Exhibit 10.1
                                PSB HOLDINGS, INC.

                      DIRECTORS DEFERRED COMPENSATION PLAN

                                PSB HOLDINGS, INC.
                      DIRECTORS DEFERRED COMPENSATION PLAN

      1.    ADOPTION OF PLAN.  PSB Holdings, Inc. ("PSB Holdings") hereby
adopts the PSB Holdings, Inc. Directors Deferred Compensation Plan (the "Plan")
effective as of March 18, 2003.

      2.    PURPOSE.  The purpose of the Plan is to provide an alternative
method of compensating members (the "Directors") of the board of directors of
PSB Holdings, whether or not they otherwise receive compensation as employees,
in order to aid PSB Holdings and its Subsidiaries in attracting and retaining
as Directors persons whose abilities, experience, and judgment can contribute
to the continued progress of PSB Holdings and its subsidiaries and to provide a
mechanism by which the interests of the Directors and the shareholders of PSB
Holdings can be more closely aligned.

      3.    DEFINITIONS.  As used in this Plan, the following terms shall have
the meaning set forth in this paragraph 3:

      (a)   "BANK" means Peoples State Bank, a Subsidiary of PSB Holdings, Inc.

      (b)   "BENEFICIARY" means such person or persons, or organization or
organizations, as the Participant from time to time may designate by a written
designation filed with PSB Holdings during the Participant's life.  Any amounts
payable hereunder to a Participant's Beneficiary shall be paid in such
proportions and subject to such trusts, powers, and conditions as the
Participant may provide in such designation.  Each such designation, unless
otherwise expressly provided therein, may be revoked by the Participant by a
written revocation filed with PSB Holdings during the Participant's life.  If
more than one such designation shall be filed by a Participant with PSB
Holdings, the last designation so filed shall control over any revocable
designation filed prior to such filing.  To the extent that any amounts payable
under this Plan to a Participant's Beneficiary are not effectively disposed of
pursuant to the above provisions of this subparagraph 3(b), either because no
designation was in effect at the Participant's death or because a designation
in effect at the Participant's death failed to dispose of such amounts in their
entirety, then for purposes of this Plan, the Participant's "Beneficiary" as to
such undisposed of amounts shall be the Participant's estate as provided for in
subparagraph 6(c)(ii).

      (c)   "BOARD" means the Board of Directors of PSB Holdings.
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      (d)   "CHANGE IN CONTROL" means the happening of any of the following
events:

                  (i)   when any "person" as defined in Section 3(a)(9) of the
            Securities Exchange Act of 1934, as amended (the "Exchange Act")
            and as used in Sections 13(d) and 14(d) thereof, including a
            "group" as defined in Section 13(d) of the Exchange Act, excluding
            any employee benefit plan sponsored or maintained by PSB or any
            subsidiary of PSB (including any trustee of such plan acting as
            trustee), directly or indirectly, becomes the "beneficial owner"
            (as defined in Rule 13d-3 under the Exchange Act, as amended from
            time to time), of securities of PSB representing 30% or more of the
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            combined voting power of PSB's then outstanding securities with
            respect to the election of the directors of PSB; or

                  (ii)  when, during any period of 24 consecutive months, the
            individuals who, at the beginning of such period, constitute the
            Board of Directors of PSB (the "Incumbent Directors") cease for any
            reason other than death to constitute at least a majority thereof,
            provided, however, that a director who was not a director at the
            beginning of such 24-month period shall be deemed to have satisfied
            such 24-month requirement (and be an Incumbent Director) if such
            director was elected by, or on the recommendation of or with the
            approval of, at least a majority of the directors who then
            qualified as Incumbent Directors either actually (because they were
            directors at the beginning of such 24-month period) or by prior
            operation of this provision; or

                  (iii) the occurrence of a transaction requiring stockholder
            approval of the acquisition of the Bank by an entity other than PSB
            or a 50% or more owned subsidiary of PSB or shareholder approval of
            the acquisition of PSB through purchase of assets, or by merger,
            consolidation or otherwise, except in the case of a transaction
            pursuant to which, immediately after the transaction, PSB's
            shareholders immediately prior to the transaction own at least 60%
            of the combined voting power of the surviving entity's then
            outstanding securities with respect to the election of the
            directors of such entity solely be reason of such transaction; or

                  (iv)  the liquidation or dissolution of the Bank or PSB.

      (e)   "DEFERRAL ACCOUNT" means the account established pursuant to
subparagraph 5(a) to record a Participant's Directors Fees.
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      (f)   "DEFERRALS" means the amount of Directors Fees which a Director
elects to defer pursuant to this Plan.

      (g)   "DIRECTORS FEES" means all retainer, meeting fees, or other
compensation to which a Director would otherwise become entitled for services
to be rendered as a Director, but excluding any compensation to which such
person is entitled to receive in his capacity, if any, as an employee of PSB
Holdings or any Subsidiary.

      (h)   "PARTICIPANT"  means a Director who has an undistributed balance in
his or her Deferral Account.

      (i)   "RETURN ON EQUITY" for any calendar year means a percentage equal
to the quotient determined by dividing (i) PSB's net income for such year, by
(ii) average stockholders' equity of PSB Holdings, determined without regard to
unrealized gains or losses on investment securities, on a consolidated basis
for such year.

      (j)   "SUBSIDIARY" means the Bank and each other subsidiary of PSB
Holdings, including any subsidiary of the Bank.

      (k)   "TERMINATION OF SERVICE" means the bona fide termination of a
Participant's services as a member of the Board and each other board of
directors of any Subsidiary which has been designated as a participating
Subsidiary.
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      4.    DEFERRAL OF DIRECTORS FEES.

      (a)   Annual Election.  Each Director may elect (i) before March 31,
2003, with respect to the year ended December 31, 2003, and (ii) before January
1 of any subsequent fiscal year of PSB Holdings, to defer the payment of all or
any portion of the Directors Fees to which the Director would otherwise become
entitled for services to be rendered during each fiscal year subsequent to the
date on which such election is effective and on or before the last day of the
month in which the director's 70th birthday occurs.  An election by a Director
to defer Director's Fees pursuant to this subparagraph 4(a) shall be effective
with respect to Director's Fees earned during the first fiscal year beginning
after the date such election is made and during each subsequent fiscal year
until revoked or amended, provided, however, that any such revocation or
amendment shall only be effective with respect to fiscal years beginning after
the date written notice of such revocation or amendment is first received by
PSB Holdings.
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      (b)   New Director.  Despite any other provision of subparagraph 4(a), if
a person first becomes a Director during a fiscal year, such Director may,
within 30 days of his election or appointment, elect to become a Participant
with respect to all or any portion of the Director's Fees earned and payable
(i) from and after the date on which he is elected a Director if an election is
filed on or before the date of such election, or (ii) if no election is filed
pursuant to clause (i), on the first day of the first month immediately
following the month in such fiscal year in which such election is made, and on
or before the last day of the month in which the director's 70th birthday
occurs.  An election by a Director to defer Directors Fees pursuant to this
subparagraph 4(b) shall remain in effect until the last day of the fiscal year
in which such election is made and during each subsequent fiscal year until
revoked or amended, provided that any such revocation or amendment shall only
be effective with respect to fiscal years beginning after the date written
notice of such revocation or amendment is first received by PSB Holdings.

      (c)   Payment of Fees.  Directors Fees which are deferred pursuant to
this paragraph 4 shall be distributable in accordance with paragraph 6 and only
after such Participant's Termination of Service.  Any Directors Fees not
subject to an election made in accordance with this paragraph 4 shall be paid
in accordance with the Board's policy as from time to time in effect.

      5.    ACCOUNTING AND ELECTIONS.

      (a)   Accounts.  PSB Holdings shall establish a Deferral Account in the
name of each Director who has elected to defer the payment of Directors Fees
pursuant to paragraph 4.

      (b)   Crediting Deferred Fees.  As of each date on which PSB Holdings
would otherwise make a payment of Directors Fees, that portion of the Directors
Fees of each Participant who has a deferral election then in effect shall, to
the extent deferred, be credited by PSB Holdings to the Participant's Deferral
Account.

      (c)   Crediting Interest.  On each March 1, up to and including the Basic
Initial Payment Date (as defined in paragraph 6), if, but only if, the Return
on Equity for the immediately preceding fiscal year was not less than 12%,
interest at a rate equal to 50% of the Return on Equity for the immediately
preceding calendar year earned through December 31 shall be credited to each
Participant's Deferral Account based on the average balance in the Deferral
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Account as of the last day of each calendar quarter of such prior year;
provided, however, that:
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            (i)   on March 1 of the year following the year in which the
      Director has incurred a Termination of Service prior to December 31, the
      interest to be credited hereunder shall be (a) if, but only if, the
      Return on Equity for the immediately preceding fiscal year was not less
      than 12%, a rate equal to 50% of the Return on Equity for the immediately
      preceding calendar year multiplied by a percentage, the numerator of
      which is the number of days in the preceding year that the Director was a
      member of the Board and the denominator of which is 365, and (b) at a
      rate equal to 8% per annum multiplied by a percentage, the numerator of
      which is the number of days in the preceding year that the Director was
      not a member of the Board and the denominator of which is 365; and

            (ii)  if the Director has specified an Initial Payment Date other
      than the Director's Basic Initial Payment Date, then interest at the rate
      of 8% per annum shall be credited under this subparagraph 5(c) on each
      March 1 following such Basic Initial Payment Date.

      (e)   Annual Report.  Within 120 days of the end of each fiscal year in
which this Plan is in effect, PSB Holdings shall furnish each Participant a
statement of the year-end balance in such Participant's Deferral Account.

      6.    DISTRIBUTION OF DEFERRED AMOUNTS.

      (a)   Initial Payment Date.  The "Initial Payment Date" of a Director
shall be the later of (i) the March 1 following the last day of the calendar
year in which occurs the Director's Termination of Service (the "Basic Initial
Payment Date") and (ii) with respect to a Director who retires prior to the
mandatory retirement age for Directors, the March 1 specified by the Director
as the Initial Payment Date (but not later than the March 1 occurring on or
immediately after, as the case may be, the date on which such Director would
have attained his mandatory retirement age) in a written election filed with
PSB Holdings not less than one year prior to his Termination of Service.

      (b)   Ending Balance.  The "Ending Balance" of a Director's Deferral
Account means the balance of the Deferral Account determined as of the Initial
Payment Date.

      (c)   Distribution.  On the Initial Payment Date, distribution of the
Ending Balance shall be made in cash in accordance with the following:

            (i)   Automatic Form of Payment.  In 120 monthly installments
      beginning on the Initial Payment Date in an amount equal to the amount
      necessary to amortize the
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      repayment of a loan in an amount equal to the Ending Balance in 120
      monthly payments at an interest rate of 8% per annum with payments
      being made on the first day of each monthly period.

            (ii)  Death Benefit.  In the event that the Director dies before
      receiving payment of the entire amount to which he is entitled under this
      Agreement, the unpaid balance shall be paid in a lump sum or in
      installments, as specified in the Director's most recent election in
      accordance with the provisions of subparagraph 6(c)(iv), to the
      Beneficiary of such Participant.  If a Beneficiary dies after the
      Director's death, but before receiving the entire payment of the
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      Beneficiary's portion of the amount to which the Director was entitled
      under this Agreement, the portion of the unpaid balance which such
      Beneficiary would have received if he had not died shall be paid in a
      lump sum to such Beneficiary's estate unless the Director designated
      otherwise.

            (iii) Change in Control.  In the event a Participant incurs a
      Termination of Service in connection with a Change in Control, payment of
      the Ending Balance shall be made on the first March 1 following the
      Participant's Termination of Service (or on the date of such termination
      if it occurs on March 1).

            (iv)  Elective Forms of Distribution.  The Director may elect, (A)
      before the first day of each calendar year, (B) subject to the provisions
      of subparagraph 6(c)(iii), and (C) one year prior to his Termination of
      Service, that payment of the Director's Ending Balance shall be made in
      one of the following forms:

                  (A)   in 60 monthly installments beginning on the Initial
            Payment Date in an amount equal to the amount necessary to amortize
            the repayment of a loan in an amount equal to the Ending Balance in
            60 monthly payments at an interest rate of 8% per annum with
            payments being made on the first day of each monthly period; or

                  (B)   in a lump sum, payable on the Initial Payment Date.

      (d)   Modification of Payments.  After a Participant's Termination of
Service occurs, neither such Participant or his Beneficiary shall have any
right to modify in any way the schedule for the distribution of amounts
credited to such Participant under this Plan as specified in the last election
filed by the Participant.  However, upon a written request submitted to the
Secretary of PSB Holdings by the person then entitled to receive payments under
this Plan (who may be the Participant or a Beneficiary), the Board may in its
sole discretion, accelerate the time for payment of any one or more
installments remaining unpaid.
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      7.    FORM FOR ELECTIONS.  The Secretary of PSB Holdings shall provide
election forms for use by Directors in making an initial election to become a
Participant and for making all other elections or designations permitted or
required by the Plan.

      8.    MISCELLANEOUS.

      (a)   No Assignment.  Amounts payable hereunder may not be voluntarily or
involuntarily sold or assigned, and shall not be subject to any attachment,
levy or garnishment.

      (b)   No Right of Election.  Participation in this Plan by any person
shall not confer upon such person any right to be nominated for re-election or
re-elected to the Board.

      (c)   Unsecured Claims.  PSB Holdings shall not be obligated to reserve
or otherwise set aside funds for the payment of its obligations hereunder, and
the rights of any Participant under the Plan shall be an unsecured claim
against the general assets of PSB Holdings.  All amounts due Participants or
Beneficiaries under this Plan shall be paid out of the general assets of PSB
Holdings.
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      (d)   Plan Administration.  The Board shall have all powers necessary to
administer this Plan, including all powers of Plan interpretation, of

determining eligibility, and the effectiveness of elections, and of deciding
all other matters relating to the Plan; provided, however, that no Participant
shall take part in any discussion of, or vote with respect to, a matter of Plan
administration which is personal to him, and not of general applicability to
all Participants.  All decisions of the Board shall be final as to any
Participant under this Plan.

      (e)   Amendment and Termination.  The Board may amend this Plan in any
and all respects at any time (including, specifically, but not limited to, the
rate at which interest will be credited to any Deferral Account from and after
the date of such amendment), or from time to time, or may terminate this Plan
at any time, but any such amendment or termination shall be without prejudice
to any Participant's right to receive amounts previously credited to such
Participant under this Plan.
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