by Regulation S-K.

     The Company did not sell any common stock  during the year ended  September
30, 2005 that was not registered for sale under the Securities Act of 1933.

     The  following  table  details the common stock  information  for the years
ended September 30, 2005 and 2004.

                                Low           High        Per Share
---------------------------------------------------------------------
Fiscal 2005
1st QTR                          $ 21.00      $ 23.10       $ 0.18
2nd QTR                            20.00        23.02         0.18
3rd QTR                            19.12        21.22         0.18
4th QTR                            19.57        20.95         0.19

Fiscal 2004
1st QTR                          $ 21.60      $ 25.75       $ 0.17
2nd QTR                            23.67        27.67         0.17
3rd QTR                            22.78        26.95         0.17
4th QTR                            21.50        24.98         0.18

In February 2003, the Board authorized a three-year  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, 2005,
the Company  had  repurchased  131,703  shares and  [168,297]  shares may yet be
purchased under the plan. This plan expires on February 18, 2006.

     The following  table details stock  repurchased  by the Company  during the
fourth quarter of fiscal year 2005 as per the plan  referenced on page 5 of this
document.

                                                      Total            Maximum
                                                   Numer of          Number of
                        Total       Average    Shares Purchased     Shares that
                      Number of      Price       as Part of            May yet
                       Shares        Paid          Publicly        be Purchased
Period                Purchased    Per Share    Announced Plan    Under the Plan
--------------------------------------------------------------------------------
July 1-31, 2005             -         $ -                 -           174,993
August 1-31, 2005       3,382       20.02             3,382           171,611
September 1-30, 2005    3,314       19.80             3,314           168,297
                     ---------                --------------
Total                   6,696     $ 19.91             6,696
                     =========  ==========    ==============

Item 6.  Selected Financial Data

     Reference is made to page 2 of the Company's  Annual Report to Stockholders
for the year ended  September  30, 2005,  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


                                       26
<PAGE>

     Reference  is  made to  pages 3 to 11 of the  Company's  Annual  Report  to
Stockholders for the year ended September 30, 2005, 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 5 and 6 of the  Company's  Annual  Report  to
Stockholders for the year ended September 30, 2005, 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 14 to 40 of the  Company's  Annual  Report  to
Stockholders for the year ended September 30, 2005, 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.

Item 9A. Controls and Procedures

     Our management, with participation of our chief executive officer and chief
financial  officer,   conducted  an  evaluation  of  the  effectiveness  of  our
disclosure  controls  and  procedures,  as defined  in  Sections  13a-15(e)  and
15d-15(e)  of  the  Exchange  Act  as of  September  30,  2005.  Based  on  that
evaluation,  our chief executive  officer and chief financial  officer concluded
that our  disclosure  controls and  procedures  were  effective in ensuring that
information  required  to be  disclosed  by the  Company  in reports it files or
submits under the Exchange Act is recorded,  processed,  summarized and reported
within the time periods  specified in the Securities  and Exchange  Commission's
rules and forms.

     No  significant  changes  occurred in our internal  control over  financial
reporting,  as defined in Rule 13a-15(f) of the Exchange Act, during the quarter
ended September 30, 2005 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.

     The Company's  management,  including the CEO and CFO, does not expect that
its  disclosure  controls or its internal  controls and procedures for financial
reporting will prevent all error and all fraud. A control system,  no matter how
well  conceived  and  operated,  can  provide  only  reasonable,  not  absolute,
assurance that the objectives of the control system are met. Further, the design
of a control  system must reflect the fact that there are resource  constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent  limitations in all control  systems,  no evaluation of controls
can provide  absolute  assurance that all control issues and instances of fraud,
if any,  within the  Company  have been  detected.  These  inherent  limitations
include the realities that judgments in decision-making  can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally,  controls
can be circumvented by the individual acts of some persons,  by collusion of two
or more people,  or by  management  override of the  control.  The design of any
system of  controls  also is based in part upon  certain  assumptions  about the
likelihood of future events,  and there can be no assurance that any design will
succeed in achieving  its stated goals under all  potential  future  conditions;
over time,  control may become inadequate  because of changes in conditions,  or
the degree of  compliance  with the  policies  or  procedures  may  deteriorate.
Because  of  the  inherent  limitations  in  a  cost-effective  control  system,
misstatements due to error or fraud may occur and not be detected.

Item 9B.  Other Information

Mr.  Maurice F. Winkler III, a director and the Chief  Executive  Officer of the
Company and the President and Chief Executive  Officer of Peoples  Federal,  has
entered  into a  three-year  employment  agreement  with the Company and Peoples
Federal.  The agreement provides for the full-time  employment of Mr. Winkler as
President and Chief Executive Officer of Peoples Federal, and may be amended and
extended for additional  twelve-month  periods upon the mutual  agreement of the
parties.  The original effective date of the agreement was May 18, 2000, and the
agreement  was most  recently  extended on November 15,  2005,  when the parties
executed an updated agreement.  The agreement,  as updated,  provides for a base
salary of $137,800 per year.  Pursuant to the agreement,  the base salary amount
is  reviewed  at  least  once  every  twelve  months  and  increases  are  to be
substantially  consistent  with  the  increases  to the base  salaries  of other
executives  of Peoples  Federal,  provided  that the base salary amount shall be
increased by a percentage no less than the annual increase in the cost of living
index for the Fort Wayne, Indiana metropolitan area. Under the employment


                                       27
<PAGE>

agreement,  Mr.  Winkler  is  eligible  to  receive  such  benefits  as are made
available to other senior  executives  and key  management  employees of Peoples
Federal.  The agreement  protects  Peoples  Federal's trade secrets for one year
after the termination of Mr.  Winkler's  employment and protects Peoples Federal
from  competition by Mr. Winkler for one year after he terminates his employment
or after Peoples Federal terminates his employment for cause.

     The agreement  provides that Mr. Winkler may terminate his employment  upon
60 days'  notice  upon the  occurrence  of one of the  events  specified  in the
agreements.  If Peoples Federal  terminates Mr. Winkler's  employment other than
for cause or if Mr. Winkler terminates his employment upon the occurrence of the
events  specified in the  agreement,  the agreement  provides for Mr. Winkler to
receive an amount  equal to his base  salary for each year  remaining  under the
term of the agreement plus bonuses in an amount equal to the last bonus received
multiplied by the number of years remaining under the term of the agreement, but
such amount is subject to deferment for minimum capital maintenance purposes. In
the event of a change in control (as defined in the  agreement),  the  agreement
provides  for Mr.  Winkler  to  receive  an amount  equal to 2.99 times his base
salary plus the amount of any bonus compensation  earnings during the 2.99 years
immediately  preceding the change of control,  plus certain other benefits.  The
agreement also provides that any unvested  options held by Mr. Winkler will vest
if his employment is terminated as a result of a change in control.  If a change
in control had occurred as of September 30, 2005, the cash compensation that Mr.
Winkler would have received upon his  termination in connection with a change of
control would have been approximately $515,746.

     If the payments provided for in the employment agreement, together with any
other payments to be made to Mr. Winkler, are deemed to be payments in violation
of the  "golden  parachute"  rules of the  Internal  Revenue  Code of  1986,  as
amended,  such payments will be reduced to the highest amount permissible before
Mr.  Winkler  becomes  subject  to excess  parachute  payment  excise tax or the
Company or Peoples Federal loses all or part of their compensation deduction for
such payments.

     A copy of the employment agreement is filed as Exhibit 10.3 to this report.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

     Reference  is  made  to  the  section  captioned  "Proposal  1-Election  of
Directors" in the Company's  Proxy  Statement  dated  December 9, 2005,  for the
information  required by this Item,  which is hereby  incorporated by reference.
Information  concerning the Company's executive officers is included in Item 4.5
in Part I of this report.

     Based solely on its review of copies of such forms  received by it,  and/or
written  representations  from  certain  reporting  persons that no Forms 5 were
required for those  persons,  the Company  believes  that during the fiscal year
ended  September 30, 2005, all filing  requirements  applicable to its officers,
directors and greater than 10%  beneficial  owners with respect to Section 16(a)
of the 1934 Act were satisfied in a timely manner,  except that Bruce  Holwerda,
Director, filed a Form 4 with respect to the acquisition of 12 shares on January
25, 2005, about 3 months late.

     Code of Ethics.  The company has adopted an ethics  policy that  applies to
Financial  Managers of the Company  and its  subsidiaries.  A copy of the Ethics
Policy is attached as Exhibit 14 to this annual report.  The Company  intends to
satisfy  the  disclosure  requirement  under  Item 10 of Form 8-K  regarding  an
amendment  to a  provision  of its Code of Ethics and  Conduct  by posting  such
information on the Company's website www.Peoplesbancorp.us.

Item 11.  Executive Compensation

     Reference  is made to the section  captioned  "The Peoples  Bancorp  Annual
Meeting-Compensation of Executive Officers and Directors" in the Company's Proxy
Statement  dated  December  9, 2005 for the  information  required by this Item,
which is hereby incorporated by reference.

Item 12.  Security  Ownership of Certain  Beneficial  Owners and  Management and
Related Stockholder Matters


                                       28
<PAGE>

     Reference is made to the sections captioned "Election of Directors-Nominees
for Election as  Directors"  and  "Securities  Ownership  of Certain  Beneficial
Owners"  in the  Company's  Proxy  Statement  dated  December  9,  2005  for the
information required by this Item which is hereby incorporated by reference.


                                       29
<PAGE>



                      Equity Compensation Plan Information
<TABLE>

                                                                                                      (c)
                                                                                            Number of securities
                                                                                            remaining available for
                                                                                             future issuance under
                                                                            (b)               equity compensation
                                                  (a) Weighted-average plans
(excluding
            Plan Category               Number of securities to      exercise price of      securities reflected in
                                        be issued upon exercise     outstanding options,          column (a))
                                        of outstanding options,     warrants and rights
                                          warrants and rights
<S>                                             <C>                        <C>                      <C>
Equity compensation plans approved              84,924(1)                  $14.48                   89,751
by security holders.................
Equity compensation plans not                     -0-                                                 -0-
approved by security holders........
Total...............................             84,924                    $14.48                   89,751
</TABLE>

(1) 80,249  shares were  assumed in  connection  with the  acquisition  of Three
Rivers Financial Corp. at a weighted average exercise price of $11.78.

Item 13.  Certain Relationships and Related Transactions

     Reference  is made to the  section  captioned  "Transactions  with  Certain
Related Persons" in the Company's Proxy Statement dated December 9, 2005 for the
information required by this Item, which is hereby incorporated by reference.

Item 14. Principal Accounting Fees and Services

     Reference  is made to the  section  captioned  "Accountant's  Fees"  in the
Company's Proxy Statement dated December 9, 2005 for the information required by
this Item, which is hereby incorporated by reference.

Item 15.  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, 2005 are filed as part of this
report:

                  1.  Financial Statements

                    REPORT OF BKD LLP, INDEPENDENT  REGISTERED PUBLIC ACCOUNTING
                    FIRM, PAGE 13.

                    CONSOLIDATED  BALANCE SHEETS - AS OF SEPTEMBER 30, 2005, AND
                    2004, PAGE 14.

                    CONSOLIDATED  STATEMENTS  OF  INCOME  FOR  THE  YEARS  ENDED
                    SEPTEMBER 30, 2005, 2004, AND 2003, PAGE 15.


                    CONSOLIDATED  STATEMENTS  OF  STOCKHOLDERS'  EQUITY  FOR THE
                    YEARS ENDED SEPTEMBER 30, 2004, 2004, AND 2003, PAGE 16.

                    CONSOLIDATED  STATEMENTS  OF CASH FLOWS FOR THE YEARS  ENDED
                    SEPTEMBER 30, 2005, 2004, AND 2003, PAGE 17.

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, PAGES 18-40.

             2.       Financial Statement Schedules

                                       30
<PAGE>

     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, as amended and restated on December 14,
             2004. (2)

10.1*        1998 Peoples Bancorp Stock Option and Incentive Plan.

10.2*        Three Rivers Financial Corporation Stock Option and Incentive Plan
            (as assumed by Peoples Bancorp). (3)

10.3*        Employment Agreement with Maurice F. Winkler III.

10.4*        Employment Agreement with G. Richard Gatton is incorporated by
             reference to Exhibit 10.5 of the Company's  Form 10-K for the
             fiscal year ended September 30, 2004.

13           Annual Report to Stockholders is incorporated by reference to the
             Company's filing of form DEF14-A  on December 12, 2005.

14           Code of Ethical Conduct for Financial Managers is incorporated by
             reference to Exhibit 14 of the Company's Form 10-K filed for the
             fiscal year ended September 30, 2004.

21           Subsidiaries of the Registrant

23           Consent of BKD LLP

31.1         Rule 13a-14(a)/15d-14(a) Certification of CEO

31.2         Rule 13a-14(a)/15d-14(a) Certification of CFO.

32.1         Section 1350 Certifications

* Indicates management contract or compensatory plan, contract or arrangement.
--------------------------------
     (1)  Incorporated  by  reference  to the  same  Exhibit  in  the  Company's
Registration  Statement on Form S-4  (33-37343)  filed with the  Securities  and
Exchange Commission on October 17, 1990.

     (2) Incorporated by reference to the same Exhibit in the Company's  Current
Report on Form 8-K  (Commission  File Number  0-18991) filed with the Securities
and Exchange Commission on December 20, 2004.

     (3)  Incorporated  by  reference  to the same  Exhibit in the Three  Rivers
Financial  Corporation's  Annual Report on Form 10-KSB  (Commission  File Number
1-13826) for the year ended June 30, 1996.

The  Securities  and  Exchange  Commission  maintains  a Web site 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.


                                       31
<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 20, 2005                   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 20, 2005                   Roger J. Wertenberger,
                                    Chairman of the Board,
                                          and Director

                                    ----------------------------
December 20, 2005                   Maurice F. Winkler III,
                                    President, Chief Executive Officer
                                          and Director

                                    ----------------------------
December 20, 2005                   Deborah K. Stanger
                                    Vice President-Chief Financial Officer

                                    ----------------------------
December 20, 2005                   G. Richard Gatton, Director


                                    ----------------------------
December 20, 2005                   Bruce S. Holwerda, Director


                                    ----------------------------
December 20, 2005                   Erica D. Dekko, Director


                                    ----------------------------
December 20, 2005                   Douglas D. Marsh, Director


                                    ----------------------------
December 20, 2005                   Stephen R. Olson, Director


                                    ----------------------------
December 20, 2005                   John C. Thrapp, Director


                                       32
<PAGE>



                                                                    Exhibit 10.1



                                 PEOPLES BANCORP

                      1998 STOCK OPTION AND INCENTIVE PLAN

         1. Purpose of the Plan.

     The purpose of this Peoples  Bancorp 1998 Stock Option and  Incentive  Plan
(the "Plan") is to advance the interests of the Company through providing select
key  Employees  and  Directors  of the  Company  and  its  Affiliates  with  the
opportunity  to  acquire  shares of Common  Stock.  By  encouraging  such  stock
ownership,  the Bank seeks to attract,  retain,  and motivate the best available
personnel for positions of substantial  responsibility and to provide additional
incentive to  Directors  and key  Employees  of the Company or any  Affiliate to
promote the success of the business.

         2. Definitions.

         As used herein, the following definitions shall apply.

     (a)  "Affiliate"  shall  mean  any  "parent   corporation"  or  "subsidiary
          corporation"  of the  Company,  as such  terms are  defined in Section
          424(e) and (f),  respectively,  of the Code, and any other  subsidiary
          corporations of a parent corporation of the Company.

     (b)  "Agreement"  shall mean a written agreement entered into in accordance
          with Paragraph 5(c).

     (c)  "Award" shall mean collectively,  Options and SARs, unless the context
          clearly indicates a different meaning.

     (d)  "Bank" shall mean Peoples  Federal  Savings Bank of DeKalb  County,  a
          wholly owned subsidiary of the Company.

     (e)  "Board" shall mean the Board of Directors of the Company.

     (f)  "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (g)  "Committee"  shall mean the Stock  Option  Committee  appointed by the
          Board in accordance with Paragraph 5(a) hereof.

     (h)  "Common Stock" shall mean the common stock, par value $1.00 per share,
          of the Company.

     (i)  "Company" shall mean Peoples Bancorp.

     (j)  "Continuous  Service"  shall mean the absence of any  interruption  or
          termination of service as an Employee or Director of the Company or an
          Affiliate.  Continuous Service shall not be considered  interrupted in
          the case of sick leave,  military leave, or any other leave of absence
          approved by the Company or in the case of  transfers  between  payroll
          locations of the Company or between the Company,  an  Affiliate,  or a
          successor.

     (k)  "Control"  shall have the  meaning  ascribed to such term in 12 C.F.R.
          Part 574.  "Change in Control"  shall mean:  (i) the sale of all, or a
          material  portion,  of the  assets  of the  Company;  (ii) a merger or
          recapitalization  in the  Company  whereby  the  Company  is  not  the
          surviving  entity;  (iii) an  acquisition of Control of the Company as
          defined in 12 C.F.R.  574.3 or as  otherwise  defined by the Office of
          Thrift Supervision,  or any successor regulation or agency thereto; or
          (vi)  the  acquisition,  directly  or  indirectly,  of the  beneficial
          ownership  (within  the  meaning of that term as it is used in Section
          13(d) of the  Securities  Exchange  Act of 1934,  as amended,  and the
          rules and regulations  promulgated  thereunder) of twenty-five percent
          (25%) or more of the outstanding  voting  securities of the Company by
          any person,  entity,  or group. A Change in Control shall be deemed to
          have  occurred  upon the  execution  of any  agreement or document the
          effect of which will  result in a Change in Control.  This  definition
          shall  not  apply  to  the  purchase  of  Shares  by  underwriters  in
          connection with a public offering of securities of the Company, or the
          purchase  of  shares of up to 25% of any  class of  securities  of the
          Company by a tax-qualified employee stock benefit plan which is exempt
          from  the  approval  requirements  of 12  C.F.R.  Part  574.  The term
          "person" refers to an individual or a corporation, partnership, trust,
          association,  joint venture,  pool,  syndicate,  sole  proprietorship,
          unincorporated  organization,  or any other form of entity not listed.
          The  decision of the  Committee  as to whether a Change in Control has
          occurred shall be conclusive and binding.

                                       33
<PAGE>

     (l)  "Director"  shall mean any member of the Board,  and any member of the
          board of directors of any  Affiliate  that the Board has by resolution
          designated  as  being  eligible  for   participation   in  this  Plan.
          "Non-employee  Director"  shall  have the  meaning  set  forth in Rule
          16b-3.

     (m)  "Effective Date" shall mean the date specified in Paragraph 15 hereof.

     (n)  "Employee" shall mean any person employed by the Company, the Bank, or
          an Affiliate who is an employee for federal tax purposes.

     (o)  "Exercise  Price" shall mean the price per Optioned  Share at which an
          Option may be exercised.

     (p)  "ISO"  means an  option  to  purchase  Common  Stock  which  meets the
          requirements set forth in the Plan, and which is intended to be and is
          identified  as an  "incentive  stock  option"  within  the  meaning of
          Section 422 of the Code.

     (q)  "Market  Value" shall mean the fair market value of the Common  Stock,
          as determined under Paragraph 7(b) hereof.

     (r)  "Measurement  Price"  shall mean the price of the  Common  Stock to be
          utilized  to  determine   the  extent  of  stock   appreciation.   The
          Measurement  Price as to any particular SAR shall not be less than the
          Market Value on the date of grant.

     (s)  "Non-ISO"  means an option to  purchase  Common  Stock which meets the
          requirements set forth in the Plan but which is not intended to be and
          is not identified as an ISO.

     (t)  "Option" means an ISO and/or a Non-ISO.

     (u)  "Optioned  Shares"  shall  mean  Shares  subject  to an Award  granted
          pursuant to this Plan.

     (v)  "Participant" shall mean any key Employee or other person who receives
          an Award pursuant to the Plan.

     (w)  "Plan" shall mean this Peoples Bancorp 1998 Stock Option and Incentive
          Plan.

     (x)  "Rule  16b-3"  shall  mean  Rule  l6b-3  of  the  General   Rules  and
          Regulations under the Securities Exchange Act of 1934, as amended.

     (y)  "Share" shall mean one share of Common Stock.

     (z)  "SAR" (or "Stock  Appreciation  Right")  means a right to receive  the
          appreciation in value, or a portion of the appreciation in value, of a
          specified number of shares of Common Stock.

         3. Term of the Plan and Awards.

     (a)  Term of the Plan.  The Plan shall  continue in effect for a term of 10
          years from the  Effective  Date or the date the Plan is adopted by the
          Board  (whichever  period  ends  earlier),  unless  sooner  terminated
          pursuant to Paragraph 17 hereof.  No Award shall be granted  under the
          Plan after such ten year term.

     (b)  Term of Awards. The term of each Award granted under the Plan shall be
          established by the Committee, but shall not exceed 10 years; provided,
          however,  that in the case of an Employee who owns Shares representing
          more than 10% of the  outstanding  Common  Stock at the time an ISO is
          granted,  the term of such ISO shall not exceed five years, subject to
          the provisions of Section 8(e) hereof.

         4. Shares Subject to the Plan.

     (a)  General  Rule.  Except as  otherwise  required  by the  provisions  of
          Paragraph  12  hereof,  the  aggregate  number of  Shares  deliverable
          pursuant to Awards shall not exceed 200,000. Such Shares may either be
          authorized  but  unissued  Shares or Shares held in  treasury.  If any
          Awards should expire,  become  unexercisable,  or be forfeited for any
          reason without  having been exercised or becoming  vested in full, the
          Optioned Shares shall, unless the Plan shall have been terminated,  be
          available for the grant of additional Awards under the Plan.

     (b)  Special  Rule for SARs.  The number of Shares with  respect to which a
          SAR is  granted,  but not the  number  of  Shares  which  the  Company
          delivers or could deliver to an Employee or  individual  upon exercise
          of a SAR,  shall be charged  against  the  aggregate  number of Shares
          remaining  available under the Plan;  provided,  however,  that in the
          case  of  a  SAR  granted  in  conjunction   with  an  option,   under
          circumstances  in which the exercise of the SAR results in termination
          of the Option and vice versa, only the number of Shares subject to the
          Option  shall be  charged  against  the  aggregate  number  of  Shares
          remaining  available  under the Plan. The Shares involved in an Option


                                       34
<PAGE>

          as to which option rights have terminated by reason of the exercise of
          a related  SAR,  as  provided  in  Paragraph  10 hereof,  shall not be
          available for the grant of further Options under the Plan.

         5. Administration of the Plan.

     (a)  Composition of the Committee.  The Plan shall be  administered  by the
          Committee,  which  shall  be  composed  solely  of  two  (2)  or  more
          Non-employee  Directors.  Members of the Committee  shall serve at the
          pleasure of the Board.  In the absence at any time of a duly appointed
          Committee, the Plan shall be administered by the members of the Board.

     (b)  Powers of the Committee.  Except as limited by the express  provisions
          of the Plan or by  resolutions  adopted  by the Board,  the  Committee
          shall have sole and  complete  authority  and  discretion,  subject to
          compliance  with  applicable  regulations  of  the  Office  of  Thrift
          Supervision  (i) to  select  Participants  and grant  Awards,  (ii) to
          determine  the form and  content of Awards to be issued in the form of
          Agreements  under  the Plan,  (iii) to  interpret  the  Plan,  (iv) to
          prescribe,  amend and rescind  rules and  regulations  relating to the
          Plan, and (v) to make other determinations  necessary or advisable for
          the  administration  of the Plan.  The  Committee  shall  have and may
          exercise  such other power and  authority as may be delegated to it by
          the Board from time to time. A majority of the entire  Committee shall
          constitute  a quorum  and the  action  of a  majority  of the  members
          present at any meeting of the  committee at which a quorum is present,
          or acts approved in writing by a majority of the  Committee  without a
          meeting, shall be deemed the action of the Committee.

     (c)  Agreement.  Each  Award  shall be  evidenced  by a  written  agreement
          containing such  provisions as may be approved by the Committee.  Each
          such Agreement shall constitute a binding contract between the Company
          and the Participant,  and every  Participant,  upon acceptance of such
          Agreement,  shall be bound by the terms and  restrictions  of the Plan
          and of such  Agreement.  The terms of each such Agreement  shall be in
          accordance  with  the  Plan,  but  each  Agreement  may  include  such
          additional provisions and restrictions determined by the Committee, in
          its discretion,  subject to compliance  with  applicable  regulations,
          provided that such  additional  provisions  and  restrictions  are not
          inconsistent with the terms of the Plan. In particular,  the Committee
          shall set forth in each  Agreement (i) the Exercise Price of an Option
          or SAR, (ii) the number of Shares subject to, and the expiration  date
          of,  the  Award,  (iii) the  manner,  time,  and rate  (cumulative  or
          otherwise)   of  exercise   or  vesting  of  such   Award,   (iv)  the
          restrictions,  if any, to be placed  upon such  Award,  or upon Shares
          which may be issued upon  exercise of such Award,  and (v) whether the
          Option is intended to be an ISO or a Non-ISO.

               The  Chairman  of the  Committee  and such  other  Directors  and
          officers as shall be designated by the Committee are hereby authorized
          to execute Agreements on behalf of the Company and to cause them to be
          delivered to the recipients of Awards.

     (d)  Effect of the Committee's  Decisions.  All decisions,  determinations,
          and  interpretations of the Committee shall be final and conclusive on
          all persons affected thereby.

     (e)  Indemnification.  In addition to such other rights of  indemnification
          as they may have, the members of the Committee shall be indemnified by
          the Company in connection with any claim,  action, suit, or proceeding
          relating to any action taken or failure to act under or in  connection
          with the  Plan or any  Award,  granted  hereunder  to the full  extent
          provided for under the  Certificate  of  Incorporation  of the Company
          with respect to the indemnification of Directors.

         6. Grant of Options.

     (a)  General  Rule.  On and after the  Effective  Date,  key  Employees and
          Non-employee  Directors  shall be  eligible  to receive  discretionary
          grants of Options (or other  Awards)  pursuant  to the Plan;  provided
          that such  grant  shall  not be made to an  Employee  or  Non-employee
          Director whose Continuous  Service terminates on or before the date of
          grant.

     (b)  The Option  granted to the optionee  hereunder (i) shall become vested
          and  exercisable  in  accordance  with the  Agreement  regarding  such
          Option, (ii) shall have a term of not more than 10 years from the date
          of the Award, and (iii) shall be subject to the general rule set forth
          in  Paragraph  8(c)  with  respect  to  the  effect  of an  optionee's
          termination of Continuous  Service on the Optionee's right to exercise
          his or her Options.

         (c) Special Rules for ISOs.

     (1)  The Option  granted to the optionee  hereunder (1) shall become vested
          and  exercisable,  on a cumulative  basis,  with respect to 20% of the
          Optioned Shares upon each of the first five  anniversary  dates of the


                                       35
<PAGE>

          date of grant,  provided  that vesting shall not occur on a particular
          date if the Optionee's  Continuous Service has terminated on or before
          such date and (ii)  shall have a term of 10 years from the date of the
          Award.

     (2)  The aggregate  Market Value, as of the date the Option is granted,  of
          the Shares with  respect to which ISOs are  exercisable  for the first
          time by an Employee  during any  calendar  year  (under all  incentive
          stock  option  plans,  as defined in Section  422 of the Code,  of the
          Company or any present or future Affiliate) shall not exceed $100,000.
          Notwithstanding  the  foregoing,  the  Committee  may grant Options in
          excess  of the  foregoing  limitations,  in which  case  such  Options
          granted  in  excess  of such  limitation  shall be  Options  which are
          Non-ISOs.

         7. Exercise Price for Options and Measurement Price for SARs.

     (a)  Limits  on  Committee  Discretion.   The  Exercise  Price  as  to  any
          particular  Option and the  Measurement  Price for any  particular SAR
          shall not be less than 100% of the Market Value of the Optioned Shares
          on the date of grant without taking into account any  restrictions  on
          the  Optioned  Shares.  In the case of an  Employee  who  owns  Shares
          representing  more  than 10% of the  Company's  outstanding  Shares of
          Common Stock at the time an ISO is granted,  the Exercise  Price shall
          not be less than 110% of the Market  Value of the  Optioned  Shares at
          the time the ISO is granted.

     (b)  Standards for Determining  Exercise Price or Measurement Price. If the
          Common Stock is listed on a national  securities  exchange  (including
          the  Nasdaq  National  Market  or  SmallCap  System)  on the  date  in
          question,  then the Market Value per Share shall be the average of the
          highest and lowest selling prices on such exchange on such date, or if
          there  were  no  sales  on such  date,  then  the  Exercise  Price  or
          Measurement  Price shall be the mean  between the bid and asked prices
          on such  date.  If the  Common  Stock is  traded  otherwise  than on a
          national securities exchange on the date in question,  then the Market
          Value per Share shall be the mean  between the bid and asked prices on
          such date, or, if there is no bid and asked prices on such date,  then
          on the next  prior  business  day on  which  there  was bid and  asked
          priced, If no such bid and asked prices are available, then the Market
          Value per Share shall be its fair market  value as  determined  by the
          Committee, in its sole and absolute discretion.

         8. Exercise of Options.

     (a)  Generally. Subject to (e) below, any Option granted hereunder shall be
          exercisable  at such  times  and  under  such  conditions  as shall be
          permissible  under the terms of the Plan and of the Agreement  granted
          to a  Participant.  An Option may not be  exercised  for a  fractional
          Share.

     (b)  Procedure for Exercise. A Participant may exercise Options, subject to
          provisions   relative  to  its  termination  and  limitations  on  its
          exercise,  only by (1) written notice of intent to exercise the option
          with respect to a specified  number of Shares,  and (2) payment to the
          Company  (contemporaneously  with delivery of such notice) in cash, in
          Common Stock, or a combination of cash and Common Stock, of the amount
          of the  Exercise  Price for the number of Shares with respect to which
          the option is then being  exercised.  Each such  notice  (and  payment
          where required) shall be delivered, or mailed by prepaid registered or
          certified  mail,  addressed  to the  Treasurer  of the  Company at the
          Company's executive offices.  Common Stock utilized in full or partial
          payment  of the  Exercise  Price  for  options  shall be valued at its
          Market Value at the date of exercise.

     (c)  Period of  Exercisability.  Except to the extent otherwise provided in
          more restrictive terms of an Agreement,  an Option may be exercised by
          a Participant  only with respect to the vested  portion of such Option
          and only while a  Participant  is an  Employee  or  Director  that has
          maintained  Continuous  Service  from  the  date of the  grant  of the
          Option,  or within three months after  termination of such  Continuous
          Service  (but  not  later  than the date on  which  the  Option  would
          otherwise expire),  except if the Employee's or Director's  Continuous
          Service terminates by reason of:

     (1)  "Just  Cause"  which for  purposes  hereof  shall have the meaning set
          forth in any unexpired  employment  agreement  between the Participant
          and the Company, the Bank, and/or an Affiliate (and, in the absence of
          any such agreement,  shall mean termination  because of the Employee's
          or Director's personal dishonesty,  incompetence,  willful misconduct,
          breach  of  fiduciary  duty  involving  personal  profit,  intentional
          failure to perform stated duties,  willful violation of any law, rule,
          or regulation  (other than traffic  violations or similar offenses) or
          final  cease-and-desist  order),  then  the  Participant's  rights  to
          exercise such Option shall expire on the date of such termination;

     (2)  death,  then all  Options of the  deceased  Participant  shall  become
          immediately exercisable and may be exercised within two years from the

                                       36
<PAGE>


          date of the Participant's  death (but not later than the date on which
          the Option would otherwise expire) by the personal  representatives of
          the   Participant's   estate  or  person  or   persons   to  whom  the
          Participant's rights under such Option shall have passed by will or by
          laws of descent and distribution;

     (3)  Permanent  and Total  Disability  (as such term is  defined in Section
          22(e)(3) of the Code),  then all Options of the  disabled  Participant
          shall become  immediately  exercisable and may be exercised within one
          year from the date of such  Permanent  and Total  Disability,  but not
          later than the date on which the Option would otherwise expire.

     (d)  Effect of the Committee's  Decisions.  The  Committee's  determination
          whether  a  Participant's  Continuous  Service  has  ceased,  and  the
          effective  date thereof,  shall be final and conclusive on all persons
          affected thereby.

     (e)  Vesting of all Options shall cease immediately upon the termination of
          employment or  directorship of an optionee.  The vesting  schedule for
          ISOs set  forth in  Section  6(c)(1)  of this  Plan is the most  rapid
          vesting permitted under the Plan for ISOs, except in the case of death
          or disability  (which shall be governed by Paragraphs  8(c)(2) and (3)
          above) or a change in control  (which  shall be governed by  Paragraph
          11).

         9. Grants of Options to Non-Employee Directors

     (a)  Grants.  Notwithstanding  any  other  provisions  of this  Plan,  each
          Non-employee Director on the Effective Date is elegible to receive, on
          and after said date,  Non-ISOs to purchase Shares.  Such Non-ISO shall
          have an Exercise  Price per Share equal to the Market Value of a Share
          on the date of grant.

               Each  Director who joins the Board after the  Effective  Date and
          who is a Non-employee  Director  shall be eligible to receive,  on and
          after the date of joining the Board, a discretionary grant of Non-ISOs
          in  accordance  with  Section 6 of the Plan at an  Exercise  Price per
          Share equal to the Market Value of a Share on the date of grant.

     (b)  Terms of  Exercise.  Options  received  under the  provisions  of this
          Paragraph may be exercised in accordance with Paragraph 8 above.

         10. SARs (Stock Appreciation Rights)

     (a)  Granting of SARs. In its sole  discretion,  subject to compliance with
          applicable regulations, the Committee may from time to time grant SARs
          to Employees  either in  conjunction  with, or  independently  of, any
          Options  granted under the Plan. A SAR granted in conjunction  with an
          Option may be an alternative  right wherein the exercise of the Option
          terminates  the SAR to the  extent of the  number of shares  purchased
          upon exercise of the Option and, correspondingly,  the exercise of the
          SAR  terminates  the Option to the extent of the number of Shares with
          respect to which the SAR is exercised. Alternatively, a SAR granted in
          conjunction with an Option may be an additional right wherein both the
          SAR and the  Option  may be  exercised.  A SAR may not be  granted  in
          conjunction  with an ISO under  circumstances in which the exercise of
          the SAR affects the right to  exercise  the ISO or vice versa,  unless
          the SAR, by its terms, meets all of the following requirements:

     (1)  The SAR will expire no later than the ISO;

     (2)  The SAR may be for no more than the  difference  between the  Exercise
          Price of the ISO and the Market Value of the Shares subject to the ISO
          at the time the SAR is exercised;

     (3)  The SAR is transferable  only when the ISO is transferable,  and under
          the same conditions;

     (4)  The SAR may be exercised only when the ISO may be exercised; and

     (5)  The SAR may be  exercised  only when the  Market  Value of the  Shares
          subject to the ISO exceeds the Exercise Price of the ISO.

     (b)  Timing of Exercise.  Any election by a  Participant  to exercise  SARs
          shall be made  during the period  beginning  on the 3rd  business  day
          following the release for publication of quarterly or annual financial
          information  and ending on the 12th business day following  such date.
          This  condition  shall be deemed to be  satisfied  when the  specified
          financial data is first made publicly available. In no event, however,
          may a SAR be exercised  within the six-month period following the date
          of its grant.

                                       37
<PAGE>

               The  provisions of Paragraphs  8(c) and 8(e) regarding the period
          of exercisability and vesting of Options are incorporated by reference
          herein,  and shall determine the period of exerci sability and vesting
          of SARs.

     (c)  Exercise of SARs. A SAR granted hereunder shall be exercisable at such
          times and under  such  conditions  as shall be  permissible  under the
          terms of the  Plan  and of the  Agreement  granted  to a  Participant,
          provided that a SAR may not be exercised for a fractional  Share. Upon
          exercise  of a SAR,  the  Participant  shall be  entitled  to receive,
          without  payment  to the  Company  except for  applicable  withholding
          taxes,  an amount equal to the excess of (or, in the discretion of the
          Committee  if provided in the  Agreement,  a portion of) the excess of
          the then aggregate  Market Value of the number of Optioned Shares with
          respect to which the Participant exercises the SAR, over the aggregate
          Measurement Price of such number of Optioned Shares. This amount shall
          be payable by the Company, in the discretion of the Committee, in cash
          or in  Shares  valued  at  the  then  Market  Value  thereof,  or  any
          combination thereof

     (d)  Procedure  for  Exercising   SARs.  To  the  extent  not  inconsistent
          herewith,  the  provisions  of Paragraph  8(b) as to the procedure for
          exercising Options are incorporated by reference,  and shall determine
          the procedure for exercising SARs.

         11. Change in Control.

               All outstanding  Awards shall become  immediately  exercisable in
          the event of a Change in Control of the Company,  as determined by the
          Committee in its sole discretion. In the event of a Change in Control,
          the Committee and the Board of Directors,  at their  discretion,  will
          take one or a combination of the following  actions to be effective as
          of the date of such Change in Control:

     (1)  provide that such Awards shall be assumed,  or equivalent Awards shall
          be  substituted  ("Substitute  Awards") by the acquiring or succeeding
          corporation  (or an  Affiliate  thereof),  provided  that (a) any such
          Substitute  Award  exchanged for ISOs shall meet the  requirements  of
          Section  424(a) of the Code, and (b) the shares of stock issuable upon
          the  exercise of such  Substitute  Award shall  constitute  securities
          registered in accordance  with the  Securities Act of 1933, as amended
          ("Securities  Act"),  or such  securities  shall be  exempt  from such
          registration  in accordance  with  Sections  3(a)(2) or 3(a)(5) of the
          Securities Act, or

     (2)  provide that the  Participants  will receive upon the  consummation of
          the  Change in  Control  transaction  a cash  payment  for each  Award
          surrendered  equal to the  difference  between (1) the Market Value of
          the consideration to be received for each share of Common Stock in the
          Change in Control  transaction times the number of Shares subject to a
          surrendered  Award,  and  (2) the  aggregate  exercise  price  of such
          surrendered  Awards.  Awards to which the  Committee  or the Board has
          determined to provide a cash payment in lieu of the Award  pursuant to
          this section shall be and become, upon the Change in Control the right
          to receive the cash payment only and shall cease to be an Award.

               The individual  agreements  concerning  Awards under this Plan or
          other  agreements  between  Participants  and the  Company,  the Bank,
          and/or any Affiliate  thereof,  may provide  restrictions on Awards in
          the case of a Change in Control in order to avoid  adverse tax results
          under Section 280G and/or Section 4999 of the Code.

         12. Effect of Changes in Common Stock Subject to the Plan.

     (a)  Recapitalizations;  Stock  Splits,  Etc. The number and kind of shares
          reserved  for  issuance  under the Plan,  and the  number  and kind of
          shares subject to  outstanding  Awards (and the Exercise Price thereof
          in the case of Options and the Measurement Price in the case of SARs),
          shall be proportionately adjusted for any increase,  decrease, change,
          or  exchange  of Shares  for a  different  number or kind of shares or
          other   securities  of  the  Company  which  results  from  a  merger,
          consolidation,  recapitalization,   reorganization,  reclassification,
          stock dividend,  split-up,  combination of shares, or similar event in
          which the number or kind of shares is changed  without  the receipt or
          payment of consideration by the Company.

     (b)  Special Rule for ISOs.  Any adjustment  made pursuant to  subparagraph
          (a)  hereof  shall be made in such a  manner  as not to  constitute  a
          modification,  within the  meaning of Section  424(h) of the Code,  of
          outstanding ISOs.

     (c)  Conditions and Restrictions on New, Additional, or Different Shares or
          Securities.  If, by reason of any  adjustment  made  pursuant  to this
          Paragraph,  a  Participant  becomes  entitled to new,  additional,  or
          different  shares of stock or  securities,  such new,  additional,  or
          different  shares of stock or securities shall thereupon be subject to
          all of the conditions  and  restrictions  that were  applicable to the
          Shares pursuant to the Award before the adjustment was made.

     (d)  Other Issuances.  Except as expressly provided in this Paragraph,  the
          issuance  by the  Company  or an  Affiliate  of shares of stock of any
          class,  or of securities  convertible  into Shares or stock of another
          class,  for cash or  property  or for labor or  services  either  upon


                                       38
<PAGE>

          direct sale or upon the  exercise  of rights or warrants to  subscribe
          therefor,  shall  not  affect,  and no  adjustment  shall be made with
          respect to, the number, class, Exercise Price, or Measurement Price of
          Shares then subject to Awards or reserved for issuance under the Plan.

         13. Non-Transferability of Awards.

               Awards  may  not  be  sold,  pledged,   assigned,   hypothecated,
          transferred, or disposed of in any manner other than by will or by the
          laws of  descent  and  distribution,  or  pursuant  to the  terms of a
          "qualified  domestic  relations  order" (within the meaning of Section
          414(p) of the Code and the  regulations  and rulings  thereunder).  An
          Award  may be  exercised  only  by a  Participant,  the  Participant's
          personal representative, or a permitted transferee.

         14. Time of Granting Awards.

               The date of grant of an Award  shall,  for all  purposes,  be the
          later of the date on which the Committee  makes the  determination  of
          granting  such  Award,   and  the  Effective   Date.   Notice  of  the
          determination  shall be given to each  Participant to whom an Award is
          so granted within a reasonable time after the date of such grant.

         15. Effective Date.

               The Plan shall become effective  immediately upon its approval by
          the Board;  provided,  however,  that the Plan shall be  approved by a
          favorable  vote of  stockholders  owning  at least a  majority  of the
          Shares cast at a meeting duly held in accordance  with applicable laws
          within 12 months of the  adoption  of the Plan by the  Board.  If such
          approval  of  stockholders  is not  obtained  within  12 months of the
          adoption  of the Plan,  all ISOs  granted  pursuant  to the Plan shall
          become Non-ISOs.

         16. Modification of Awards.

               At any time,  and from time to time,  the Board may authorize the
          Committee  to direct  execution  of an  instrument  providing  for the
          modification of any outstanding  Award,  provided no such modification
          shall  confer on the holder of said  Award any right or benefit  which
          could not be  conferred  on such person by the grant of a new Award at
          such time,  or impair the Award  without  the consent of the holder of
          the Award.

         17. Amendment and Termination of the Plan.

               The  Board  may from  time to time  amend  the terms of the Plan,
          subject to compliance with applicable  regulations,  and, with respect
          to any Shares at the time not subject to Awards,  suspend or terminate
          the Plan;  provided  that the  provisions  of  Paragraph  9 may not be
          amended  more than once every six months  (other than to comport  with
          changes in the Code, the Employee  Retirement  Income  Security Act of
          1974, as amended, or the rules thereunder).

               Shareholder  approval  must be obtained for any  amendment of the
          Plan that  would  change  the  number of  Shares  subject  to the Plan
          (except in accordance  with Section 13 above),  change the category of
          persons  eligible  to be  Participants,  or  materially  increase  the
          benefits under the Plan.

               No  amendment,  suspension,  or  termination  of the Plan  shall,
          without  the  consent of any  affected  holders of an Award,  alter or
          impair any rights or obligations under any Award theretofore granted.

         18. Conditions upon Issuance of Shares.

     (a)  Compliance with Securities  Laws.  Shares of Common Stock shall not be
          issued with  respect to any Award  unless the issuance and delivery of
          such  Shares  shall  comply  with  all  relevant  provisions  of  law,
          including, without limitation, the Securities Act of 1933, as amended,
          the rules and regulations promulgated thereunder, any applicable state
          securities law, and the  requirements of any stock exchange upon which
          the Shares may then be listed.  The Plan is  intended  to comply  with
          Rule  16b-3,  and  any  provision  of the  Plan  which  the  Committee
          determines in its sole and absolute discretion to be inconsistent with
          said Rule shall, to the extent of such  inconsistency,  be inoperative
          and null and void,  and shall not affect the validity of the remaining
          provisions of the Plan.  The  Committee  shall have the power to amend
          the Plan to conform the Plan with Rule 16b-3.

     (b)  Special Circumstances. The inability of the Company to obtain approval
          from any regulatory body or authority deemed by the Company's  counsel
          to be  necessary  to the  lawful  issuance  and  sale  of  any  Shares
          hereunder shall relieve the Company of any liability in respect of the
          non-  issuance or sale of such Shares.  As a condition to the exercise
          of an option or SAR, the Company may require the person exercising the
          Option or SAR to make such  representations  and  warranties as may be
          necessary  to  assure  the  availability  of  an  exemption  from  the
          registration requirements of federal or state securities law.

                                       39
<PAGE>

     (c)  Committee  Discretion.  The  Committee  shall  have the  discretionary
          authority,  subject to  compliance  with  applicable  regulations,  to
          impose  in  Agreements  such  restrictions  on  Shares  as it may deem
          appropriate  or desirable,  including but not limited to the authority
          to impose a right of first refusal or to establish  repurchase  rights
          or both of these restrictions.

         19. Reservation of Shares.

               The Company,  during the term of the Plan,  will reserve and keep
          available a number of Shares sufficient to satisfy the requirements of
          the Plan.

         20. Withholding Tax.

               The  Company's  obligation  to deliver  Shares  upon  exercise of
          Options and/or SARs shall be subject to the Participant's satisfaction
          of all applicable federal,  state, and local income and employment tax
          withholding obligations.  The Committee, in its discretion, may permit
          the  Participant  to satisfy the  obligation,  in whole or in part, by
          irrevocably  electing  to have  the  Company  withhold  Shares,  or to
          deliver to the  Company  Shares  that the  Participant  already  owns,
          having a value equal to the amount required to be withheld.  The value
          of Shares to be withheld, or delivered to the Company,  shall be based
          on the Market  Value of the Shares on the date the amount of tax to be
          withheld  is to be  determined.  As an  alternative,  the  Company may
          retain,  or sell without notice, a number of such Shares sufficient to
          cover the amount required to be withheld.

         21. No Employment or Other Rights.

               In no event shall an  Employee's  or  Director's  eligibility  to
          participate or participation in the Plan create or be deemed to create
          any legal or equitable right of the Employee,  Director,  or any other
          party to continue service with the Company, the Bank, or any Affiliate
          of such corporations. Except to the extent provided in Paragraphs 6(b)
          and 9(a), no Employee or Director  shall have a right to be granted an
          Award or, having  received an Award,  the right to again be granted an
          Award.  However, an Employee or Director who has been granted an Award
          may, if otherwise eligible, be granted an additional Award or Awards.

         22. Governing Law.

               The Plan shall be governed by and  construed in  accordance  with
          the laws of the State of Indiana,  except to the extent  that  federal
          law shall be deemed to apply.



                                       40
<PAGE>



                                                                    Exhibit 10.3
                              EMPLOYMENT AGREEMENT

     This Employment Agreement ("Agreement") is made and entered into as of this
15th day of November 2005, the "Effective  Date") by and among Peoples  Bancorp,
("Peoples"),  the  holding  company of Peoples  Federal  Savings  Bank of DeKalb
County (the "Bank"),  the Bank and Maurice F. Winkler,  III ("Executive"),  with
reference to the following:

     WHEREAS,  Executive  is currently  employed by the Bank,  which is a wholly
owned subsidiary of Peoples;

     WHEREAS,  Peoples and the Bank desire to provide for the  employment of the
Executive by the Bank;

     WHEREAS,  the Executive is willing to commit himself to serving the Bank on
the terms and conditions herein provided;

     NOW,  THEREFORE,  IN  CONSIDERATION OF the recitals set forth above and the
mutual promises, covenants, agreements,  conditions and undertakings hereinafter
set  forth,   the  adequacy  and  receipt  of  which   consideration  is  hereby
acknowledged, the parties hereto agree as follows:

1.       Term.

     This Agreement  shall have a term of three (3) years,  commencing as of the
Effective  Date set forth above (the  "Term").  Where used herein,  "Term" shall
refer to the entire period of employment of Executive by the Bank from and after
the Effective Date of this Agreement,  whether for the period provided above and
as extended or terminated earlier as hereinafter provided.

                   2. Position and Duties.

(a) During the Term,  Executive  shall be employed on a full-time basis to serve
as  President  and Chief  Executive  Officer of the Bank and  perform the duties
customarily  performed by such officer of a savings  association,  including the
general  supervision  and operation of the business and affairs of the Bank, and
reporting to the applicable  regulatory  authorities regarding the activities of
the Bank,  subject to the direction of and the powers vested by law in the Board
of Directors  of the Bank (the  "Board")  and the Bank's  shareholder,  Peoples.
Except as provided for herein, the duties and position of Executive as President
and Chief Executive  Officer hereunder may be changed only by the mutual written
agreement  of the  parties  hereto.  The parties  may  mutually  agree to extend
Executive's  full-time  status for  additional  12-month  periods  following the
Effective Date.

(b)  During  the Term  hereof,  Executive  shall  perform  the  services  herein
contemplated to be performed by Executive faithfully, diligently and to the best
of  Executive's  ability in  compliance  with  instructions  and policies of the
Board,  the Bank's Federal  Charter and Bylaws and with all applicable  laws and
regulations.

                 3. Compensation.

(a) Base Salary. For executive's services rendered hereunder, the Bank shall pay
or cause to be paid a base  salary  to  Executive  at the rate of  $136,373  per
annum,  payable  in  conformity  with the  Bank's  normal  payroll  periods  and


                                       41
<PAGE>

procedures.  During the Term, Executive's base salary shall be reviewed at least
once every  twelve (12) months and shall be  increased  (but not reduced) at any
time, and from time to time, as shall be substantially consistent with increases
in base salary  generally  awarded in the  ordinary  course of business to other
executives of the Bank, provided that Executive's Base Salary shall be increased
by a percentage no less than the annual increase of the cost of living index for
the Fort Wayne, Indiana metropolitan area. Any increase in base salary shall not
serve to limit or reduce  any  other  obligation  to the  Executive  under  this
Agreement.  The term "Base Salary" as utilized in this Agreement  shall refer to
base salary as so increased.

(b)  Discretionary  Bonus.  In addition to Executive's  Base Salary provided for
under  Paragraph  4(a) above,  the Executive  shall  participate in an equitable
manner with all other senior management  executives of the Bank in discretionary
bonuses  that  the  Board  may  award  from  time to time to the  Bank's  senior
management  executives.  No other  compensation  provided for in this  Agreement
shall be deemed a substitute  for the  Executive's  right to participate in such
discretionary bonuses.

(c) Stock Awards.  The Executive shall be eligible for  consideration  for stock
option  grants by Peoples  pursuant to any stock option plan adopted by Peoples,
for so long as Executive shall be employed by the Bank.

(e) Other  benefits.  The Executive  will eligible to  participate in or receive
benefits  under any employee  benefit  plans of the Bank which are  available to
senior executives and key management  employees of the Bank, subject to and on a
basis consistent with the terms,  conditions and overall  administration of such
plans  and  arrangements.  Nothing  paid to  Executive  under  any such  plan or
arrangement  will be  deemed  to be in lieu of other  compensation  to which the
Executive is entitled under this Agreement.

                4. Vacation and Sick Leave.

     During the Term hereof,  Executive  shall be entitled to paid  vacation and
paid sick leave,  the amount and term of which shall be determined in accordance
with the  policies of the Bank as in effect  from time to time,  but in no event
shall the vacation period be less than four weeks per year.

                5.       Group Medical, Life Insurance and Other Benefits.

     The Executive shall participate in any plan that the Bank maintains for the
benefit of its executives if the plan relates to (i) pension,  profit sharing or
other  retirement  benefits,  (ii)  medical  insurance or the  reimbursement  of
medical or dependent care  expenses,  or (iii) other group  benefits,  including
disability and life insurance plans.

                6.       Business Expenses.

     Executive  shall be entitled to  reimbursement  by the Bank for any and all
ordinary and necessary business expenses reasonably incurred by Executive in the
performance of Executive's  duties and in acting for the Bank during the Term of
this  Agreement,  provided that Executive  furnishes to the Bank, for review and
approval by the Chairman of the Board,  adequate records and other documentation
as may be required for the  substantiation  of such  expenditures  as a business
expense of the Bank

                7.       Termination for Cause.

     (a) The Board may for cause  terminate  Executive's  employment at any time


                                       42
<PAGE>

during the Term of this Agreement.  In such event, all rights of Executive under
this  Agreement  shall  terminate and  Executive  shall have no right to receive
compensation  or other  benefits for any period after the effective date of such
termination for cause. Termination for cause shall be defined as the Executive's
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law,  rule or  regulation  (other  than  traffic  violations  or  similar
offenses) or final  cease-and-desist  order, or material breach of any provision
of this Agreement.

          (b) Notwithstanding  the foregoing,  no termination for cause shall be
     effective  with respect to the Executive  unless and until there shall have
     been  delivered  to him a copy of a  resolution,  finding  that in the good
     faith  opinion of the Board of  Directors  of the Bank (the  "Board"),  the
     Executive's  actions and/or failure to act justifies  termination for cause
     and specifying the particulars  thereof in detail.  Reasonable notice shall
     be provided to the Executive and he shall receive an opportunity,  together
     with counsel,  to be heard before the Board.  The Executive  shall not have
     the right to receive  compensation or other benefits for any period after a
     termination for cause,  except that benefits  previously  vested or accrued
     shall be unaffected by such termination.

                  8.       Events of Termination; Payments to Executive.

                                       43
<PAGE>

          The  provisions of this Paragraph 9 shall apply upon the occurrence of
     an Event of Termination (as herein defined).

(a) As used in this Agreement,  an "Event of Termination" shall mean and include
any  one or more  of the  following:  (i)  the  termination  by the  Bank of the
Executive's employment hereunder for any reason other than for cause (as defined
in Paragraph 7 hereinabove) during the Term; or (ii) the Executive's resignation
or constructive termination from the Bank's employ, upon any (A) material change
in the Executive's  function,  duties, or  responsibilities,  which change would
cause  the  Executive's  position  to  become  one  of  lesser   responsibility,
importance,  or scope from the  position  and  attributes  thereof (and any such
material  change shall be deemed a  continuing  breach of this  Agreement),  (B)
Relocation  of  the  principal  place  at  which  Executive's  duties  are to be
performed to a location  outside a thirty (30) mile radius  around the principal
location at which  Executive's  duties are  performed  immediately  prior to the
termination  of  employment,   (C)  material   reduction  in  the  benefits  and
perquisites  to the Executive from those being provided as of the Effective Date
of this Agreement except for any changes that are generally applicable to senior
executives  and key  management  employees  or  expressly  contemplated  by this
Agreement  (any  such  reduction  to be  deemed  a  continuing  breach  of  this
Agreement),  or (D) or any other material  breach of this Agreement by the Bank.
Upon the  occurrence  of any event  described  in clauses  (A),  (B), (C) or (D)
above,  the Executive  shall have the right to elect to terminate his employment
under this  Agreement  by  resignation  upon not less than sixty (60) days prior
written notice given within a reasonable period of time not to exceed, except in
case of a continuing  breach,  four  calendar  months after the later of the (i)
occurrence of the event giving rise to said right to elect  termination  or (ii)
actual  knowledge  of such event by the  Executive.  In the case of a continuing
breach,  the  Executive  may give such sixty (60) days prior notice at any time.
Either of  Executive's  sixty (60) days prior notice of his Date of  Termination
shall  be  referred  to as  "Notice  of  Termination."  The  date  specified  in
Executive's  Notice of  Termination  to the Bank of his last date of  employment
shall be the "Date of Termination."

(b) Upon the occurrence of an Event of Termination,  on the Date of Termination,
as defined in this  Paragraph  9, the Bank shall pay the  Executive,  or, in the
event of his subsequent  death,  his beneficiary or beneficiaries as he may have
designated, or his estate, if no beneficiary designation has been made, or if no
beneficiaries survive the Executive,  as severance pay or liquidated damages, or
both,  a sum equal to (i) the amount of Base  Salary of the  Executive  for each
year during the remaining Term of this Agreement, plus (ii) bonuses in an amount
equal to the last bonus received, multiplied by the number of years remaining in
the Term of this Agreement,  as well as (iii) health and/or medical  benefits as
provided  under  Paragraph 6 and retirement  benefits under  Paragraph 6 of this
Agreement,  provided,  however,  that if the Bank is not in compliance  with its
minimum capital  requirements or if such payments would cause the Bank's capital
to be reduced below its minimum  capital  requirements,  such payments  shall be
deferred  until  such time as the Bank is in  capital  compliance.  Such  health
benefit  payments  shall  be  made as  incurred,  and  such  salary,  bonus  and
retirement  benefit payments shall be made in a lump sum within ten (10) days of
the Date of Termination  unless the Executive  makes an election within ten (10)
days of the Notice of  Termination  to have such  payments made under the Bank's
current payment  procedures  during the remaining Term of Employment  under this
Agreement.

(c) The payments  provided  under this  Paragraph 9 upon an Event of Termination
shall be in lieu of any other  payments or damages  recoverable in any causes of
action by  Executive  related to this  Agreement.  As a condition  to receipt of
payments  hereunder,  the  Executive  shall  execute  a Release  and  Settlement
Agreement  pursuant  to which  the  Executive  shall  waive  any and all  claims
resulting from employment at or termination from the Bank other than payments or
benefits which are expressly provided for in this Agreement.

                                       44
<PAGE>

          9.      Termination as a Result of a Change of Control.

(a) Change of Control.  For purposes of this Agreement and except as provided in
Paragraph 12(c) below relating to supervisory transactions,  the term "Change of
Control" shall mean the occurrence of any of the following events:

     (i) Any  "person"  (as such term is used in Section  13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),  other than a
trustee or other fiduciary holding  securities under an employee benefit plan of
Peoples or a corporation  owned  directly or indirectly by the  shareholders  of
Peoples in  substantially  the same  proportions as their  ownership of stock in
Peoples,  becomes  after the date hereof the  "beneficial  owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of the securities of
Peoples  representing  fifty  percent  (50%) or more of the total  voting  power
represented by Peoples then  outstanding  securities  that vote generally in the
election of directors ("Voting Securities");

     (ii) Any "person"  (as such term is used in Section  13(d) and 14(d) of the
Exchange Act), other than a trustee or other fiduciary holding  securities under
an  employee  benefit  plan  of  Peoples  or a  corporation  owned  directly  or
indirectly by the shareholders of Peoples in substantially  the same proportions
as their  ownership  of stock in  Peoples,  becomes  after the date  hereof  the
"beneficial owner" (as defined in Rule 13 d-3 under the Exchange Act),  directly
or indirectly,  of twenty-five percent (25%) or more of the Voting Securities of
Peoples,  and,  within a period of twelve  (12)  months of such  acquisition  of
beneficial ownership, individuals who at the beginning of such period constitute
the Board of  Directors  of  Peoples,  or any new  director  whose  election  or
nomination  was approved by a vote of at least  two-thirds  of the  directors of
Peoples then still in office who were directors at the beginning of such period,
or whose election or nomination was previously so approved, cease for any reason
to constitute at least sixty percent (60%) of the directors of Peoples;

     (iii) The merger or  consolidation  of Peoples with any other  corporation,
other  than a merger or  consolidation  in which  the  shareholders  of  Peoples
immediately  prior  thereto  continue  to own,  directly or  indirectly,  Voting
Securities  representing at least seventy-five percent (75%) of the total voting
power of the entity surviving such merger or consolidation; or

     (iv) The complete liquidation of Peoples or the Bank or sale or disposition
by Peoples or the Bank (in one transaction or a series of  transactions)  of all
or substantially all of Peoples' or the Bank's assets.

(b) Severance Payment. If Executive's  employment with the Bank is terminated as
a result of a Change of Control  of  Peoples,  Executive  shall be  entitled  to
receive as his sole and exclusive remedy a severance payment equal to 2.99 years
of Executive's Base Salary, as provided for in Paragraph 3(a) of this Agreement,
plus the amount of any bonus  compensation  earned by Executive  during the 2.99
years  immediately  preceding  the  Change of  Control,  health  benefits  under
Paragraph 6(a) and retirement benefits under Paragraph 6(b), both of which shall
be  received  until  Executive  reaches  the age of 65, as well as rights to any
vested or accrued but unvested options, less any amounts required to be deducted
by the Bank for federal and state taxes or other  applicable  requirements.  The
severance payment hereunder shall be paid to Executive upon the effectiveness of
Executive's  termination of employment from the Bank and the termination of this
Agreement.  In the event a  severance  payment is paid to  Executive  under this
Paragraph  10(b),  this Agreement shall be terminated and the Bank shall have no
further obligation to Executive under this Agreement, except as provided herein.

(c) Upon the  occurrence of a Change in Control,  the Executive will be entitled


                                       45
<PAGE>

to any benefits granted to him pursuant to any stock option or any other benefit
plan of the Bank whether or not such  benefits  have vested in  accordance  with
Paragraph 4(d). Vested and/or accrued but unvested rights of Executive under the
Bank's Retirement Plan, or any supplemental  plan, and Executive's health and/or
medical  benefits  provided  under  Paragraph 6 of this  Agreement  shall not be
affected by a Change in Control.

(d) Notwithstanding the preceding  paragraphs of this Paragraph 10, the payments
or  benefits  to be made or  afforded to  Executive  under this  Agreement  when
aggregated with any other "golden parachute" amounts (defined under Section 280G
of the Internal  Revenue Code of 1986,  as amended (the "Code") as  compensation
that becomes payable or accelerated due to a Change in Control payable under any
other plans,  agreements or policies of Peoples or the Bank, shall be reduced to
the highest amount  permissible  under Sections 280G and 4999 of the Code before
the Executive  becomes subject to the excess parachute  payment excise tax under
Section  4999 of the  Code and  Peoples  or the  Bank  loses  all or part of its
compensation  deduction for such  payments.  The Executive  shall  determine the
allocation  of the  reduction  required  hereby  among the benefits to which the
Executive is entitled.

(e) Compliance with Law and Regulation. The parties hereto expressly acknowledge
and agree that any  payments  made to  Executive  pursuant to this  Agreement or
otherwise are subject to and conditioned upon compliance with 12 U.S.C.  Section
1828(k) and any regulations promulgated there under.

                10.     Other Termination.

(a)  Disability.  In the event that  Executive  shall fail,  because of illness,
incapacity or injury, to render the services  contemplated by this Agreement for
three (3) consecutive  calendar months, or for shorter periods  aggregating four
(4) months in any twelve (12) month period, Executive's employment hereunder may
be  terminated by written  notice from the Bank to Executive.  In the event that
Executive's employment is terminated under this Paragraph 11(A), Executive shall
receive the difference  between any disability  payments  provided by the Bank's
insurance  plans and his Base Salary as set forth in Paragraph 4(a) hereof which
he would have received  during the remaining  Term of this  Agreement,  plus the
amount of any bonus compensation  payable to Executive under Section 4(b) hereof
for any number of years  remaining  in the Term of this  Agreement,  prorated as
appropriate.  Such  termination  shall not affect any rights which Executive may
have pursuant to any insurance or other death benefit, retirement or stock award
plans or  arrangements  of the  Bank,  or any  stock  option  plans  or  options
thereunder, which rights shall continue to be governed by the provisions of such
plans and arrangements.

(B) Death.  If  Executive's  employment is  terminated by reason of  Executive's
death, this Agreement shall terminate without further obligations of the Bank to
Executive (or Executive's heirs or legal  representatives) under this Agreement,
other than for payment of (i) Executive's  Base Salary which he was receiving at
the time of death, prorated through the date of termination;  (ii) the amount of
any bonus  compensation  payable  to  Executive  at the time of his death  under
Section  4(b)  above,  prorated  through  the  date of  termination;  (iii)  any
compensation previously deferred by Executive;  (iv) any accrued vacation and/or
sick leave pay; (v) any vested and/or  accrued but unvested  rights in any stock
options and (vi) any amounts due pursuant to the terms of any applicable welfare
benefit plan. All of the foregoing amounts shall be paid to Executives estate or
beneficiary,  as applicable, in a lump sum in cash within thirty (30) days after
the date of termination or earlier as required by applicable law.

                11.      Regulatory Provisions.

(a) Suspension and Removal Orders. If Executive is suspended and/or  temporarily


                                       46
<PAGE>

prohibited  from  participating  in the conduct of the Bank's  affairs by notice
served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act (12
U.S.C.  Section 181  8(e)(3)  and  (g)(1)),  the Bank's  obligations  under this
Agreement  shall  be  suspended  as of the date of  service,  unless  stayed  by
appropriate  proceedings.  If the charges in the notice are dismissed,  the Bank
may in its  discretion:  (i)  pay  Executive  all or  part  of the  compensation
withheld while its  obligations  under this Agreement were  suspended;  and (ii)
reinstate (in whole or in part) any of its obligations which were suspended.  If
Executive is removed and/or  permanently  prohibited from  participating  in the
conduct  of the Bank's  affairs  by an order  issued  under  Section  8(e)(4) or
8(g)(1) of the Federal Deposit  Insurance Act (12 U.S.C.  Section 181 8(e)(4) or
(g)(1)),  all obligations of the Bank under this Agreement shall terminate as of
the effective  date of the order,  but vested rights of the parties shall not be
affected.

(b)  Termination  by  Default.  If the Bank is in default (as defined in Section
3(x)(1) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(x)(1)), all
obligations under this Agreement shall terminate as of the date of default,  but
vested rights of the parties shall not be affected.

(c) Supervisory Assistance or Merger. All obligations under this Agreement shall
be terminated,  except to the extent that it is determined that  continuation of
the Agreement is necessary for the continued  operation of the Bank:  (i) by the
Director  of the Office of Thrift  Supervision  (the  "Director")  or his or her
designee,  at the time that the Federal  Deposit  Insurance  Corporation  or the
Office of Thrift  Supervision  enters into an agreement to provide assistance to
or on behalf of the Bank under the  authority  contained in Section 13(c) of the
Federal  Deposit  Insurance  Act (12  U.S.C.  Section  1823(c));  or (ii) by the
Director  or his or her  designee,  at the time that the  Director or his or her
designee  approves  a  supervisory  merger to  resolve  problems  related to the
operation of the Bank or when the Bank is in an unsafe or unsound condition. All
rights of the parties that have already vested,  however,  shall not be affected
by such action.

                12. Disclosure or Use of Trade Secrets/Non-Compete Agreement.

During the Term hereof, Executive will have access to and become acquainted with
what Executive and the Bank acknowledge are trade secrets of the Bank. Executive
shall not use or disclose any trade secrets or,  directly or  indirectly,  cause
them to be used or  disclosed  in any  manner,  during the Term  hereof or for a
period of one (1) year after the termination of this Agreement, except as may be
required or requested  by the Bank,  by court order or under  applicable  law or
regulation. While Executive is employed by the Bank and for a period of one year
after  termination  of  Executive's  employment  by the Bank for cause or by the
Executive,  Executive  shall not  directly or  indirectly  engage in any bank or
bank-related  business which competes with the business of the Bank as conducted
during  Executive's  employment  by the  Bank  for  any  financial  institution,
including,  but not limited to, banks,  savings  associations  and credit unions
within a 50-mile radius of Three Rivers, Michigan.

                13.      Return of Documents.

Executive expressly agrees that all manuals,  documents, files, reports, studies
or other  materials  used and/or  developed by Executive for the Bank during the
Term of this Agreement or prior thereto while Executive was employed by the Bank
are solely the property of the Bank, and that  Executive has no right,  title or
interest therein.  Upon termination of this Agreement,  Executive or Executive's
representative   shall  promptly  deliver   possession  of  all  such  materials
(including any copies thereof) to the Bank.


                                       47
<PAGE>

                        14.      Notices.

All notices,  demands or other communications  hereunder shall be in writing and
shall be deemed  to have been duly  given if  delivered  in  person,  or sent by
United States mail, certified or registered,  with return receipt requested,  if
to Executive,  addressed to Executive at the last residence address of Executive
as shown in the  records  of the  Bank,  and if to the  Bank,  addressed  to the
Chairman of the Board at the Bank's principal office.

                        15.      Governing Law and Jurisdiction.

This Agreement  shall be governed by and interpreted in accordance with the laws
of the State of Indiana. Each of the parties hereto consents to the jurisdiction
of the Indiana or federal  courts,  as the case may be, for the  enforcement  of
this  Agreement  and  matters  pertaining  to the  transactions  and  activities
contemplated hereby.

                        16.      Attorneys' Fees.

In the  event  that a  dispute  arises  with  respect  to  this  Agreement,  the
prevailing  party in such  dispute  shall be entitled  to recover all  expenses,
including,

                        17.      Benefit of Agreement.

This  Agreement  shall be  binding  upon and shall  inure to the  benefit of the
parties hereto and their respective successors and assigns;  provided,  however,
that Executive may not assign any interest in this  Agreement  without the prior
written consent of the Bank.

                        18.      Captions.

Captions and paragraph  heading used in this Agreement are for convenience  only
and shall not be used in interpreting or construing this Agreement.

                        19.      Entire Agreement.

This Agreement  contains the entire agreement of the parties with respect to the
employment  of Executive by the Bank,  and it expressly  supersedes  any and all
other agreements, either oral or written, relating thereto

                        20.      Severability.

Should any provision of this Agreement for any reason be declared invalid,  void
or unenforceable by a court of competent jurisdiction,  the validity and binding
effect of any remaining  portions of this  Agreement  shall remain in full force
and effect as if this  Agreement had been  executed  with such invalid,  void or
unenforceable  provisions  eliminated;  provided,  however,  that the  remaining
provisions still reflect the intent of the parties to this Agreement.

                        21.      Amendments.

This  Agreement  may not be amended or  modified  except by a written  agreement
signed by Executive and the Bank.  This Agreement and any amendment  thereof may
be executed in counterparts.

                                       48
<PAGE>

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the day and year first above written.

                                                PEOPLES FEDERAL SAVINGS BANK
                                                OF DEKALB COUNTY


                                            By:  /s/Roger J Wertenberger
                                                 Chairman of the Board



                                             By:  /s/Cheryl L. Taylor
                                                  Corporate Secretary




                                            EXECUTIVE


                                            /s/Maurice F. Winkler, III




                                       49
<PAGE>
                                                                      Exhibit 23

            Consent of Independent Registered Public Accounting Firm


We consent to the  incorporation by reference in the  registration  statement of
Peoples  Bancorp on Form S-8 (File No.  333-120950)  relating to the  Employees'
Savings & Profit  Sharing  Plan and Trust of Peoples  Bancorp and Form S-8 (File
No. 333-45164)  relating to the Three Rivers Financial  Corporation Stock Option
and Incentive Plan (as assumed by Peoples  Bancorp) and the 1998 Peoples Bancorp
Stock Option and  Incentive  Plan of our report dated  October 28, 2005,  on our
audits  of the  consolidated  financial  statements  of  Peoples  Bancorp  as of
September 30, 2005 and 2004,  and for the years ended  September 30, 2005,  2004
and 2003,  which report is  incorporated  by reference in this Annual  Report on
Form 10-K.




/s/ BKD, LLP

Indianapolis, Indiana
December 22, 2005



                                       50
<PAGE>
                                                                    Exhibit 31.1


                                  CERTIFICATION

I, Maurice F. Winkler III, President-Chief Executive Officer, certify that:

1.   I have reviewed this annual report on Form 10-K of Peoples Bancorp;

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


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

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

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

     (b)  [intentionally omitted].

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

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

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

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

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




December 20, 2005
                                               /s/Maurice F. Winkler III
                                               President-Chief Executive Officer




                                       51
<PAGE>
                                                                    Exhibit 31.1


                                  CERTIFICATION

I, Deborah K. Stanger, Vice President-Chief Financial Officer, certify that:

1.   I have reviewed this annual report on Form 10-K of Peoples Bancorp;


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


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


4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

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


     (b)  [intentionally omitted].


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


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


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


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


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


Date:  December 20, 2005                  /s/Deborah K. Stanger
                                          Vice President-Chief Financial Officer





                                       52
<PAGE>
                                                                      Exhibit 32



                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



Pursuant  to Section  906 of the  Sarbanes-Oxley  Act of 2002  (Section  1350 of
Chapter  63 of Title 18 of the  United  States  Code),  each of the  undersigned
officers of Peoples  Bancorp (the "Company") does hereby certify with respect to
the annual report on Form 10-K for the period ended September 30, 2005, as filed
with the Securities and Exchange Commission (the "Report"), that:

     1.   The Report fully  complies with the  requirements  of Section 13(a) of
          the Securities Exchange Act of 1934; and

     2.   The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.




Date: December 20, 2005                              /s/Maurice F. Winkler III
                                                     Chief Executive Officer


Date: December 20, 2005                              /s/Deborah K. Stanger
                                                     Chief Financial Officer

A signed  original of this  written  statement  required by Section 906 has been
provided to People Bancorp and will be retained by Peoples Bancorp and forwarded
to the Securities and Exchange Commission or its staff upon request.


                                       53
<PAGE>