UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
 SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2010


Commission File No.: 000-50301
 PSB GROUP, INC.
  Michigan
(State or other jurisdiction of 
incorporation or organization)
    
    42-1591104
(I.R.S. Employer I.D. No.)
 1800 East Twelve Mile Road, Madison Heights, Michigan 48071
 (248) 548-2900
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
  o þ




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##### 



TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATION
    
    
    3ITEM 1. FINANCIAL STATEMENTS
    
    
    3ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    19ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    27ITEM 4T: CONTROLS AND PROCEDURES
    
    
    28PART II.  OTHER INFORMATION
    
    
    29Item 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3. Defaults Upon Senior Securities
    
    
    29Item 4. (RESERVED)
    
    
    29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    29SIGNATURES
    
    
    30
 Information Concerning Forward-Looking Statements
 Statements contained in this Form 10-Q which are not historical facts are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements involve important known and unknown risks,
uncertainties and other factors and can be identified by phrases using estimate, anticipate,
believe, project, expect, intend, predict, potential, future, may, should and
similar expressions or words. Such forward-looking statements are subject to risk
and uncertainties which could cause actual results to differ materially from those projected. Such
risks and uncertainties include potential changes in interest rates, competitive factors in the
financial services industry, general economic conditions, the effect of new legislation, the
failure of assumptions and estimates underlying the establishment of reserves for possible loan
losses, the failure of assumptions and estimates used in our reviews of our loan portfolio, changes
in the values of residential and commercial real estate, and other risks detailed in documents
filed by the Company with the Securities and Exchange Commission from time to time.
 2




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##### 



PART I FINANCIAL INFORMATION
  Application of Critical Accounting Policies
 Allowance for Loan Losses 
  Accounting for Deferred Taxes 
 3




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##### 



PSB Group, Inc.
Consolidated Balance Sheet
 September 30,
    
    
    December 31,2010
    
    
    2009(unaudited)AssetsCash and cash equivalents
    
    $
    30,127
    
    
    $
    29,260Securities available for sale
    
    
    52,829
    
    
    
    60,031Loans
    
    
    333,709
    
    
    
    354,263Less allowance for possible loan loss
    
    
    (13,853
    )
    
    
    (9,469
    )Net loans
    
    
    319,856
    
    
    
    344,794Loans held for sale
    
    
    485
    
    
    
    774Bank premises and equipment
    
    
    15,010
    
    
    
    15,937Accrued interest receivable
    
    
    2,101
    
    
    
    2,244Other real estate owned
    
    
    6,565
    
    
    
    6,235Other assets
    
    
    2,815
    
    
    
    2,754Total assets
    
    $
    429,788
    
    
    $
    462,029LiabilitiesDeposits:Non-interest bearing
    
    $
    58,385
    
    
    $
    54,647Interest bearing
    
    
    361,028
    
    
    
    388,098Total deposits
    
    
    419,413
    
    
    
    442,745Long-term debt
    
    
    128
    
    
    
    282Accrued taxes, interest and other liabilities
    
    
    2,162
    
    
    
    2,284Total liabilities
    
    
    421,703
    
    
    
    445,311Shareholders EquityCommon stock  no par value 
10,000,000 authorized   3,463,963 shares
issued and outstanding at September 30, 2010
and 3,480,110 at December 31, 2009
    
    
    23,367
    
    
    
    23,692Unearned ESOP benefits
    
    
    (128
    )
    
    
    (282
    )Common stock held in trust
    
    
    (410
    )
    
    
    (410
    )Deferred compensation obligation
    
    
    410
    
    
    
    410Additional paid in capital  stock
options/awards
    
    
    1,382
    
    
    
    1,096Unearned compensation
    
    
    (1,287
    )
    
    
    (1,182
    )Retained earnings
    
    
    (15,937
    )
    
    
    (6,740
    )Accumulated other comprehensive income
    
    
    688
    
    
    
    134Total shareholders equity
    
    
    8,085
    
    
    
    16,718Total liabilities and stockholders equity
    
    $
    429,788
    
    
    $
    462,029
 4




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##### 



PSB Group, Inc.
Consolidated Statement of Income (unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest Income:Interest and fees on loans
    
    $
    4,550
    
    
    $
    5,122
    
    
    $
    14,307
    
    
    $
    16,600Securities:Taxable
    
    
    457
    
    
    
    590
    
    
    
    1,588
    
    
    
    1,784Tax-exempt
    
    
    12
    
    
    
    54
    
    
    
    49
    
    
    
    163Total interest income
    
    
    5,019
    
    
    
    5,766
    
    
    
    15,944
    
    
    
    18,547Interest expense:Deposits
    
    
    1,139
    
    
    
    2,148
    
    
    
    3,751
    
    
    
    6,630Interest on borrowings
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    287Total interest expense
    
    
    1,139
    
    
    
    2,226
    
    
    
    3,751
    
    
    
    6,917Net interest income
    
    
    3,880
    
    
    
    3,540
    
    
    
    12,193
    
    
    
    11,630Provision for loan losses
    
    
    8,562
    
    
    
    1,620
    
    
    
    10,903
    
    
    
    6,378Net interest income after provision for
loan losses
    
    
    (4,682
    )
    
    
    1,920
    
    
    
    1,290
    
    
    
    5,252Other operating income:Service charges on deposit accounts
    
    
    624
    
    
    
    670
    
    
    
    1,828
    
    
    
    1,843Gain on the sale of investment securities
    
    
    (49
    )
    
    
    866
    
    
    
    177
    
    
    
    1,974Other income
    
    
    315
    
    
    
    359
    
    
    
    1,322
    
    
    
    1,197Total other income
    
    
    890
    
    
    
    1,895
    
    
    
    3,327
    
    
    
    5,014Other operating expense:Salaries and employee benefits
    
    
    1,555
    
    
    
    1,933
    
    
    
    5,271
    
    
    
    6,129Occupancy costs
    
    
    701
    
    
    
    792
    
    
    
    1,974
    
    
    
    2,361Legal and professional
    
    
    682
    
    
    
    340
    
    
    
    1,678
    
    
    
    1,085Other real estate owned expense
    
    
    471
    
    
    
    231
    
    
    
    964
    
    
    
    1,103Marketing expense
    
    
    28
    
    
    
    61
    
    
    
    125
    
    
    
    251FDIC insurance
    
    
    488
    
    
    
    294
    
    
    
    1,659
    
    
    
    1,091Other operating expense
    
    
    739
    
    
    
    837
    
    
    
    2,143
    
    
    
    2,126Total other operating expenses
    
    
    4,664
    
    
    
    4,488
    
    
    
    13,814
    
    
    
    14,146Loss  before federal income tax (benefit)
    
    
    (8,456
    )
    
    
    (673
    )
    
    
    (9,197
    )
    
    
    (3,880
    )Federal income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23Net loss
    
    $
    (8,456
    )
    
    $
    (673
    )
    
    $
    (9,197
    )
    
    $
    (3,903
    )Loss per average outstanding share of
common stock  Basic
    
    $
    (2.42
    )
    
    $
    (.19
    )
    
    $
    (2.63
    )
    
    $
    (1.12
    )Fully diluted
    
    
    (2.42
    )
    
    
    (.19
    )
    
    
    (2.63
    )
    
    
    (1.12
    )Cash dividends per share
    
    $
    .00
    
    
    $
    .00
    
    
    $
    .00
    
    
    $
    .00
 5




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##### 



PSB Group, Inc.
Consolidated Statement of Comprehensive Income (unaudited)
 Nine Months EndedSeptember 30,2010
    
    
    2009Net loss
    
    $
    (9,197
    )
    
    $
    (3,903
    )Other comprehensive income (loss):Change in unrealized loss on securities
available for sale, net of tax
    
    
    731
    
    
    
    1,534Less reclassification adjustment for gains
included in net loss
    
    
    (177
    )
    
    
    (1,974
    )Other comprehensive income (loss)
    
    
    554
    
    
    
    (440
    )Comprehensive loss
    
    $
    (8,643
    )
    
    $
    (4,343
    )
 6




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##### 



PSB Group, Inc.  Consolidated Statement of Changes in Shareholders Equity (Unaudited)
Nine Months Ended September 30, 2010
(in thousands, except share data)
 Unearned
    
    
    Common
    
    
    Deferred
    
    
    Addl Paid in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalNumber of
    
    
    Common
    
    
    ESOP
    
    
    Stock
    
    
    Comp.
    
    
    Capital - Stock
    
    
    Unearned
    
    
    Retained
    
    
    Accumulated
    
    
    ShareholdersShares
    
    
    Stock
    
    
    Benefits
    
    
    Held in Trust
    
    
    Obligation
    
    
    Options/Awards
    
    
    Compensation
    
    
    Earnings
    
    
    OCI
    
    
    EquityBalance  December 31, 2009
    
    
    3,480,110
    
    
    $
    23,692
    
    
    
    ($282
    )
    
    
    ($410
    )
    
    $
    410
    
    
    $
    1,096
    
    
    
    ($1,182
    )
    
    
    ($6,740
    )
    
    $
    134
    
    
    $
    16,718Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,197
    )
    
    
    
    
    
    
    (9,197
    )Change in Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    554
    
    
    
    554Comprehensive IncomeComprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,643
    )Earned ESOP Benefit
    
    
    
    
    
    
    
    
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154Restricted Stock Awards (net of cancellations)
    
    
    (16,147
    )
    
    
    (325
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (325
    )Additional paid in capital
stock options and awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    286
    
    
    
    (105
    )
    
    
    
    
    
    
    
    
    
    
    181Balance  Sept. 30, 2010
    
    
    3,463,963
    
    
    $
    23,367
    
    
    
    ($128
    )
    
    
    ($410
    )
    
    $
    410
    
    
    $
    1,382
    
    
    
    ($1,287
    )
    
    
    ($15,937
    )
    
    $
    688
    
    
    $
    8,085
 7




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##### 



PSB Group, Inc.  Consolidated Statement of Cash Flows (Unaudited)
 Nine Months EndedSeptember 30,2010
    
    
    2009Net cash provided by operating activities:
    
    $
    1,804
    
    
    $
    4,223Cash flow from investing activities:Purchase of securities available for sale
    
    
    (42,267
    )
    
    
    (94,200
    )Proceeds from maturities of securities available for sale
    
    
    10,811
    
    
    
    8,418Proceeds from sale of securities available for sale
    
    
    39,129
    
    
    
    69,582Net decrease in loans
    
    
    14,324
    
    
    
    4,283Proceeds from sale of fixed assets
    
    
    585
    
    
    
    Capital expenditures
    
    
    (187
    )
    
    
    (2,933
    )Net cash provided by (used in) investing activities
    
    
    22,395
    
    
    
    (14,850
    )Cash flow from financing activities:Net increase (decrease) in deposits
    
    
    (23,332
    )
    
    
    27,609Net increase in short-term borrowings
    
    
    
    
    
    
    5,500Net decrease in FHLB Advances
    
    
    
    
    
    
    (15,000
    )Repurchase of common stock
    
    
    
    
    
    
    (52
    )Net cash (used in ) provided by financing activities
    
    
    (23,332
    )
    
    
    18,057Net increase in cash
    
    
    867
    
    
    
    7,430Cash and Cash Equivalents  Beginning of period
    
    
    29,260
    
    
    
    12,268Cash and Cash Equivalents  End of period
    
    $
    30,127
    
    
    $
    19,698Supplemental Information Cash paid (received) for:Interest
    
    $
    3,823
    
    
    $
    7,027Taxes
    
    $
    
    
    
    $
    (1,218
    )
 8




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##### 



PSB Group, Inc.
Notes to Consolidated Financial Statements (unaudited)
 Note 1  Basis of Presentation
    9




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##### 



Note 2  Securities
  September 30, 2010Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailablefor-sale securities:U.S. treasury securities and
obligations of U.S. government
corporations and agencies
    
    $
    30,508
    
    
    $
    233
    
    
    $
    (56
    )
    
    $
    30,685Obligations of state and political
subdivisions
    
    
    17,532
    
    
    
    547
    
    
    
    
    
    
    
    18,079Corporate debt securities
    
    
    500
    
    
    
    
    
    
    
    (50
    )
    
    
    450Mortgage backed securities
    
    
    2,070
    
    
    
    13
    
    
    
    
    
    
    
    2,083Other
    
    
    1,532
    
    
    
    
    
    
    
    
    
    
    
    1,532Total available-for-sale securities
    
    $
    52,142
    
    
    $
    793
    
    
    $
    (106
    )
    
    $
    52,829
 December 31, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailable-for-sale securities:U.S. Treasury securities and
obligations of U.S. government
corporations and agencies
    
    $
    39,946
    
    
    $
    302
    
    
    $
    (93
    )
    
    $
    40,155Obligations of state and political
subdivisions
    
    
    17,919
    
    
    
    116
    
    
    
    (141
    )
    
    
    17,894Corporate debt securities
    
    
    500
    
    
    
    
    
    
    
    (50
    )
    
    
    450Other
    
    
    1,532
    
    
    
    
    
    
    
    
    
    
    
    1,532Total available-for-sale securities
    
    $
    59,897
    
    
    $
    418
    
    
    $
    (284
    )
    
    $
    60,031
  10




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##### 



Available for SaleAmortized
    
    
    MarketCost
    
    
    ValueDue in one year or less
    
    $
    9,472
    
    
    $
    9,536Due in one year through five years
    
    
    7,668
    
    
    
    7,838Due after five years through ten years
    
    
    2,145
    
    
    
    2,159Due after ten years
    
    
    7,123
    
    
    
    7,47426,408
    
    
    
    27,007Federal agency pools
    
    
    24,202
    
    
    
    24,290Other
    
    
    1,532
    
    
    
    1,532Total
    
    $
    52,142
    
    
    $
    52,829
  Note 3  Loans
  September 30,
    
    
    December 31,2010
    
    
    2009Commercial Real Estate
    
    $
    222,796
    
    
    $
    230,053Residential Mortgages
    
    
    76,186
    
    
    
    81,887Commercial
    
    
    30,016
    
    
    
    36,268Consumer
    
    
    4,711
    
    
    
    6,055Total
    
    $
    333,709
    
    
    $
    354,263
  11




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##### 



September 30,
    
    
    December 31,2010
    
    
    2009Non-accrual loans
    
    $
    41,558
    
    
    $
    38,026Loans past due 90 or more days and still accruing
    
    
    1,221
    
    
    
    8Restructured debt
    
    
    30,998
    
    
    
    25,118Total non-performing loans
    
    
    73,777
    
    
    
    63,152Other real estate owned
    
    
    6,565
    
    
    
    6,235Total non-performing assets
    
    $
    80,342
    
    
    $
    69,387Total non-performing loans to total loans
    
    
    22.11
    %
    
    
    17.83
    %Total non-performing assets to total assets
    
    
    18.69
    %
    
    
    15.02
    %
 Note 4  Allowance for Possible Loan Losses
  Nine Months Ended
    
    
    Year EndedSeptember 30, 2010
    
    
    December 31, 2009Loan loss balance  Beginning of period
    
    $
    9,469
    
    
    $
    7,116Provision for loan losses
    
    
    10,903
    
    
    
    16,169Charge-offs
    
    
    (6,844
    )
    
    
    (14,270
    )Recoveries
    
    
    325
    
    
    
    454Loan loss balance  End of period
    
    $
    13,853
    
    
    $
    9,469Allowance as a % of total loans
    
    
    4.15
    %
    
    
    2.67
    %Allowance as a % of total non-performing loans
    
    
    18.78
    %
    
    
    14.99
    %
  12




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##### 



Note 5  Fair Value Measurements
       Quoted Pricesin Active Markets
    
    
    Significant Other
    
    
    Significantfor Identical Assets
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    Balance at(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Sept. 30, 2010Assets:Investment securities
available-for-sale:U.S. treasury securities
    
    $
    1,006
    
    
    $
    
    
    
    $
    
    
    
    $
    1,006U.S. government corporations
and agencies
    
    
    
    
    
    
    29,679
    
    
    
    
    
    
    
    29,679Obligations of state and political
subdivisions
    
    
    
    
    
    
    18,079
    
    
    
    
    
    
    
    18,079Corporate debt securities
    
    
    
    
    
    
    
    
    
    
    450
    
    
    
    450Mortgage backed securities
    
    
    
    
    
    
    2,083
    
    
    
    
    
    
    
    2,083Other
    
    
    
    
    
    
    1,532
    
    
    
    
    
    
    
    1,532Total available-for-sale securities
    
    $
    1,006
    
    
    $
    51,373
    
    
    $
    450
    
    
    $
    52,829
 13




---



##### 



Investmentsecurities - available-for-saleBalance at December 31, 2009
    
    $
    450Total realized and unrealized gains (losses) included in income
    
    
    Total unrealized gains (losses) included in other
comprehensive income
    
    
    Net purchases, sales, calls and maturities
    
    
    Net transfers in/out of Level 3
    
    
    Balance at September 30, 2010
    
    $
    450
 Investment Securities Available for Sale.
     14




---



##### 



Significant
    
    
    
    
    
    TotalQuoted Prices in
    
    Other
    
    Significant
    
    LossesBalance
    
    Active Markets
    
    Observable
    
    Unobservable
    
    YTDSept. 30,
    
    For Identical
    
    Inputs
    
    Inputs
    
    Sept. 30,2010
    
    Assets (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    2010AssetsImpaired loans
accounted for under
FAS 114
    
    $
    53,876
    
    
    $
    
    
    
    $
    
    
    
    $
    53,876
    
    
    $
    3,427Other Real Estate
Owned
    
    $
    6,565
    
    
    $
    
    
    
    $
    
    
    
    $
    6,565
    
    
    $
    556
 Impaired Loans.
 Other Real Estate
  15




---



##### 



Note 6  Earnings per Share
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss)
    
    $
    (8,456
    )
    
    $
    (673
    )
    
    $
    (9,197
    )
    
    $
    (3,903
    )Average number of common shares
outstanding used
to calculate basic earnings per
common share
    
    
    3,488,795
    
    
    
    3,476,310
    
    
    
    3,492,488
    
    
    
    3,476,149Effect of dilutive securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average number of common shares
outstanding used
to calculate diluted earnings per
common share
    
    
    3,488,795
    
    
    
    3,476,310
    
    
    
    3,492,488
    
    
    
    3,476,149Number of anti-dilutive stock options
excluded from
diluted earnings per share computation
    
    
    118,793
    
    
    
    145,293
    
    
    
    118,793
    
    
    
    145,293
 Note 7  Fair Value of Financial Instruments
   Cash and Cash Equivalents
 Securities
 16




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##### 



Loans Held for Sale
 Loans Receivable
 Deposit Liabilities
 Long-term Borrowings
 Short-term Borrowings
 Accrued Interest
 Other Instruments
  17




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##### 



September 30, 2010
    
    
    December 31, 2009Estimated
    
    
    
    
    
    
    EstimatedCarrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueAssets:Cash and short-term
investments
    
    $
    30,127
    
    
    $
    30,127
    
    
    $
    29,260
    
    
    $
    29,260Securities
    
    
    52,829
    
    
    
    52,829
    
    
    
    60,031
    
    
    
    60,031Loans
    
    
    319,856
    
    
    
    329,526
    
    
    
    344,794
    
    
    
    357,800Loans held for sale
    
    
    485
    
    
    
    494
    
    
    
    774
    
    
    
    794Accrued interest receivable
    
    
    2,101
    
    
    
    2,101
    
    
    
    2,244
    
    
    
    2,244Liabilities:Noninterest-bearing deposits
    
    
    58,385
    
    
    
    58,385
    
    
    
    54,647
    
    
    
    54,647Interest-bearing deposits
    
    
    361,028
    
    
    
    364,705
    
    
    
    388,098
    
    
    
    390,331Long-term debt
    
    
    128
    
    
    
    128
    
    
    
    282
    
    
    
    282Accrued interest payable
    
    
    149
    
    
    
    149
    
    
    
    221
    
    
    
    221
 18




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##### 



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
 .
      19




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##### 



Recent Events
 Stipulation and Order
    
    
    The Bank shall have and retain qualified management.
 
    
    The Board of Directors shall assume full responsibility for the approval of sound
policies and objectives and for the supervision of all of the Banks activities.
 
    
    Increase the Banks level of Tier 1 capital as a percentage of total assets to at least
8 percent.
 
    
    Charge off any loans classified as loss.
 
    
    Prohibit the extension of credit to borrowers that have had loans with the Bank that
were classified substandard, doubtful or special mention without prior board
approval.
 
    
    Prohibit the extension of credit to borrowers that have had loans charged off or
classified as loss in exam reports.
 
    
    The Bank may not declare or pay any cash dividend without prior written consent of the
FDIC and OFIR.
 
    
    Prior to submission or publication of all Reports of Condition, the Board shall review
the adequacy of the Banks Allowance for Loan and Lease Losses.
 
    
    Within 30 days of the effective date of the Stipulation and Order, the Bank shall
eliminate and/or correct all violations of law, rule, and regulations.
 
    
    Within 60 days from the effective date of the Stipulation and Order, the Bank shall
correct all deficiencies in the loans listed for Special Mention.
 
    
    Prepare and submit progress reports the FDIC and OFIR.
  20




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##### 



Prompt Corrective Action Directive
   Total Risk-Based
    
    
    Tier 1 Risk-BasedCapital Ratio
    
    
    Capital Ratio
    
    
    Leverage RatioWell capitalized
    
    10% or above
    
    6% or above
    
    5% or aboveAdequately capitalized
    
    8% or above
    
    4% or above
    
    4% or aboveUndercapitalized
    
    Less than 8%
    
    Less than 4%
    
    Less than 4%Significantly undercapitalized
    
    Less than 6%
    
    Less than 3%
    
    Less than 3%Critically undercapitalized
    
    
    
    
    
    
    
    
    
    A ratio of tangible equity to total assets of 2% or less
  1.
    
    The Bank shall sell enough voting shares or obligations of the Bank so that the
Bank will be adequately capitalized after the sale; and/or
 2.
    
    The Bank shall accept an offer to be acquired by a depository institution
holding company or to combine with another insured depository institution.
   21




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##### 



Financial Condition
   22




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##### 



Financial Results
 Three Months Ended September 30, 2010
   23




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##### 



Nine Months Ended September 30, 2010
  24




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##### 



25




---



##### 



Liquidity
   Off Balance Sheet Arrangements and Contractual Obligations
  26




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##### 



Capital Resources
  Tier 1 capital
    
    $
    7,925Total capital
    
    $
    12,131Tier 1 capital to risk-weighted assets
    
    
    2.42
    %Total capital to risk-weighted assets
    
    
    3.71
    %Tier 1 capital to average assets
    
    
    1.78
    %
  ITEM 3:
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  27




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##### 



ITEM 4T:
    
    CONTROLS AND PROCEDURES
 (a) Disclosure controls and procedures.
 (b) Internal controls.
 28




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##### 



PART II. OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1A. Risk Factors
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Item 3. Defaults Upon Senior Securities
  Item 4. (RESERVED)
 Item 5. Other Information
  Item 6. Exhibits
  Exhibit 10.1
    
    Second Amendment to Employment Agreement dated July 17, 2010
(Henry R. Thiemann)Exhibit 31.1
    
    Certification of Henry R. Thiemann required by Rule 13a 
14(a)Exhibit 31.2
    
    Certification of David A. Wilson required by Rule 13a  14(a)Exhibit 32.1
    
    Certification of Henry R. Thiemann required by Rule 13a 
14(b) and Section 906 of the Sarbanes  Oxley Act of 2002, 18 U.S.C.
Section 1350Exhibit 32.2
    
    Certification of David A. Wilson required by Rule 13a  14(b)
and Section 906 of the Sarbanes  Oxley Act of 2002, 18 U.S.C. Section
1350
 29




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##### 



SIGNATURES
  PSB GROUP, INC.Date: November 15, 2010
    /s/ Henry R. ThiemannHenry R. ThiemannPresident and Chief Executive Officer Date: November 15, 2010
    /s/ David A. WilsonDavid A. WilsonChief Financial Officer 30




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##### 



EXHIBIT INDEX
      31