<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549


                         ---------------------------- 

                                   FORM 10-Q


(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998.


[ _ ] 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 0-22641


                             PEOPLES BANCORP, INC.
                             ---------------------
            (Exact name of registrant as specified in its charter)


        Delaware                                          22-6764023
-------------------------------                  ------------------------------
(State or other jurisdiction of                          (IRS Employer
 incorporation or organization)                       Identification Number)


           134 Franklin Corner Road, Lawrenceville, New Jersey 08648
           ---------------------------------------------------------
                   (Address of principal executive offices)

Registrant's telephone number, including area code:     609-844-3100
                                                        ------------      


Former name, former address and former fiscal year, if changed since last report
--------------------------------------------------------------------------------

    Indicate by check 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 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
              ----------   ---------


                     APPLICABLE ONLY TO CORPORATE ISSUERS:

    As of June 30, 1998 there were 36,325,617 shares of the company's
 common stock.

                                       1
<PAGE>
                             PEOPLES BANCORP, INC.

                                     INDEX


                                                                            Page

PART I.  FINANCIAL INFORMATION


         Item 1.  Financial Statements

                  Consolidated Statements of Condition as of
                         June 30, 1998 and December 31, 1997...................4

                  Consolidated Statements of Income for the three and six
                         months ended June 30, 1998 and 1997...................5

                  Consolidated Statements of Stockholders' Equity for the
                         six months ended June 30, 1998 and 1997...............6

                  Consolidated Statements of Cash Flows for the six months 
                         ended June 30, 1998 and 1997..........................7

                  Notes to the Consolidated Financial Statements............8-11

         Item 2.  Management's Discussion and Analysis of Financial 
                  Condition and Results of Operations......................12-14


PART II. OTHER INFORMATION....................................................14

                                       2


<PAGE>
 
                        NOTES TO THE FINANCIAL STATEMENTS







(1)  Basis of Presentation

     The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in conformity with the instructions to Form 10-Q and Article 10
of Regulation S-X for Peoples Bancorp, Inc.

     In the opinion of management, all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial condition, results
of operations, and changes in cash flows have been made at and for the three and
six months periods ended June 30, 1998 and 1997. The results of operations for
the three and six months periods ended June 30, 1998 are not necessarily
indicative of results that may be expected for the entire year ending December
31, 1998.

(2)  The Conversion of the Mutual Holding Company to the Stock Form of
     Organization

     Peoples Bancorp, Inc. (the "Mid-Tier Holding Company") a federal
corporation and the Registrant's predecessor, became the holding company for
Trenton Savings Bank, FSB (the "Bank") in a reorganization (the "Two-Tier
Reorganization"), in which all of the outstanding shares of the Bank's common
stock ("Bank Common Stock"), including shares held by Peoples Bancorp, MHC (the
"Mutual Holding Company") and stockholders other than the Mutual Holding Company
(the "Minority Stockholders"), were converted into shares of common stock of the
Mid-Tier Holding Company ("Mid-Tier Common Stock"), and the Bank became the
wholly-owned subsidiary of the Mid-Tier Holding Company. From July 1997 through
April 8, 1998, the Mid-Tier Holding Company's only material asset consisted of
100% of the outstanding shares of common stock of the Bank. The Registrant,
Peoples Bancorp, Inc., a Delaware corporation, is the successor to the Mid-Tier
Holding Corporation. The Company was formed as part of the mutual-to-stock
conversion (the "Conversion") of the Mutual Holding Company. In the Conversion
the Bank became the wholly-owned subsidiary of the Company and the corporate
existence of the Mutual Holding Company ended. The Conversion was completed on
April 8, 1998. Prior to the completion of the Conversion the Company had
insignificant assets and liabilities.

     As part of the Conversion each of the outstanding shares of
Mid-Tier Common Stock held by Minority Stockholders was automatically converted
into 3.8243 shares of common stock (the "Common Stock") of the Company. As part
of the Conversion and in addition to the 12,430,673 shares issued due to the
Conversion of Mid-Tier Common Stock into Common Stock, the Company sold
23,805,827 shares of Common Stock for a subscription price of $10.00 per share
in a subscription offering (the "Offering"). Net proceeds of the Offering were
approximately $217 million. At the conclusion of the Conversion there were
36,236,500 shares of Common Stock outstanding, including 952,233 shares held by
the Company's employee stock ownership plan (the "ESOP").

     The following diagrams outline (i) the organization structure of the Mutual
Holding Company, the Mid-Tier Holding Company, and the Bank and its subsidiaries
prior to the completion of the Conversion and (ii) the organizational structure
of the Company and the Bank and its subsidiaries following the Conversion.

                                       3
<PAGE>
 
      ----------------------                        --------------------- 
      Mutual Holding Company                        Minority Stockholders
      ----------------------                        ---------------------

                   64.1%                                     35.9%
                                ---------------
                                   Mid-Tier
                                Holding Company
                                ---------------

                                        100%

                                --------------- 
                                     Bank
                                ---------------

                  100.0%                            100.0%

      ---------------------                         ------------------
      Manchester Trust Bank                         TSBusiness Finance 
      ---------------------                         ------------------

Organizational structure following the Conversion:

                              -------------------
                              Public Stockholders
                              -------------------
                                         
                                           100%

                              -------------------
                                    Company
                              -------------------

                                           100%

                              -------------------
                                     Bank
                              -------------------


                  100.0%                            100.0%

      ---------------------                         ------------------
      Manchester Trust Bank                         TSBusiness Finance 
      ---------------------                         ------------------

(3)  Non Performing Loans, Non Performing Assets and the Allowance for Loan
     Losses

                                       4
<PAGE>
 
     Non performing loans at June 30, 1998 and December 31, 1997 are as follows
(in thousands of dollars):


                                         June 30, 1998     December 31, 1997
                                        --------------   -------------------

Loans delinquent 90 days or more               $4,800                $5,558

Loans delinquent 90 days or more
 as a percentage of net loans
 receivable                                     1.11%                 1.40%


    An analysis of the allowance for loan losses for the six month periods ended
June 30, 1998 and 1997 is as follows (in thousands of dollars):

                                         June 30, 1998     June 30, 1997
                                        --------------   -------------------

Balance at beginning of the period             $3,415                $2,901
Provision charged to operations                   547                   214
(Charge-offs), Recoveries, net                      3                  (526)
                                        --------------   -------------------
Balance at the end of the period               $3,965                $2,589
                                        ==============   ===================

     Generally, the Bank's loans are placed on a non-accrual status when a
default of principal or interest has existed for a period of 90 days except
when, in the opinion of management, the collection of principal or interest is
reasonably anticipated or adequate collateral exists. In addition, the Bank
places any loan on non-accrual status if any part of it is classified as
doubtful or loss or if any part has been charged to the allowance for loan
losses. Real estate owned consists of property acquired through formal
foreclosures and acquired by deed in lieu of foreclosure, and is recorded at the
lower of cost or fair value. At June 30, 1998, the Bank had $.4 million
classified as real estate owned.

     The Bank continually reviews the quality of the loan portfolio, and engages
an outside consultant to perform routine reviews of the portfolio on a quarterly
basis. Management believes that the allowance for loan losses is adequate based
on historical experience, the volume and type of lending conducted by the Bank,
the amount of non-performing loans, general economic conditions and other
factors relating to the Bank's loan portfolio. However, there can be no
assurance that actual losses will not exceed estimated amounts.

     As of June 30, 1998, the Bank's total non-performing loans and foreclosed
assets amounted to $5.2 million, or .60% of total assets, compared to $5.9
million, or .92% of total assets at December 31, 1997.

     Federal regulations required that each insured savings institution classify
its assets on a regular basis. There are four classifications for problem
assets: "special mention," "substandard," "doubtful" and "loss." At June 30,
1998, the Bank had $5.4 million of loans classified as special mention, $5.6
million classified as substandard and $.6 million classified as doubtful or
loss.

     It is management's policy to maintain an allowance for estimated loan
losses based upon an assessment [1] in the case of residential loans,
management's review of delinquent loans, loans in foreclosure and market
conditions, [2] in the case of commercial business loans and commercial mortgage
loans, when a significant decline in value can be identified as well as an
overall assessment of the inherent risk in the portfolio and [3] in the case of
consumer loans, based on the assessment of risks inherent in the loan portfolio.
The Bank's allowance for loan losses, which includes a general valuation
allowance, amounted to approximately $4.0 million and $3.4 million, respectively
at June 30, 1998 and December 31, 1997.

(4)  Per Share Data

     As discussed in Note 2, the Company completed the conversion on April 8,
1998, which included the exchange of previously outstanding shares of Mid-Tier
common stock for new shares of common stock at an exchange ratio of 3.8243
shares of common stock for each share of Mid-Tier common stock. All historical
share and per share information has been adjusted to reflect this change.

(5)  Comprehensive Income

                                       5
<PAGE>
 
     During the first quarter of 1998, the Bank adopted the provisions of
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 establishes standards for reporting and display
of comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. This Statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. This Statement requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. In accordance with the provisions of SFAS 130
for interim period reporting, the Bank's total comprehensive income for the six
months ended June 30, 1998 and 1997 was $ ($57) and ($671) thousand. The
difference between the Bank's net income and total comprehensive income for
these periods relates to the change in the net unrealized gains on securities
available for sale during the applicable period of time.

(6)  Recent Accounting Pronouncements

     In February 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 132, "Employers' Disclosures About Pensions and Other Postretirement
Benefits." This Statement standardizes the disclosure requirements for pension
and other postretirement benefits by requiring additional information that will
facilitate financial analysis, and eliminating certain disclosures that are
considered no longer useful. SFAS No. 132 supersedes the disclosure requirements
in SFAS Nos. 87, 88 and 106. This Statement is effective for fiscal years
beginning after December 15, 1997 and will be adopted December 31, 1998.

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, and for hedging activities. SFAS
No. 133 supersedes the disclosure requirements in SFAS Nos. 80, 105 and 119.
This statement is effective for periods after June 15, 1999. The adoption of
SFAS No. 133 is not expected to have a material impact on the financial position
or results of operations of the Company.

                                       6
<PAGE>
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

     People's Bancorp,Inc. (the "Mid-Tier Holding Company") a federal
corporation and the Registrant's predecessor, became the holding company for
Trenton Savings Bank , FSB (the "Bank") in a reorganization (the "Two-Tier
Reorganization"), in which all of the outstanding shares of the Bank's common
stock ("Bank Common Stock"), including shares held by Peoples Bancorp, MHC (the
"Mutual Holding Company") and stockholders other than the Mutual Holding Company
(the "Minority Stockholders"), were converted into shares of common stock of the
Mid-Tier Holding Company ("Mid-Tier Common Stock"), and the Bank became the
wholly-owned subsidiary of the Mid-Tier Holding Company. From July 1997 through
April 8, 1998, the Mid-Tier Holding Company's only material asset consisted of
100% of the outstanding shares of common stock of the Bank. The Registrant,
Peoples Bancorp, Inc., a Delaware corporation, is the successor to the Mid-Tier
Holding Corporation. The Company was formed as part of the mutual-to-stock
conversion (the "Conversion") of the Mutual Holding Company. In the Conversion
the Bank became the wholly-owned subsidiary of the Company and the corporate
existence of the Mutual Holding Company ended. The Conversion was completed on
April 8, 1998. Prior to the completion of the Conversion the Company had
insignificant assets and liabilities.

     As part of the Conversion each of the outstanding shares of Mid-Tier Common
Stock held by Minority Stockholders was automatically converted into 3.8243
shares of common stock (the "Common Stock") of the Company. As part of the
Conversion and in addition to the 12,430,673 shares issued due to the
Conversion of Mid-Tier Common Stock into Common Stock, the Company sold
23,805,827 shares of Common Stock for a subscription price of $10.00 per share
in a subscription offering (the "Offering"). Net proceeds of the Offering were
approximately $217 million. At the conclusion of the Conversion there were
36,236,500 shares of Common Stock outstanding, including 952,233 unallocated
shares held by the Company's employee stock ownership plan (the "ESOP").

Financial Condition

     Stockholders' equity increased by $231.3 million, or 210.2%, to $341.4
million at June 30, 1998 from $110.0 million at December 31, 1997. The increase
in stockholders' equity was primarily due to the Conversion which provided
approximately $236 million in proceeds. At June 30, 1998 the Registrant had a
stated equity of $341.3 million and tangible equity of $331.2 million. At June
30, 1998 the stated equity as a percentage of assets was 39.08% and the tangible
equity a percentage of assets was 38.36%.

     At June 30, 1998 the Bank's tangible, core and risk based capital ratios
were 29.69% , 29.69% , and 46.35%, respectively.

     Total assets increased by $233.0 million, or 36.4%, to $873.5 million at
June 30, 1998 from $640.4 million at December 31, 1997 primarily due to the
Conversion proceeds. Cash and cash equivalents increased by $127.6 million to
$143.1 million at June 30, 1998 from $15.5 million at December 31, 1997.
Securities available for sale increased by $85.7 million or 62.4% to $223.1
million at June 30, 1998 from $137.3 million at December 31, 1997. Loans
increased by $37.9 million or 9.6% to $434.3 million at June 30, 1998 from
$396.4 million at December 31, 1997. Deposits increased by $1.5 million, or
 .3% to $494.9 million at June 30, 1998 from $493.4 million at December 31,
1997.

Results of Operations

     Net income was $3.5 million for the second quarter of 1998 compared to $2.3
million for the second quarter of 1997 which included net securities gains of
$.9 million compared to only $50,000 in 1998.

     Total interest income increased $3.5 million, or 32.4%, to $14.3 million
for the quarter ended June 30, 1998 from $10.8 million for the quarter ended
June 30, 1997. The increase resulted from an increase in average interest
earnings assets to $842.6 million for the quarter ended June 30, 1998 from
$594.5 million for the quarter ended June 30, 1997 which offset a decline in the
average yield on interest-earnings assets to 6.81% for the quarter ended June
30, 1998 from 7.29% for the quarter ended June 30, 1997. The $248.1 million
increase in average interest earnings assets was primarily attributed to the
Conversion.

     Total interest expense increased by $.3 million, or 5.1%, to $5.6 million
for the quarter ended June 30, 1998 from $5.3 million for the quarter ended June
30, 1997. The increase was primarily the result of an increase in average
deposits to $493.6 million for the quarter ended June 30, 1998 from $482.7
million for the quarter ended June 30, 1997 which combined with an increase in
the average rate paid on deposits to 4.16% for the quarter ended June 30, 1998
from 4.01% for the quarter ended June 30, 1997. The increase in deposits is
primarily attributed to normal branch deposit inflows and a new branch opening
in the third quarter of 1997. The increase in the average rate paid on deposits
was attributed to higher market deposit rates.

                                       7
<PAGE>
 
     Total other income was $.9 million for the quarter ended June 30, 1998
compared to $1.3 million for the quarter ended June 30, 1997. Other income
included $.9 million of gains from the sale of equity securities for the quarter
ended June 30, 1997 compared to $50 thousand from the sale of equity securities
for the quarter ended June 30, 1998. Excluding gains on sales of securities,
other income increased $.5 million or 125.0% for the quarter ended June 30, 1998
compared to the quarter ended June 30, 1997. The increase in other income is
attributed to fees earned by Manchester Trust Bank ("MTB") which was acquired
in September of 1997. Total operating expenses were $3.8 million for the quarter
ended June 30, 1998 compared to $3.1 million for the quarter ended June 30,
1997. Operating expenses were impacted by the acquisition of MTB and staff
expansion within the Bank and at TSBusiness Finance Corporation.

     The Bank made a $.4 million provision for loan losses for the quarter ended
June 30, 1998 compared to a $.2 million provision for the three months ended
June 30, 1997. The increased provision generally reflects loan growth. The
evaluation of the loan loss provision includes a review of all loans for which
full collectibility may not be reasonably assured and considers, among other
matters, the estimated net realizable value of the underlying collateral,
economic conditions and other matters which warrant consideration.

     Total interest income increased $4.2 million, or 19.5%, to $25.7 million
for the six months ended June 30, 1998 from $21.5 million for the six months
ended June 30, 1997. The increase resulted from an increase in average earnings
assets to $732.6 million for the six months ended June 30, 1998 from $596.5
million for the six months ended June 30, 1997 which offset a decrease in the
average yield on interest earnings assets to 7.00% for the six months ended
June 30, 1998 from 7.20% for the six months ended June 30, 1997. The $136.1
million increase in average interest earnings assets was attributed to the
Conversion.

     Total interest expense increased by $.5 million, or 4.5%, to $11.1 million
for the six months ended June 30, 1998 from $10.7 million for the six months
ended June 30, 1997. The increase was primarily the result of an increase in
average deposits to $496.8 million for the six months ended June 30, 1998 from
$484.6 million for the six months ended June 30, 1997 combined with an increase
in the average rate paid on deposits to 4.12% for the six months ended June 30,
1998 from 4.01% for the six months ended June 30, 1997. The increase in deposits
is primarily attributed to normal branch deposit inflows and a new branch
opening in the third quarter 1997. The increase in the average rate paid on
deposits was attributable to higher market rates.

     Total other income was $1.9 million for the six months ended June 30, 1998
compared to $2.1 million for the six months ended June 30, 1997. Other income
included $50 thousand from the sale of equity securities for the six months
ended June 30, 1998 compared to $1.2 million of gains from the sale of equity
securities for the six months ended June 30, 1997. Excluding gains on sales of
securities, other income increased $1.0 million or 117.9% for the six months
ended June 30, 1998 compared to the six months ended June 30, 1997. The increase
in other income is primarily attributed to fees earned by MTB which was acquired
in September of 1997. Total operating expenses were $7.6 million for the quarter
ended June 30, 1998 compared to $6.1 million for the six months ended June 30,
1997. Operating expenses were also impacted by the acquisition of MTB in
September of 1997 and an increase in staff and expansion of TSBusiness Finance.

     The Bank made a $.5 million loan loss provision for the six months ended
June 30, 1998 compared to a $.2 million loan loss provision for the six months
ended June 30, 1997. The increased provision generally reflects loan growth.

Bank Capital

     The OTS requires that the Bank meet minimum tangible, core and risk-based
capital requirements. As of June 30, 1998, the Bank exceeded all regulatory
capital requirements. The Bank's required, actual, and excess capital levels as
of June 30, 1998, are as follows:

                    Required                   Actual          Excess of  
                -------------------     -------------------   Actual Over  
                             % of                    % of     Regulatory   
                 Amount     Assets       Amount     Assets    Requirement 
                --------   --------     --------   --------  ------------- 
                           (Dollars in Thousands)  

Core Capital    $30,184        4.00     $224,019     29.69       $193,835
Risk-based 
 Capital        $39,350        8.00     $227,984     46.35       $188,634


Bank Liquidity

                                       8
<PAGE>
 
     The Bank is required to maintain minimum levels of liquid assets as defined
by OTS regulations. This requirement, which varies from time to time depending
upon economic conditions and deposit flows, is based upon a percentage of
deposits and short-term borrowings. The required ratio currently is 4%. The
Bank's liquidity ratio averaged 48.92% during the first quarter of 1998 and
equaled 55.02% at June 30, 1998. The Bank adjusts liquidity as appropriate to
meet its asset and liability management objectives.

PART II. OTHER INFORMATION

Legal Proceedings

     There are various claims and lawsuits in which the Company and the Bank are
periodically involved incidental to their business. In the opinion of
management, no material loss is expected from any of such pending claims or
lawsuits.

Changes in Securities

     Not applicable.

Defaults upon Senior Securities

     Not applicable.

Submission of Matters to a Vote of Security Holders

     On May 22, 1998 at 10:00 a.m. the annual meeting of stockholders (the
"Annual Meeting") was held at the Trenton Country Club in West Trenton, New
Jersey. The business conducted at the annual meeting included the election of
four directors and the ratification of the appointment of KPMG Peat Marwick LLP
as auditors for the company's 1998 fiscal year.

     At the Annual Meeting Directors Wendell T. Breithaupt, Peter S. Longstreth,
Charles E. Stokes, III and Miles W. Truesdell, Jr. were elected to serve as
directors for terms of three years and until their successors elected and
qualified. The vote was as follows:

                                     For                Withheld
                                 ============          ==========

Wendell T. Breithaupt             20,095,936             247,434
Peter S. Longstreth               20,087,212             256,158
Charles E. Stokes, III            20,089,579             253,791
Miles W. Truesdell, Jr.           20,093,536             249,834



     At the Annual Meeting the appointment of KPMG Peat Marwick LLP as auditors
for the Company for the year ending December 31, 1998 was ratified by the
following vote:

                               For           Against         Abstain
                           ============     =========       =========

Number of Votes             19,596,380       147,172         599,818


Other Information

     Not applicable.


Exhibits and Report on Form 8-K.

     Not applicable.

                                       9
<PAGE>
 
                                  SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.


                                       PEOPLES BANCORP, INC.


Date:    August 10, 1998               By:
                                           -------------------------------------
                                           Wendell T. Breithaupt
                                           President and Chief Executive Officer


Date:    August 10, 1998               By:
                                           -------------------------------------
                                           Dan A. Chila
                                           Senior Vice President and 
                                           Chief Financial Officer
<PAGE>
 
Part I.  Financial Information
Item I.  Financial Statements

PEOPLES BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(In Thousands of Dollars)

<TABLE> 
<CAPTION> 
                                                                                             30-Jun                  31-Dec
ASSETS                                                                                         1998                    1997
                                                                              (unaudited)
<S>                                                                                     <C>                     <C> 
Cash and due from banks                                                                      $9,704                  $9,596
Federal funds sold                                                                          133,400                   5,950

Total cash and cash equivalents                                                             143,104                  15,546


Securities available for sale                                                               223,068                 137,338
Securities held to maturity                                                                  42,560                  60,955
Federal Home Loan Bank stock, at cost                                                         3,386                   3,386
Loans, net                                                                                  434,330                 396,448
Bank premises and equipment, net                                                              6,770                   6,747
Accrued interest receivable                                                                   5,764                   4,975
Prepaid expenses                                                                                372                   1,105
Intangible assets                                                                            10,199                  10,604
Other assets                                                                                  3,913                   3,315

Total assets                                                                               $873,466                $640,419


LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                                   $494,942                $493,400
Borrowed funds                                                                               30,000                  30,000
Accrued expenses and other liabilities                                                        7,172                   6,981

Total liabilities                                                                           532,114                 530,381


Stockholders' Equity
  Common Stock: par value $0.01; authorized                                                     363                     362
    70,000,000 shares as of June 30, 1998; issued
    & outstanding 36,325,617 shares as of June 30, 1998
    and, 36,236,500 shares as of December 31, 1997
  Additional paid in capital                                                                267,345                  31,045
 Unearned ESOP Plan shares                                                                   -9,362                       0
 Unearned Management Recognition Plan shares                                                   -252                    -673
 Retained earnings - substantially restricted                                                82,881                  78,870
 Accumulated other comprehensive income, net of tax                                             377                     434

Total stockholders' equity                                                                  341,352                 110,038


Total liabilities and stockholders' equity                                                 $873,466                $640,419
</TABLE> 
See accompanying notes to Consolidated Financial Statements.
<PAGE>
 
PEOPLES BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME
[In Thousands of Dollars]
[unaudited]

<TABLE> 
<CAPTION> 

                                                    Three Months                                   Six Months
                                                    Ended June 30                                 Ended June 30
                                                            1998                 1997                    1998                 1997


<S>                                               <C>                          <C>               <C>                       <C> 
Interest and dividend income:
    Interest and fees on loans                           $8,297                $7,402                $16,090               $14,680
    Interest on securities                                3,436                 3,293                  6,694                 6,524
    Interest on Federal funds sold                        2,607                   132                  2,870                   270

            Total interest income                        14,340                10,827                 25,654                21,474

Interest expense                                          5,593                 5,324                 11,131                10,652


            Net interest income                           8,747                 5,503                 14,523                10,822

Provision for loan losses                                   361                   204                    547                   214

        Net interest income after provision
                for loan losses                           8,386                 5,299                 13,976                10,608

Other income:
    Service fees on deposit accounts                        230                   204                    426                   451
    Fees and other income                                   628                   193                  1,424                   376
    Net gain on sale of other real estate                     0                    22                      0                    22
    Net gain on sale of securities                           50                   913                     50                 1,247

        Total other income                                  908                 1,332                  1,900                 2,096

Operating expense:
    Salaries and employee benefits                        2,082                 1,665                  4,351                 3,322
    Net occupancy expense                                   432                   381                    818                   762
    Equipment expense                                        44                    27                     77                    57
    FDIC insurance premium                                   18                    19                     36                    19
    Amortization of intangible assets                       223                   126                    444                   258
    Data processing fees                                    174                   188                    322                   376
    Other operating expense                                 791                   667                  1,520                 1,299

        Total operating expense                           3,764                 3,073                  7,568                 6,093

        Income before income taxes                        5,530                 3,558                  8,308                 6,611

Income taxes                                              2,031                 1,282                  3,106                 2,381


          Net income                                     $3,499                $2,276                 $5,202                $4,230


Earnings per common share:
    Basic                                                 $0.10                 $0.06                  $0.15                 $0.12
    Diluted                                               $0.10                 $0.06                  $0.15                 $0.12

</TABLE> 


See accompanying notes to Consolidated Financial Statements.
<PAGE>
 
PEOPLES BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(unaudited)

<TABLE> 
<CAPTION> 
                                                                                                     Six Months Ended June 30,
                                                                                                    1998                     1997
<S>                                                                                             <C>                     <C> 
Cash flows from operating activities:
 Net income                                                                                       $5,202                   $4,230
 Adjustments to reconcile net income to net cash provided by operating activities:
   Provision for loan losses                                                                         547                      214
   Depreciation and amortization expense                                                           1,182                      801
   Net accretion of premiums and discounts on securities                                              -8                      -42
   Increase in accrued interest receivable and other assets                                         -654                   -2,174
   Decrease in accrued interest payable and other liabilities                                        191                      214
   Net gain on sale of securities                                                                    -50                   -1,247

  Net cash provided by operating activities                                                        6,410                    1,996

Cash flows used in investing activities:
 Proceeds from maturities of securities available for sale and held to maturity                  $33,980                  $24,842
 Purchase of securities available for sale                                                      -113,890                  -50,260
 Proceeds from sales of securities available for sale                                                861                    1,859
 Purchase of Federal Home Loan Bank Stock                                                              0                     -297
 Maturities and repayments of mortgage-backed securities                                          11,328                    4,974
 Net increase in loans                                                                           -37,882                   -4,023
 Net additions to bank premises, furniture, & equipment                                             -379                     -236
 Proceeds from sale of bank premises, furniture & equipment                                            0                      312

  Net cash used in investing activities                                                         -105,982                  -22,829

Cash flows from financing activities:
 Net (decrease)increase in savings and time deposits                                               1,542                   -3,391
 Dividends paid                                                                                   -1,191                     -566
 Net increase in borrowings                                                                            0                   30,000
 Proceeds from stock offering                                                                    226,502                        0
 Proceeds from exercise of stock options                                                             277                        0

  Net cash provided by financing activities                                                      227,130                   26,043

Net decrease in cash and cash equivalents                                                        127,558                    5,210

Cash and cash equivalents as of beginning of year                                                $15,546                  $20,938

Cash and cash equivalents as of end of period                                                   $143,104                  $26,148

Supplemental disclosure of cash flow information:
 Cash paid:
  Interest                                                                                       $11,100                  $10,390

  Income taxes                                                                                    $3,606                   $2,965
</TABLE> 

See accompanying Notes to Consolidated Financial Statements.
<PAGE>
 
PEOPLES BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
For the Six Month Period ended June 30, 1998 and 1997 
(In Thousands, except share data) 
(unaudited)

<TABLE> 
<CAPTION> 
                                                                                                       Unearned
                                          Number                                     Unearned          Management  
                                          of                           Additional    ESOP              Recognition  
                                          Common           Common      paid-in       Plan              Plan         Retained 
                                          Shares           stock       capital       Shares            Shares       Earnings 
<S>                                     <C>              <C>         <C>           <C>               <C>          <C>  
Balance at December 31, 1996                   36,200,996      $362      $30,899                        ($1,543)      $72,545 

Net income for the six months
  ended June 30, 1997                                                                                                   4,230 

  Other comprehensive income, net of tax                                                                                      

Dividends declared                                                                                                       -566 

Amortization of unearned Management
  Recognition Plan shares                                                                                   168               

Balance at June 30, 1997                       36,200,996      $362      $30,899     --                 ($1,375)      $76,209 

Balance at December 31, 1997                   36,236,500      $362      $31,045                          ($673)      $78,870 

Common stock offering and
  conversion of Peoples Bancorp, Inc.                                    236,024                                              

Establishment of ESOP plan                                                             -9,522                                 

Net income for the six months
  ended June 30, 1998                                                                                                   5,202 

Other comprehensive income, net of tax                                                                                        

Dividends declared                                                                                                     -1,191 

Exercise of stock options                          89,117         1          276                                              

Amortization of unearned Management
  Recognition Plan shares                                                                                   421               

Amortization of ESOP shares                                                               160                                 

Balance at June 30, 1998                       36,325,617      $363     $267,345      ($9,362)            ($252)      $82,881 



<CAPTION> 

                                                    Accumulated                          
                                                    Other                    Total 
                                                    Comprehensive            Stockholders' 
                                                    Income                   equity 
<S>                                               <C>                      <C>  
Balance at December 31, 1996                          $1,089                 $103,352   
                                                                                        
Net income for the six months                                                           
  ended June 30, 1997                                                          $4,230   
                                                                                        
  Other comprehensive income, net of tax                -671                    ($671)  
                                                                                        
Dividends declared                                                              ($566)  
                                                                                        
Amortization of unearned Management                                                     
  Recognition Plan shares                                                        $168   
                                                                                        
Balance at June 30, 1997                                $418                 $106,513   
                                                                                        
Balance at December 31, 1997                            $434                 $110,038   
                                                                                        
Common stock offering and                                                               
  conversion of Peoples Bancorp, Inc.                                        $236,024   
                                                                                        
Establishment of ESOP plan                                                    ($9,522)  
                                                                                        
Net income for the six months                                                           
  ended June 30, 1998                                                          $5,202   
                                                                                        
Other comprehensive income, net of tax                   -57                     ($57)  
                                                                                        
Dividends declared                                                            ($1,191)  
                                                                                        
Exercise of stock options                                                        $277   
                                                                                        
Amortization of unearned Management                                                     
  Recognition Plan shares                                                        $421   
                                                                                        
Amortization of ESOP shares                                                      $160   
                                                                                        
Balance at June 30, 1998                                $377                 $341,352   
</TABLE> 
                                                      
See accompanying Notes to Consolidated Financial Statements.

<PAGE>
 
PEOPLES BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(unaudited)

<TABLE> 
<CAPTION> 
                                                                                                 Six Months Ended June 30,
                                                                                                   1998             1997
<S>                                                                                              <C>               <C> 
Cash flows from operating activities:
  Net income                                                                                      $5,202           $4,230
  Adjustments to reconcile net income to net cash provided by operating activities:
      Provision for loan losses                                                                      547              214
      Depreciation and amortization expense                                                        1,182              801
      Net accretion of premiums and discounts on securities                                           -8              -42
      Increase in accrued interest receivable and other assets                                      -654           -2,174
      Decrease in accrued interest payable and other liabilities                                     191              214
      Net gain on sale of securities                                                                 -50           -1,247

    Net cash provided by operating activities                                                      6,410            1,996

Cash flows used in investing activities:
  Proceeds from maturities of securities available for sale and held to maturity                 $33,980          $24,842
  Purchase of securities available for sale                                                     -113,890          -50,260
  Proceeds from sales of securities available for sale                                               861            1,859
  Purchase of Federal Home Loan Bank Stock                                                             0             -297
  Maturities and repayments of mortgage-backed securities                                         11,328            4,974
  Net increase in loans                                                                          -37,882           -4,023
  Net additions to bank premises, furniture, & equipment                                            -379             -236
  Proceeds from sale of bank premises, furniture & equipment                                           0              312

    Net cash used in investing activities                                                       -105,982          -22,829

Cash flows from financing activities:
  Net (decrease)increase in savings and time deposits                                              1,542           -3,391
  Dividends paid                                                                                  -1,191             -566
  Net increase in borrowings                                                                           0           30,000
</TABLE> 
<PAGE>
 
<TABLE> 
<S>                                                                                              <C>              <C> 
  Proceeds from stock offering                                                                   226,502                0
  Proceeds from exercise of stock options                                                            277                0

    Net cash provided by financing activities                                                    227,130           26,043

Net decrease in cash and cash equivalents                                                        127,558            5,210

Cash and cash equivalents as of beginning of year                                                $15,546          $20,938

Cash and cash equivalents as of end of period                                                   $143,104          $26,148

Supplemental disclosure of cash flow information:
  Cash paid:
    Interest                                                                                     $11,100          $10,390

    Income taxes                                                                                  $3,606           $2,965
</TABLE> 

See accompanying Notes to Consolidated Financial Statements.
<PAGE>
 
PEOPLES BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
For the Six Month Period ended June 30, 1998 and 1997 
(In Thousands, except share data) 
(unaudited)


<TABLE> 
<CAPTION> 
                                                                                                                            
                                                                Number                                         Unearned     
                                                                of                           Additional        ESOP         
                                                                Common        Common         paid-in           Plan         
                                                                Shares        stock          capital           Shares       
<S>                                                           <C>             <C>            <C>               <C> 
Balance at December 31, 1996                                  36,200,996        $362         $30,899                         

Net income for the six months                                                                           
  ended June 30, 1997                                                                                                            
                                                                                                        
Other comprehensive income, net of tax                                                                                         

Dividends declared                                                                                                               
                                                                                                        
Amortization of unearned Management                                                                     
  Recognition Plan shares                                                                                                        
                                                                                                        
Balance at June 30, 1997                                      36,200,996        $362         $30,899              -- 
                                                                                                        
Balance at December 31, 1997                                  36,236,500        $362         $31,045                             
                                                                                                        
Common stock offering and                                                                               
  conversion of Peoples Bancorp, Inc.                                                        236,024                             
                                                                                                        
Establishment of ESOP plan                                                                                        -9,522            

                                                                                                        
Net income for the six months                                                                           
  ended June 30, 1998                                                                                                            

Other comprehensive income, net of tax                                                                                           

Dividends declared                                                                                                               
                                                                                                        
Exercise of stock options                                         89,117           1             276                             
                                                                                                        
Amortization of unearned Management                                                                     
  Recognition Plan shares                                                                                                        
                                                                                                        
Amortization of ESOP shares                                                                                          160            

                                                                                                        
Balance at June 30, 1998                                      36,325,617        $363        $267,345             ($9,362)           

</TABLE> 

See accompanying Notes to Consolidated Financial Statements.
<PAGE>
 
<TABLE> 
<CAPTION> 
Unearned                                                                                      
Management                                 Accumulated                                  
Recognition                                Other                    Total               
Plan                    Retained           Comprehensive            Stockholders'       
Shares                  Earnings           Income                   equity              
<S>                     <C>                <C>                     <C> 
($1,543)                 $72,545            $1,089                 $103,352             
                                                                                        
                                                                                        
                           4,230                                     $4,230             
                                                                                        
                                              -671                    ($671)            
                                                                                        
                            -566                                      ($566)            
                                                                                        
                                                                                        
    168                                                                $168             
                                                                                        
($1,375)                 $76,209              $418                 $106,513             
                                                                                        
  ($673)                 $78,870              $434                 $110,038             
                                                                                        
                                                                                        
                                                                   $236,024             
                                                                                        
                                                                    ($9,522)            
                                                                                        
                                                                                        
                           5,202                                     $5,202             
                                                                                        
                                               -57                     ($57)            
                                                                                        
                          -1,191                                    ($1,191)            
                                                                                        
                                                                       $277             
                                                                                        
                                                                                        
    421                                                                $421             
                                                                                        
                                                                       $160             
                                                                                        
  ($252)                 $82,881              $377                 $341,352             
</TABLE>