Exhibit 10.1

Peoples State Bank

Board of Directors’ Focus Rewards Plan

March 19, 2013

Purpose

The purpose of the Peoples State Bank Board of Directors Focus Rewards Plan (the
“Plan”) is to maximize the achievement of Peoples State Bank (the “Bank”) and
PSB Holdings, Inc. (“PSB”) goals and to recognize Bank directors (the “Board”)
for their contribution to the Bank’s overall success in a manner directly
related to shareholder equity return.

General Description

Board members receive Plan awards in the form of shares of PSB common stock upon
achieving some measure of the following specific objectives each year:
 Attainment of the Bank’s budgeted net income, PSB’s current year Return on
Equity ranking in at least the top 50th percentile compared to a peer group
based on asset size using information available from SNL Financial LLC, and
achievement of the Directors’ customer referral goal.  The specific objectives
used within the Plan are determined annually.

Administration

Prior to the beginning of each fiscal year, the Board will approve the
components of the Plan in conjunction with the approval of the Bank employee
cash incentive Focus Reward plan for the coming year. The computation of Plan
awards based on year-end results will be performed by the Bank’s Chief Financial
Officer and approved by the Directors’ Compensation Committee.  The actual stock
award will be paid in the year immediately subsequent to the year to which the
specific objectives relate (the “Subsequent Year”) following completion of the
external financial statement audit, but in no event later than March 15th of the
Subsequent Year.  The value of the stock award is not eligible to be deferred
into the Directors’ Deferred Compensation Plan, and income and employment taxes
are due for the calendar year in which the non-cash award is paid.1  This Plan
can be terminated, amended or modified at any time.

As with the employee Focus Reward incentive plan, the Board may exclude unusual
or non-recurring net income items from the Plan award calculation if the
non-recurring item results in an award not reflective of actual net income
performance.   However, Board adjustments to the Plan award calculation are
intended to be infrequent.  

Measurement of the Directors’ Customer Referral Goal

Directors will receive credit for product referrals by submitting their customer
referrals to the Bank’s Assistant Secretary which will be logged and tracked on
the same system used for employee product referrals.   Upon closing of the
referral by a sales associate, the Director will receive credit for the
referral.

1 Directors should consult with their tax advisor as to the timing and amount of
any such federal and state income and employment tax payments.  There is no
withholding of taxes on director awards.

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Participants

Eligibility for participation in the Plan is limited to external (non-employee)
voting Board members who have served on the Board for the majority (greater than
6 months) of the fiscal year to which the specific objectives relate. For those
who have served the majority of the year, but not a full twelve months, the
stock award will be prorated by the number of months served.  Director Emeriti,
board consultants and internal directors are not eligible to participate in the
Plan.

Definitions

For purposes of determining the amount of the stock awards, the following
definitions apply:

·

Net operating income – After-tax Bank net income after deducting the after tax
cost of the Plan.

·

Specific objectives – The specific goals which are established as targets to be
reached in the fiscal year including Bank budgeted net income and other targets
as appropriate.

·

Unusual or non-recurring items – Those income or expense items related to events
which, in the opinion of the Board, are outside the significant influence of the
Plan participants or provide only short-term non-recurring income or expense not
representative of normal operations.  Examples of such events could include
income recorded on receipt of the death benefits of life insurance, significant
short-term merger and acquisition or conversion expenses that yield long-term
income benefits, gain on purchase of another entity, statutory changes in tax
rates or changes in accounting principles, and other large-non-recurring
transactions which distort Bank net income.

·

Referrals - Consumers who enter into, or expand through the purchase of
additional products, a banking relationship with the Bank as the result of a
Board member’s referral for products or services.

Stock Award Computation

Stock awards are determined using net operating income levels determined after
recognizing the after tax cost of the Plan.  The size of the incentive pool can
increase at predetermined thresholds of increased net income based on the same
thresholds used in the employee Focus Rewards cash incentive plan.

The “baseline” stock award, assuming achievement of the following three targets,
is equal to 10% of the director’s compensation paid during the fiscal year,
including amounts deferred into the Directors’ Deferred Compensation Plan.  For
example, if the Board member earned $20,000 from the retainer and meeting fee
income, the baseline annual incentive for stock award would be $2,000 if all 3
goals were met for that year. Each of the three goals for the Plan provides a
portion of the total 10% baseline award as shown below:

·

Reaching the Board member customer referral goal – 20% of award (2% of cash
compensation)     

·

PSB Holdings, Inc. Return on Equity ranking in at least the top 50th percentile
compared to peer group – 20% of award (2% of cash compensation)

·

Attainment of the Peoples State Bank  budgeted net income goal – 60% (6% of cash
compensation)

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In the case of the first two objectives, the computation is based on a “pass or
fail test” receiving either all, or none, of the credit.  Credit for the net
income goal begins to be earned when net income reaches 95% of the target, and
the full 60% is earned when at least 100% of the target is reached.

Focus Reward Multiplier

The baseline incentive may be multiplied higher based on how much Bank actual
net operating income (including the after tax expense of the Plan) exceeds the
budgeted net income target.  Each tier represents progressively higher net
income targets after recognizing the cost of the Plan.  

The following tables display the range of incentive that could be earned by a
Director as a percentage of director fees paid or eligible to be deferred during
the year.

 

Referral Goal and

 

Peer Return on Equity Goal Achieved

 

% of Bank Net Income Target Actually Achieved

% of Bank Budgeted

< 95%

95%

96%

97%

98%

99%

100%

Net Income Actually Achieved

Incentive Compensation as a Percentage of Directors’ Fees

 

4.00%

7.00%

7.60%

8.20%

8.80%

9.40%

10.00%

102.5%

 

 

 

 

 

 

12.50%

105.0%

 

 

 

 

 

 

16.00%

107.5%

 

 

 

 

 

 

20.00%

110.0%

 

 

 

 

 

 

25.00%

112.5%

 

 

 

 

 

 

30.00%

 

 

 

No Referral Goal Achieved

 

and Peer Return on Equity Goal Not Achieved

 

% of Bank Targeted Net Income Actually Achieved

% of Bank Budgeted

< 95%

95%

96%

97%

98%

99%

100%

Net Income Actually Achieved

Incentive Compensation as a Percentage of Directors’ Fees

 

0.00%

3.00%

3.60%

4.20%

4.80%

5.40%

  6.00%

102.5%

 

 

 

 

 

 

  7.50%

105.0%

 

 

 

 

 

 

  9.60%

107.5%

 

 

 

 

 

 

12.00%

110.0%

 

 

 

 

 

 

15.00%

112.5%

 

 

 

 

 

 

18.00%

Payment of Incentive

Following conclusion of the year-end financial statement audit for the year to
which the specific objectives relate, and approval of the incentive calculation
by the Directors’ Compensation Committee, shares of PSB Holdings, Inc. common
stock, equal to the award amount, will be issued in the name of the Director no
earlier than January 1st and no later than March 15th of the Subsequent Year.
 Fractional shares will not be issued, and any Plan award will be rounded up or
down to the nearest full number of

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shares.  Common stock awards will be issued out of PSB’s existing treasury stock
account and must be held the minimum period required by regulation for shares
issued in an unregistered offering of common stock.  The securities are fully
vested when issued with all the rights of dividends, voting, and ownership,
(subject to the minimum holding period required by securities regulation).
Payment or holding periods required on Plan awards of PSB common shares are
subject to securities or banking regulation as may now, or ever, be in effect,
and the Plan will comply with any existing or new regulation associated with
payment of the award in common stock.  

Miscellaneous

In the event of retirement from the Board or death of the Board member, the
Director will receive a proration of the award for each full month served
providing they served the majority of the year.  In any other cases of
termination, the director forfeits the right to receive any stock award for the
current year, and, if the Directors’ Compensation Committee so determines, the
prior year to the extent the award has not yet been paid.

Taxation of Award

Plan awards are considered taxable income and therefore reported as such on the
Directors’ Form 1099-MISC for the year in which they are paid.  It is the
Director’s financial responsibility to pay any taxes associated with the award.
 It is intended that awards under the terms of the Plan shall be issued in such
manner as to satisfy the short-term deferral exception to Section 409A of the
Internal Revenue Code of 1986, as amended.